Synergy Health (UK) Ltd v CGU Insurance Plc & 3 others
| Jurisdiction | England & Wales |
| Judgment Date | 19 October 2010 |
| Neutral Citation | [2010] EWHC 2583 (Comm) |
| Docket Number | Case No: 2009 FOLIO 843 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 19 October 2010 |
[2010] EWHC 2583 (Comm)
Before: The Honourable Mr Justice Flaux
Case No: 2009 FOLIO 843
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE HIGH COURT OF JUSTICE
Mr Graham Eklund QC and Mr Ben Elkington (instructed by Edwin Coe LLP) for the Claimants
Mr Colin Wynter QC and Ms Alison Padfield (instructed by Kennedys) for the 1 st to 3 rd Defendants ( and instructed by DWF LLP) for 4 th Defendant
Mr Richard Southern QC and Miss Sarah Martin (instructed by Beachcroft LLP) for the 5 th Defendants
Hearing dates: 12 th to 15 th, 19 th to 21 st, 23 rd and 26th July 2010
The Hon. Mr Justice Flaux:
Background and introduction
The Claimant company (to which I will refer as “Synergy”) is one of a number of companies in the Synergy group of companies, which provide laundry and related services to the NHS. The business was founded by Dr Richard Steeves in 1991 and has grown fourfold since then. In October 2005, during the period with which this case is concerned, Synergy acquired another business called Shiloh Plc, which was a substantial supplier of services to health care providers.
One of the laundries owned and operated by Synergy was at Unit 32, Verey Road, Woodside Industrial Estate, Dunstable. This was a modern building constructed in the 1990s which Synergy acquired and developed as a laundry in 2005. With effect from 23 May 2005, the premises and the plant and equipment were insured against, inter alia, the risks of material damage and business interruption, by way of addition to the Combined Commercial Policy for the year 30 April 2005 to 29 April 2006 (subsequently renewed from 30 April 2006 to 29 April 2007) under which the First to Fourth Defendants insured Synergy. The insurance was underwritten on behalf of the First to Fourth Defendants (to whom I will refer as “the insurers”) by underwriting agents, Fusion Insurance Services Limited (“Fusion”) in Birmingham. The insurance was placed with Fusion by the Fifth Defendants, THB Clowes Limited (now called Towergate TLC Limited following a takeover in 2006), insurance brokers acting on behalf of Synergy (“the brokers”).
On 3 February 2007, during the currency of the renewed policy, there was a fire at the Dunstable premises which led to a claim by Synergy under that policy for both material damage and business interruption losses. The material damage claim has been agreed at £4 million and whilst there are some areas of dispute in relation to business interruption, the overall claim under that section of the policy is in excess of £2 million. However, the insurers have repudiated liability and sought to avoid the contract of insurance for alleged material non-disclosure and/or misrepresentation by Synergy before and at the time of the renewal of the insurance as at 30 April 2006.
The alleged misrepresentation arises from the fact that, on 28 December 2005, the brokers forwarded to Fusion a letter from Dr Geoff Andrews, Operations Director of Synergy, dated 13 December 2005 which dealt with various Risk Improvements outstanding from insurers’ surveys of Synergy premises, including a survey at Dunstable on 15 September 2005 which had noted the absence of an intruder alarm. In relation to this, the letter stated “Intruder Alarm. This will be completed by end December”. In fact work had not even commenced and due to an extraordinary internal breakdown in communications within Synergy (which I will need to consider in detail hereafter) the alarm was never installed before the fire over a year later.
The insurers’ case is that the statement in the letter was a misrepresentation as at 28 December 2005 when conveyed to them which was never withdrawn or corrected prior to renewal. Accordingly, they contend that there was a continuing material misrepresentation or an implied material misrepresentation at the time of renewal. Alternatively, they contend that there was a material non-disclosure of the fact that there was no intruder alarm installed at the Dunstable premises. Either way, it is their case that their underwriter Simon Smith and his immediate superior Paul Garbutt, the Regional Underwriting Manager for Fusion, who between them had responsibility for underwriting the risk at renewal, were induced to renew the policy by such misrepresentation or non-disclosure.
In those circumstances, Synergy has commenced proceedings against both the insurers, seeking an indemnity under the policy and against the brokers for damages for breach of duty if (contrary to Synergy's primary case) the insurers were entitled to avoid the contract of insurance.
The witnesses
Before setting out my findings of fact in detail, I should just set out my findings about the various witnesses who gave evidence at the trial. Synergy called a number of its former and current management. Ms Sue Cowley was the operations manager at Dunstable until she left in December 2005, for what were essentially personal reasons. She was a candid witness who understandably had a limited recollection of events after some five years, but I found her entirely truthful. Mr Nicholas Caley, who was to take over from her as operations manager at Dunstable having been operations manager at Derby, was also straightforward, although some of his evidence was rather confused and he evidently had some embarrassment over the fact that his errors, particularly in relation to the email exchange in January 2006 which I describe in detail below, contributed to the situation in which Synergy found itself after the fire.
Mr Derek Isles was managing director of UK linen services within Synergy and, as such, the immediate line manager of Ms Cowley and Mr Caley. He too was straightforward in his evidence, although like others, he had limited recollection of events. He fairly accepted that the problem over the non-installation of the alarm had arisen because nobody at Synergy “saw it through”.
Dr Geoff Andrews was operations director of Synergy at the time. For reasons which I set out in more detail below, he was the person in Synergy management who was most to blame for what went wrong. It may have been an appreciation that what occurred was to a substantial extent his fault that led to his being somewhat defensive and inflexible in his evidence. On a number of occasions he showed a marked reluctance to accept propositions which pretty clearly were the explanation for what had occurred.
Another aspect of his evidence was extremely unsatisfactory. After the fire, he was interviewed by the loss adjusters and on Friday 9 March 2007, a witness statement was taken from him. It is apparent that at the time that the statement was taken he had forgotten about his involvement with the installation or otherwise of the intruder alarm at Dunstable since the statement said in paragraph 32:
“As far as I am aware there was never an issue relating to a burglar alarm system. Certainly I was never involved in any discussions relating to such at our Dunstable branch. I have never commissioned or asked for such a system to be considered. This is something I cannot comment on”.
Dr Andrews did not sign the statement until the following Monday 12 March 2007. However, before he did so, his memory about his involvement with the problem of non-installation of the alarm at Dunstable must have been jogged by an email exchange later on 9 March 2007 with Mr Harris of the brokers and then Mr Caley, where Mr Harris was asking why an alarm had not been installed and Mr Caley, albeit incorrectly, was saying that there had been a number of quotes obtained, but that the expenditure on the alarm had not been approved because of the tight budget on installation of the Dunstable laundry.
Dr Andrews accepted, on the basis of these emails, that between the statement being prepared and its signature, his attention had been directed to the fact that there had been a number of quotes for the alarm. When challenged as to why he had not corrected the statement, he initially said this was an oversight. When it was pointed out to him that at the end of the statement before his signature, it said: “I believe the facts in this Statement are true”, he then came out with some quite extraordinary evidence that this was a statement as to his belief on 9 March when the statement was taken, not on 12 March, when he signed the statement. I considered this evidence unimpressive, displaying a somewhat cavalier attitude to the giving of evidence generally. In consequence, I approached the evidence of Dr Andrews with a certain amount of caution.
Mr Ivan Jacques was the finance director of Synergy, who had overall responsibility for insurance matters. He was by far and away the most impressive of Synergy's witnesses, intelligent and sophisticated. He gave his evidence in a frank and fair manner. The particular significance of his evidence was that it was quite clear that, at the time, he had been unaware that the alarm had not been installed by the end of December, but that if he had known this, he would have immediately issued instructions for the installation of the alarm and would have ensured that any misleading impression given to the brokers and insurers was corrected.
Mr David Johnson was the former Group Accountant for Shiloh and then for Synergy Health plc. He had taken over responsibility for insurance within Shiloh about eighteen months before the takeover. He took over responsibility within the newly expanded Synergy group for insurance matters with effect from January 2006. He was an essentially straightforward witness, although he was obviously somewhat embarrassed by the fact that he had...
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