William McIlroy Swindon Ltd v Quinn Insurance Ltd
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE EDWARDS-STUART |
| Judgment Date | 12 October 2010 |
| Neutral Citation | [2010] EWHC 2448 (TCC) |
| Docket Number | Case No: HT-10136 and HT-10208 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 12 October 2010 |
[2010] EWHC 2448 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: The Honourable Mr Justice Edwards-Stuart
Case No: HT-10136 and HT-10208
Mr Neil Moody QC (instructed by Kennedys) for the First Claimant
Mr Ben Elkington (instructed by Greenwoods) for the Second Claimant
Mr Nicholas Davidson QC (instructed by Weightmans) for the Defendant
Hearing date: 28 July 2010
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.
The Hon Mr Justice Edwards-Stuart:
This is the trial of preliminary issues arising in two claims that have been brought under the Third Parties (Rights Against Insurers) Act 1930. The insured was a building and roofing contractor called A Lenihan Limited (“Lenihan”). The insurer was Quinn Insurance Limited (“Quinn”). The issues arise out of an arbitration clause in the policy that provided that any dispute between the insured and the insurer in respect of the insurer's liability in respect of a claim was to be referred to arbitration within 9 months of the dispute arising and, that if it was not referred to arbitration within that period, then the claim was deemed to have been abandoned.
By judgments of this Court dated 12 August and 17 December 2009, Lenihan was held liable to the Claimants in the first action for causing a fire in a building in Lewes, Sussex, on 5 September 2006. By a judgment dated 21 April 2009 Lenihan was held liable to the Claimant in the second action. The amount of damages payable was assessed in each action on 11 December 2009 and 13 January 2010, respectively. The judgments were not satisfied and shortly afterwards Lenihan went into voluntary liquidation.
Quinn had denied liability on the grounds that Lenihan was in breach of certain policy conditions and so it took no part in the actions brought against Lenihan. There was a dispute as to when Lenihan was notified of Quinn's repudiation of the claim, but even if this occurred on the date contended for by Lenihan it is common ground that there was no reference of any dispute to arbitration within 9 months of Lenihan becoming aware of the repudiation. Although the preliminary issues include points relating to the incorporation of the arbitration clause and its true construction (it was submitted that the arbitration clause is not an exclusive remedy), the issue that has occupied most of the argument is whether or not a dispute under the policy can have arisen before Lenihan's liability to the Claimants had been established. This raises an important question of principle.
The Claimants submit that a person insured under a liability policy such as this one has no right of action against his insurer unless and until his liability to a third party has been established by litigation, arbitration or agreement. Accordingly, they submit, no dispute can arise within the meaning of the arbitration clause until this has happened. If this submission is correct, then the 9 month time bar has no application and the Claimants are entitled to pursue their claims against Quinn.
If the Claimants are wrong on this primary point, and their arguments about incorporation of the arbitration clause and its true construction fail also, then the Claimants seek an extension of time within which to refer the dispute to arbitration under section 12 of the Arbitration Act 1996.
At the outset of the hearing of the preliminary issues I raised a point in relation to my jurisdiction in relation to the application for an extension of time. Quinn is an insurance company that carries on business in Dublin, but it has operated in the UK insurance market since 2003. General Condition 26 of the Policy is a choice of law clause which provides as follows:
“Under the relevant European and Irish legal provisions the Company and the Insured Person are free to choose the law applicable to the Contract. We propose that Irish Law will apply.”
There is no evidence before the court that either Lenihan or its brokers ever proposed that any other system of law should apply to the Policy, and so on the face of it Irish Law applies. General Condition 16 of the Policy, the arbitration clause, provided that the arbitrator was either to be appointed jointly by the insured and the insurer in agreement or, failing agreement, by the “chairman for the time being of the Bar Council”. The Bar Council of Ireland is, like the Bar Council of England and Wales, generally known as the Bar Council. It is likely therefore that, if the default position is applicable, namely that Irish Law applies to the Policy, the reference to the “Bar Council” is a reference to the Bar Council of Ireland.
In these circumstances it seemed to me that I probably had no jurisdiction to entertain an application under section 12 of the Arbitration Act 1996 because the only courts which would have jurisdiction to consider an extension of time for starting arbitration proceedings would be the courts of Ireland. I was told by Mr Nicholas Davidson QC, who appeared for Quinn, that it was Quinn's policy to agree to the resolution of disputes by arbitration in England in cases where the insured was a company which carried on business in England and that this was why Quinn had not taken any point based on the application of Irish Law and had conceded in its skeleton argument that the seat of any proposed arbitration would be in England and Wales. However, in my judgment that concession cannot confer jurisdiction on the court where it would otherwise lack jurisdiction. If, as appears to be the case, the law governing the Policy is the law of Ireland, then I consider that an English court has no jurisdiction to extend the time within which an arbitration may be started. This may only be done by an application to the appropriate court in Ireland. Accordingly, in these circumstances the parties agreed that, if the question arose, I should indicate how I would exercise my discretion under section 12 without actually making any decision.
In addition to the trial of the preliminary issues, I have before me an application by Quinn for summary judgment in the first action brought by McIlroy/Mackays and CWO.
With this brief introduction, I now turn to the facts.
The facts
Lenihan was first insured by Quinn against public liability and other risks for 12 months with effect from 21 July 2004. The policy was renewed annually for the following two years. Lenihan had brokers, Primo plc (“Primo”), who arranged the insurance. So far as these applications are concerned, the material terms and conditions of the policy were the same for each of the three years.
The underlying claim arises from a fire which broke out at 198 Lewes High Street, Sussex, on 5 September 2006. The building contained shop premises on the ground floor and flats on the first and second floor. The freehold was and is owned by Rannoch Investments Limited (“Rannoch”), the Claimant in the second action. It is represented by Mr Ben Elkington. The lessee was William McIlroy (Swindon) Limited (“McIlroy”). Mackays Stores Limited (“Mackays”) occupied the ground floor shop premises pursuant to a licence from McIlroy. Mackays and McIlroy are related companies.
At the time of the fire, refurbishment works were being undertaken. Mackays had entered into a building contract with Cathedral Works Organisation (Chichester) Limited (“CWO”). CWO had in turn sub-contracted certain works to Lenihan. McIlroy, Mackays and CWO are the claimants in the first action, and they are represented by Mr Neil Moody QC.
It has been alleged that, contrary to statements made by Lenihan's employees who were on site when the fire started, the fire was caused by the careless use of a blowtorch by one of those employees. Quinn asserts that it is and was entitled to refuse to indemnify Lenihan for this reason. By contrast, in a letter dated 3 March 2008 to Quinn, Lenihan wrote “we would again state categorically that we strongly refute any inference that the fire was a direct consequence of our works and as such, we do not accept liability”.
According to Quinn's records, on 2 July 2008 it sent a letter to Lenihan in which it stated that its investigations into the claim were now complete and that it would “not be offering indemnity due to a breach of the general terms and conditions of the policy”. The two conditions relied on were General Conditions 6 and 17 of the General Policy Conditions.
General Condition 6 was what is often known as a “reasonable precautions” clause, which required the insured to take all reasonable precautions to prevent accidents and “to comply with all applicable statutory requirements and to maintain their ways, works, machinery, plant and premises in good order and repair”. It is now settled that clauses in this form are not apt to exclude liability for the insured's negligence. Something further is required: see Fraser v P N Furman (Productions) Ltd [1967] 1 WLR 898; for example, that the insured should not deliberately court a danger, the existence of which he recognises, by refraining from taking any measures to avert it.
General Condition 17 was headed “Material Information” and provided that the Policy would be voidable in the event of non-disclosure by the insured and/or his agents/servants of any material information or knowingly providing inaccurate or false information.
The letter went on to say that during the course of its negotiations Quinn had been prejudiced by non-disclosure of material facts and that it...
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