Turville Heath Inc. v Chartis Insurance Uk Ltd (formerly Aig Uk Ltd)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Edwards-Stuart |
| Judgment Date | 01 November 2012 |
| Neutral Citation | [2012] EWHC 3019 (TCC) |
| Docket Number | Case No: HT-12–183 |
| Date | 01 November 2012 |
| Court | Queen's Bench Division (Commercial Court) |
[2012] EWHC 3019 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Edwards-Stuart
Case No: HT-12–183
Mr Peter Fraser QC (instructed by Russell-Cooke) for the Claimant
Mr Adam Constable QC (instructed by Kennedys) for the Defendant
Hearing dates: 5 October 2012
Introduction
This is an application by the Defendant ("Chartis"), an insurance company,
(1) For a stay of these proceedings pursuant to section 9 of the Arbitration Act 1996 ("the Act"); alternatively
(2) For a stay of the proceedings pursuant to the inherent jurisdiction of the court under section 49 of the Senior Courts Act 1981.
The Claimant, Turville Heath Inc ("Turville"), resists the application. Turville's claim against Chartis arises out of losses caused in a fire at a property owned or occupied by Turville. Chartis asserts that it has admitted liability under the policy, but the policy contains an arbitration clause which applies to any dispute about the amount to be paid under the policy and that the parties elected to have the dispute resolved in accordance with the clause.
In these circumstances Chartis submits that it is entitled to have the proceedings stayed as of right under section 9 of the Act. Alternatively, if the court is not persuaded that the clause is a valid arbitration clause, the court should stay the proceedings under its inherent jurisdiction so that the parties can continue to resolve their dispute by the process that they have chosen.
In this application Turville has been represented by Mr Peter Fraser QC, instructed by Russell-Cooke, and Chartis has been represented by Mr Adam Constable QC, instructed by Kennedys.
The clause
The clause, which appears in the Part IX of the policy, which is headed "General Conditions", is in the following terms:
'2. Arbitration
If you and we fail to agree on the amount of loss, either party may make a written demand that each selects an independent appraiser. In this event, the parties must notify each other of their selection within twenty (20) days. The independent appraiser will select an arbitrator within fifteen (15) days. If an arbitrator is not agreed upon within that time, either party may request that the arbitrator be selected by the Association of British Insurers or Financial Services Authority. The independent appraisers will then appraise the loss and submit any differences to the arbitrator. A decision in writing agreed to by the two appraisers or either appraiser and the arbitrator will be binding. Each appraiser will be paid by the party that has selected the appraiser. Expenses will be allocated at the discretion of the arbitrator."
It is not disputed that the clause is capable of being invoked where there is a dispute about the amount to be paid under the policy, liability being otherwise admitted. For the sake of convenience, in the rest of this judgment I shall refer to this clause as the "arbitration clause": however, this is not to be taken as any predetermination of whether or not the clause is in fact an arbitration clause within the meaning of the Act. It is, I think, common ground that the label which the parties apply to the clause is not determinative of its true status or function, although Mr Constable submits that the language used by the parties is a very strong indicator of their intention.
Section 6 of the Act provides:
"Definition of arbitration agreement.
(1) In this Part an "arbitration agreement" means an agreement to submit to arbitration present or future disputes (whether they are contractual or not)…"
The issues
Turville resists the application on the following grounds:
(1) The clause is not an arbitration clause within the meaning of the Act and so Chartis is not entitled to a stay under section 9.
(2) The dispute is not limited to the amount of the loss and so the clause does not apply: there are other issues between the parties, such as title to sue, estoppel, breach of a collateral agreement and breaches of both express and implied terms of the policy.
(3) In the light of the matters raised under (2) it would be inappropriate for the court to stay the proceedings under its inherent jurisdiction since it is more convenient to have all the matters in issue resolved by one tribunal, which can only be the court.
(4) In any event, the dispute resolution machinery under the clause has broken down or is inoperable and so the procedure is no longer available.
The facts and the history of the dispute
The insured is described as "Kathleen DuRoss Ford, Trustee" and the first residence insured under the policy is named as "Turville Grange, Turville Heath". The property covered includes the house, other permanent structures and the contents. The sums insured for this property were in excess of US$17 million.
The following are described in the schedule as interested parties under the policy:
"1/ Turville Heath Inc and Heath Cottages Inc
2/ Kathleen DuRoss Ford Revocable Inter Vivos Trust, Distinguished Investment Corp, Trustee; Kathleen DuRoss Ford, Trustee; Kathleen DuRoss Ford Individually; Ford Properties, Inc, UKAR, Inc, KDF Toys, Inc, Turville Grange, Inc."
Turville Grange, which is a listed Grade II property, has a swimming pool enclosed in a Pool House. The Pool House was destroyed in a fire on 3 July 2009. Turville is the freehold owner of the property, and it is now accepted by Chartis (to the extent that it was ever disputed) that Turville is entitled to maintain the claim under the policy in respect of the losses caused by the fire.
However, an issue has arisen as to whether it was in fact necessary to demolish the whole of the Pool House structure and rebuild it. Chartis suggests that part of the substructure could have been retained and reused. The amount that is involved in this issue is about £200,000. The claim under the policy, as presently quantified, is well in excess of £2 million.
Mrs Kathleen DuRoss Ford is the widow of Mr Henry Ford II, and a member of the Ford Motor Company family dynasty. To the extent that it may be relevant, I infer that she is an insured who is not without substantial resources.
Following the fire, loss adjusters appointed by Chartis attended the scene in the usual way. The fire damage had also been inspected by a Mr Frank Chopin, a trustee of the family trust. It appears to have been agreed that what remained of the Pool House should be demolished in order to make the site safe. This intention was notified or confirmed to Chartis in an e-mail from Mr Chopin dated 6 August 2009. Chartis acknowledged this e-mail without expressing any disagreement to the course proposed.
On 5 October 2009 planning permission was granted for the remedial works, which involved some improvements from the original structure. These improvements were largely ones that Turville wished to carry out but also included some that were required by the local authority. A contract for the works was entered into on 5 April 2010 with a contract sum of about £2.8 million (excluding VAT). In the course of this period various professional advisers were retained by Turville. These included Gardiner & Theobald ("G&T") who was retained to provide project management, to act as the employer's agent and to provide quantity surveying services. In addition Turville retained M&E consultants, an interior designer, an electrical designer, engineers to test the soil and ground conditions and other specialist engineers.
In the meantime, in December 2009, G&T produced an estimate of the cost of the works in the sum of £2.4 million, with a 10% contingency for design and estimating services.
On 12 April 2010 a Notional Cost Plan was prepared by John Austin & Partners ("JAP") on behalf of Chartis. This showed a building cost of about £1.6 million. It had been prepared on the basis of a like for like replacement and thus stripped out elements of betterment that had been incorporated in the scheme that had received planning permission.
In either late 2009 or early 2010 (there are conflicting statements about the date in the papers) Chartis made an interim payment of £600,000, which was followed by a further payment in May 2010 to bring the amount paid up to the amount identified in the JAP notional cost plan. In September 2010 Chartis offered to pay Turville an additional £112,550 to cover demolition costs and planning fees and £75,000 in relation to the contents. That offer was not accepted.
On 8 March 2011 Russell-Cooke, then as now acting for Turville, sent a letter of claim to Chartis. The claim was for £2.8 million in respect of the rebuilding costs and £235,000 for the contents. The figure of £2.8 million was said to represent the cost of rebuilding to the original plans but using the rates adopted by the contractor who had carried out the actual rebuilding. The sum of £2.8 million was made up of building costs of £1.981 million, together with professional fees of about £400,000 (representing about 20% of the building costs). VAT added a further £417,000.
The JAP cost estimate had allowed 12 1/2% for professional fees, so the figures being put forward by each party at that time (excluding VAT) can be compared as follows:
So the parties were a little over £1 million apart.
| Item | JAP | G&T |
| Building costs | £1,194,080 | £1,981,352 |
| Professional fees | £149,260 | £401,254 |
| Totals: | £1,343,340 | £2,382,576 |
On 6 April 2011 Kennedys, on behalf of Chartis, responded to Russell-Cooke's letter of 8 March 2011 and notified Turville that Chartis was invoking the procedure set out in the arbitration clause. By a letter in reply dated 14 April...
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