Ann Stewart v Karl Mckenna and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Barrett
• Judgment Date: 30 May 2014
• Neutral Citation: [2014] IEHC 301
• Court: High Court
• Docket Number: [No. 6228 P/2009]
• Date: 30 May 2014

Stewart v McKenna & Kapada Ltd t/a Homebuilder

BETWEEN/

ANN STEWART

PLAINTIFF

AND

KARL McKENNA AND WENDY McKENNA AND KAPADA LIMITED TRADING AS HOMEBUILDER

DEFENDANTS

AND

ALLIANZ PLC

THIRD PARTY

[2014] IEHC 301

[No. 6228 P/2009]

THE HIGH COURT

Insurance – Assignment of benefit – Preliminary issues – Defendants seeking clarification as to their rights as assignees of the benefit of an insurance policy – Whether the assignment is valid and good against the insurer

Facts: The first and second defendants, Mr and Mrs McKenna, had building works carried out to their house in 2008 by the third defendant, Kapada Ltd t/a Homebuilder. At all times the defendants were insured by Allianz plc, the third party. The plaintiff, Mrs Stewart, was the McKennas” next-door neighbour. She alleged Kapada had caused damage to her property in the course of carrying out the building works and commenced proceedings in 2009. In 2010 Allianz advised the defendants that it was not providing an indemnity in respect of the claim against them, repudiating liability. In 2011, Kapada assigned to the McKennas the benefit of the insurance policy and the entitlement to receive any sums payable thereunder. The McKennas disputed that Allianz was entitled to avoid the policy and asserted that the effect of s.62 of the Civil Liability Act 1961 is to confer on them and the plaintiff an entitlement to seek to be indemnified by Allianz in respect of any loss or damage suffered by them where they have a valid claim against Kapada in respect of that loss or damage, and where Kapada is entitled under the policy to be indemnified in respect of its liability on foot of such claim. By order of the court made in 2013, it was directed that the following preliminary issues of law be determined by the High Court between the defendants and Allianz: (1) whether the McKennas have a legal entitlement to obtain an indemnity pursuant to the policy made between Allianz and Kapada; (2) whether such claim has been abandoned pursuant to clause 11 of the policy by not having been referred to arbitration within 12 months and/or whether the McKennas are entitled to an extension of time under s.45 of the Arbitration Act 1954; and (3) whether such claim must be brought by arbitration pursuant to clause 11.

Held by Barrett J, regarding (1), that it was not an assignment of the contract of insurance but of the benefit of the policy; he noted that there was no prohibition or requirements on the assignment in the form of policy. He held that it did not appear that any consent from the insurer is required as there is no change in the contents of the policy, considering Schneideman v Barnett [1951] NZLR 301. He held that the assignment of 2011 was valid and that Allianz is on notice of same and is, if required to make a payment under that policy, is now entitled and would be bound in the event of payment to make such payment to the McKennas. In terms of the McKennas” rights under s.62, considering Dunne v PJ White Construction Co. Limited (In Liquidation) [1989] ILRM 803, Barrett J held that they have not secured judgment against Kapada in respect of such liability. On (2), he held that the McKennas were not a party to the live arbitration commenced in 2010. He held that the notion of an extension of time application was misfounded as the rights of the McKennas only took effect when the policy was assigned. Regarding (3), Barrett J held that the McKennas are eligible to submit to the jurisdiction of such arbitrator as may be appointed in the arbitration proceedings that commenced with the referral of 2010. However, the court did not consider that they are obliged to do so. As assignees of certain choses in action arising under the policy, Barrett J held that they can sue Allianz in its capacity as purported debtor; they cannot join the existing arbitration through submission to the arbitrator and then litigate their dispute with Allianz in court proceedings.

Barrett J held that the assignment of the policy was valid, that Allianz is on notice of same, and that Allianz, if required to make a payment under that policy, is now entitled, and would be bound in the event of payment thereunder, to make such payment to the McKennas. Barrett J held that the McKennas cannot avail of s.62, nor is an order under s.45 available to them. The court considers that the McKennas can elect to join the arbitration proceedings that, the court concludes, were validly commenced in 2010, but they may also elect not to. The court considers that the McKennas can sue Allianz in its alleged capacity as debtor provided they have not previously proceeded to arbitration.

Judgment approved.

CIVIL LIABILITY ACT 1961 S62

ARBITRATION ACT 1954 S45

SCHNEIDEMAN v BARNETT 1951 NZLR 301

MACGILLIVRAY & ORS MACGILLIVRAY ON INSURANCE LAW 12ED 2012 639

WILLIAM BRANDTS SONS & CO v DUNLOP RUBBER CO LTD 1905 AC 454 2 LDAB 91 1904-7 AER REP 345

STOCKS v DOBSON 43 ER 411

DUNNE v PJ WHITE CONSTRUCTION CO LTD (IN LIQUIDATION) & ORS 1989 ILRM 803 1989/5/1360

COMPANIES ACT 1963 S231(1)(A)

GRESHAM INTERNATIONAL LTD (IN LIQUIDATION) & ANOR v MOONIE & ORS 2010 CH 285 2010 2 WLR 362 2010 BUS LR 67 2009 2 BCLC 256 2009 AER (D) 14 (JUN) 2009 EWHC 1093 (CH)

LONDON METALLURGICAL CO, IN RE 1897 2 CH 262

INSOLVENCY ACT 1986 (UK)

DUBLIN CITY DISTILLERY (GREAT BRUNSWICK STREET DUBLIN) LTD & ANOR v DOHERTY 1914 AC 823

MACCANN & ORS COMPANIES ACTS 1963-2012 2012 490

MONTEDIPE SPA v JTP-RO JUGOTANKER (THE JORDAN NICOLOV) 1990 2 LLOYDS 11

BAYTUR SA v FINAGRO HOLDINGS SA 1992 QB 610 1991 3 WLR 866 1991 4 AER 129

ARBITRATION ACT 2010 S4(2)

ARBITRATION ACT 2010 S3(1)

Mr. Justice Barrett

1 Mr and Mrs. McKenna are the purported assignees of the benefit of a particular insurance policy and the entitlement to receive and/or recover any, if any, sums payable by the insurer thereunder. This case is concerned with whether the relevant assignment is valid and good against the insurer and what the McKennas' rights as assignees are.

2 In August 2008, Mr. and Mrs. McKenna had building works carried out to their house at 50 Upper Grand Canal Street, Dublin 2, by the third named defendant, Kapada Limited t/a Homebuilder, a company of which Mr. McKenna was a director and shareholder. At all material times both the McKennas and Kapada were insured by Allianz plc., the former pursuant to a standard household policy and the latter pursuant to a standard building contractor's policy. In September 2008, Mrs. Stewart, the next-door neighbour of the McKennas, alleged that Kapada had caused damage to her property at 52, Upper Grand Canal Street, in the course of carrying out the building works and intimated that she intended to maintain a claim against the McKennas and Kapada. Allianz plc was notified by the McKennas and Kapada of this pending claim and commenced handling the claim in the usual way, appointing loss adjustors to liaise with the loss adjustors appointed by Mrs. Stewart's insurers and also instructing engineers to inspect Mrs. Stewart's property and to provide advice in relation to the pending claim. On 9^th July, 2009, Mrs. Stewart commenced her proceedings. In a letter of 26^th March, 2010, Allianz advised the McKennas and Kapada, then in liquidation, that it was not providing an indemnity in respect of Mrs. Stewart's claim against them. In summary, the grounds given for this repudiation of liability were threefold: (1) that under paragraph 6 of the policy exclusions set out at the beginning of the insurance policy with Kapada, Allianz was not obliged to indemnify the insured party in respect of any liability assumed by it under any contract or agreement unless such liability would have attached to it in the absence of such contract or agreement and that the liability in respect of which Kapada had sought indemnity was a liability which had been assumed by it under a contract or agreement with Mrs. Stewart in circumstances where liability would not have attached to it in the absence of such contract or agreement; (2) that under exclusion 9 of the Public Liability section of the policy, Allianz was not obliged to indemnify Kapada in respect of any liability for costs and expenses incurred in replacing or making good faulty, defective or incorrect workmanship, design or specification, material goods or other property supplied or installed or erected by or on behalf of Kapada, and that the liability in respect of which Kapada had sought indemnity was a liability arising out of allegedly faulty, defective or incorrect workmanship so that this exclusion was operative; and (3) that Allianz had not been given immediate notification of the claim in respect of which the indemnity had been sought.

3 On 23^rd March, 2011, Kapada, acting by its liquidator, assigned to Mr. and Mrs. McKenna the benefit of the insurance policy and the entitlement to receive any sums payable thereunder. This assignment referred at the first recital to 'a policy of insurance number DN CPD 3544665 ('the Policy ') made between Allianz Corporate Ireland plc (the 'Insurer') and the Company the Insurer agreed to indemnify and insure the Company in the manner therein provided for the period 1^st June 2006 to 31^st May 2007'. A second purported assignment was entered into by the same parties on 14^th October, 2011 in which the first recital refers to 'a policy of insurance number DN CPD 3544665 ('the Policy') made between Allianz Corporate Ireland plc ('the Insurer ') and the Company the Insurer agreed to indemnify and insure the Company in the manner provided therein for the period 1^st June 2008 to 31^st May 2009'. The version of the second assignment supplied to the court has been executed by Kapada only. Regardless, the court does not consider that this second assignment was necessary. The policy is clearly defined in the first assignment as meaning...