Ted Baker Plc and Another v AXA Insurance UK Plc and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 25 May 2012 |
| Neutral Citation | [2012] EWHC 1406 (Comm) |
| Docket Number | Case No: 2010 FOLIO 209 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 25 May 2012 |
[2012] EWHC 1406 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Eder
Case No: 2010 FOLIO 209
Stephen Cogley QC and Tim Marland (instructed by Browne Jacobson) for the Claimants
Richard Lynagh QC and James Medd (instructed by Kennedys) for the Defendants
Hearing dates: 27, 28, 29 February 2012
, 5, 6, 9, March 2012
Mr Justice EderIntroduction
This is an insurance claim. The present trial concerns coverage and certain related issues in relation to claims made by the claimants against their insurers for the years 2004–2008 in respect of employee theft. Pursuant to the Order of Steel J dated 18 March 2011, other issues in relation to both quantum and "claims cooperation" will be dealt with, if appropriate, at a later stage.
The first claimant is a holding company for businesses that conduct the design, distribution and marketing of the well-known Ted Baker brand worldwide. The second claimant is its wholly owned UK subsidiary. Issues may arise in due course about the distinction between the two claimants but for present purposes there is no relevant distinction and I shall refer to them compendiously as "Ted Baker".
During the relevant period, Ted Baker sold merchandise through various shops and other retail outlets. Between early 2006 and December 2008 Ted Baker, as part of its stock take, noticed losses at its warehouse in Abbey Road, London (the "warehouse") and called in independent security consultant to investigate. Initially, the cause could not be identified; but the losses were confirmed. On 9 December 2008 an anonymous tip-off was received: an employee (Mr Okyere-Nsiah) at the warehouse who was in charge of processing returns of stock, along with two accomplice van drivers, was stealing stock from the warehouse. Mr Okyere-Nsiah was arrested on 12 December 2008. On 13 March 2009, he pleaded guilty to conspiracy to steal between 10 September 2000 and 12 December 2008. As I have indicated, the present trial is not concerned with quantum. Nevertheless, I should mention that the claims advanced are sizeable and, in broad terms, fall into two main categories. First, there was the loss of the stock itself which, at cost, is said to be of the order of £1 million. Second, there is a claim for what is variously described as "consequential loss" or "business interruption" ("BI") which is said to amount to about £3 million.
So far as insurance is concerned, the position may be summarised as follows. In the early part of 2001 Ted Baker was insured by another insurer, the Independent Insurance Company Limited (the "Independent"). In May 2001 the Independent collapsed and the first defendant ("AXA") issued its own cover on terms which I describe below and which was renewed from time to time and continued in substantially similar form during the relevant period ie until at least the end of 2008.
During this period, Chambers and Newman acted as Ted Baker's insurance brokers until May 2004 when that firm was taken over by another brokerage firm, Layton Blackham. Initially, the cover provided by AXA was 100%. However, again as described below, for certain periods the second defendant ("Fusion") and the third defendant ("Tokio Marine") also provided part of the cover as co-insurers. During at least some part of this period, Ted Baker also had what has been referred to as separate "Fidelity Cover" with other insurers, viz AIG and Norwich Union.
In essence, it is the defendants' primary case that the insurance wording does not, as a matter of construction, cover theft by or in collusion with an employee (which the defendants refer to variously as "surreptitious theft by an employee", "surreptitious theft", "fidelity guarantee", "fidelity", "theft by employee" or "dishonesty of employee"). In particular, the defendants assert that if such cover were going to be provided, then it would only be provided via a discrete form of cover known as "Fidelity Insurance" and as this cover was not provided in this case, employee theft was not covered. Alternatively, the defendants advance a claim for rectification and raise other defences based upon mistake and estoppel. Fusion and Tokio Marine also, discreetly, allege that Ted Baker, via the brokers, materially "non-disclosed" the true meaning of the AXA policy wordings that each of Fusion and Tokio Marine adopted and assert that they can avoid cover on this basis, alternatively misrepresentation said to arise from the same non-disclosure. Finally, each defendant asserts that, notwithstanding the negotiation of employee theft/BI cover, other wordings exclude liability for employee theft.
These issues have necessitated the calling of a substantial number of witnesses as set out below – although it was the claimants' primary case that most, if not all, of this evidence was irrelevant. Moreover, I should mention that much of this evidence related to events some years ago and its reliability was, at best, sometimes most uncertain.
The Issues
The parties initially agreed a list of issues relevant to this trial. In the course of the trial, it was agreed between the parties that some at least of these issues did not arise but it is convenient to retain the original numbering system to avoid confusion. Thus, the agreed issues (as amended) relevant for the purposes of this trial are as follows.
Issue 1 – Are direct losses by non forcible and violent ("F&V") theft by employees covered under the Policy?
1. On its true construction does the AXA policy wording cover direct losses viz. the cost of stock sustained by the claimants, or either of them, as a result of the alleged acts of Mr Okyere-Nsiah?
2. Deleted.
Issue 2 – Are business interruption losses arising from non F&V theft by employees covered under the Policy?
3. On its true construction does the AXA policy wording cover business interruption losses consequent on the alleged loss of stock sustained by the claimants, or either of them, as a result of the alleged acts of Mr Okyere-Nsiah?
4. Deleted.
5. Are the claimants entitled to indemnity under the policy in respect of the business interruption losses claimed even if they are not entitled to indemnity under the Theft section of the AXA policy in respect of the direct losses claimed?
6. Are business interruption losses excluded because they were the subject of policy exclusions relied upon by the defendants, namely that they were caused by or consisted of acts of fraud or dishonesty ?
7. What is the significance, if any, for this purpose of the fact that the parties agreed by an express endorsement entitled "Theft Extension Endorsement" to delete from the Policy an exclusion which read "This section does not cover….Consequential loss…arising directly from theft or attempted theft." ?
Issue 4—Estoppel
8. If, on its true construction, the Policy does cover the losses referred to in issues 1 and 2 above, are the claimants nonetheless estopped by convention from relying on such construction?
9. Is the knowledge and conduct of the claimants' brokers to be imputed to the claimants for the purposes of determining the defendants' claim to an estoppel?
10. If, on the true construction of the Business Interruption section of the Policy, the losses claimed are excluded by policy exclusion 4(c), are the defendants nonetheless estopped from relying on such construction as alleged by the claimants in paragraphs 43 and 44 of the Reply?
Issue 5 – Rectification
11. If, on its true construction, the Policy does cover the losses referred to in Issues 1 and 2, should the Policy nonetheless be rectified as alleged by the defendants so as expressly to exclude theft of stock by employees by non forcible or violent means from the cover provided on the basis of mutual mistake?
12. Is the knowledge and intention of the claimants' brokers to be imputed to the claimants for the purposes of determining the defendants' claim to rectification?
13. If, on the true construction of the Business Interruption section of the Policy, the losses claimed are excluded by exclusion 4(c), should the section nonetheless be rectified as alleged by the claimants in paragraphs 43 and 44 of the Reply so as to remove such exclusion?
Issue 6 The Factual Matrix/Custom of the Trade Alleged by AXA
14. Is the existence and/or nature of 'Fidelity' or Theft by Employee policies relevant to construing the AXA wording or to the claims for rectification or estoppel?
15. If so, are the averments made by the defendants about such policies in paragraphs 18 to 22 of AXA's Defence correct?
16. Is the extent of coverage under the Independent policy previously issued to the claimants relevant to the issues of construction, rectification or estoppel in the circumstances of this case? And if so,
17. What were the terms of the Independent policy and would it have covered losses sustained by the claimants, or either of them, as a result of the acts of Mr Okyere-Nsiah and his accomplices?
18. Is evidence of the matters pleaded at paragraphs 32 to 45 of AXA's Defence relevant and admissible in respect of the construction of the AXA policy wording, it being common ground that it is, if proved, admissible in connection with the issues of rectification or estoppel?
19. If so, are these facts correct?
20. Did the claimants or their brokers, prior to inception or renewal of the policy, provide disclosure of any the following facts and matters:
i) Experience of fidelity losses.
ii) Size of annual payroll
iii) A statement as to the nature of the insured's supervision, checking and management system;
iv) The existence of the Norwich Union and/or AIG policies.
v)...
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