Western Trading Ltd v Great Lakes Reinsurance (UK) Plc
| Jurisdiction | England & Wales |
| Judge | Judge Mackie |
| Judgment Date | 26 January 2015 |
| Neutral Citation | [2015] EWHC 103 (QB) |
| Docket Number | Case No: 2013 FOLIO 936 |
| Court | Queen's Bench Division |
| Date | 26 January 2015 |
[2015] EWHC 103 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
His Honour Judge Mackie QC
Case No: 2013 FOLIO 936
Ben Elkington QC (instructed by Edwin Coe) for the Claimant
Bob Moxon-Browne QC (instructed by Kennedys) for the Defendant
Hearing dates: 24 November to 4 December 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Judge Mackie QC:
This fire insurance claim by the Claimant is resisted by the Defendant on the grounds that the assured had no insurable interest and that there was misrepresentation and non disclosure. The Defendant also claims that if the Claimant does have a valid claim it should not have a Declaration that it is entitled to be indemnified for the cost of reinstatement. The claim follows a fire on 24th July 2012 which destroyed buildings (which I will together call "the Property") in Central Walsall including a listed local landmark, the Boak Building.
The Claimant is a company which is owned mainly by Mr Chinderpal Singh. The company secretary is Mr Singh's wife, Mrs Kaur, who plays an active role in the administration of the Claimant. The Claimant exists to hold and manage Mr Singh's property portfolio. Some properties, such as those which are the subject of this claim, are owned by Mr Singh personally, others by the Claimant. The Defendant is an insurance company and a subsidiary of Munich Re.
The Trial
At the trial thirty one bundles of documents were before the court. I heard evidence from five fact witnesses for the Claimant. These were Mr Singh, his son Mr Sandeep ("Sunny") Singh, Mr Philip Jones, a former tenant of the Boak, Mr Altin Gjura, owner of a car wash operated at the Property and Mr Michael Bird, a Walsall Councillor and a former Leader of the Council and Mayor of the Borough. There were four fact witnesses for the Defendant, Mr David Chubb who carried out a survey of the property, Mr John Firminger a director of Cunningham Lindsay, loss adjusters, Ms Lorraine Sheehan formerly director of UK underwriting at Kay International PLC and Mr Mark Fearn, Project Lead at Walsall Council who has formidable knowledge and experience of commercial rating in the area. I found all these witnesses to be straightforward and truthful. Disagreement about the facts involved not a clash of competing recollections but the question of whether what the Claimant's witnesses said was correct given the material deployed and the questions asked by the Defendant. I will accordingly set out the facts in narrative form dealing with disputed matters as they arise.
There was also expert evidence. In the area of underwriting the Claimant called Mr Jamie Lye and the Defendant Mr Trevor Clegg. On valuation the Claimant called Mr Robert Taylor and the Defendant Mr Peter Clarke. On quantity surveying the Claimant called Mr Simon Janes and the Defendant Mr George Taft.
Background facts—Insurable interest and misrepresentation.
Mr Singh has been a very successful investor in property, mainly of a modest commercial kind. Thus the Defendant says that by 2003 Mr Singh already had a large property portfolio, including the Gill and Russell Business Park in Walsall (which he owned with his elder son Mr Sunny Singh), a block of office premises in central Birmingham (Swan House, Beacon House and Gothic House), a valuable retail and warehousing complex in Wednesbury let for £45,000 per quarter, and the Hampstead Business Park in Walsall producing rent of at least £100,000 p.a. which he owned with Mrs Kaur. He has apparently many other properties as well.
Mr Singh came to this country with his family as a child in 1963 and started a business from his father's shop dealing in and later making garments before moving into property. Mr Singh retains frugal ways and an informal and traditional small business structure. Despite his success Mr Singh is modest and unassuming, commendable characteristics which may have led to misunderstandings when the fire was investigated. Mr Singh has two sons, the elder being Mr Sunny Singh. I will, to avoid confusion, refer to Mr Singh and his elder son Sunny as "Mr Singh" and "Sunny". Sunny runs a property business, Property Link (Midlands) Limited ("Property Link"), which operates from the same building as the Claimant with which it shares facilities. The Singh family is close knit.
The Property comprises two neighbouring buildings which were destroyed or damaged by the fire which gives rise to the claim and the Claimant says that it let and managed them both. The first was 1 – 7 Station Street, Walsall known as the Boak Building. This was an historic listed building, built as a factory at the start of the twentieth century. It stood close to the railway leading into Walsall and was a local landmark. The second was 8 Station Street. The upper floors of 8 Station Street have a separate entrance from the road and are sometimes known as 8A Station Street. Mr Singh also owned the properties at 9 – 13 Station Street. All but one of the other neighbouring properties in Station Street were owned by a Mr Parkes.
Mr Singh acquired the Boak building in 2003 buying out his brother's interest. The property had been in the family since the early 1980s (and, as Mr Singh emphasised, had been insured against fire for over thirty years). He continued its use for manufacturing clothing, but that ended in the late 1990s. After that it was used for storage. Prior to 2006 the utilities to the building (water, sanitation, gas and electricity) were disconnected, and it was stripped back to a shell, ready for redevelopment. It followed that any commercial use of the Property would be limited to basic rough storage. Both parties do or should recognise that the nature of the occupation and tenancy of insured buildings without services was going to be limited. In evidence both Mr Singh and Sunny showed nostalgia for a building which had been a feature of family life for so long.
The Boak building was 'U' shaped. The centre of the U contained a single storey unit, and openings into that area had been blocked up. Mr Singh and Sunny explained and Mr Jones confirmed that the ground floor of the Boak Building had been converted into offices and a show room with suspended ceilings. The ground floor had modern aluminium windows with a large pane of glass and grills over them. The Defendant says that the ground floor was nothing more than a shell.
Letting and occupation
That and related disputes arise because the Defendant said, at least until the start of the trial, that the Property had been empty and unused since 2001 at the latest. The Defendant says that the Property could not be used for storage (or anything else) because since at least 2001 Mr Singh (or Sunny on his behalf) had been claiming an empty rates exemption for both the Boak and No. 8. In the case of the Boak, this was on the basis that the property was an unoccupied listed building, and in the case of No. 8 and 8a, on the grounds that the premises were empty and awaiting demolition. If the premises had been let, business rates of about £14,000 p.a. would have become payable. This, the Defendant says, was more than could have been obtained for them by way of rent.
Relevance of letting and occupation. These matters are relevant as the Defendant contends that the Claimant had no insurable interest because it did not own or have a tenancy over the premises, and had no interest in their preservation, or exposure to prejudice in the event of their loss. The Defendant says that the Claimant's sole interest was in the insurance contract, which could not of itself give rise to an insurable interest in the property insured. The insurance contract "was one of naked speculation (i.e. in substance no more than a disinterested wager on whether or not the Boak would burn down)."
Alleged letting to the Claimant. The terms upon which the Claimant let and managed the properties which were owned by Mr Singh were not documented. The Claimant contends that it had the right to sub-let the properties and to receive and enjoy the rent received from the sub-tenants. The Claimant says that, in return, it was responsible for and paid for the upkeep and maintenance of the buildings, for arranging insurance for the properties, and for the outgoings on the properties. In his oral evidence Mr Singh explained that this arrangement applied to the Boak building. The Claimant paid all its outgoings, and has a responsibility to replace the Boak building. As part of this, Mr Singh arranged for the Claimant to pay him rent. The amount of rent was not calculated by reference to the total rents collected by the Claimant, but reflected what Mr Singh thought was a reasonable charge and was what the Claimant could afford to pay. The rent paid by the Claimant to Mr Singh was recorded in its accounts and financial statements. Similarly, the rent received by Mr Singh from the Claimant was declared in Mr Singh's personal accounts and in his tax returns. The rent was recorded as a credit in Mr Singh's director's loan account with the Claimant. The Claimant's accountant and auditor, Wright & Co, has confirmed that rent was paid by sub-tenants to the Claimant, and then by the Claimant to Mr Singh, as described above. Wright & Co confirmed in writing on 31 st October 2012 that the arrangements were quite normal for owner managed properties, had been adopted in the Claimant's accounts for many years and accepted by HMRC without question, and were entirely acceptable to them as auditors. The report of Mr Lye, the Claimant's...
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