“BUSINESS INTERRUPTION Definitions Indemnity Period The period beginning with the occurrence of the Incident and ending not later than the Maximum Indemnity Period thereafter during which the results of the Business shall be affected in consequence thereof Turnover The money paid or payable to the Insured for goods sold and delivered and for services rendered in the course of the Business at the Premises Maximum Indemnity Period as stated in the Schedule Uninsured Working Expenses as stated in the Schedule Gross Profit The amount by which 1) the sum of the amount of the Turnover and the amounts of the closing stock and work in progress shall exceed 2) the sum of the amount of the opening stock and work in progress and the amount of the Uninsured Working Expenses Rate of Gross Profit The rate of Gross Profit earned on the Turnover during the financial year immediately before the date of the Incident Annual Turnover The Turnover during the twelve months immediately before the date of the Incident. Standard Turnover The Turnover during the period in the twelve months immediately before the date of the Incident which corresponds with the Indemnity Period …….. to which such adjustments shall be made as may be necessary to provide for the trend of the Business and for variations in or other circumstances affecting the Business either before or after the Incident or which would have affected the business had the Incident not occurred so that the figures thus adjusted shall represent as nearly as may be reasonably practicable the results which but for the Incident would have been obtained during the relative period after the Incident Basis of Loss Settlement The undernoted terms of settlement apply only if the paragraph title appears in the Schedule to this Section Gross Profit/Estimated Gross Profit The insurance under this item is limited to loss of Gross Profit due to a) Reduction in Turnover and b) Increase in Cost of Working and the amount payable as indemnity thereunder shall be a) In respect of Reduction in Turnover: the sum produced by applying the Rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall fall short of the Standard Turnover in consequence of the Incident b) In respect of Increase in Cost of Working: the additional expenditure (subject to the provisions of the Uninsured Working Expenses clause) necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in Turnover which but for that expenditure would have taken place during the Indemnity Period in consequence of the Incident but not exceeding the sum produced by applying the Rate of Gross Profit to the amount of the reduction thereby avoided . less any sum saved during the Indemnity Period in respect of such of the charges and expenses of the Business payable out of Gross Profit as may cease or be reduced in consequence of the Incident provided that if the sum insured by the item on Gross Profit be less than the sum produced by applying the Rate of Gross Profit to the Annual Turnover (or to a proportionately increased multiple thereof where the Maximum Indemnity Period exceeds twelve months) the amount payable shall be proportionately reduced… Additional Increased Cost of Working The insurance under this item is limited to such further additional expenditure beyond that recoverable under paragraph (b) of any of the above items insured hereby as the Insured shall necessarily and reasonably incur during the Indemnity Period in consequence of the Incident for the sole purpose of avoiding or diminishing a reduction in Turnover or Gross Revenue. Professional Accountants Clause Any particulars or details contained in the Insured's books of account or other business books or documents which may be required by the Company under part (b) of Special Condition 2 for the purpose of investigating or verifying any claim hereunder may be produced by professional accountants if at the time they are regularly acting as such for the Insured and their report shall be prima facie evidence of the particulars and details to which such report relates The Company will pay to the Insured the reasonable charges payable by the Insured to their professional accountants for producing such particulars or details or any other proofs information or evidence as may be required by the Company under part (b) of Special Condition 2 of this Section and reporting that such particulars or details are in accordance with the Insured's books of accounts or other business books or documents provided that the sum of the amount payable under this Clause and the amount otherwise payable under the Section shall in no case exceed the liability of the Company as stated. Special Conditions …………. 2. Claims Conditions a) In the event of any loss destruction or damage in consequence of which a claim is or may be made under this Section the Insured shall - notify the Company immediately - deliver to the Company at the Insureds expense within 7 days of its happening full details of loss destruction or damage caused by riot civil commotion strikers locked-out workers persons taking part in labour disturbances or malicious persons - with due diligence carry out and permit to be taken any action which may be reasonably practicable to minimise or check any interruption of or interference with the Business or to avoid or diminish the loss b) In the event of a claim being made under this Section the Insured at their own expense shall i) - (not later than 30 days after the expiry of the Indemnity Period or within such further time as the Company may allow) deliver to the Company in writing particulars of their claim together with details of all other insurances covering property used by the Insured at the Premises for the purpose of the Business or any part of it or any resulting consequential loss … ii) - deliver to the Company such books of account and other business books vouchers invoices balance sheets and other documents proofs information explanation and other evidence as may be reasonably required by the Company for the purpose of investigating or verifying the claim .. c) If the terms of this condition have not been complied with - no claims under this Section shall be payable ……. BUSINESS INTERRUPTION – ALL RISKS. (Exclusions) CONSEQUENTIAL LOSS arising directly or indirectly from (d) disappearance unexplained or inventory shortage misfiling or misplacing of information …”
“42 On or about12 December 2008 , TB notified Mr Burbedge of Layton Blackham ("LB"), then their insurance brokers, of the discovery of JON's thieving activities. On that date, Mr Burbedge notified AIG of a claim for theft of stock under their fidelity policy. AIG appointed as loss adjusters ASL. By email dated that same day i.e.12 December 2008 , ASL made an initial request to Mr Burbedge for information as set out in a schedule attached to that email which ASL said would be helpful in presenting the claim to insurers including a detailed description of internal controls relating to stock recording and counting and, in due course, a schedule of all the stock items thought to have been stolen. Mr Burbedge forwarded that request to Mr Page [Finance Director of TB]. 43. On15 December 2008 , Mr Burbedge sent an email to Gina Griffiths of Layton Blackham asking her to notify AXA of the incident. In particular, Mr Burbedge asked her to inquire whether AXA would want to appoint WC [Woodgate & Clark Ltd, Loss Adjusters] or would be happy to rely on ASL …. 44 On18 December 2008 , there was an initial meeting which took place at the TBDC attended by Messrs Page, Connolly, and Burbedge on behalf of TB; and Mr Ledger and Ms Raby of ASL and Mr [John] Coonan of WC. The meeting lasted about 1½ hours. There is a dispute between the parties as to precisely what was said and discussed at that meeting.”
“65 On13 February 2009 , Mrs Stone sent an email to Ms Raby [of ASL, AIG’s Loss Adjuster] and Mr Coonan [AXA’s Loss Adjuster] confirming a meeting on2 March 2009 . The email states, in particular: "As explained, the purpose of the meeting is to provide the outstanding information previously requested to enable you to report to your principals with the aim of securing a commitment to provide indemnity. This includes … item 1 on your 29 December e-mail … I shall also circulate headline claim details so you have an idea of overall quantum and how it was calculated. … all items relevant to recovery possibilities will be provided.…. Subsequently Lindsay [i.e. Mr Page of TB] can produce the more in depth stock and financial information needed to support the claim (John the balance of your shopping list is currently parked here …)”
“67 On2 March 2009 , in accordance with Mrs Stone's request, an important meeting took place at TB's offices attended by Mrs Stone, Mr Burbedge, Mr Page, Ms Raby, and Mr Coonan. There are three separate contemporaneous notes of this meeting i.e. Mr Burbedge's, Mrs Stone's and Mr Coonan's. In addition, each of them as well as Mr Page gave evidence both in their written witness statements and in cross-examination as to what happened at this meeting. Drawing these different pieces of evidence together, the following is a summary of my conclusions as to the discussion at that meeting: i) Mr Coonan asked for various documents and reiterated that the information he was seeking was largely unchanged from what he had sought in December 2008. ii) Neither Mr Page nor Mrs Stone said that the requests were unreasonable as such. However, Mr Page said that in the first instance AXA should confirm whether or not liability (i.e. for BI losses) was accepted and then TB would, if such confirmation were provided, go on to provide all documentation that would be required in support of the figures and agree the methodology and assumptions. Although I accept that this was not an outright refusal as such, my assessment of the totality of the evidence is that, contrary to the evidence of Mr Page, this was more than a "suggestion" on his part. Rather, Mr Page was adamant that he did not have the resource to provide all the financial and stock detail requested; and he made it clear that he was not prepared to put in the time and incur the cost of obtaining and preparing suchinformation unless he knew that AXA were, in principle, going to pay the claim. TB's representatives indicated that all necessary supporting documents, turnover records and stock reconciliation sheets would then be supplied; but producing such information would be laborious and would require the use of external resources, the cost of which they were unwilling to incur until after agreement in principle by AXA that losses of gross profits adequately demonstrated would be reimbursed. This is consistent with, for example, Mrs Stone's contemporaneous note which states: "Not prepared to do work until liability admitted" and Mr Coonan's subsequent email dated24 March 2009 . iii) Mrs Stone raised the question of accountant's charges. She said that TB wanted insurers to pay for KPMG to provide the information listed in items 2 to 7 of Mr Coonan's "shopping list". Mr Coonan said that in his view TB had to pay for the cost of preparing and presenting a quantified claim to AXA but that cover was available for additional costs incurred to produce particulars to verify the information. Mrs Stone argued that the costs of providing the information requested should be accepted under the policy. Mr Coonan said he did not believe the cover for accountants' fees was as broad as she was suggesting.”
“In his written statement, it was Mr Page's evidence that Mr Coonan seemed to accept his proposal i.e. that AXA should first confirm in principle whether or not liability was accepted before the information requested was provided. However, I am satisfied that Mr Coonan never expressed himself in such terms. In cross-examination, Mr Page accepted that this was indeed the case although his evidence was that this was his (Mr Page's) interpretation of Mr Coonan's manner because he (Mr Coonan) did not disagree and said he was taking it to his principals. I do not accept that evidence in particular because, quite apart from Mr Coonan's own evidence, it is plain from Mrs Stone's evidence that he (Mr Coonan) did disagree. As she said in her written statement: "I would say positions did not change during the meeting as the adjusters had no authority to make decisions on liability or funding." Rather, it seems plain that the meeting ended on the basis that Mr Coonan would report back to underwriters, take further instructions and get back to her when such instructions had been obtained.”
“i) Mr Coonan referred to his requests for detailed evidence supporting loss and to the position about that indicated by TB. ii) Mr Coonan commented about various difficulties for TB on the claim for loss of profits. iii) Mr Coonan reported that TB had requested that it instruct either KPMG or other forensic accountants to present a quantified claim and that the accountants' charges be accepted under the Professional Accountant's Clause (PAC); and that he had advised TB that it was responsible for the costs of preparing and presenting a quantified claim although cover was available for additional costs for accountants to produce particulars to verify the information. He said that he did not believe the clause might be used to fund the costs of accountants investigating and presenting a quantified claim and asked whether AXA agreed.”
“73 Mr Coonan e-mailed Mrs Stone noting "I have issued a further report to Insurers and currently await instructions. I shall contact you again once these instructions are received." In addition, Mr Coonan stated that the information in the stock and loss of profit documents provided was "… entirely speculative regarding frequency and size of thefts and not supported by factual information" and then ended as follows: “I note that your client is not prepared to undertake the exhaustive reviews and analysis of stock shortage and claim reconciliation information at this stage until such time as agreement in principle that liability is accepted has been provided.” “I note that your client is not prepared to undertake the exhaustive reviews and analysis of stock shortage and claim reconciliation information at this stage until such time as agreement in principle that liability is accepted has been provided.”
“74 Following receipt of Mr Coonan's interim report dated17 March 2009 , it was carefully considered by Mrs Julie Taylor, the claims handler at AXA responsible for the claim. She prepared an internal Strategy Report for consideration at the internal Strategy Meeting that (in the event) took place on30 March 2009 . Her main focus was on issues of cover; she left quantum details for Mr Coonan to pursue. As to accountants' charges, she considered the PAC and agreed with the views indicated by Mr Coonan. In the report, Mrs Taylor proposed that AXA should agree to pay for producing information to verify a quantified claim but not to put the claim together in the first place, in accordance with Mr Coonan's interpretation of the policy wording; and this was agreed at the meeting. However, it would appear that she did not relay these views to Mr Coonan. Also, she could not commit to paying any sums under the PAC whilst liability under the policy remained uncertain; and she 'parked' responding to Mr Coonan on the matters he had raised for instructions until she had got legal advice from solicitors on policy indemnity.”
“75 On1 April 2009 , Mrs Taylor telephoned Mr Coonan and told him that Kennedys had been instructed and that she would update him in due course. As submitted by Mr Cogley, it would seem that this can only be a reference to the matters upon which Mr Coonan was seeking instructions and on which he had said he was going to revert to Mrs Stone. In the event, Mrs Taylor never did revert to Mr Coonan. In cross-examination, Mrs Taylor explained that this was due to the fact that she could not authorise expenditure under the PAC because she (i.e. AXA) had not admitted liability and was still seeking legal opinion. Further, Mrs Taylor accepted in cross-examination that she did not go back to Mr Coonan because, until AXA had received legal advice, AXA had "parked" getting back to him and "parked" the matters that he had raised and in respect of which he wanted instructions; and that these matters would remain "parked" until AXA "unparked" them. In addition, she also accepted that all the liability issues that Mr Coonan had raised in his interim report dated17 March 2009 were also effectively "parked" until AXA had dealt with the issues then being considered by the solicitors. This evidence would seem consistent with the note of her telephone conversation with Mr Coonan. Mr Cogley relied heavily on this evidence; and it was his submission that thereafter the defendants never "unparked" the quantum issues…”
“Advised in discussion with U/w re intent of cover & what we are actually covering. Legal advice will be sort [sic], not least of all because of potentially [sic]. Insured do not want to expend money on collecting info if indemnity not being offered… [AS will] diary for two weeks, I’ll advise her in meantime if anything to report.”
“129. …in effect agreed to take instructions with regard to paying the costs of instructing accountants to do such work - i.e. the work that Mr Coonan described in that email as the "exhaustive reviews and analysis of stock shortage" – or at least made a representation that that is what he would do and that he would revert once such instructions had been received. To that extent, I accept that Mr Coonan, in effect, agreed or at least represented that matters in respect of such work had to await the receipt by Mr Coonan of instructions from insurers and the communication of such instructions by Mr Coonan to Mrs Stone. As it seems to me, the highpoint of Mr Cogley's case is that Mr Coonan never did revert one way or another and, in my view, Mrs Stone and Mr Page reasonably assumed, in the meantime, that the need to do such work was "parked" pending a response by Mr Coonan or until, at least, the question of liability in principle had been resolved one way or another. In legal terms, there was, in my judgment, a limited agreement to such effect; alternatively an estoppel by representation to similar effect.”
“131 …… and for the avoidance of doubt, if and to the extent that Mr Page or Mrs Stone may have thought or assumed that TB was not required to deliver such documents/information, such thinking or assumption was in my view not the result of any agreement or representation by the defendants. Moreover, there is, as I understand, no dispute that none of the documents/information in Category 7 of Mr Coonan's shopping list was ever delivered to AXA. In my judgment, this is fatal to TB's claim in these proceedings.”
“I have issued a further report to Insurers and currently await instructions. I shall contact you again once those instructions are received. …. I note that your client is not prepared to undertake the exhaustive reviews and analysis of stock shortage and claim reconciliation information at this stage until such time as agreement in principal [sic] that liability is accepted has been provided.”
“Professional Accountants Clause Any particulars or details contained in the Insureds books of account or other business books or documents which may be required by the Company under part (b) of Special Condition 2 for the purpose of investigating or verifying any claim hereunder may be produced by professional accountants if at the time they are regularly acting as such for the Insured and their report shall be prima facie evidence of the particulars and details to which such report relates. The Company will pay to the Insured the reasonable charges payable by the Insured to their professional accountants for producing such particulars or details or any other proofs information or evidence as may be required by the Company under part (b) of Special Condition 2 of this Section and reporting that such particulars or details are in accordance with the Insureds books of accounts or other business books or documents……”
“The Insured shall: ii) - deliver to the Company such books of account and other business books vouchers invoices balance sheets and other documents proofs information explanation and other evidence as may be reasonably required by the Company for the purpose of investigating or verifying the claim.”
“I accept that when a judge at first instance has to decide whether there has been a waiver of a breach of warranty for the purposes of section 34(3) of the MIA 1906 , and the judge therefore has to decide whether the insurer has made an unequivocal representation that it will no longer rely on its legal right that it is discharged from liability under the policy, the judge is making a finding of fact on whether an unequivocal representation has been made. The judge has to place his assessment of the evidence against the legal concept of what constitutes an “unequivocal representation by words or conduct”
“… difficult in particular because (i) Mr Nicholson submitted (rightly in my view) that insofar as AXA owed any relevant duty of good faith, it did not extend to any general duty positively to warn TB that it needed to comply with policy terms; (ii) Mr Cogley's submission that the defendants were "hoodwinking" Mrs Stone and TB is tantamount to an allegation of bad faith on the part of AXA but, as submitted by Mr Nicholson, such serious allegation was not put to Mr Coonan or any other AXA witness as, in my view, it needed to be if it was to be pursued; and (iii) there is no evidence at all to support the suggestion that it should be inferred that the defendants' silence was deliberate which was, in my view and again as Mr Nicholson submitted, similarly a serious allegation which needed to be put if it was to be pursued.”
“7 But once it is recognised that in a contract of insurance, and indeed in certain other contracts, an element of good faith is to be observed, and that that element may impose certain duties particularly of disclosure between one party and the other, duties which may vary in their content and substance according to the circumstances, then a question may arise as to the utility of the concept of an utmost good faith or an uberrima fides. In my view the idea of good faith in the context of insurance contracts reflects the degrees of openness required of the parties in the various stages of their relationship. It is not an absolute. The substance of the obligation which is entailed can vary according to the context in which the matter comes to be judged. It is reasonable to expect a very high degree of openness at the stage of the formation of the contract, but there is no justification for requiring that degree necessarily to continue once the contract has been made.”
“dishonesty’ in an equitable sense”
“It follows that, in the absence of some other identifiable error, such as (without attempting an exhaustive account) a material error of law, or the making of a critical finding of fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified.”
“As to the validity and general reliability of such exercise, the central issue was the methodology adopted by Mrs Britten in assessing the timing of unfulfilled demand and, in particular, her use of what was described as a “blended gross margin”
“...even applying the broad approach stated above, I remain unpersuaded that it provides a sufficiently reliable or reasoned method for assessing the appropriate loss of profit in the present case. In particular, as submitted by Mr Nicholson, it seems to me that (apart from some “dilution” in the early part of each season), it assumes, wrongly in my view, that the (hypothetical) sales profile of the stolen items would have followed the profile of actual sales. By way of a number of homely examples, Mr Cogley vigorously advocated that such criticism was fundamentally flawed; and Mrs Britten herself emphasised that she had applied the “full range of discounts”
“…I do not necessarily accept the accuracy or reliability of the exercises carried out by Mr Emery and Mrs Rawlin. In that regard, Mr Cogley advanced a number of criticisms with regard to what he described as their “granular” approach. I recognise the potential force of at least certain of those criticisms. However, it is unnecessary for me to consider them in detail because, even if certain of those criticisms are justified in whole or in part, they do not affect my overall conclusion viz that TB has failed to establish even on the basis of the broad approach any lost profit above the excess”
“The purpose of my analysis was to establish the rate of diminishing SKU availability during the last 8 weeks of the Retail season. Mrs Britten has used it to establish the rate of Diminishing SKU Availability for the first 8 weeks of the season. It is clear to me that this is not an appropriate use of my analysis because the rate of sale products in the first few weeks of the season is much slower than in the last few weeks”
“Q. Do you agree with that as well? A. Yes I do. Q. Well, that is a nonsense, isn’t it, Mrs Britten, that you have done that, because you’re looking at the wrong end of the season? The reason why that doesn’t work is as Mr Emery explains at 5.3.6? A. It would be a nonsense if the result was significantly different, but in fact I tested the percentage that I’d used by carrying out the same analysis, but only looking at last dates following the TBDC going out of stock in the first two SUN periods, and the percentages that I arrived at were very, very similar. So I decided that, having adopted Mr Emery’s numbers before I saw his criticism, I had no need to change them. Q. Do we find any reference to that testing in your 25 June report? A. No, because I’d written the report before I saw this. Q. Do we find your test or analysis in any material put before the court? A. No, because I haven’t changed my calculations. Q. Mrs Britten, the point is it’s just fundamentally inappropriate to use an analysis that one expert has carried out for one purpose and then apply it backwards the wrong way round for an entirely different purpose; that’s correct, isn’t it? A. Put like that, yes.”