William McIlroy Swindon Ltd v Quinn Insurance Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Henry Brooke,Lord Justice Hooper,Lord Justice Rix |
| Judgment Date | 18 July 2011 |
| Neutral Citation | [2011] EWCA Civ 825 |
| Docket Number | Case No: A1/2010/2547, A1/2010/2548 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 July 2011 |
and
[2011] EWCA Civ 825
Lord Justice Rix
Lord Justice Hooper
and
Sir Henry Brooke
Case No: A1/2010/2547, A1/2010/2548
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
MR JUSTICE EDWARDS-STUART
Royal Courts of Justice
Strand, London, WC2A 2LL
Neil Moody QC (instructed by Kennedys) for the First Appellants
Ben Elkington (instructed by Greenwoods) for the Second Appellants
Nicholas Davidson QC (instructed by Weightmans) for the Respondents
Hearing date: 24 th May 2011
On 5 th September 2006 a fire broke out in shop premises in the High Street in Lewes. In due course it spread to neighbouring premises as well. The premises where the fire broke out were owned by Rannoch Investments Ltd ("Rannoch") and consisted of a ground floor shop with two residential flats above, all of which were leased to William McIlroy (Swindon) Ltd ("McIlroy"). At all material times the shop premises were occupied by an associate company Mackays Stores Ltd ("Mackay").
At the time of the fire refurbishment works were being carried out in the shop pursuant to a contract between Mackay and Cathedral Works Organisation (Chichester) Ltd ("CWO"). CWO sub-contracted the roof work and the work involved in the removal of paint from the front of the building to A Lenihan Ltd ("Lenihan"), who carried on business in a small way as a roofing and building contractor. It was alleged that the fire had been caused by one of Lenihan's employees using a blowtorch in a negligent way while he was engaged in paint removal.
At all material times Lenihan were insured under a policy of public liability insurance issued by Quinn Insurance Ltd ("Quinn"). Although Lenihan contended that the outbreak of fire was not their fault, their brokers duly notified Quinn when the fire took place, and on being told that Lenihan were denying that their workmen were using hot works on the day of the fire, Quinn closed their file. They later reopened the file after Rannoch had written a letter of claim to Lenihan, and after a considerable delay they refused to provide an indemnity to Lenihan for two reasons. The first related to the way in which the blow torch had been used. It was said that this contravened General Condition 6 of the Policy, which required the Insured to take all reasonable precautions to prevent accidents. The second, which was later abandoned, relied on alleged material non-disclosure arising out of untrue statements which Lenihan's employees were said to have made to loss adjusters following the fire.
In due course Rannoch and neighbouring occupiers brought an action against McIlroy, Mackay, CWO and Lenihan. The first three defendants defended the action and brought CPR Part 20 proceedings against Lenihan. Lenihan and Quinn were kept informed of the progress of the litigation, but took no part in it. Default judgments were entered against Lenihan by Rannoch on 21 st April 2009 and by the first three defendants in the Part 20 proceedings on 12 th August 2009.
On 19 th November 2009 all the claims in the main action (other than the claim against Lenihan) were settled at a mediation. On 11 th December 2009 Ramsey J held that the settlements were reasonable. He went on to assess CWO's damages against Lenihan in the sum of £600,000 and costs, and the claim by McIlroy and Mackay in the sum of £150,000 and costs. On 13 th January 2010 the same judge assessed the value of Rannoch's claim against Lenihan in a total sum of £792,542 inclusive of interest and costs.
Lenihan did not satisfy any of these judgments. On 17 th February 2010 a voluntary winding up resolution was passed, and Lenihan's rights against Quinn were then vested in the various claimants pursuant to section 1 of the Third Party (Rights against Insurers) Act 1930.
This led to two actions being brought promptly against Quinn to recover the damages assessed against Lenihan by Ramsey J. McIlroy, Mackay and CWO were now jointly represented in the first action, and Rannoch were the claimants in the second. These two actions have been managed and heard together as have the appeals. In their defence Quinn raised an entirely new ground for non-payment, namely that Lenihan should have instituted arbitration proceedings within nine months of February 2009, when Quinn's refusal of an indemnity was first communicated to Lenihan, and the actions were now time-barred. In this context Quinn relied on General Condition 16 of the policy which provided that:
"Any dispute between the Insured and the Company on our liability in respect of a claim or the amount to be paid shall, in default of agreement, be referred within nine months of the dispute arising to an Arbitrator…and the decision of the arbitrator shall be final and binding on both parties.
If the dispute has not been referred to arbitration within the aforesaid nine month period, then the claim shall be deemed to have been abandoned and not recoverable thereafter."
Ramsey J directed that Quinn's entitlement to rely on General Condition 16 should be tried as a preliminary issue, and this preliminary issue came on for trial before Edwards-Stuart J on 28 th July 2010. A number of witness statements were filed with the court. Their contents were taken to be true, and the judge heard no oral evidence. So far as is relevant to the present appeals, the judge rejected the claimants' contention that the time bar in General Condition 16 was an onerous and unusual clause which had not properly been brought to Lenihan's attention, and held that their claims were time-barred by the operation of General Condition 16.
The claimants now appeal to this court. The trial judge gave them permission to appeal on the time-bar point, and Richards LJ granted the McIlroy claimants permission to appeal on the "unusual and onerous condition" point. Quinn were content that Rannoch should be entitled to rely on this point, too, but it was common ground on the hearing of the appeals that if the appellants were successful on the time-bar point there would be no need for this court to go on to consider whether or not sufficient steps had been taken to draw Lenihan's attention to this provision of their policy.
The central issues to be determined on the appeals on the time-bar point were said to be whether Quinn's refusal of indemnity in February 2009 amounted to a dispute which triggered the time-bar clause, and/or whether their refusal in December 2009 to provide an indemnity to Lenihan in relation to the judgments awarded against them amounted to a further dispute which also triggered a right to arbitrate. If it did, Quinn accept that the claims were brought in time and are content to submit to the jurisdiction of the High Court to resolve the matter. I should say at once that the alternative argument has no merit at all, since if time did run against Lenihan from February 2009 onwards, then "the claim shall be deemed to have been abandoned" in November 2009 and no further dispute could possibly arise under the indemnity cover aspects of the policy the following month.
The argument on the appeal followed a different course from that apparently pursued before the judge. On the face of it, the judge's conclusion seemed remarkably unfair, since his construction of the clause would require Lenihan to have initiated proceedings within nine months of Quinn purporting to repudiate liability under the policy, even though Lenihan were contending that the fire was not their fault, and even though, if they were indeed responsible, their liability to the present claimants might not have been established at any point during the nine-month period. It was therefore necessary for us to consider the wording of General Condition 16 with care to see if it required us to uphold the judge's interpretation.
It is trite law that liability under an indemnity policy does not accrue unless and until the existence and amount of the liability to relevant third parties has first been established, whether by a judgment or by an arbitration award or by agreement. See Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 per Lord Denning MR at pp 373–4; Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 per Lord Brandon at p 966 A-B.
It follows that no dispute could have arisen between Lenihan and Quinn on Quinn's liability under the public liability section of the policy, whether in respect of a claim or the amount to be paid, unless and until Lenihan's liability to the present claimants had been established by the judgments on the assessment of damages which Ramsey J directed to be entered in December 2009 and January 2010 respectively. It follows that the judge was wrong to hold that Lenihan's rights under the policy had been extinguished by that time by the operation of General Condition 16. The present actions were commenced well within the nine-month period after December 2009 or January 2010 which is stipulated by General Condition 16, and Quinn takes no point on the fact that court proceedings, as opposed to arbitration proceedings, were initiated in order to enforce these claims.
The only argument which provided any cause for pausing before reaching this obviously fair conclusion was founded on a decision of this court in Walker v Pennine Insurance Co Ltd [1980] 2 Lloyd's Rep 156 which...
To continue reading
Request your trial
-
Mythen Construction Ltd v Allianz Plc
...that it will rely on the decision of the Court of Appeal of England and Wales in William McIllroy (Swindon) Ltd v Quinn Insurance Ltd [2011] EWCA Civ 825, [2012] 1 All ER (Comm) 241 at the trial in answer to this point. 17 In response, Allianz says that it is incorrect that Section 62 giv......
-
Technip Saudi Arabia Ltd v The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company
...Mr Brocklebank that this is not a strong authority. The judge's decision on the issue of time-bar was reversed by the Court of Appeal: [2011] EWCA Civ 825. Paragraph [70], quoted above, is part of the judge's reasoning on that issue, albeit that it does not appear that the point there disc......
- Navig8 Chemical Pools Inc. v Nu Tek (HK) Pvt Ltd and Others
-
Maciej Kotarski v The Director of Border Force, TC 06508
...61 Air Canada v United Kingdom (1995) 20 EHRR 150, para 36 Lindsay v HMRC [2002] STC 588 paragraph [52] HMRC v Lawrence Jones & anr [2011] EWCA Civ 825 per Mummery LJ at paragraph [71] Worx Food & Beveridge BV v The Director for Border Revenue [2014] UKFTT 774 (TC), paragraphs 56, 58, 66, 8......
-
Discontinued Business Group Update - July 2011
...policy was time-barred and when did the "claim" arise? William McIllroy (Swindon) Limited and others v Quinn Insurance Limited [2011] EWCA Civ 825 A third party alleged that the insured had negligently caused a fire which damaged its property. The insured denied liability but notified its p......
-
Tort, Insurance and Ideology: Further Thoughts
...Act 2010 comes into force, thisrule of practice will become a rule of law.24 William McIlroy (Swindon) Ltd vRannoch Investments Ltd [2011] EWCA Civ 825.25 SI 2002 No 3061.Rob Merkin© 2012 TheAuthor.The Moder n Law Review© 2012 The Modern Law Review Limited. 305(2012) 75(3) MLR insurance sys......