Ted Baker Plc and Another v Axa Insurance UK Plc and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson |
| Judgment Date | 19 February 2014 |
| Neutral Citation | [2014] EWCA Civ 134 |
| Docket Number | Case No: A3/2013/0934 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 February 2014 |
[2014] EWCA Civ 134
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Mr Justice Eder
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
and
Lord Justice Tomlinson
Case No: A3/2013/0934
Stephen Cogley QC and Tim Marland (instructed by Browne Jacobson LLP) for the Respondents
Jeremy Nicholson QC and James Medd (instructed by Kennedys Law LLP) for the Appellants
The Appellant insurers seek permission to appeal against the determination by Eder J in the Commercial Court of preliminary issues concerning the scope of insurance cover afforded by them to the Respondent insured in the years 2004–2009. Axa bore the bulk of the risk over the period in question, Fusion carried 20% of the risk for two of the years of account, 2004/5 and 2005/6, whilst Tokio Marine was co-insurer for 25% of the risk in 2006/7. At the conclusion of the hearing we refused permission to appeal for reasons to be given in writing at a later date. These are the court's reasons for dismissing the application.
The Respondents may for present purposes collectively and shortly be described as the distributors and marketers of the well-known Ted Baker brand of merchandise. The underlying claim concerns loss of stock from the Respondents' warehouse in Harlesden. Eder J determined the issues in a reserved judgment delivered on 25 May 2012, following a seven day trial in February and March. The judge heard a large number of witnesses give evidence concerning events which had occurred some years before.
The principal issue was the proper construction of the policy wording. The judge determined this issue in favour of the insured, and also held that the insured were not estopped by convention from reliance on the natural meaning of the wording of the insuring clauses. The judge refused the insurers' application to rectify the policy wording. The judge also refused two free-standing applications by the Second and Third Appellants, Fusion and Tokio Marine, to rescind or avoid their participation in the cover in reliance on or on the grounds of misrepresentation and non-disclosure.
The Appellants sought permission to appeal from the judge, placing before him draft Grounds of Appeal which challenged his findings on construction, misrepresentation and non-disclosure. It will be noted that there was therefore no challenge to the judge's conclusions on rectification and estoppel by convention. The judge refused permission to appeal. There the matter was left to rest. It was said before us on behalf of Fusion and Tokio Marine that it was decided that to attempt to pursue an appeal on the misrepresentation and non-disclosure ground would have been neither proportionate nor reasonable unless that appeal formed part of a wider appeal by all of the insurers. However that may be, the first hurdle faced by all the insurers on this application is that time for filing an Appellants' Notice expired on 9 July 2012 and the Appellants require an extension of time to 8 April 2013. The remaining issues of liability and quantum are due to be tried on 7 July 2014 with a time estimate of three weeks.
The application with which we are concerned has been prompted by disclosure of documents in the on-going action given by the Respondents on 26 February 2013. There is no doubt that documents then disclosed for the first time from the files of the placing brokers were potentially relevant to the preliminary issues tried by Eder J, or to some of them, and ought to have been disclosed earlier pursuant to orders for standard disclosure relevant to those issues. The explanations offered for the failure to disclose are unconvincing, as is the suggestion that the Appellants could themselves have obtained the documents from the brokers. We accept that the Appellants acted with reasonable expedition in assimilating the documents, considering their position and issuing their Appellants' Notice on 8 April 2013. The first issues for decision however are whether there is any reason why the grounds of appeal now put forward could not have been advanced earlier and whether the new material has any real connection therewith. In order to put those issues into context we must first say a little more about the issues resolved by the judge and then examine the relevance, if any, of the new documents thereto.
Although it was once wider the claim now made by the insured against their insurers is for business interruption consequent upon more than five hundred incidents of theft of stock by an employee, said to have occurred over a five year period. The thefts are alleged to have been carried out by Mr Nsiah, an employee of No Ordinary Designer Label Ltd, at its warehouse in Harlesden, London NW10, where he was employed. It is accepted by the Respondents that the thefts took place without forcible and violent entry into or exit from the premises. We shall from time to time refer to this as clandestine theft. The claim is for substantial loss of profit over and above the cost of the stock and is said to give rise to liability under the policies in five policy years.
All of the policies in question were placed on behalf of the Respondents by their insurance brokers: initially Chambers and Newman, and later, as a result of successive takeovers, Layton Blackham, and then Bluefin. The employee with prime responsibility for placing the policies under which the Respondents claim was a Mr Guy Burbedge: in particular, he placed all of the policies with Axa and also the policies with Fusion.
It was common ground at the trial that cover for theft by employees is traditionally provided by Fidelity Insurance and that cover for business interruption consequent upon theft by employees is always excluded under such insurance. It was also common ground that such cover is not available in the general commercial market.
Axa's policy, to which the other insurers in due course subscribed, was initially to be found in a document entitled, confusingly, "Schedule: Commercial Combined". As the judge recorded this was in effect the primary document constituting the policy. It referred to Axa's then standard printed wording.
Axa's policies, like most commercial combined policies, each consisted of policy wording and a schedule containing specific details and endorsements. Both the policy wording and the schedule were divided into sections providing different types of cover. The policy wording contained, inter alia:
1) Sections covering loss by theft and business interruption (all risks): which were stated as operative in the schedules;
2) A section providing for fidelity cover entitled "Theft by Employees": which was not stated as operative in the schedules.
The theft section contained policy wording limiting cover to theft involving forcible and violent entry; but contained also an endorsement, the "Theft Extension Clause" (designated initially "A05", later "F08"), which extended the insurance to cover loss or damage resulting from theft or any attempt thereat which did not involve forcible and violent entry. There was an excess of £1000 later raised to £5000. On its ordinary and natural meaning, this provided indemnity in respect of the cost of stock stolen by an employee.
The business interruption section provided financial loss cover consequential on loss of property, if that property was insured against loss; but the policy wording contained:
1) an exclusion (Exclusion Clause 2(c)) in respect of consequential loss arising directly from theft or attempted theft;
2) a further exclusion (Exclusion Clause 4(c)) in respect of "consequential loss caused by or consisting of … acts of fraud and dishonesty".
However the Schedule also contained a Special Endorsement No 637 "Theft Extension Clause (All Risks)" which provided "exclusion 2(c) of the [Business Interruption] cover is deleted". Exclusion 4(c) was not deleted.
The judge ruled, unsurprisingly, that the Theft section provided cover for direct losses as a result of employee theft not involving forcible or violent entry. That conclusion as to the clear and natural meaning of the words used was not displaced or affected by any factual matrix or market practice as alleged by insurers – judgment paragraph 105.
The Business Interruption section provided cover for financial loss consequential on loss of property provided the property was itself insured against loss. The stock was covered against the risk of theft by employees not involving forcible and violent entry. Exclusion 2(c) would ordinarily have excluded consequential loss arising directly from theft or attempted theft, but that exclusion was itself deleted by Endorsement No 637. The judge concluded that it followed that business interruption losses arising from theft, including theft not involving forcible and violent entry by employees, was covered under the policy. The judge rejected the suggestion that Exclusion 4(c) nonetheless excluded clandestine employee theft. Exclusion 4(c), standing alongside Exclusion 2(c), was not concerned with theft at all but rather with fraud or dishonesty other than theft. The evidence as to market practice or resort to other supposedly standard market wordings was of little relevance, given that for all of the witnesses who gave evidence on these topics the deletion of Exclusion 2(c) in the...
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