World Challenge Expeditions Ltd v Zurich Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Dias |
| Judgment Date | 07 July 2023 |
| Neutral Citation | [2023] EWHC 1696 (Comm) |
| Docket Number | Case No: CL-2021-000322 |
| Court | King's Bench Division (Commercial Court) |
[2023] EWHC 1696 (Comm)
Mrs Justice Dias
Case No: CL-2021-000322
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, WC4A 1NL
Mr Daniel Shapiro KC, Mr Michael Harper and Ms Alethea Redfern (instructed by Fenchurch Law Limited) for the Claimant
Mr Jonathan Hough KC and Mr William Harman (instructed by Clyde & Co. LLP) for the Defendant
Hearing dates: 24–27 April, 2–4, 9–11, 15–18 May 2023
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:00 on Friday 7 th July 2023.
INTRODUCTION
The Claimant, World Challenge Expeditions Ltd (“ WCE”) is a specialised travel company registered in the UK which provides adventurous, “challenging”, expeditions worldwide for school students (known as “ Challengers”). It was formerly a subsidiary of TUI but became part of the Travelopia group of travel companies in 2017 following the acquisition of TUI's Specialist and Activity sector by KKR.
From at least 2012 to 31 March 2016, WCE had taken out personal accident and travel insurance, including cancellation cover, with Royal & Sun Alliance Ltd (“ RSA”). From 1 April 2016, similar cover was provided by Zurich Insurance plc, whose business has since been transferred to the Defendant, Zurich Insurance Company plc (“ Zurich”). It is unnecessary for the purposes of this judgment to distinguish further between the two Zurich entities. The present claim concerns Zurich's Z-Alert Corporate Personal Accident and Business Travel Policy No. 7108302(19) (the “ Policy”) which was in force from 1 April 2019 to 31 March 2020.
As everyone knows, COVID-19 (“ Covid”) emerged in late 2019/early 2020 and rapidly spread worldwide severely restricting overseas travel. As a result, WCE was obliged to cancel nearly all of its booked expeditions for 2020. Under the applicable legislation, WCE had a statutory obligation in the event of cancellation to refund UK Challengers in full for any payments they had made. Similar regulations applied in the case of EU nationals and, although WCE had more flexibility under its own terms and conditions to offer alternative remedies in the case of overseas Challengers (such as deferrals or diversions), it ultimately repaid more than £10 million which it had received from Challengers by way of deposits and advance payments.
As will appear below, it was the firm belief of WCE that it was insured under the Policy in respect of any deposits which it was contractually obliged to refund to Challengers, such belief having been (in its view at least) confirmed by the fact that both RSA and Zurich had historically settled WCE's cancellation claims on that basis, albeit that no physical payments were ever made since all such claims fell within the applicable policy deductible. This is denied by Zurich, which contends that on its true construction the Policy only indemnified WCE for irrecoverable costs paid out by WCE to third party suppliers (for example, in respect of flights, accommodation and other trip costs). On that basis, Zurich maintains that WCE is entitled to an indemnity under the Policy of less than £150,000. The difference is stark.
The principal issues between the parties fall into two broad categories: (1) the correct construction of the Policy; (2) whether Zurich is precluded by estoppel or collateral contract from denying that the Policy provided the coverage which WCE thought it had. Further issues arise in relation to aggregation and quantum.
THE PARTIES
As indicated above, WCE is part of the Travelopia group of companies. Travelopia consists of 123 legal entities registered in 35 different companies grouped into ten divisions. WCE is part of the Education Division and itself has a number of subsidiaries registered in different countries. At the time relevant to this claim WCE partnered with schools to organise and provide expeditions from some 21 different departure countries or groups of countries to around 36 different destination countries or groups of countries, including a number of undeveloped countries off the beaten track. The most important source markets in terms of numbers were the UK, Australia, the Middle East and the USA.
At the time of the claim, the Group Managing Director of WCE was Mr Peter Fletcher, who had joined the company in 2005 as a School Programme Manager. Mr Stuart Morris was the Operations and Products Director responsible for trip planning and logistics, including compliance and health and safety aspects. He also had worked for the company since 2005 in a variety of operational roles. Both men had assumed their current positions in around 2016. Mr James Venn joined the company as a Financial Controller in 2009 and was its Finance and Commercial Director at the relevant time.
Zurich is the well-known insurance company. Mr Aaron Stephens was one of its Senior Underwriters in the Accident & Health (“ A&H”) Department, who was responsible for the underwriting of the WCE cover from its inception in 2016. Mr Joe Ratcliffe was the Claims Relationship Manager for WCE from 2016 to 2018 and was succeeded in that role by Ms Lauren Wall. Claims under the cover were handled by the A&H claims handling team, of which Sharna Aylett was the lead manager. Other members of the claims handling team included Mr Daniel Mullan who subsequently left in 2017 to join Zurich's A&H underwriting team, and Ms Danielle Langford (previously Mace). Another key figure in the events giving rise to this claim was Mr Alexander Blake, an Executive Adjuster, who in 2020 was working as a Marine Cargo, Fine Art and Specie Claims Adjuster but who was asked in February 2020 to support the A&H claims team and thus became involved in the WCE account at that stage.
The brokers when the cover was first placed with Zurich in 2016 were Aon plc (“ Aon”) who were the brokers for TUI's business generally. In February 2017, following the sale to KKR, Travelopia used their own broker, Willis Towers Watson (“ WTW”), and WTW placed the renewals for the 2017 policy year onwards. The relevant Account Manager at WTW was Mr Ian Brown, while the Loss Management Executive responsible for managing the relationship with WCE was Mr Thomas Warner.
WCE's BUSINESS
WCE's expeditions were focused on personal growth and development. Challengers were generally students aged 13–18 from the UK and Europe, the Middle East, the USA, Australia and New Zealand. Expeditions lasted from 7–27 nights and were led by self-employed leaders with one or two accompanying teachers.
Challengers would sign up for a trip following a presentation at their school which generally took place about 18–24 months prior to the anticipated departure date. WCE would then organise a pre-trip programme to prepare the Challengers and their teachers for what lay ahead. This included a launch meeting at which the WCE account manager would talk about the destination and what Challengers wished to achieve from the trips. There would then be an itinerary planning meeting where Challengers could choose their preferred activities, followed by a two-day camping trip to learn basic survival skills. Closer to the departure date, a final meeting would be held to discuss any last-minute issues such as visa applications and vaccinations. Information and tips were also available on a web portal which Challengers could access as they chose.
As far as payment was concerned, Challengers would pay an initial deposit of around £100–£250 on signing up, followed by monthly or quarterly instalments depending on the length of time to departure and the trip price. The final balance (known as the “ balloon payment”) would generally be paid around 60 days before the departure date. Although there was no set formula for the calculation of the balloon payment, it averaged around 60% of the total trip price.
As will be appreciated, there was a substantial lead time between the booking of a trip by the Challenger and the actual departure, during which a considerable amount of work was undertaken by WCE as described above. However, flights would not usually be booked until about 3–4 months prior to departure and payment would not be made to the airline until even closer to the departure date, around 1–2 months before. Accommodation and trips (“ in-country costs”) were not paid for until later still, frequently when the trip was already under way. Sums payable by WCE to the self-employed expedition leaders would usually be paid on submission of an invoice after the conclusion of the trip.
The timing of the balloon payment therefore coincided with the requirement to pay for flights, accommodation and other in-country costs. It was not in dispute that WCE typically received around 40% of the total trip cost before having to make any substantial third party outlay and that the trip cost charged by WCE to Challengers included its internal costs and an element of profit.
Although WCE partnered with schools to organise trips, its actual contractual arrangements were for the most part concluded directly with the Challengers and/or their families. Individual contracts were governed by WCE's terms and conditions (“ T&C”s), of which it had various different sets applying in different markets. These had been produced by the central legal teams at TUI and, later, Travelopia, and covered a number of matters including cancellation. While broadly consistent, each set of T&Cs was drafted so as to conform to any applicable legislation. Thus, the T&Cs applicable to UK Challengers reflected the fact that WCE was subject in this...
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