Kelly Builders (Rosemount) Ltd v HCC Underwriting Agency Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Murphy |
| Judgment Date | 01 February 2016 |
| Neutral Citation | [2016] IEHC 72 |
| Docket Number | [2010 No. 8374P] |
| Court | High Court |
| Date | 01 February 2016 |
[2016] IEHC 72
[2010 No. 8374P]
THE HIGH COURT
Contract – Damages & Restitution – Specific performance – Compliance with condition precedent – Construction of policy
Facts: The plaintiff sought an order for specific performance of a contract of insurance entered into between the plaintiff and the defendant and a declaration that the plaintiff was entitled to an indemnity on the basis of that contract. The plaintiff contended that the defendant had the onus to prove that there was non-compliance of the terms of the contract by the plaintiff and thus, the defendant should make the case first. The defendant argued that the plaintiff needed to prove that the defendant was liable and then seek damages subject to the shifting burden in relation to non-compliance.
Ms. Justice Murphy dismissed the plaintiff's claim for specific performance and all other ancillary reliefs. The Court held that in construing the policy, the Court should bear in mind that non-compliance of a relevant condition, which was a condition precedent to liability, could make an insurer escape liability even if the failure to fulfil that condition did not in any way contribute to the cause of the loss. The Court held that since the defendant was relying on the breach of the relevant condition which entitled it to decline the insurance cover, the defendant must prove that there was a breach of relevant condition by the plaintiff. The Court found that though the spread of fire in the present case was not linked in any way to the presence of suitable and fully charged fire extinguishers near the place of operations, the evidence that the fire extinguisher in question was suitable but not fully charged would be sufficient to hold that the insurer had no liability as there was a non-compliance of that condition precedent by the plaintiff.
The plaintiff in these proceedings seeks an order for specific performance of a contract of insurance entered into between the plaintiff and the defendant; a declaration that the plaintiff is entitled to an indemnity from the defendant pursuant to the provisions of that contract in respect of all liability for loss and damage sustained to the premises known as National University of Ireland, Maynooth, County Kildare as a result of a fire which took place on 28th November, 2010; an indemnity in respect of the plaintiff's liability for loss and damage sustained to National University of Ireland, Maynooth as a result of said fire and; further, or in the alternative, damages for breach of contract.
The plaintiff company, Kelly Builders (Rosemount) Limited is a limited liability company engaged in the business of building contracting. The defendant company, HCC Underwriting Agency Limited is a limited liability company incorporated in the UK, engaged in the provision of insurance services. The plaintiff and defendant were parties to a contract of insurance bearing Policy Number B200/OMP600136 which related to the plaintiff, and its employees or agents, engaged in carrying out work as building contractors in various locations. The events giving rise to this claim arose as a result of a fire which broke out on the campus of NUI Maynooth on 28th November, 2010 while a sub-contractor of the plaintiff company, Mr. Brian Feeney, was carrying out hot works to repair a flat roof on the premises which involved the use of burning, welding and cutting materials.
The policy entered into between the plaintiff and the defendant was subject to a number of conditions precedent including burning, welding and cutting conditions. At issue in these proceedings is the plaintiff's compliance with condition 7(a) which reads as follows:
‘7. The following must be kept available for immediate use near the scene of operations:
(a) suitable and fully charged fire extinguishers…’
At the outset of the proceedings, the Court heard legal argument from both parties in respect of the running order of the proceedings and the issue of the onus of proof.
The plaintiff submitted that the conditions precedent of the policy should be strictly construed and that the onus of proving the breach of a condition precedent is on the insurer who seeks to avail of the alleged breach of condition to withhold cover. The plaintiff then submitted that the practical result of that position is that once it is established that there was a policy in existence, that a fire occurred, that a claim was made and that such claim was declined, the onus of proof rests on the defendant such that the defendant should be required to present its case first. The plaintiff noted in this respect that significant admissions are made in the Defence including the existence of a policy, the occurrence of the fire, the submission of a claim and the existence of the relevant condition precedent. It noted that the core of the defendant's case, as laid out at paragraph 23 of the Defence is that ‘ the defendant was fully entitled to decline cover on the grounds that the Plaintiff had failed to comply with the Policy Endorsement and in particular para. 7 of same. If, which is denied, there were two fire extinguishers present, neither of them were fully charged and/or suitable’. The plaintiff submits therefore that on the pleadings in this case, the fact of the policy, fire, claim and declinature are not in issue and the core issue is whether the defendant insurance company is entitled to avail of an alleged breach of condition to avoid indemnifying the plaintiff in respect of its liability to NUI Maynooth.
The plaintiff relied on paragraph 5-31 of Buckley, Insurance Law, 3rd Ed., (Dublin, 2014) in support of its contention that although it is the plaintiff who seeks specific performance of the insurance policy, the onus of proof is on the defendant to prove a breach of any conditions of that policy. It would appear that the law in this regard is as stated in MacGillivray, Insurance Law, 12th Ed., (London, 2012) at paragraph 10-089:
‘It is for the insurer who alleged that the assured's breach of warranty or condition provides him with a defence to a claim to prove that there has actually been a breach. This had been accepted at least since Parke B.'s judgment in Barrett v. Jermy (1849) 3 Ex, 535 at 542. It is open to the parties to insert express words to shift the burden of proof, but clear words would need to alter what has been an established principle of insurance law for over a century.’
The plaintiff noted a number of judgments referred to by the authors in support of the position outlined above including Stebbings v. Liverpool and London and Globe Insurance Company Limited [1917] 2 K.B. 433 and Sofi v. Prudential Assurance Company [1993] 2 Lloyd's Reports 559. The plaintiff also points to the following remarks of Lord Goddard CJ in Bond Air Services Limited v. Hill [1955] 2 Q.B. 417 at 427:
‘It is axiomatic in insurance law that, as it is always for an insurer to prove an exception, so it is for him to prove the breach of a condition which would relieve him of his liability for a particular loss’.
Lord Goddard CJ went on to state at 428:
‘I think, for a century and probably much longer, [it] has always been regarded as a fundamental principle of insurance law, that it is for the insurers who wish to rely on a condition to prove it.’
The plaintiff also drew the Court's attention to the case of Simons v. Gale [1957] 2 Lloyd's Reports 485 in which Walsh J in the Supreme Court of New South Wales referred to the dicta of Lord Goddard CJ in Bond Air Services and stated as follows at p. 491:
‘This “fundamental principle” seems to be stated by his Lordship in the sentence last quoted as being applicable to all cases of breach of condition. But the earlier passages I have quoted from his reasons suggests that it may not apply in relation to a breach of a condition precedent to the formation of the policy and that it may be limited to cases of breach of a condition which would relieve the insurer from liability’.
Finally, the plaintiff relied on Cornhill Insurance plc v. D.E. Stamp Felt Roofing Contractors Limited [2002] EWCA Civ. 395. In that case, a subcontractor was sued for causing damage to a school extension when a fire broke out following the use of a propane gas blowtorch. The insurance policy in question contained extensive provisions in relation to fire precautions that had to be taken, but the condition was prefaced by the following statement:
‘It is a condition precedent to any liability that the insured shall have arranged for the following precautions to be taken whenever carrying out any work involving the application of heat’.
In its decision, the Court of Appeal noted that the terminology used drew a distinction between making arrangements for precautions to be taken and promising that such arrangements would actually be complied with. The Court held that as the insured had made the necessary arrangements by setting up a safety system, there was no breach of the provisions of the condition even though the insured's employees had failed to adhere to the arrangements. Longmore LJ made the following comments in relation to the findings of the trial judge concerning the onus of proof, at paragraph 37:
‘For my part I can see no fault in the judge's reasoning on this aspect of the case. She records that Mr. Stamp's evidence as to his practice was unchallenged. She records there was some evidence of examination of the work area, and that there was some evidence that Mr. Stamp had considered fire hazards in addition to construction details. This is a condition which is very much to the advantage of insurers. If insurers wish to take advantage of...
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...protected by overlapping sheets or screens of non-combustible material”) and Kelly Builders (Rosemount) Ltd v HCC Underwriting Agency Ltd [2016] IEHC 72 (where the provision of “suitable and fully charged ire extinguishers” near the area of any burning, welding or cutting of materials was a......