Sprung v Royal Insurance (UK) Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeBeldam,Evans,Pill L JJ
Judgment Date14 June 1996
Date14 June 1996

Court of Appeal

Beldam, Evans and Pill L JJ

Sprung
and
Royal Insurance (UK) Ltd

The appellant appeared in person.

Graham Morris (instructed by Davies Wallis Foyster) for the respondent.

The following cases were referred to in the judgment:

Firma C-Trade SA v Newcastle Protection and Indemnity Association (“The Fanti”)ELR [1991] 2 AC 1.

President of India v La Pintada Compania Navigacion SAELR [1985] AC 104.

President of India v Lips Maritime CorporationELR [1988] AC 395.

Ventouris v Mountain (“The Italia Express” (No. 2))UNK [1992] 2 Ll Rep 281.

Insurance — Late payment of sum due under policy of insurance — Insured suffering loss as a result of late payment — Whether insured entitled to recover damages for loss incurred by late payment.

This was an appeal by the plaintiff against a decision of Judge Hedley holding that although he had suffered a loss of £75,000 by reason of late payment of a sum due from the defendant insurance company, that sum was not recoverable in law from the defendant in addition to the interest element of the sum already paid under the policy.

The plaintiff was proprietor of a family business carrying on the collection, processing and redistribution of animal waste products. In 1986 the market was at a low ebb and the plaintiff was under financial pressure. The judge found, on the basis of accountants' expert evidence, that in 1986 the dominant firm in the market would have been interested in purchasing the plaintiff's business. However, in April 1986 the plaintiff's premises were invaded by thieves or vandals and the machinery wrecked. The defendant had insured the plaintiff by a policy which provided for indemnity against the cost of making good sudden and unforeseen damage to the plant which necessitated immediate repair or replacement before it could resume working. When notified of the loss by the plaintiff, the defendant initially denied liability for the major part of the damage, and did not make a payment under the policy until three and a half years later. In the meantime the plaintiff was unable to continue the business and lost the opportunity to sell it.

On 12 March 1990 a consent order was made by Judge Stannard, sitting as an Official Referee, that the defendant pay the plaintiff £30,000 with interest of £10,937.50 and costs by way of interim payment. The plaintiff pursued his claim for the loss caused by the defendant's refusal to indemnify him and to pay him his loss or damage, which was later assessed by Judge Hedley at £75,000. The judge held, however, that the plaintiff was not entitled to recover that sum. On the plaintiff's appeal against that judgment, the defendant argued that it was not liable to the plaintiff for damages for its failure to meet its obligations under the policy.

Held, dismissing the appeal:

The liability of insurers under a policy of insurance arose when the loss occurred and was a liability to pay money for that loss. The essential nature of the liability was to pay the sum of money as damages. A failure to pay under a policy was thus a failure to pay damages, and an assured had no cause of action for damages for non-payment of damages. In such circumstances a plaintiff would be compensated by the award of interest on the damages eventually assessed by the court. (Ventouris v Mountain (“The Italia Express” (No. 2))UNK[1992] 2 Ll Rep 281 applied.)

JUDGMENT

Beldam LJ: I will ask Evans LJ to give the first judgment.

Evans LJ: This appeal is from a judgment given in Liverpool on 13 October 1994 by Judge Hedley. By that judgment he held that the plaintiff had suffered a loss, which he measured as £75,000, by reason of the late payment of the sum which became due from the defendant insurance company to the plaintiff as a result of a loss sustained in April 1986. But he proceeded to consider whether that loss was recoverable in law from the defendants in addition to the interest element of the sum which had already been paid in respect of the loss under the policy. He held as a matter of law, following the judgment of Hirst J in The Italia Express (No. 2)UNK[1992] 2 Ll Rep 281, that the plaintiff was not entitled to recover that sum in law.

There is a cross-appeal by the defendants. They contend that the judge's finding that the loss sustained was £75,000 was based on inadmissible evidence and therefore should be set aside.

Until 1986 the plaintiff was the proprietor of a family business, Henry Sprung and Co, which he inherited from his father in 1981. The business carried on was the collection, processing and redistribution of animal waste products. The business made small, but some, profits until 1985, when there was, on any view of the matter, a substantial downturn in the trade and in the fortunes of the business. It was carried on originally at premises at Stanley Market in Prescott Road, Liverpool. That was a council property. It seems that the council wished to repossess and redevelop that site, but did not in fact commence doing so until much later, in 1993. Meanwhile, before 1986, the plaintiff had acquired new premises at Oriel Street in Liverpool, where he envisaged carrying on the business for the future. As he emphasises, the business carried on there involved a different process or processes from those carried on at Stanley Market. His general intention was to build up the new business at Oriel Street and to continue at Stanley Market so long as the premises were available there and the level of trade and his financial resources permitted it. During 1986 the market was at a low ebb. In particular, sale prices were very low, although there was some evidence of an upturn in about August. What is quite clear, and not disputed, is that in April the plaintiff was under very considerable financial pressure.

A prominent — indeed, the dominant — figure in the market was the firm of Prosper De Mulder Ltd, which already had, it seems, something of a monopoly. Certainly by 1991 it held in excess of 50 per cent of the market share and at that time, in relation to another acquisition, it was the subject of a reference to the Monopolies and Mergers Commission. The Commission's report is the source of much useful evidence with regard to the trade generally and the activities of Prosper De Mulder Ltd in particular. At the time, in 1986, Prosper De Mulder was regarded as what was called a “predator”; that is to say, a potential purchaser of smaller businesses.

The judge found, on the basis of accountants” expert evidence, that in 1986 Prosper De Mulder would have been interested in purchasing the plaintiff's business. The figures involved were in total in excess of £200,000, but he assessed the plaintiff's loss as £75,000. He expressed it in the course of his judgment as follows:

“Once satisfied that a loss has occurred the court cannot say that just because the plaintiff fails to prove a specific figure, therefore he can recover nothing. All the court can do is to do its best to place a fair, just and reasonable value on the loss.”

That was the basis upon which he arrived at the figure of £75,000, which was considerably less than the figure resulting from calculations of the price which Prosper De Mulder would have been likely, as he saw it, to have paid. Unfortunately, however, the business had ceased in September 1986. There was no remaining goodwill, and from then on the relevant customers would be likely (as, indeed, may well have been the case) to have transferred to Prosper De Mulder in any event.

This appeal is concerned with the reasons why that situation came about. The story begins at the weekend of 5–6 April, when the Stanley Market premises were invaded by thieves or vandals or both and, as it is graphically put, they were “wrecked” so far as the machinery, in particular the electrical machinery, was concerned. The items damaged included a weighbridge, which was from the start treated as a separate item for insurance purposes, and the same insurers, the present respondents, within a few weeks paid the sum of about £3,500 in respect of that particular item of damage.

The plaintiff had two policies of insurance with the defendants, the first being described as a theft policy. That covered damage to the insured property at the premises which was “lost, destroyed or damaged by theft or attempted theft”. Apart from saying that there was, on the surface at least, a basis for saying that the damage caused, first to the weighbridge and then to other items of equipment, was covered by that theft policy, it is not necessary to give its terms in any further detail.

The more relevant cover for present purposes is the Qualisure contract, which was in the following terms:

“SECTION 1 THE AGREEMENT

In return for the premium the company contracts to indemnity the...

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