Dalamd Ltd v Butterworth Spengler Commercial Ltd [2018] EWHC 2558 (Comm)

[2018] EWHC 2558 (Comm)

Case No CL-2015-000276

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 05/10/2018

Before

MR JUSTICE BUTCHER

Between

Dalamd LimitedClaimant

Butterworth Spengler Commercial LimitedDefendant

Neil Hext QC and Peter Morcos (instructed by Edwin Coe LLP) for Claimant

Daniel Shapiro and Mek Mesfin (instructed by Berrymans Lace Mawer LLP) for Defendant

Hearing Hearing dates: 12 to 19 June and 13 July 2018.

Judgment Approved

[1]The Claimant’s claim is for insurance brokers’ negligence. It arises out of a fire which occurred on 21 October 2012 at a waste recycling facility at 3 Johnsons Lane, Widnes, Cheshire (“the Premises”).

The parties and the business

[2]The Claimant (“Dalamd”) was incorporated in 2014. It claims as the assignee of the causes of action against the Defendant of Widnes Land Partnership LLP (“Widnes”) and of JL Sorting Limited (“JLS”). The business of the Defendant (“Butterworth Spengler”) is insurance broking.

[3]The matters at issue arise from the operations of 3 entities owned by members of the same families. One of these was Doumac Ltd, which traded as Ecocycle (“Doumac”). Until August 2012, Doumac carried on a recycling business from the Premises. JLS was a company which, in effect, took over Doumac’s business at the Premises from 2 August 2012. Widnes was the freehold owner of the Premises.

[4]Doumac was originally set up in 2008 by three individuals, Colin and Leslie Douthwaite, who were brothers, and a friend of theirs, Andrew McQueen. It was incorporated in January 2008, and the brothers and Andrew McQueen all became equal shareholders, and directors of the company. It obtained planning permission for use of the Premises as a materials recycling facility in March 2008, and in about August 2008 acquired a waste management licence from the Environment Agency (“EA”). It commenced trading thereafter.

[5]The Douthwaite brothers and Andrew McQueen had invited their respective parents to invest in the purchase of the Premises after they had been identified as a suitable site for the business which it was intended Doumac should carry on. This led to the formation of Widnes, of which the members were the Douthwaite brothers’ parents, Leslie Douthwaite senior and Angela Douthwaite, and Andrew McQueen’s parents, Douglas and Anne McQueen. Widnes purchased the Premises for just over £950,000 in 2008.

[6]Doumac rented the Premises from Widnes, initially pursuant to an informal arrangement. On 12 May 2010, however, Doumac and Widnes entered into a formal lease, which was for a period of 15 years, backdated to 1 October 2008. It provided for Doumac to pay a rent at £75,000 per annum for the first 18 months, £150,000 for the next 30 months, and £250,000 thereafter. By clause 8.3 of the lease Widnes was entitled to be paid an insurance rent by Doumac, defined as the annual premium for insuring the building and the “loss of Annual Rent of the Property for three years”.

[7]The Premises consisted of three large sheds on one side, with a road passing north-south down the site. On the other side of the road, at the entrance to the property, there was a two-storey office building. The sheds have been referred to as sheds 1-3, with shed 1 the most northerly and shed 3 the most southerly.

[8]Of the directors of Doumac, only Colin Douthwaite had any experience in the waste recycling field, as he was, before Doumac started operations, site manager for a local waste recycling company called Gaskell’s Waste. When Doumac was set up he became in charge of its day-to-day operations, with the title of Operations Director. Leslie Douthwaite junior’s and Andrew McQueen’s roles were less clearly defined. Leslie Douthwaite junior had the title of Managing Director and was in charge of raising finance and was the first “port of call” for customers. Andrew McQueen was the Financial Director. He was also, initially, responsible for arranging insurance. From about November 2011, however, that role passed to Colin Douthwaite, and it was with Colin Douthwaite that Butterworth Spengler had most interactions and communications during 2012.

[9]Doumac employed Philip Roche, from 2008, as its health and safety manager. Philip Roche, who had previously been in the fire service before being a driving instructor and accident investigator, knew Colin and Leslie Douthwaite junior, through Leslie Douthwaite senior, who was a family friend.

The prior insurance brokers

[10]Insurance was originally broked through David Roberts and Partners (Insurance Brokers) Ltd (“DRP”). Buildings insurance in the name of Widnes was placed with Novae at Lloyd’s with a sum insured of £800,000 for the period 25 August 2009 to 24 August 2010. Widnes also had property owner’s liability cover with Lloyd’s Syndicates through Amlin Insurance Services Ltd (“Amlin”) for the same period.

[11]Doumac had employer’s, public and product liability cover from Amlin for the period 25 August 2009 to 25 August 2010. Doumac also had a contractor’s all risks policy with Lloyd’s Syndicate 1209 managed by XL London Market Limited (“XL”) which insured it in respect of its plant and machinery. Doumac also appears to have had some property damage cover with Novae.

The appointment of Butterworth Spengler

[12]In about August 2010, Doumac became dissatisfied with DRP, in particular because of a significant increase in the premium for its liability cover. Andrew McQueen contacted Butterworth Spengler in August 2010, the initial enquiry being made to Gary Spengler, who referred the matter to his colleague, Andrew Thomson.

[13]Butterworth Spengler were able to place Doumac’s liability insurance for a lower premium and Doumac subsequently requested that Butterworth Spengler obtain property and plant and machinery cover for it. Doumac and Widnes, by an appointment letter dated 22 September 2010, retained Butterworth Spengler to arrange insurance in relation to the Premises for Doumac and also for Widnes.

The Course of Events during Butterworth Spengler’s retainer up to the Fire

[14]There are a number of factual disputes between the parties as to what occurred during the period of Butterworth Spengler’s retainer. It will be necessary to return to some of them in more detail at a later point. At present, I will set out a summary of what are largely undisputed facts showing how the issues between the parties arise.

[15]At the 2010 renewal, Doumac’s liability insurance was switched to RSA. The rest of the cover remained with the existing insurers. This meant that(1) Doumac had commercial combined insurance, covering, inter alia, the buildings with Novae, and contractor’s all risks cover with XL; and

(2) Widnes had commercial combined cover with Novae.

[16]A mid-term review meeting took place between Andrew McQueen and Andrew Thomson on 9 February 2011. There was a discussion of whether business interruption (“BI”) cover should be obtained. Andrew Thomson subsequently sent Andrew Thomson the notes of this meeting.

[17]A Pre-Renewal Review meeting took place on 29 June 2011. One of the matters discussed was “Uninsured Risks”, and Butterworth Spengler were asked to source quotations for D&O, Terrorism and BI insurance. Andrew Thomson had provided Andrew McQueen with some “Guidance Notes” on BI cover and on this occasion he asked Andrew McQueen to fill in an “Insurable Gross Profit Calculation”. This Andrew McQueen had provided by 1 August 2011, and a quotation was obtained through brokers Thompson Heath & Bond Ltd (“THB”) for gross profit BI cover of £16,000 (excluding IPT). Because of the scale of that proposed premium, and because of doubts as to whether the client would be prepared to pay that amount, THB and Andrew Thomson considered that it would be sensible to supply indications of the cost of standalone Increased Cost Of Working (“ICOW”) cover in order that these could be discussed at the renewal meeting on 17 August 2011.

[18]A further meeting took place between Andrew McQueen and Andrew Thomson on 17 August 2011. Andrew Thomson handed over a “Risk and Insurance Report”. One section of this report dealt with what was described as “Uninsured Risk: Business Interruption”. It stated:

“We have chatted on a number of occasions about looking at insuring your business interruption risk. Following the completion of the calculation sheet which you kindly provided we are pleased to confirm a quotation listed below. Cover Sum Insured Premium (exc IPT) Gross Profit Sum Insured £1,600,000 £16,000 Increased cost of working £250,000 £2500 Additional Increased Cost Of Working £100,000 £1000 Stock Debris Removal cover £250000 £2500 Indemnity Period 12 months 12 months”

[19]After the meeting, Andrew Thomson produced minutes, which record:

“The following uninsured risks were discussed at length:- Business Interruption: is tied to the property insurance and the rate applicable is £1. AT [Andrew Thomson] explained that there is a cost implication to insure the Gross Profit figure and that this figures [sic] needs to be set accurately as otherwise it would be subject to average. The relative merits of other forms of business interruption was discussed including Stock debris removal, Increased cost of Working and Additional Cost of Working. These limits can be set by Ecocycle. AM [Andrew McQueen] to discuss with fellow directors and advise if cover is required. If affordable this cover is recommended.”

[20]Andrew Thomson sent those minutes to Andrew McQueen later on 17 August 2011. The email under cover of which he sent them stated “If you need anything else on the Business Interruption or D&O let me know”. On 19 August 2011 Andrew Thomson then sent the Renewal Report to Andrew McQueen, “so you can forward to the other Directors to discuss the D&O and Business Interruption”. On 6 September 2011 Andrew Thomson chased Andrew McQueen about BI cover, stating that “At the moment it is quite a big exposure for you, but understand that there is a cost implication”. On 16 September 2011, Andrew McQueen emailed Andrew Thomson as follows:

“We have had time to digest and discuss the business interruption insurance. We would like to add your recommended policies to our annual premium. So can we start a policy for the following: Increased cost of working, £250,000. Additional increased cost of working £100,000 and stock debris removal cover of £250,000 … The cost should be £5000.”

[21]On 27 September 2011 Andrew Thomson emailed Ms Clarke of THB as follows:

“Further to our telephone conversation today. I have had a good chat with our mutual client Ecocycle today. He has finally caught up with his fellow directors and chatted through the BI risk. They would have liked to take the full Gross Profit cover but unfortunately finances dictate that this is not possible at the moment. They would however like to take some cover to protect the business. …”

They would however like to take some cover to protect the business. …”

[22]The email then set out the covers which Andrew McQueen had identified in his email of 16 September 2011. These were then placed, with Novae.

[23]Apart from BI insurance, Andrew Thomson had otherwise been instructed at the 17 August 2011 meeting to renew the existing covers. This was done. What this meant was that, for the 2011/2012 year, there were the following covers in place:(1) for Doumac, material damage and ICOW/Additional ICOW and stock debris removal cover with Novae, liability cover with RSA, and contractors’ all risks cover with XL;

(2) for Widnes, buildings and property owners’ liability cover with Novae.

[24]From 3 to 5 January 2012 a storm caused damage to a conveyor between sheds 1 and 2 and some damage to the sheds. The damage to the conveyor affected Doumac’s processing ability. This led to a build-up of waste in sheds 1 and 3, and in due course to the storage of quantities of waste outside the buildings. On 27 January 2012 the EA inspected and reported to Doumac that the quantity of waste stored on site was a breach of the quantities agreed in the permit, and the length of time that the material had been stored on site was also a breach. Doumac took steps to move material off the site. By March 2012 the situation as to quantities of waste at the Premises was back under control.

[25]The storm damage to the plant and machinery (i.e. the conveyor) was indemnified by XL in the amount of £55,629. Novae paid out an agreed settlement of £125,000 under the ICOW cover. There was also a claim on the buildings cover, but Novae contended, inter alia, that much of the damage was pre-existing, and that the buildings were underinsured.

[26]In addition, and significantly, on 14 February 2012 Novae gave 30 days’ notice to cancel its policies because “the risk was unacceptable and the tenant [was] trading contrary to the conditions of the [Environment] Agency Licence”. There is an issue as to what Butterworth Spengler told Doumac as to the Novae cancellation. Andrew McQueen and Colin Douthwaite gave evidence that they were told that the Novae policy was simply due for renewal and that Novae was no longer interested in the waste recycling sector. Andrew Thomson gave evidence that he did tell them that Novae was cancelling the policy.

[27]What is undisputed is that on 9 March 2012 Andrew Thomson sent an email to Colin Douthwaite which said:

“As you know the buildings insurance runs out on 14th March. We have been around the market and have only one insurer interested, but this is subject to a surveyor coming round to have a look and inspect the site before going on cover.”

[28]The “insurer interested” there referred to was Aviva. The policy would be written on Aviva’s behalf by Core Underwriting Ltd (“Core Underwriting”), which was a company in the same group as Miles Smith London Market Broking (“Miles Smith”), which is a firm of brokers, and which was the channel for communications between Butterworth Spengler and Core Underwriting. On 16 March 2012, a colleague of Andrew Thomson, Geoff Orrell, emailed Aviva’s quotation to Colin Douthwaite. With the quotation was a copy of an “External Storage Condition”, a “Waste Storage and Removal Condition” and a “Hot Work Condition”. The External Storage Condition provided:

“If in relation to any claim for Damage to the Property Insured by or resulting from fire or explosion You have failed to fulfil any of the following conditions, You will lose Your right to indemnity or payment for that claim. Combustible materials stored outside of any building must be kept at least 10 metres away, or twice the height of stacked storage if this is greater, from any building. Combustible materials stored outside of any building must be kept at least 2 metres away from any boundary fence or wall. Checks should be made at the end of each working day to ensure that the specified clear areas are maintained between any stored combustible materials and the building, boundary fence or wall.”

[29]Instructions were given to place the cover with Aviva. The Novae policy lapsed at midnight on 14 March 2012. The Aviva policy incepted on 15 March 2012 on a held covered basis. At that time there were two subjectivities: a satisfactory signed and dated proposal form to be provided by 14 April 2012 and a survey to be carried out by Aviva by the same date (which was later extended).

[30]A proposal form for the Aviva cover was completed on 2 April 2012, and signed by Colin Douthwaite. There is an issue as to how it was completed. Colin Douthwaite gave evidence that Andrew Thomson filled in the form in his absence, without having gone through the questions with him, and then gave it to him for signature. Andrew Thomson on the other hand said that he went through the questions with Colin Douthwaite and wrote the answers given by Colin Douthwaite in the proposal form, which Colin Douthwaite then signed.

[31]On 17 April 2012, on Colin Douthwaite’s instructions, Butterworth Spengler asked Miles Smith to increase the sum insured for buildings to £1,125,000 and this was effected by an endorsement dated 8 May 2012.

[32]On 16 May 2012 Butterworth Spengler sent a letter to Colin Douthwaite confirming that they had instructed buildings insurers to hold covered with effect from 15 March 2012. This letter contained a “Duty to Disclose” notice, which included the following:

“Duty to Disclose You are obliged to ensure that the Insurer is provided with full and accurate material facts about your risk … A material fact is anything that may influence an Insurer’s judgement in the assessment of your policy, and should include all incidents/losses that you have dealt with yourself without involving an Insurer. A material fact could include changes to your business activity, criminal convictions or any financial issues such as potential bankruptcies… If you are unsure as to whether a fact is material, we recommend that it be disclosed. Failure to disclose may entitle the Insurers to refuse to pay part or all of any subsequent claims and may invalidate your insurance cover partially or in whole.”

(emphasis in original)

[33]The survey for the Aviva policy was eventually carried out on 17 July 2012 by Marian Rhead of Aviva. Andrew Thomson attended, as did Colin Douthwaite and Phil Roche. There is a dispute as to what Andrew Thomson told the representatives of the insured as to what they should and should not reveal to insurers, and as to whether he was told of previous fire incidents.

[34]What is not in dispute is that during the survey it was identified that there was a breach of the External Storage Condition, in that bales of processed polythene were being stored in close proximity to the sheds, some two to three metres from the shed walls. On the same day, 17 July 2012, Andrew Thomson forwarded a request to Miles Smith for insurers to note the storage of the bales and agree cover whilst they were sold or moved, and indicated that this would take a period of four to eight weeks. Andrew Thomson says that this was following a discussion which he had had with Colin Douthwaite, in which they had discussed the breach of the External Storage Condition, its significance, and the length of time it would take to ensure compliance. Colin Douthwaite’s account was that he had had no such conversation with Andrew Thomson.

[35]A summary of Aviva’s survey report was sent to Butterworth Spengler on about 7 August 2012, and to Colin Douthwaite on about 9 August. It identified the breach of the External Storage Condition. It stated:

“Therefore these bales are to be removed from the premises as soon as possible. In the meantime the remaining bales must be kept at least 10 metres from any building and 2 metres from any boundary walls and fences.”

[36]The document stated that this “Mandatory Risk Improvement” was “To be completed by 16/09/2012”.

[37]By the time of receipt of the summary of the Aviva survey report, a highly significant development had occurred, namely the insolvency of Doumac. Doumac’s financial difficulties had resulted in large part from an increase in the tax for landfill disposal of glass fines in May 2012. By the beginning of July 2012 Doumac’s directors were anticipating that Doumac would enter a pre-pack insolvency arrangement within about three to four weeks. They decided to set up a new business which would take over Doumac’s business but focus on the sorting and recovery of recyclable plastic bottles rather than the processing of comingled waste. The new business was to be carried on by JLS, which was set up on 26 July 2012. Colin Douthwaite and Leslie Douthwaite junior and Andrew McQueen were the directors of JLS as they had been of Doumac. On 31 July 2012 the directors of Doumac made a board resolution to cease trading, and applied to the EA to transfer Doumac’s licence to JLS. JLS purchased Doumac’s goodwill, and took over the Premises, and the bulk of Doumac’s plant and machinery. The waste management licence was transferred to JLS on 17 August 2012. Doumac then entered insolvent compulsory winding up on 20 August 2012. Widnes agreed that JLS could temporarily operate from the Premises under a licence: a lease was not agreed prior to the fire.

[38]While there was an issue as to the date on which Andrew Thomson was given any notice of the insolvency of Doumac, I considered the documentation to indicate, and I find, that he was told in the afternoon of 1 August 2012. At that point Colin Douthwaite told him that Doumac would be entering into liquidation and that the recycling and waste business would be carried on from the Premises by a new company, JLS. I find that he was also told that the business and the risk was the same. While what precisely was said was not agreed it is plain that Andrew Thomson was asked to ensure that Doumac’s existing liability and property damage policies were transferred to JLS to allow it to commence operations immediately.

[39]There is a handwritten file note made by Andrew Thomson, which is dated 1 August 2012, and states the time as 16.20. It is in these terms:

“T/C with Miles Smith. Left message with Miles Smith to note change of name following Ecocycle going into administration. NewCo JL Sorting. Same risk details/ownership. Change with effect 1/8/12. Asked to confirm in email with Hayley. T/C with Premium Credit. Re above, they require new bank details/Business Plan/P&L/Balance Sheet. Details to be emailed over.”

Details to be emailed over.”

[40]There is a further handwritten file note made by Andrew Thomson, again dated 1 August 2012, and stating the time as 16.45. This records a conversation with RSA, the liability insurers. It records:

“T/C with Steve. Explain Ecocycle into administration and new co JL Sorting. All same business/directors etc. Steve confirmed all OK and would not[e] the system.”

Steve confirmed all OK and would not[e] the system.”

[41]As is apparent from the note of the telephone call with Miles Smith, Andrew Thomson had not on that occasion spoken with the person who was the main file handler there, namely Hayley Jennings. On 2 August 2012 Andrew Thomson, as he had been asked to do, sent an email to Hayley Jennings, in the following terms:

“Hayley, I refer to the above. The client has advised us of a change of a trading name. All risk details, process and material facts remain the same as do the common directors and share splits. The insured title needs to read: Widnes Land LLP and JL Sorting Limited. Regards Andy.”

Regards Andy.”

Regards

[42]As to the XL policy, THB invited renewal of this on 8 August 2012. Aviva, through Core Underwriting, quoted to provide this cover in early August 2012, at a lower premium but with a higher excess. JLS decided to renew Doumac’s existing plant and machinery policy with XL. THB was informed of this, and the XL cover was renewed on 25 August 2012. On 31 August 2012 Geoff Orrell contacted Sarah Askew of THB by email and stated that:

“Doumac Ltd t/a Ecocycle has recently ceased trading. The company has re-formed as JL Sorting Ltd. All cover on the policy is to remain the same and nothing has changed. Can you please confirm XL will simply change the name on the policy.”

Can you please confirm XL will simply change the name on the policy.”

[43]In response, Ms Askew asked why Ecocycle had ceased trading, and whether the directors were the same. Geoff Orrell replied:

“The Directors are the same. Doumac Ltd was finished up as they had to restructure the company finances. The January 2012 storm claim and the loss of a large contract has resulted in action needing to be taken in order to safeguard the long term future of the business. It is very much business as usual.”

Ms Agnew then responded, still on 31 August 2012, that underwriters had agreed the name change. XL scratched the slip the same day, and the policy was issued on 8 October 2012. It is very much business as usual.”

[44]On 13 September 2012 Andrew Thomson asked Colin Douthwaite if further time was needed to comply with the External Storage Condition. On 14 September 2012 Colin Douthwaite responded that they would definitely need an extension, and that “It may be for a while”. Underwriters granted a ten-day extension on 14 September 2012. On 20 September 2012 Andrew Thomson sought a further month’s extension. In the email to Ms Jennings he wrote:

“Hayley, I’ve had a catch up with the Ops Director regarding the extension below. They would like to get another months extension. They have reduced the number of bales since survey, but there still remains some outside. Please can you ask insurers to consider another extension. They continue to move bales closest to building first, and have moved some back inside, but as your surveyor will have noted from the visit there are limited areas that are 10 metres from the buildings. The site is fenced, operative 24/7 and access controlled via gated entry. Look forward to hearing from you. Andy”

Andy”

[45]On 26 September 2012, Ms Jennings responded:

“Hi Andrew With reference to the above, following your email of the 20th, please see below response from Underwriters: With regards to extending the outstanding Risk Improvement for the removal of bales which do not comply with the External Storage Condition, we confirm that we are prepared to allow one more month with effect from today and will expire 26/10/2012. During this period the bales must be stored as far away as possible from the building with a minimum distance of 4 metres. We hope that the Insured can comply with this. At the end of this period the External Storage Condition will revert to the usual 10 metres and if by then the insured is unable to comply we will have no alternative but to withdraw cover as the risk is considered to be a heavy one. Can you confirm that the client can comply with the 4 metres & that they are aware that we will be coming off cover if they cannot comply with the 10 metres after the 26/10/2012.”

That email was forwarded to the Douthwaite brothers on 27 September 2012.

[46]Ms Jennings chased for confirmation that the insured was complying with the revised condition in an email of 2 October 2012 which stated “If they are not then cover may be prejudice (sic) in the event of a claim” and which was forwarded to Colin Douthwaite on 3 October 2012. Ms Jennings chased again on 10 October 2012.

The fire

[47]A fire started at the Premises on the evening of Sunday 21 October 2012. It developed into a very significant fire which involved all the sheds and the office building. It burned the waste inside the sheds and the bales stored outside. The Premises were entirely destroyed. The remains of the buildings had to be demolished.

The Claims on the Insurances: Aviva

[48]A claim was made by JLS and Widnes on the Aviva policy. By letter dated 8 November 2012 Cunningham Lindsey reserved Aviva’s rights. The letter set out a number of concerns as to matters affecting the validity of the policy, including whether there had been a proper discharge of the insured’s duty of good faith in relation to disclosure of(i) the past experience of fires at the site;

(ii) the insolvent trading or pending insolvency of Doumac; and

(iii) that JLS was a ‘phoenix company’ and not Doumac by a name change. Further, in relation to matters potentially affecting an entitlement to indemnity, Cunningham Lindsey stated that it appeared to be the case that there was non-compliance with the modified External Storage Condition at the time of the fire. Hope & Williams, Chartered Loss Adjusters, on behalf of the insureds, then sought to answer Cunningham Lindsey’s letter by a letter of their own of 14 November 2012.

[49]In an undated letter, but which must have been sent before 12 December 2012, Cunningham Lindsey wrote that, while investigations were still ongoing in relation to other aspects, including whether the policy was voidable for breach of the utmost good faith, it was already possible for insurers to state their position in relation to the issue of breach of condition. The letter continued:

“We are instructed to advise you accordingly that Aviva Insurance has reached a final decision that, whatever other determinations might be made in due course, it would not in any event volunteer a policy indemnity in this case, if only because of being wholly satisfied of breach of the External Storage Condition of the policy. There was not only the most flagrant breach of the External Storage Condition, but it was both a continuation of breach that was known to each of the Insureds and was also directly causative of the wider fire damage in this case.”

The letter attached a series of plans prepared by Burgoynes (forensic experts instructed by Aviva) which indicated where insurers believed waste had been stored in breach of the relaxed External Storage Condition and a series of photographs of the Premises. Cunningham Lindsey stated that breach of the condition:

“… is unequivocally established by the incident photographs taken by the Fire and Rescue Service, direct factual evidence from the attending Fire Officers and from other factual witnesses. The photographic record is established from the time of the fire itself and even prior to any vehicles coming onto the site; certainly before any clearance at all of the fire debris was undertaken.”

[50]Cunningham Lindsey also addressed an issue which had been raised by Hope & Williams to the effect that even if there had been a breach of the External Storage Condition, Widnes could still successfully claim on the policy by reason of the Non-Invalidation clause therein, which provided:

“Non-invalidation The insurance by this Section will not be invalidated by any act, omission or alteration either unknown to You or beyond Your control, which increases the risk of Damage. However, You must Notify us immediately You become aware of any such act, omission or alteration and Pay any additional premium We require.”

To this argument Cunningham Lindsey stated, inter alia:

“Further, a Non Invalidation Clause cannot ‘over-write’ an express Condition of a policy designed to allocate risk on a certain basis between Insurer and Insured from the very outset of the policy. The reference in the Non Invalidation Clause to, ‘any act, omission or alteration … which increases the risk of Damage…’, is properly limited to such that do not of themselves involve breach of express condition or warranty. Finally a Non Invalidation Clause could have no application in the context of a breach of an arrangement that itself was adopted temporarily to cure an existing breach of Condition, as was the case here. … Breach of the External Storage Condition as at the date of the fire is conclusive against both Insureds.”

Thereafter, on 16 January 2013 Greenwoods, solicitors, on behalf of Aviva stated that in addition to Aviva’s position on breach of the External Storage Condition, Aviva “…is now satisfied that the entire policy is indeed avoidable from the time when cover was continued in the combined names of [JLS] and [Widnes] only because of a misrepresentation as to the history concerning the demise of [Doumac].” However, You must Notify us immediately You become aware of any such act, omission or alteration and Pay any additional premium We require.”

Notify us immediately You become aware of any such act, omission or alteration and

[51]The letter stated that there had been no disclosure to it in August 2012 of the insolvency of Doumac, and that there had, instead, been a misrepresentation that all that was involved was a name change from Doumac to JLS. The letter stated that Miles Smith was not Aviva’s underwriting agent, only Core Underwriting was; and that the only information which appeared on Core Underwriting’s files, “or for that matter of Miles Smith”, was that in the email sent by Andrew Thomson to Ms Jennings on 2 August 2012, which I have quoted above. The letter further stated:

“It is accepted that Aviva Insurance would have the burden of showing inducement to the continuation of cover consequent upon the material misrepresentation of the position, but Aviva Insurance is fully satisfied of that burden being discharged here. Had it been correctly disclosed that [Doumac] had failed insolvently and that the business was being rolled into the new phoenix company of [JLS], then the routine continuation of the cover by [Core Underwriting] would not have proceeded as it did. [Core Underwriting] would have recognised that there was a new prospective insured to be considered in what was then a distinct and unfavourable commercial context. The credit rating and financial position of any prospective insured is a primary consideration for [Core Underwriting] and the request for continued cover in this case would have been referred to Aviva Insurance. It is likely in this case that such a referral would have resulted in Aviva Insurance declining to continue any cover at all under this policy…”

The Claims on the Insurances: XL

[52]XL sent a letter to JLS on 6 March 2013 in which its rights were reserved. That letter referred to the fact that there was an “excessive amount of waste material located all around the premises” at the time of the fire. It also stated that information had recently been received from the EA as to concerns which it had raised with Colin Douthwaite about the amount of waste on site, and the fact that an enforcement notice had been served on 27 July 2012 requiring a reduction of the amount of waste on site.

[53]XL then instructed Clausen Miller, who on 26 April 2013 wrote stating that the XL policy was avoided on the grounds of misrepresentation and non-disclosure. Clausen Miller stated that, for the purposes of the renewal on 25 August 2012, XL had been invited to rely, and had relied, on a proposal form submitted originally in 2010. That proposal had stated:

“In view of the trade the premises and operation are regularly inspected by Health and Safety Executive, EA and the Fire Service and there have been no problems.”

The letter stated that XL’s underwriter had renewed on the understanding that there had been no material changes to this position or to the risk save that (1) the insured had made a claim for storm damage to certain insured equipment, and (2) the name of the insured had changed from Doumac to JLS.

[54]The letter proceeded to assert that this understanding had been due to misrepresentation and non-disclosure and that had the facts been properly disclosed the risk was one which the underwriter would not have agreed to accept. The following particular matters were relied upon:(1) There had been a series of warnings and notices from the Health and Safety Executive (“HSE”), the EA and the Fire and Rescue Service. In particular, there had been an Immediate Prohibition Notice, and Improvement Notices served by HSE in September 2011; an Enforcement Notice had been served by the EA on 27 July 2012, outlining remedial action to be taken; a further EA inspection on 9 August 2012 had found excessive amounts of waste on site; a visit to the site by Mr Marshall of Cheshire Fire and Rescue Service on 23 August 2012 had found the site very untidy, with stacked combustible material within two metres of the buildings; and a further visit from the EA on 28 August 2012 had noted no improvement. These matters were material because the amount of waste was relevant to fire risk.

(2) There had been a fire on 27 November 2011 which had required the attendance of the Fire and Rescue Service, which had not been disclosed. This was itself said to be material.

(3) That the buildings on the Premises were in very poor condition, and damage caused by the storm in January 2012 had remained unrepaired. It was said that this should have been disclosed, as should the “unresolved dispute” with Novae as to the insurance claim relating to that damage.

[55]After further correspondence, on 1 May 2014 Clausen Miller wrote stating that XL was not prepared to withdraw its notice of rescission and avoidance and asked JLS to take a realistic view of the case, but stated that they were instructed to accept service of proceedings.

The Assignments

[56]On 17 October 2014 a Deed of Assignment was entered into between JLS and Dalamd whereby JLS assigned to Dalamd, inter alia, all rights which JLS had under the Aviva and XL policies and claims against Butterworth Spengler in respect of the damage to the Premises. Clauses 2 and 3 of this Deed of Assignment, which are relevant to an issue raised by Butterworth Spengler, read as follows:

“2. Assignment Save for the Excluded Rights the Assignor transfers and assigns to the Assignee all legal and beneficial right, title and interest in and to the Policies and the Claims (insofar as any right title or interest is capable of assignment) together with the right to commence continue and conduct any and all proceedings in relation to the Policies and/or the Claims PROVIDED ALWAYS that the Assignor shall pay to the Assignee the Consideration in accordance with the provisions of this Assignment. 3. Consideration The Assignee agrees and undertakes to pay to the Assignor: 3.1 the Initial Consideration of £1,000 on the date hereof; and 3.2 the Assignee further agrees and undertakes that at any time following the execution of this Deed it shall immediately upon receiving any Claim Sums pay to the Assignor by telegraphic transfer, an aggregate sum calculated as follows: Claim Sums Received % Payable to the Assignor £0-£100,000 12.5% £100,001-£500,000 5% £500,000+ 2% …”

The Assignee agrees and undertakes to pay to the Assignor:

[57]On 12 November 2014 Widnes as assignor entered into a Deed of Assignment with Dalamd which, mutatis mutandis, was in identical terms to that between JLS and Dalamd.

The Present Proceedings

[58]No proceedings were commenced against either Aviva or XL. Instead, the present proceedings were begun by issue of a Claim Form on 27 February 2015.

[59]The essential features of the claim made by Dalamd were as follows:(1) That Butterworth Spengler had failed to give JLS and/or Widnes any adequate guidance as to what matters ought to be disclosed to insurers and failed to give proper disclosure of matters which it knew itself. But for these failures, disclosure would have been made to Aviva of the insolvency of Doumac, and to XL of all the matters which it complained had not been disclosed.

(2) While denying that there had been any breach of the External Storage Condition, if there was it was a result of Butterworth Spengler’s having failed to advise Widnes of the existence of that Condition, and/or of Butterworth Spengler’s having failed to give JLS and/or Widnes adequate advice as to the meaning and effect of that Condition and as to the consequences of its breach.

(3) That Butterworth Spengler had failed to exercise due skill and care in obtaining suitable insurance for Widnes and/or JLS, and in particular had failed to obtain insurance which was not voidable and which was not subject to a reasonable argument that it was voidable, had failed to advise JLS that it should have obtained BI insurance for loss of profit in the event of a fire, and had failed to advise Widnes that it should have obtained insurance for loss of rent in the event of a fire.

(4) That had it not been for Butterworth Spengler’s breaches of duty, Widnes would have been entitled to an indemnity from insurers in respect of (i) reinstatement costs of the buildings at the Premises, (ii) stock debris removal, and (iii) loss of rent; and JLS would have been entitled to an indemnity in respect of (i) additional increased cost of working, (ii) loss of profit, (iii) damage to plant, machinery, tools and other equipment, and (iv) loss of stock.

(5) That, therefore, as a result of Butterworth Spengler’s breaches of duty: 1) Widnes had suffered the following loss: (i) the full amount of the reinstatement costs of the Premises, (ii) loss of rent after the date of the fire, and/or (iii) a payment in respect of stock debris removal, or, in each case, the loss of a chance to recover the same from insurers; 2) JLS had suffered the following loss: (i) the reinstatement or replacement value of the plant, machinery, tools and equipment damaged by the fire, (ii) a payment in respect of damaged stock, (iii) a payment in respect of the additional increased cost of working; and/or (iv) a payment in respect of its loss of profit, or, in each case, the loss of a chance to recover the same from insurers.

[60]The essence of Butterworth Spengler’s defence in its statements of case was as follows:(1) The effectiveness of the assignments to Dalamd was put in issue.

(2) It was denied that there had been a breach of duty. There had been adequate advice given to the Douthwaite brothers and Andrew McQueen as to their duties of disclosure, and adequate enquiries to elicit material information. There had also been adequate warnings and advice given as to the consequences of breach of the External Storage Condition. Doumac had been advised to obtain BI cover embracing loss of profits, but Doumac had declined to do so. Aviva had not been entitled to avoid its policy because Doumac’s insolvency had been disclosed to Aviva by Miles Smith, which Butterworth Spengler alleged was Aviva’s agent. Further or alternatively Aviva had not been entitled to avoid its policy against Widnes based upon non-disclosure of Doumac’s insolvency.

(3) In any event, JLS and Widnes had no valid claim under the Aviva policy because they were in breach of the External Storage Condition.

(4) XL had not been entitled to avoid its policy. The matters it had relied upon to do so were either known to it, as in the case of the storm damage, or were not material.

The Evidence

[61]As with most commercial cases, the most reliable evidence is provided by the contemporary documentation and the inferences which can be drawn from it. In the present case there are, nevertheless, a number of issues where witness evidence necessarily plays a significant role in determining what occurred and it is helpful therefore that I should set out my assessment of the witnesses who gave evidence before me.

[62]Dalamd relied on the evidence of four factual witnesses, Andrew McQueen, Douglas McQueen, Colin Douthwaite and Philip Roche. Butterworth Spengler relied on the factual evidence of Andrew Thomson.

[63]I considered that Andrew McQueen’s evidence was marked, in a number of significant respects, by a desire to present the position in the most advantageous way for Dalamd’s claim, even if that meant going beyond what he recollected to be the case, evading points which he considered unhelpful.

[64]Douglas McQueen’s evidence was, in most respects, not central, but he was an intelligent and honest witness.

[65]The evidence of Colin Douthwaite required careful assessment. Colin Douthwaite was involved, in April 2015, in an incident which had led to his receiving a brain injury and also to the death of his brother. As to his memory, he explained that, while it was intact in relation to matters predating April 2015, he often required a prompt, such as a document, in order to be able to access it. I was informed prior to his giving evidence that he reports on-going difficulties with attention, inhibition, and distractibility. He had been suffering from PTSD and dizziness. During his evidence he asked for or was offered a number of breaks, but ultimately felt he could not go on. I was given a medical report which stated that he had experienced tingling in the arms and feet and a dizzy and disorientated feeling. I took all these matters into consideration. Having done so, I nevertheless was of the clear view that Colin Douthwaite’s evidence was not only, in parts, unreliable, but, in some significant respects, not an honest account of what happened or his recollection thereof. Most significantly, I considered that his account of how the Aviva Proposal Form was completed in April 2012 was not credible, not supported by the documents and was not honestly given; and that the same applies to his suggestion that he had no discussion with Andrew Thomson immediately after the Aviva survey as to how long it would take Doumac to achieve compliance with a modified version of the External Storage Condition. I also found his evidence in relation to what was said by Butterworth Spengler as to the reason why the Novae policy came to an end, and as to what Andrew Thomson said before the Aviva survey as to holding back information from insurers unconvincing. My approach to Colin Douthwaite’s evidence was accordingly to treat it with caution and not to accept it, where it was in issue, without clear support from the documents or the inherent probabilities.

[66]Philip Roche’s evidence contained, I considered, a number of points on which he was reluctant to make concessions which he considered might be disadvantageous to Dalamd’s case. He was, for example, reluctant to concede a breach of the company policy in that the Fire and Rescue Service was not called to attend after a shovel fire of May 2009. I considered that he was keen to be loyal to his former employers, and this led him on occasion to make claims as to what had happened which were not based on his recollection of events.

[67]Andrew Thomson’s evidence I found to be honest and generally fair and measured. Though he was in some respects defensive, he made a number of appropriate concessions.

[68]In addition to the factual witness evidence, the parties served expert evidence in relation to five areas. Only the expert brokers were ultimately called to give evidence. They were Stephen Mooney on behalf of Dalamd and Robert Powell on behalf of Butterworth Spengler. Each gave evidence which sought to assist the court in relation to the broking issues. This is not a case in which I considered that I could, as a matter of generality, accept the evidence of one expert in preference to that of the other. I have preferred the evidence of one or the other on different issues, depending on its cogency, as appears below.

[69]The other four categories of expert evidence all went to issues of quantum. As a result of agreements between the parties it was not necessary for the experts involved to be called. It is however, convenient to record here the nature of the agreements reached:(1) That if the Aviva policy covered on a reinstatement basis, the amount it would have paid out (in the absence of other defences) in respect of the buildings would have been £1,150,000. On the reinstatement basis, there would also have been an entitlement to stock debris removal, agreed at £250,000.

(2) That if the Aviva policy covered on an indemnity basis, the amount it would have paid out (in the absence of other defences) was the diminution in value of the Premises which was £700,000, which includes the costs of debris removal.

(3) JLS’s loss of gross profits, net of savings, were £85,621 for a one year indemnity period and £155,570 for a two year indemnity period. Was there an effective assignment of rights to Dalamd?

[70]This issue requires to be addressed first. Butterworth Spengler deny that there was an effective assignment of Widnes’s or JLS’s causes of action against them to Dalamd. This is on the basis that the Initial Consideration of £1000 was not paid on the date of the assignment, as was provided for in clauses 2 and 3 of each assignment.

[71]In more detail, the argument was as follows:(1) The words “PROVIDED ALWAYS that…” created a condition precedent. That meant that the £1000 specified in clause 3.1 of each assignment had to be paid on the date of the assignment.

(2) No payment was made to JLS in respect of the JLS assignment on the date of the Deed of Assignment, 17 October 2014.

(3) A payment of £1000 had been made by Douglas McQueen, by cheque bearing the date 17 October 2014, but that cheque was probably passed to the liquidators of JLS rather than to JLS, and that that must have been after their appointment on 25 March 2015.

(4) Alternatively if the cheque was passed to JLS as opposed to the liquidators of JLS, it was not delivered to JLS until, at earliest, 18 October 2014, and thus, even on this basis, there was no payment on the date of the JLS assignment.

(5) No payment was made to Widnes on the date of the Widnes Deed of Assignment, 12 November 2014.

(6) A payment of £1000 had been made by Douglas McQueen by way of BACS transfer from his personal bank account on 28 November 2014. Because of its date, this payment did not comply with the requirement of the Widnes assignment.

[72]This is, as Mr Shapiro for Butterworth Spengler accepted, a technical argument, given that the payments of £1000 to each of JLS and Widnes, even if late, have been retained, and JLS and Widnes have not contended that the assignments are ineffective.

[73]On the question of fact as to when and to whom the cheque in relation to the JLS assignment had been sent, I find that it was probably sent out to JLS on 17 October 2014. Douglas McQueen gave evidence that the normal practice of his office was that, once a cheque had been written and signed, it would go out by first class post. It is true that Douglas McQueen also gave evidence that he thought that the cheque had been paid to the liquidators, but he also made it clear that he did not remember exactly what had happened to this particular cheque. His evidence as to the ordinary practice of his office appeared to me to provide the best evidence as to when the cheque will have been despatched.

[74]Even on that basis, the cheque in respect of the JLS assignment will not have been received until 18 October 2014 at the earliest, and so not on the date of the relevant Deed of Assignment, and certainly the payment in respect of the Widnes assignment was made over two weeks after the date of the relevant Deed of Assignment. I am unable, however, to accept that those facts mean that either assignment was ineffective. Mr Shapiro accepted that there was no commercial or other identifiable reason why the parties should have stipulated that the assignments were only to take effect if payment of the initial consideration was made on one day, namely the date each Deed of Assignment was made. I consider that, on the contrary, to give such an interpretation to the Deeds of Assignment would give them an effect which does not reflect the parties’ intentions.

[75]Whilst the use of the words “provided always that” may in many cases create a condition precedent, I consider that they do not here have the effect of meaning that there was no assignment without the payment of the Initial Consideration on the day of the Deeds of Assignment. The phrase used in clause 2 of the Deeds of Assignment is “PROVIDED ALWAYS that the Assignor shall pay to the Assignee the Consideration in accordance with the provisions of this Assignment”. The term “the Consideration” is naturally to be read as a reference to the Consideration referred to in clause 3, which is headed “Consideration”, and the term is not otherwise defined. The Consideration in clause 3 includes two elements, the second being a part of the proceeds of any Claim Sums received by the Assignee. It is plain that the payment of those amounts was not a condition precedent to the effectiveness of the assignment, because the prosecution of the Claims by the Assignee was dependent on there having already been an assignment. That means, however, that it is not possible to read the proviso as making the performance of the payment obligations in clause 3 a condition precedent to there being a valid assignment. The words “provided always that” should, in the context of these Deeds of Assignment, be taken as simply indicating the nature of the quid pro quo for the assignments.

[76]If, contrary to this view, it were possible to read the proviso as making performance of the obligation in clause 3.1 a condition precedent to the effectiveness of an assignment, and not that in clause 3.2, I would read it as having a suspensive effect, such that the assignment did not take effect until the Initial Consideration was paid. The reference to “on the date hereof”, on this reading, would confirm that the earliest date on which payment was to be made was the date of the Deed of Assignment.

[77]Furthermore, if I am wrong in relation to both these points, the provision for payment of the Initial Consideration “on the date hereof” was a stipulation included for the benefit of the Assignor, and was capable of waiver by the Assignor. In circumstances where payment of the Initial Consideration was made late, but has been retained by each Assignor, and where those Assignors have never suggested that no assignment has occurred or that there has been any failure by the Assignees to comply with the Deeds of Assignment, I consider that there has been such a waiver.

[78]On this basis, I reject Butterworth Spengler’s preliminary objection to the claim against them based on the ineffectiveness of the assignments to Dalamd. The Merits of Dalamd’s Claims The duties owed by Butterworth Spengler

The Merits of Dalamd’s Claims

[79]There was little dispute as to the content of Butterworth Spengler’s duty to take reasonable skill and care.

[80]In Jackson & Powell on Professional Liability (8th ed., 2017, para 16-044), the duties of a broker are said, correctly, to include the following: “1 The broker should identify the type and scope of cover which the client needs, and advise the client accordingly; 2 The broker should take reasonable steps to arrange the insurance cover which the client has instructed him to obtain, and which is suitable for and clearly meets the client’s requirements; 3 In placing the insurance, the broker must have regard to the obligations of disclosure owed to the insurer; … Once the cover has been placed, the broker should consider and explain to the client what cover has been arranged; and At renewal of an existing policy, the broker should go through the same exercise that was carried out at inception of the policy”.

[81]In relation to disclosure, if the broker is actually aware of material facts he has a duty to the client to take reasonable care to disclose them. (Jackson & Powell para. 16-086).

[82]Insofar as the broker is not actually aware of material matters he will have obligations to take reasonable care to warn the client of the existence of the duty to disclose and to assist the client in identifying matters which need to be disclosed. A broker’s obligations in relation to the disclosure to be made to insurers were explored in Jones v Environcom [2010] Lloyd’s Rep IR 676, where David Steel J said, at [54]-[56]:

“54. In short, a broker: Must advise his client of the duty to disclose all material circumstances; Must explain the consequences of failing to do so; Must indicate the sort of matters which ought to be disclosed as being material (or at least arguably material); Must take reasonable care to elicit matters which ought to be disclosed but which the client might not think it necessary to mention. All this flows from the requirement that the broker should take reasonable steps to ensure that the proposed policy is suitable for the client’s needs. By definition, a policy which is voidable for non-disclosure is not suitable. 55. Moreover it was, or became, common ground that where a change in personnel led to a new person being responsible for insurance matters in the client’s organisation, the broker must ensure that an appropriate understanding of questions of materiality is held by that person… 56. The rationale for the imposition of these duties on a broker is that it is an unusual obligation for a contracting party, and an area of the law which can have harsh consequences, not least because any non-disclosure relied upon by the underwriter to avoid the policy may have no causative significance as regards the claim that will as a result not be paid. This makes it all the more important that the lay client is told of the paramount duty to disclose and what it involves. Further, in case the client does not appreciate what may be material, (as will often by the situation) he needs to be advised to err on the side of caution so as to disclose anything that might impinge on the judgment of a competent underwriter in assessing the risk and be helped to unearth such matters.”

The breaches alleged

[83]Dalamd makes a number of different allegations of breach of these duties by Butterworth Spengler. Those which were pursued may be summarised under 5 heads, which it is convenient to consider in the following

[84]I have already set out most of the basic facts in relation to this issue, including my finding that it was on 1 August 2012 that Colin Douthwaite told Andrew Thomson as to the insolvency of Doumac, and asked him to ensure that Doumac’s existing covers were transferred to JLS.

[85]Butterworth Spengler’s case was that there was disclosure of the insolvency to Miles Smith, which was Aviva’s agent, on 1 August. It accepted that the follow up email of 2 August ought to have mentioned the insolvency, but contended that that did not alter the fact that disclosure had already been made.

[86]In my judgment it was not established that Miles Smith was, for the purposes of the conversation of 1 August, Aviva’s agent. Miles Smith is a placing broker and in the ordinary way would be an agent of the insured. There was no cogent evidence that Miles Smith had been made Aviva’s agent for relevant purposes, and the documents which exist pointed the other way. Thus, Aviva itself denied that Miles Smith was its underwriting agent; underwriting decisions were taken by Core Underwriting; and Miles Smith charged Widnes and JLS a placement fee of £250. That access to the Core Underwriting product might have been exclusively through Miles Smith does not of itself make Miles Smith an agent for insurers.

[87]In addition it was not established that the person to whom Andrew Thomson spoke on 1 August 2012 had authority to receive information about the risk. The person to whom he spoke on that date has not been identified, but it appears that he or she was not a person who was authorised to deal with the risk. This is the probable reason why that person requested that Andrew Thomson should send an email to Hayley Jennings. That would be consistent with the fact, which appears to be the case from information given by Greenwoods, that he or she did not leave an internal message for Ms Jennings. I found unconvincing the suggestion made by Butterworth Spengler that the person to whom Andrew Thomson spoke must have had sufficient authority because the words in the note “change with effect 1/8/12” indicated that he or she had actually authorised the change. I consider that the note recorded the leaving of a message by Andrew Thomson, and was not a note of a substantive conversation with someone who had authority to agree the change.

[88]Further, and in any event, I consider that the email which Andrew Thomson sent to Ms Jennings on 2 August was inaccurate and did not properly disclose Doumac’s insolvency. It was, in my judgment, a breach of Butterworth Spengler’s duty to send, as the only written communication crossing the line between themselves and Miles Smith, an email which failed to mention the insolvency and which referred only to a change in the trading name.

[89]Furthermore, nothing was done by Butterworth Spengler after 2 August to put right the misstatement in the 2 August email, or otherwise to make fuller disclosure of the position in relation to the insolvency of Doumac.

[90]Accordingly I consider that Dalamd has established a breach of duty on the part of Butterworth Spengler in relation to the non-disclosure to Aviva of Doumac’s insolvency.

Breach: BI Cover

[91]Dalamd’s case in this regard is that BI cover was not adequately explained by Butterworth Spengler at any point. The cover which was effected was ICOW cover as a standalone, i.e. not as part of gross profit cover. This, Dalamd contends, was not appropriate to a risk like Doumac’s because, in the event of the occurrence of a major peril which destroyed the premises, ICOW would not pay out to any significant degree because, in such circumstances, there would probably be little that could be done to mitigate the loss of profit until the property and plant were reinstated. This, Dalamd says, was not adequately explained. Further Dalamd contends that BI cover was not considered at all after JLS replaced Doumac, which it contends it should have been.

[92]Butterworth Spengler’s case is that there was an adequate explanation given of how ICOW cover worked, including as a standalone cover and that it had had no obligation to advise on BI after the Doumac insolvency because its retainer by JLS was to transfer Doumac’s existing policies.

[93]There are thus two main issues which arise in relation to this alleged breach. The first is as to the adequacy of the explanations and advice given to representatives of Doumac as to BI insurance. This itself involves a factual dispute as to what Andrew Thomson said on the subject at the mid-term review meeting on 9 February 2011 and the renewal meeting on 17 August 2011. Andrew Thomson’s evidence was that, at the meeting on 9 February 2011 he had gone through with Andrew McQueen the different types of BI cover, including cover for gross profits, as well as ICOW and Additional ICOW cover and stock debris removal cover, and he had recommended that Doumac take out the entire suite.

[94]It is clear from the documents that thereafter Andrew Thomson sent to Andrew McQueen gross profit calculation sheets, together with guidance notes, and, as I have set out above, thereafter Andrew Thomson obtained quotations for gross profit BI cover, and quotations for ICOW, Additional ICOW and stock debris removal cover, which were to be discussed at the renewal meeting on 17 August 2011.

[95]Andrew Thomson says that at that meeting, there was a discussion of how the various types of BI cover worked, including how ICOW would work as a standalone cover. His evidence was that he was sure of this, and more generally that he believed that Andrew McQueen had been aware of these matters because they had been carefully discussed with him on “multiple occasions”.

[96]I have set out above the entry in the minutes of the meeting of 17 August 2011 which were made by Andrew Thomson, and were sent by him to Andrew McQueen on the same day. Andrew McQueen gave instructions on 16 September 2011 with the email which I have quoted above, and Andrew Thomson then emailed Ms Clarke of THB.

[97]Andrew McQueen’s evidence is that at no point in this process did Andrew Thomson give any explanation of how standalone ICOW would work. His evidence was that it was “sold to me as being an alternative type of business interruption cover which would provide adequate cover following a loss”, and that “it was very much sold as a more affordable alternative to business interruption cover”.

[98]On this aspect of the case, where Andrew Thomson’s and Andrew McQueen’s evidence differed, I preferred Andrew Thomson’s evidence. I find that he did give Andrew McQueen, in their various discussions on the subject, an adequate understanding of the difference between gross profit cover and ICOW cover on its own. As I have said, I generally found Andrew Thomson to be a fair and essentially reliable witness. Moreover, while Andrew Thomson accepted that it would have been desirable for the nature of the advice given in relation to standalone ICOW to have been expressly set out in writing, it appears to me to be clear from the documents that there were lengthy discussions of the question of BI cover and of its various types. Furthermore, the email which Andrew Thomson sent to Ms Clarke on 27 September 2011 evidences the fact that Andrew McQueen was aware that the covers which he had asked to be effected on 16 September 2011 were less satisfactory than gross profit cover. I consider that the various discussions did provide Andrew McQueen with an adequate explanation of the difference between the different types of cover, and that if he had been in doubt as to how they worked, he would have contacted Andrew Thomson for further explanations, which he did not. As I will deal with in more detail below, the reason why gross profit BI cover was not taken out was not because of a lack of understanding of what standalone ICOW cover entailed, but because it was considered that Doumac could not afford it.

[99]For the reasons which I have given Dalamd has failed to make out its case that there was a breach of duty in relation to the advice given to Doumac in relation to BI insurance.

[100]The second aspect of this allegation of breach relates to whether Butterworth Spengler should have given advice to JLS, after Doumac’s insolvency, in relation to BI. I do not consider that this is made out either. Butterworth Spengler’s instructions on 1 August 2012 were to effect a transfer of Doumac’s insurances. There was no request, and no possibility, at that juncture to carry out a general review of JLS’s insurance needs.

[101]Nor do I consider that it was established that any broker acting with due care and attention would have reverted to the issue of the adequacy of its BI cover with JLS in the period between 1 August 2012 and the time of the fire. I accept Mr Powell’s evidence that, if a broker has adequately explained the existence of an uninsured exposure but been told by the client that cover for it is financially unaffordable, he does not necessarily have to go through a consideration of the same exposure with the insured every time there is a mid-year review. Mr Powell’s evidence was that a broker might not do such an exercise every year, although he should still do it periodically and that to raise it each year might well be unwelcome to the client. I accept this evidence as well, though what might be needed must depend on the precise circumstances. In the present case, the personnel at JLS were exactly the same as those who had run Doumac, and Butterworth Spengler had been told that the business was the same. Especially given these matters, Butterworth Spengler had no reason to think that JLS had greater funds or would have a greater desire to effect an insurance cover which Doumac had not been able or willing to afford. Accordingly, I do not consider that Butterworth Spengler can be said to have been in breach in not raising the issue between 1 August and 21 October 2012.

Breach: The Existence and Effect of the External Storage Condition

[102]A part of Dalamd’s pleaded case was that Butterworth Spengler had failed to take adequate steps to “bring home” to either JLS or Widnes the consequences of breach of the External Storage Condition. This part of its case received little attention in its closing submissions. As will appear hereafter it faced insuperable causation difficulties.

[103]In any event, I am not satisfied that there was a breach of duty in this respect in any event. At the time Butterworth Spengler initially obtained a quotation from Aviva in March 2012, it incorporated the External Storage Condition. The quotation and the terms of the condition were sent to Colin Douthwaite on 14 March and he was asked to check through the documents. I have quoted the terms of the External Storage Condition above. It is quite clear as to the effects of non-compliance.

[104]It is, nevertheless, true to say that, at this point, Butterworth Spengler appear not to have specifically drawn the existence of the condition to Colin Douthwaite’s attention, at least in writing. Whether or not that was a failure to exercise reasonable care appears to me, however, to be academic. This is because I accept Andrew Thomson’s evidence that, at the survey held on 17 July 2012 the Aviva Surveyor, Ms Rhead, had drawn attention to the breach of the External Storage Condition and told Colin Douthwaite and Phil Roche that they would not be covered in the event of a claim; and also that he had himself reiterated this after Ms Rhead had left. I find that his communication with Hayley Jennings on 17 July 2012, when he gave an estimate that it would take four to eight weeks to clear the bales which were non-compliant with the External Storage Condition was written after a discussion of the issue with Colin Douthwaite. I reject Colin Douthwaite’s evidence to the contrary. Furthermore, I consider that this discussion, taken with what had been said at the survey, must have made both the existence of the External Storage Condition, and the consequences of non-compliance clear to Colin Douthwaite, even if they had not been beforehand. The importance to insurers of the External Storage Condition and compliance with it was, furthermore, confirmed to Colin Douthwaite by the summary of the Aviva survey report which was sent to him on about 9 August, under cover of an email in which Andrew Thomson again drew attention to the issue.

[105]As to the issue as to whether there was proper advice to Widnes, as opposed to Doumac or JLS, I consider that there was, because Widnes, by Douglas McQueen, had, as I find, delegated full responsibility for dealing with Widnes’s insurances in relation to the Premises to Andrew McQueen and subsequently to Colin Douthwaite. In August 2009 Douglas McQueen asked Andrew McQueen to take over responsibility for renewing Widnes’s policies. From 2010 Douglas McQueen left it up to Andrew McQueen to deal with Widnes’s insurance. Thereafter he did not check that the insurance had been obtained nor ask to see the policy documentation. It was in those circumstances that Andrew McQueen signed Butterworth Spengler’s mandate dated 22 September 2010 “on behalf of” both Doumac and Widnes. From late 2011 the primary responsibility for dealing with the insurance of the Premises passed to Colin Douthwaite. In handling the insurance thenceforth Colin Douthwaite was either Widnes’s agent or sub-agent to Andrew McQueen. What is apparent is that Douglas McQueen had passed all matters of Widnes’s insurance to Andrew McQueen, Doumac and JLS. In the circumstances, I consider that Widnes is imputed with the knowledge of Andrew McQueen and of Colin Douthwaite in relation to the existence and effect of the External Storage Condition.

Breach: Loss of Rent Cover

[106]Dalamd’s case in this area is that Butterworth Spengler were in breach of their duty to Widnes in failing to advise it as to whether it was desirable and feasible to obtain cover for loss of rent.

[107]On the issue of breach, which is all that I am considering at this juncture, there was little real dispute. Mr Mooney and Mr Powell both agreed that loss of rent cover for Widnes ought to have been considered by Butterworth Spengler and discussed with their client. Andrew Thomson accepted that he had known from an early stage that Widnes leased the Premises to Doumac, and that he needed to know whether rent was being paid under the lease. He accepted further that loss of rent was a key risk for Widnes.

[108]In fact, however, I find that the risk of loss of rent was not raised or discussed with Doumac or JLS (or Widnes) at any stage. It was not mentioned in the New Business Report of September 2010, or in the Risk and Insurance Report of August 2011. It was not discussed at the meetings on 9 February 2011 or 29 June 2011, or when the Novae cover was replaced with the Aviva cover in March 2012, or at the renewal of the XL policy in August 2012. Andrew Thomson accepted this. It was also not raised after the insolvency of Doumac when JLS was substituted as an insured under the Aviva policy. It appears to have been simply overlooked. The failure to raise the issue amounted to a breach of the duty owed by Butterworth Spengler to Widnes.

Breach: Inadequate Disclosure or Advice as to what should be disclosed to XL

[109]There were two aspects to Dalamd’s case in this area. In the first place, it was said that Butterworth Spengler failed to ensure the disclosure to XL of matters which were arguably material of which they were themselves aware. Secondly, it was said that, in any event, Butterworth Spengler gave inadequate advice as to the insured’s duty of disclosure, and in particular failed to fulfil the obligations, summarised in paragraphs 54(iii) and 54(iv) of Jones v Environcom, to indicate the sort of matters which ought to be disclosed as being material or arguably material, and to take reasonable care to elicit matters which ought to be disclosed but which the client might not think it necessary to mention.

[110]As to the first aspect, Dalamd relied on two particular matters, and I will consider each in turn.

[111]The first is that Butterworth Spengler, by Andrew Thomson, knew of the significant build-up of waste which had occurred by the time of the Aviva survey, that Aviva had not been satisfied with this situation, that there was a real likelihood that there would still be waste being stored outside at the time of the XL renewal, that the accumulation of waste went to fire risk, and that when a build-up of waste had arisen in January / February 2012 it had led to a breach of the conditions of the EA permit which had led to Novae’s cancelling its policy.

[112]There is no doubt that Andrew Thomson knew these matters: he accepted that he did. Butterworth Spengler, however, contended that the build-up of waste was not material to the XL risk, because it was a CAR policy. This was not a reason which Andrew Thomson himself gave for the build-up not being disclosed to XL, but was based instead on Mr Powell’s evidence. That evidence was to the effect that a CAR policy would cover mobile plant, which would be expected to be in use where there was waste around it. The difficulty with Mr Powell’s evidence on this point, however, was that in the present case the bulk of the plant and machinery was static equipment which was installed in the sheds. I did not consider that he gave any cogent reason why the insurer of such plant and machinery should not be just as interested in an increase in the fire risk as would an insurer of the buildings. On this point I prefer the evidence of Mr Mooney.

[113]In the circumstances I find that Butterworth Spengler ought to have ensured that there was disclosure to XL of the fact that there had been a build-up of waste.

[114]The other arguably material matter which Dalamd contends that Butterworth Spengler actually knew about were two previous fire incidents, or incidents which had had the potential for fire, one in 2010 and the other that of 27 November 2011. Dalamd’s contention was that Andrew Thomson had been told about these at the time of the Aviva survey on 17 July 2012. Andrew Thomson denied that he had been.

[115]This difference was part of a wider dispute as to what had occurred on that occasion. Dalamd’s contention, and the evidence of Colin Douthwaite, was that Andrew Thomson had arrived early for the survey, well in advance of the surveyor; that he had advised Colin Douthwaite that he should not mention previous fire incidents to the surveyor; and that in the course of this discussion, Colin Douthwaite had told him about two previous incidents, namely “an electric motor running hot”, when no claim was made; and the incident on 27 November 2011. Colin Douthwaite’s evidence was that, despite Andrew Thomson’s advice, once the surveyor, Ms Rhead, had arrived, there was a discussion of previous incidents, and Phil Roche had shown Ms Rhead the fire record log book.

[116]Phil Roche’s evidence in his witness statement was to similar effect. He stated that prior to the surveyor arriving on 17 July 2012 Andrew Thomson had suggested that the insured should not volunteer any information about previous fires or incidents. But, he said, when Ms Rhead requested the fire record book, he had immediately presented it to her.

[117]Andrew Thomson’s evidence was that while he had, in accordance with what he considered good practice, arrived before the surveyor, he had not advised the insured to conceal or withhold any matters, and specifically had not told Colin Douthwaite or Phil Roche not to reveal information about previous fire incidents. He had, he said, no knowledge of any such incidents, and so would have had no reason to give such advice even if he had wanted to, which he said he had not. Furthermore, he said that he had not been told about any such incidents on this occasion; that there had been no oral mention of any previous fire incidents to Ms Rhead by Colin Douthwaite or Phil Roche in his hearing; he considered it unlikely that there could have been; and that Ms Rhead had not been shown log book entries relating to previous fires.

[118]Of these differing accounts, I preferred Andrew Thomson’s. As I have already said, I considered him a more reliable witness than Colin Douthwaite or Phil Roche. It did not appear to me credible that Andrew Thomson would have advised the insured not to mention previous fire incidents to a surveyor. Furthermore there is no documentary support of any kind for the suggestion that the previous fire incidents of 2010 or 2011 were revealed either to Andrew Thomson or to the Aviva surveyor on this occasion.

[119]While this means that I find that Andrew Thomson did not actually know of the previous fire incidents of 2010 or 2011, that is not the end of the matter because of the second strand of Dalamd’s case in this area, namely that Butterworth Spengler gave inadequate advice as to what ought to be disclosed and failed to take proper steps to elicit such matters from the insured.

[120]As to this, Butterworth Spengler could point to a number of occasions on which representatives of the insured were given advice as to the obligation of disclosure of material facts, in particular to Andrew McQueen in the Risk and Insurance Report sent at the date of the August 2011 renewal and in letters of 8 September and 16 November 2011, and to Colin Douthwaite in the declaration to the Proposal Form which he was given on 2 April 2012 and in the letter sent to him on 16 May 2012. I also accept that both Andrew McQueen and Colin Douthwaite were at all relevant times aware, in general terms, of the obligation on the part of the insured to make disclosure of material matters.

[121]Nonetheless I consider that there were failings on the part of Butterworth Spengler in the context of the renewals of the XL insurance to take adequate steps to indicate to the insured the sort of matters which ought to be disclosed or to seek to elicit such matters from the insured. I have reached this conclusion on the following basis:(1) The XL policy for 2011-2012 had been broked by the placing brokers THB on the basis of a DRP presentation dated 9 August 2010, as was apparent from the cover note sent by THB on placement of the insurance. It was necessary, in order for Butterworth Spengler adequately to advise the insured as to whether there were further matters which should be disclosed including matters which indicated that the position had changed from that set out in the DRP presentation, that Butterworth Spengler should have obtained that document. They did not do so. In fact that document had included a statement about there having been “no problems” arising from inspections by the HSE, EA and Fire Service, which I have quoted above, which needed modification.

(2) When commencing the process of renewing the risk in 2012, THB had emailed Geoff Orrell of Butterworth Spengler on 11 July 2012, seeking “any further information which is material and should be disclosed to underwriters”. This email was not forwarded to Colin Douthwaite. Equally there was no other email or other written communication from Butterworth Spengler drawing the insured’s attention to the obligation to make proper disclosure in relation to this XL renewal; and there was no good evidence that there had been oral discussion of that obligation in relation to this renewal. Specifically, there seems to have been no attempt to indicate to the insured types of matters which might need to be disclosed.

(3) In this year, as in the year before, the risk was presented by THB to XL at least in part on the basis of the DRP presentation dated 9 August 2010. That this was so was apparent from the draft slip sent by THB to Butterworth Spengler on 8 August 2012. Once again, however, Butterworth Spengler did not ask to see this document, and thus were unable to give properly focused advice as to whether there were matters which ought to be disclosed to insurers to correct or modify what was stated in that document.

(4) Furthermore, Butterworth Spengler themselves knew of some arguably material matters. Given what they knew it was the more incumbent upon them to raise with the insured whether there were any further related matters which required to be disclosed.

[122]Specifically I consider that it was necessary for Butterworth Spengler to seek to elicit whether there were material matters to be disclosed in two areas. The first was whether there had been any problems with HSE, the EA and the Fire and Rescue Service. This was necessary given that the risk was being placed on the basis of a document which indicated that there were no problems (albeit that Butterworth Spengler did not know its terms). But it was in any event a matter which was of potential materiality and which, in light of Butterworth Spengler’s knowledge of the build-up of waste, they ought to have enquired about. The second was as to previous fire incidents. That is perhaps the most obvious example of the type of question that a broker ought to ask of a client in respect of a policy which covers property damage caused by fire. I accept Mr Mooney’s evidence that a reasonably competent broker ought to ask about previous fires and make it clear that that included fires that did not result in an insurance claim.

[123]In this context, I should refer to a suggestion made that Butterworth Spengler’s obligation to enquire about previous fire incidents was adequately fulfilled by the inclusion of question 38 in the Proposal Form for the Aviva risk, completed in April 2012. I do not consider that this is the case. Question 38, in speaking of “claims and losses … made” can reasonably be understood as referring to losses which have resulted in claims on insurers, an impression which is reinforced by the columns which appear below, of “Settled” and “Outstanding”. So understood the answer to it would not have revealed the fire incidents of 2010 or 2011. In any event, this Proposal Form dates from April 2012, and Butterworth Spengler needed to make an enquiry as to what the position was in August 2012 at the time of the XL renewal.

[124]For completeness I should record that I do not consider that there was any breach by Butterworth Spengler in relation to disclosure of the condition of the buildings. The condition of the buildings, at the time that the XL policy was renewed was that there was no more than cosmetic damage to the sheds, which were otherwise structurally sound and watertight. Even though Butterworth Spengler knew of the state of the buildings, there was nothing material to be disclosed. Furthermore XL’s knowledge of the January 2012 storm and the damage it caused, given XL’s post loss survey, meant that disclosure of the state of the buildings to XL was not, and would reasonably have been considered not to have been, required.

Causation: Approach

[125]The parties differed considerably as to the correct approach to questions of causation, and as to what matters should be approached by the court on the basis of the assessment of loss of a chance or on a balance of probabilities. There were wide-ranging arguments and the citation of a considerable number of authorities. These arguments were largely made in the context of Dalamd’s case that Butterworth Spengler had been negligent in relation to the disclosure of Doumac’s insolvency to Aviva, but were applicable in part to other aspects of Dalamd’s case.

[126]I will consider first what Dalamd contended were two points of law relevant to these questions. Dalamd characterised these questions as(1) what Dalamd must show in relation to Aviva’s and XL’s avoidance, and

(2) what proof is required in respect of what would have happened had Butterworth Spengler not acted in breach of duty.

[127]The first issue relates to whether Dalamd must show that the claim on the Aviva or XL policy would have failed as a result of Butterworth Spengler’s negligence. Dalamd submitted that it was “emphatically not necessary” for it to prove that. Instead, it contended that it was enough to show simply that Butterworth Spengler’s negligence had “impaired” the insured’s claims under those policies. What was meant by this was explained as follows:

“In other words, it is enough to show that [Butterworth Spengler’s] negligence has provided the insurer with a reasonably arguable ground to defend liability.”

It was said that this was so, because it was part of the broker’s duty to protect his client from unnecessary risks, including the unnecessary risk of litigation. It was supported, Dalamd contended, by the approach of the Court of Appeal in FNCB Ltd v Barnet Devanney [1999] Lloyd’s Rep IR 459.

[128]The second issue relates to how the court should approach a contention that, but for the defendant’s breach, the policy would in any event not have responded by reason of some other point for which the brokers were not responsible, such as, in the case of the Aviva policy here, a breach of the External Storage Condition. Dalamd submits that in this regard, issues as to what the claimant would have done are to be determined on a balance of probabilities basis, but other issues are to be determined on a loss of a chance basis. That includes not only whether insurers would have taken the other point, and whether they would have compromised the case if that point had stood alone, but also what the court would have decided if the point had been maintained to trial by insurers. Dalamd submits that this approach is supported by the general principles in Allied Maples Group Ltd v Simmons & Simmons

[1995] 1 WLR 1602

, and more specifically in the present context by O & R Jewellers v Terry [1999] Lloyd’s Rep IR 436.

[129]To these contentions, Butterworth Spengler answered that, in relation to both aspects, they were not in accordance with authority, and were unprincipled. They submitted that in a case, which they submitted this one was, where what the insured was claiming was that breach of the brokers’ duty had caused it the loss of an indemnity under the policy, the issues were to be approached as follows. First, questions as to whether the policy was valid or was voidable by reason of the brokers’ negligence were to be determined either as a matter of law (if applicable) or, insofar as factual issues were concerned, on the basis of the balance of probabilities on the material before the court in the action against the brokers. Secondly, questions of whether there was some other ground, for which the brokers were not responsible, on which the insurance would not have provided an indemnity, for example breach of warranty or condition or the application of an exclusion, were also to be determined as a matter of law (if applicable) or on the basis of the balance of probabilities. However, issues of what the insurer might have done as a matter of business – for example that it might not have taken the other point, or might have compromised it – were to be determined on the basis of loss of a chance. What the court would not do, however, was to determine on a loss of a chance basis what another court would have decided had the other point been pursued to trial against insurers. Butterworth Spengler submitted that their contention that these were the correct approaches was supported by Fraser v Furman

[1967] 1 WLR 898

and by Dunbar v A&B Painters

[1986] 2 Lloyd’s Rep 38

, and also by other brokers’ negligence cases, including Everett v Hogg, Robinson

[1973] 2 Lloyd’s Rep 217

, Gunns v Par Insurance Brokers,

[1997] 1 Lloyd’s Rep 173

and RR Securities v Towergate Underwriting Group Ltd

[2016] EWHC 2653 (QB)

[130]In my judgment, in relation to the first aspect, the position contended for by Dalamd is not established by authority, and would produce potentially anomalous results. The effect of Dalamd’s case is that, if the insurer puts forward an arguable defence based on the brokers’ breach of duty, then the insured would be able not to pursue the insurer, to claim against the broker and, if there were no other point by reason of which it was said that the policy would not have paid, to recover in full. While, according to Dalamd, it would be open to the broker to say that the insured had been unreasonable in failing to sue the insurer, this, Dalamd said, would be an argument that the insured had failed to mitigate the loss caused by the broker’s conduct in having “impaired” its claim, and it would be difficult for the broker to succeed on such an argument because the duty to mitigate is a low one, and furthermore the burden of establishing a breach of that duty would fall on the brokers.

[131]What this would mean is that it would be open for an insured, faced, for example, with an assertion by an insurer in correspondence of what is merely an arguable defence based on the broker’s negligence, not to pursue the insurer but to proceed against the broker and recover the entirety of the indemnity, notwithstanding that a court actually determining the matter would have found that the insurers’ defence was clearly a bad one. On Dalamd’s case the broker could only defend itself by showing that the insured had unreasonably failed to mitigate its loss.

[132]In my judgment the approach contended for by Dalamd makes unduly favourable to the insured an action against the broker for a breach consisting simply of creating an uncertainty as to cover by comparison with the insured’s action against the insurer who, in the type of case I have mentioned in the previous paragraph, is in breach of its obligation to indemnify.

[133]It is the case that, if a breach of duty by the broker has caused the insured’s position to be uncertain, and as a result of that uncertainty, the insured has made a reasonable settlement with the insurer, then the insured can sue the broker for the difference between the amount of the settlement and an indemnity under the policy, without having to establish in that action that the defence for which the broker was responsible was a good one. That is what was decided in FNCB v Barnet Devanney and in Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] PNLR 15.

[134]On the other hand, I was shown no authority in which, where there had been no settlement with insurers, and where the insured had sued the brokers on the basis that they were in breach of duty in failing to make proper disclosure or to ensure that proper disclosure was made to insurers, the court awarded damages without a finding or concession that the policy was actually voidable. Instead, in Everett v Hogg Robinson (at 222) and in Dunbar v A&B Printers (at 40: “… the fact that they were entitled to repudiate…”) the court proceeded on the basis of whether there had actually been an entitlement on the part of insurers to avoid, not whether there was an arguable case that there had been an entitlement to avoid.

[135]Given that the issue of whether or not the policy was voidable depends on the facts in existence at the time of the placement or renewal of the insurance this approach is consistent with the ordinary approach of the courts to determining matters of past fact. Furthermore, there appears to me to be a good reason why, at least in the ordinary case, that should be the basis on which the issue is assessed. That reason is that, in cases of alleged brokers’ negligence, it is a commonplace that both the insurer and the broker are sued, very often in the same action. Manifestly, as against the insurer, the issue of whether the policy is or is not voidable has to be determined on a yes/no basis (i.e., as a matter of law, if and insofar as applicable, or insofar as issues of fact arise, on a balance of probabilities). In my judgment the issue should be determined against the broker on the same basis, and there should not be the possibility of a different basis depending on whether the insurer is and continues to be a party to the proceedings (and does not, for example, settle them).

[136]As to the second aspect, I accept Mr Shapiro’s submission that the approach he advocated was that adopted in Fraser v Furman. There the Court of Appeal first decided whether there would have been a good defence open to the (putative) insurers based on breach of a reasonable precautions clause, and held that there would not have been as a matter of construction and given the facts of the case (905B–907H), and then, as an alternative ground, considered whether the putative insurers, Eagle Star, would have taken the point. Similarly, in Everett v Hogg, Robinson the way in which the court dealt with the question of whether there was a different point than that for which the brokers were responsible which would have precluded an indemnity was first to consider whether that different point was a good one (223 RHC), and then to consider whether it would have been taken by (re)insurers and, if it would have been, whether it would have been settled. It also appears to be the approach adopted in Dunbar v A&B, in that at 40 LHC May LJ accepted that the facts of the accident meant that insurers could have relied on Memo 2 to escape liability, but then found that the judge had correctly come to the conclusion that insurers would not have taken the point. Equally, in Gunns v Par Insurance Brokers the approach of Sir Michael Ogden QC (sitting as a Deputy High Court Judge) was to decide whether or not the facts were such that the policy would not, in any event, have responded to the loss by reason of breach by the insured of a reasonable precautions clause (at 177-178). A similar approach was adopted by HHJ Waksman QC (sitting as a Deputy High Court Judge) in RR Securities Ltd v Towergate Underwriting Group Ltd at [39]-[50]. It also appears to be supported by Jackson & Powell paragraphs 16-154 – 16-158.

[137]By reason of considerations similar to those I have referred to in relation to the first aspect, there are good reasons why this should be the approach of the courts. The issue of whether there was a defence by reason of some other non-disclosure for which the brokers were not responsible, or of breach of a condition or the application of an exclusion for which they were not responsible, depends on facts which existed at the time, depending on the nature of the point, either of placement or of the occurrence of the putatively insured loss. Furthermore, in an action against the insurers, the application of such defences would necessarily be decided on the basis of a determination as to whether the defence was or was not a good one (namely, as a matter of law if and insofar as applicable and on the balance of probabilities as regards any issues of fact). The basis on which they are decided in a claim against the brokers should not depend on whether the insurers are (or are still at the point of trial) parties to that action.

[138]Mr Hext QC relied heavily in this context on the decision in O & R Jewellers v Terry. In that case the judge, Sir Godfray Le Quesne QC, sitting as a Deputy High Court Judge, included a number of uncertainties in his overall assessment of the insured’s chance of recovering the full claim of £850,000. These included not just the issues of whether insurers would have taken other points, and whether they would have compromised them and if so for how much, which, as I have said, are matters which have been assessed on such a basis in other cases, but also “If fought to a finish, with what result?” Mr Hext QC relied on this to contend that the court should not decide whether the other point which insurers might have taken was correct, but simply to decide the chances of how it might have been decided had insurers been pursued to trial and the point then argued. I do not consider that that case is persuasive authority that that is the right approach, and the judge in that case does not appear to have been addressed with arguments on the point similar to those which I have heard. In any event, I consider that the approach which I have attempted to summarise above, is that which is consistent with the preponderance of authority.

[139]I did not find persuasive Mr Hext QC’s submission that that approach was unsatisfactory because it would mean the decision of issues on a yes/no basis in the absence of underwriters. The evidence of underwriters would be admissible and could be adduced by either party, if relevant. In any event it is a commonplace for issues to be resolved on the balance of probabilities even though parties involved in the underlying events are not party to the proceedings.

[140]As I think Mr Shapiro accepted, there may perhaps be cases in which, by reason of particular facts, the insured may be able to contend against the insurance broker that it has, in effect, deprived the insured of the opportunity of having its claim under the insurance determined by a court, and that in such circumstances different considerations may apply in relation to one or the other of the two issues I have discussed above. I agree with him, however, that the present case is not pleaded on that basis, and Dalamd adduced no evidence to support such a case.

[141]I will now turn to seek to apply the approach I have found to be correct to the facts of this case, and to resolve the other issues of causation which arise, in the context of each of the allegations of breach of duty. Causation: Non-Disclosure of Doumac’s insolvency

[142]The first issue under this heading is as to whether the non-disclosure of Doumac’s insolvency, for which, as I have said, Butterworth Spengler were responsible, had the effect of giving Aviva a good defence to claims under its policy. In my judgment, it did provide a good defence to JLS’s claims under that policy. I consider that the issue of Doumac’s insolvency was material. It is more difficult to say whether it had any inducing effect, in the absence of evidence from the underwriter concerned, though there are available to the court the contents of Greenwoods’ letter of 16 January 2013. I consider that it is more likely than not that had there been disclosure of Doumac’s insolvency Aviva would at least have stipulated for some alteration of the terms on which JLS was insured, and thus that the non-disclosure did have an inducing effect.

[143]The position is, however, different with regard to Widnes. I understood Dalamd to accept, and I in any event conclude, that the Aviva policy was a composite one, and that where there are two insureds under such a policy, each with differing interests in the subject matter of the insurance, non-disclosure by one insured will not affect the cover of the other insured. Here Widnes’s contract of insurance, cover under which commenced on 14 March 2012 and which was for a period of a year, was not, prima facie, affected by the non-disclosure in the context of a variation of Doumac’s cover to replace it with JLS.

[144]Dalamd’s answer to this is to contend that Widnes’s insurance, even if it can be regarded as a separate contract, was varied by the change of the name of the insureds to include JLS rather than Doumac. I consider that that does not assist Dalamd. If, in the case of a composite policy, there is notionally a bundle of different insurances in one document, I do not consider that in the present case there can properly be said to have been a variation of the Widnes insurance within that bundle. But even if that is wrong, and the Widnes insurance was varied, if there is a non-disclosure which induces a variation of an insurance, the ordinary position is that the variation is avoided, not the cover, which survives as unamended: The Mercandian Continent

[2001] 2 Lloyd’s Rep 563

at [22(2)] per Longmore LJ; The Martin P

[2003] EWHC 3470 (Comm)

at [229] per Richard Siberry QC. Dalamd submitted that Butterworth Spengler ought not to be permitted to rely on this point, which was developed only in and after closing oral submissions. I consider, however, that there was no prejudice to Dalamd in the way in which the point was put forward.

[145]Dalamd made the further suggestion in its written closing submissions that a possible response of Aviva, in relation to the cover for Widnes, if there had been disclosure of Doumac’s insolvency, would have been to invoke the Alteration of Risk clause in the policy. That appears to me to go too far into the territory of speculation. Dalamd never put to Aviva the point that Widnes’s cover was not affected by any non-disclosure in relation to Doumac’s insolvency. The possibility of the invocation of the Alteration of Risk clause was not raised by Aviva. Furthermore, if the insolvency was an operative Alteration of Risk that would have been a reason for Aviva not to have paid which would not have been the responsibility of Butterworth Spengler.

[146]In the circumstances, while I accept that the non-disclosure of Doumac’s insolvency may have given Aviva an arguable case that Widnes’s cover was voidable, I consider that any such argument would have been wrong, and that that cover was not voidable.

[147]On this basis I would hold that Dalamd has not made out its case that Butterworth’s Spengler’s negligence in failing to disclose Doumac’s insolvency to Aviva has caused any of the losses which would have been claimable under Widnes’s cover (or would have been so claimable in the absence of other defences for which Butterworth Spengler were not responsible).

[148]There remains the question of whether, in any event, Aviva was not liable under the cover by reason of a breach of the External Storage Condition. This is relevant to any losses which JLS might have been able to claim under the insurance but which Widnes was not covered for, and in case I am wrong as to whether Widnes’s cover was unaffected by the non-disclosure of Doumac’s insolvency. Breach of the External Storage Condition was a matter for which Butterworth Spengler were not responsible and accordingly if Aviva could successfully have relied on it as a defence then there was no causative negligence on the part of Butterworth Spengler on this basis. As I have said, I consider that this is an issue which I should resolve on the balance of probabilities on the materials which are before me.

[149]A considerable volume of material and evidence was deployed. It is convenient to begin with that relied upon by Butterworth Spengler.(1) There had been an increasing build-up of waste from June 2012, reflected in the EA Enforcement Notice of 27 July 2012, and the EA Compliance Assessment Reports dated 20 July 2012, 9 August 2012, 24 August 2012 and 28 August 2012.

(2) As at 17 July 2012, at the time of the Aviva Survey, it is clear that bales were stored within two to three metres of the sheds.

(3) The EA Compliance Assessment Report of 28 August 2012 noted that “Waste is also being stored … alongside the buildings along the access route through the site to the haulage business at the end of the site”.

(4) A statement was given to representatives of Aviva by Technical Fire Officer David Marshall, dated 4 January 2013. Mr Marshall had visited the Premises on a number of occasions. One of these was on 23 August 2012 when he did so in response to a complaint from the EA as to large accumulations of externally stored materials. At this point, his statement says:

“I noted stacked combustible material against the front of all the sheds, with a gap of less than two metres between the stacked material and the buildings. There was a large amount of combustible material underfoot within that gap.”

Thereafter, he had visited the site again on 17 October 2012, in response to a complaint from the HSE over concerns over means of escape from shed 2. At that point, Mr Marshall’s statement says, there was material between sheds 2 and 3: “The material was stacked to a high level and the gap between the shed walls and the combustible material was between one and two metres wide, with a large quantity of plastic material underfoot in the gap. In the centre of the area there was a walk way of approximately two metres wide that led to an area outside the rear door on the south-west corner Shed 2. I noted that there was stored combustible material in front of shed 2 with a gap of approximately one metre between the shed wall and the combustible material.”. (5) An email from Colin Heyes, Arson Reduction Manager of Cheshire Fire and Rescue Service dating from April 2013 stated, in relation to the condition of the Premises at the time of the fire: “The site had many thousands of tonnes of baled and loose recyclable domestic waste spread from the front of the site … all the way to the rear of building 3. The first officers in attendance looked for a ‘fire break’ where they could position jets and monitors to prevent the spread, but could find no such ‘fire break’. The site was in effect a single stack/pile of combustible waste from one end to the other, contained within the buildings and stacked between them….” (6) The photographic record, Butterworth Spengler contend, demonstrates that bales were stored within four metres of the buildings. That is said to be so of certain of the photographs taken on 18 October 2012; and the photographs taken at the time of the fire. (7) No measures were taken to ensure that bales were stored more than four metres from the buildings (e.g. no painted marks, no barriers and no warnings posted for staff). (8) There was in effect no oral evidence from Dalamd’s witnesses about the position at the Premises on the evening of the fire. Colin Douthwaite had withdrawn from the witness box before being cross-examined on this point, and his evidence (including his written evidence) was unreliable, and Phil Roche was not on site after 19 October 2012. The evidence Phil Roche did give was unsatisfactory.

[150]For Dalamd, reliance was placed on the following:(1) The statement of Fire Officer Marshall had been based on notes taken in an interview with Mr Marshall by Dr Russell Cooper of Burgoynes. Mr Marshall had not been called, though Dalamd would have wished to cross-examine him.

(2) At or about the time of Mr Marshall’s visit and continuing thereafter, a significant reorganisation of the way bales were stored was being conducted, including, in response to a recommendation by the HSE and the EA, that they be stacked in a pyramid formation. This was the evidence of Phil Roche, and it appears from certain photographs that it was being carried out.

(3) The evidence of Colin Douthwaite and Phil Roche was that external bales were stored four metres or more from the building; that instructions were given to the operatives to ensure that that was the case; and there were various obstacles to their being stacked closer, such as compactor bins, hook lift wagons and the concrete ledge in the area between sheds 1 and 2.

(4) The photographs taken during the course of the fire do not show anything reliable as to bales having been within four metres of the sheds, not least because bales might have collapsed as they burned.

[151]I recognise that the evidence before me is imperfect. Nevertheless I conclude, on the balance of probabilities, that at the time of the fire waste was, in some areas, being stored within four metres of the sheds. Specifically, it seems likely that this was the case in the area between sheds 2 and 3. I have come to this conclusion the following basis:(1) I did not consider that there was any good reason not to accept what is contained in Mr Marshall’s statement as to the position on 17 October.

(2) There was no cogent evidence that the material stored in that area had been moved between 17 October and the fire.

(3) Burgoyne’s photograph 10 indicated, on the contrary, that a considerable amount of waste remained in that area.

(4) Albeit that the position is rather more doubtful, because of the lack of specific reference to this area in Mr Marshall’s statement, I consider that it is also more likely than not that there was waste stored within four metres of the east wall of shed 1, and that that is revealed in Burgoynes photographs 2 and 3.

[152]Dalamd contends that, even if breach of the External Storage Condition would have afforded Aviva a good defence to JLS’s claim on the Aviva policy, it would not have done so in relation to Widnes’s claim because of the non-invalidation clause in the policy. As to this, I consider that there was, at least, considerable force in the points of construction made on this issue by Cunningham Lindsey in their undated letter, sent before 12 December 2012, to which I have referred above. These were not explored before me. In any event, given my conclusion as to the delegation of responsibility for all matters relating to the insurance to Andrew McQueen and Colin Douthwaite, I do not consider that the breach of the External Storage Condition can be said to have been a matter “unknown to” or “beyond the control” of Widnes for the purposes of the non-invalidation clause.

[153]Given this conclusion there was no cover for either JLS or Widnes as a result of a matter for which Butterworth Spengler were not responsible. Nevertheless, given what I have found to be the correct approach to these issues, I should go on to consider whether damages might still be awarded on the basis that, had the point as to breach of the External Storage Condition stood alone (i.e. without the argument as to the voidability of the policy) Aviva, though it had initially taken it, might not have pursued it to trial, or might have compromised it. Again, this issue would arise in relation to any losses which JLS might have been able to recover under the policy which Widnes could not, or if I am wrong that Widnes’s cover was unaffected by the non-disclosure of the Doumac insolvency.

[154]I consider that the prospects of either Aviva abandoning the point or of having compromised it as being very limited indeed. The material I have does not suggest that there was any substantial chance of either of these things happening. Aviva had taken an absolutely clear stance in relation to breach of the External Storage Condition, based on advice from Burgoynes. Aviva had taken what was described as a “final decision”, based on its being “wholly satisfied” of “the most flagrant breach” of the External Storage Condition. There has been no material shown to me by Dalamd which was of a clarity such as was likely to alter Aviva’s position. The contrary evidence was largely that of Colin Douthwaite and Phil Roche, and principally the former, given that Phil Roche was not on site after 19 October 2012. Such evidence would, I consider, have been regarded by Aviva with suspicion.

Causation: BI Cover

[155]I have already set out my conclusion that in this area Butterworth Spengler were not in breach of duty.

[156]I should also indicate that I would have considered that this case would have failed on causation grounds in any event. The reason is that I find that, even had fuller advice as to the nature of the various types of BI cover and the desirability of gross profit BI cover been given, JLS would not have taken it out because of its cost.

[157]Quotations for gross profit BI cover had been provided by Mr Boylan of DRP at the initial placement of insurance for Doumac in 2008 and on the renewal in 2009. On both occasions, Andrew McQueen decided not to take out such cover. Mr Boylan again discussed BI cover with Andrew McQueen at the 2010 renewal. It is apparent from the Premium analysis that Mr Boylan assumed that Doumac would not proceed to obtain gross profit BI cover because of its cost: that must be because there was a discussion along those lines between himself and Andrew McQueen. Indeed, Doumac turned down obtaining ICOW only cover, on this occasion, despite its lower premium, for the same reason, as Andrew McQueen accepted.

[158]Consistently with this behaviour in 2008-2010, when in 2011 Andrew Thomson recommended the taking out of full Gross Profit BI cover, the decision of Doumac’s directors, as evidenced in Andrew Thomson’s email of 27 September 2011, was that Doumac could not afford it.

[159]In 2012, Doumac’s business deteriorated significantly leading to its insolvency. When JLS replaced Doumac, its financial position was weak. Doumac had had two principal customers, one of which was PHS, which had on 24 July 2012 stated that it was terminating its contract with Doumac. By the time of the fire, a company called GFSL contended that JLS owed it £95,000, which was being disputed. Even if that sum was not due, it appears from some management accounts produced in 2015 that, during the short time it had been trading, JLS had had a surplus of sales over cost of sales of only some £83,000, and this figure took no account of overheads, including directors’ salaries, wages, rates, insurance or rent. I find that its directors would not have agreed to pay for gross profit BI cover.

Causation: The Existence and Effect of the External Storage Condition

[160]I have already stated my conclusion that there was no breach of duty by Butterworth Spengler in relation to this matter.

[161]Any such complaint fails on causation grounds as well. JLS knew about the need to comply with the External Storage Condition. Andrew McQueen’s evidence was that after the Aviva survey he knew of the condition. He also gave evidence that at some point after the survey Colin Douthwaite had explained to him that bales needed to be moved “or the insurance policy would not pay if there was a claim”. That demonstrates both Colin Douthwaite’s, and Andrew McQueen’s knowledge of the effect of a breach of the External Storage Condition before the fire.

[162]Accordingly if, as I have found to be the case, there was non-compliance with the External Storage Condition, that was not the result of any lack of appreciation on the part of JLS of the importance of compliance or the potential consequences of non-compliance.

Causation: Loss of rent

[163]I have set out my conclusion that Butterworth Spengler were in breach of duty in failing to raise with Doumac, Widnes or JLS the issue of cover for loss of rent. There remains the question of what would have happened had proper advice been given.

[164]In my judgment it is unlikely that Doumac, or Widnes, or JLS would have agreed to pay for loss of rent cover. In this regard, it is apparent from a quotation request of 4 August 2009 prepared by Mr Boylan of DRP that he had identified loss of rent cover as an insured exposure and was seeking quotations from insurers for such cover. It seems likely that this was discussed with Andrew McQueen and that it was decided at that stage not to take out loss of rent cover. Given that the financial position of Doumac deteriorated after that date, and JLS’s financial position was always parlous, I consider that it unlikely that there would have been a subsequent decision to pay for a cover which it had been decided not to take out in 2009, even if the premiums had been only a few thousand pounds.

[165]If I am wrong in relation to whether loss of rent insurance would have been taken out and paid for I consider that Dalamd has not shown that any indemnity would have been payable under any insurance which would have been effected. This is because the only lease which was ever made in respect of the Premises was made with Doumac. By the time of the fire Doumac had failed. There was no lease with JLS and JLS had paid no rent to Widnes. Mr Powell’s evidence was that in such circumstances it was “unlikely that insurers would provide an indemnity”. Dalamd contended that it would have been possible to show that JLS would, at some point in the future, in fact have started to pay rent to Widnes, and accordingly that insurers would have been satisfied that Widnes had suffered a loss. This appeared to me to be entirely speculative. Given what had happened to Doumac, it is very unclear indeed as to what would have been the fate of JLS had the fire not occurred, and whether it would have paid any rent, or for what periods. If the question is whether the putative loss or rent insurers would have been persuaded that Widnes had suffered a loss, I consider that it is highly unlikely that they would have been.

Causation: Disclosure to XL

[166]I have found that Butterworth Spengler were in breach of duty,(1) in that they should have made enquires of the insured as to (i) whether there had been any problems with the HSE, the EA or the Fire Service and (ii) as to previous fire incidents; and also

(2) in not conveying to XL what they knew in relation to the build-up of waste.

[167]The first aspect ((1)) raises the question of what the insured would have revealed had there been such enquiries. Both aspects ((1) and (2)) raise the further question of whether what would have been disclosed but was not disclosed to XL was material and whether there would have been other matters which would not have been disclosed which would, in any event, have given XL the right to avoid the insurance.

[168]As to the first aspect, and as I understood it, Butterworth Spengler did not accept that, even if he had been asked about these areas, Colin Douthwaite would have revealed the true position. More specifically, Butterworth Spengler contended that, if he had revealed anything about the previous fires, it would have been materially inaccurate.

[169]I have already recorded that I have reservations about much of Colin Douthwaite’s evidence, and I recognise that it appears that he had not informed Phil Roche of the EA Enforcement Notice or the concerns which the EA had raised in August 2012, and did not volunteer information about these matters to Butterworth Spengler. Nevertheless, I consider that had he been asked in August 2012 as to whether there were any problems with the authorities as a result of the build-up of waste he would have revealed the essence of what had happened, namely that an enforcement notice had been served on Doumac in late July and that the EA considered that the build-up of waste involved various breaches of condition. For him not to have done so would have required a lie, which, given its subject matter - being one which involves publicly available information - might well have been exposed, with potentially very serious consequences.

[170]In relation to fire incidents, I consider it likely that if asked about them in 2012, Colin Douthwaite would have revealed the following:(1) As to the 2010 incident, that there was an electrical fault, which gave rise to a small fire in the shed 1 hopper, which had been extinguished by Doumac staff using fire extinguishers, but the Fire Brigade had then turned up and applied water to damp the area down. This was how he described the incident in his oral evidence, which appeared to be more solidly based on his recollection than his witness statement in this area.

(2) As to the 2011 incident, that there had been a brief ignition fire because of a bearings failure; that it had been extinguished by Doumac staff; but the fire brigade had been telephoned, had attended, found no signs of a fire, and left. That this is what he would have told insurers was distinctly confirmed in his oral evidence on Day 3.

[171]Would the matters identified above, for whose non-disclosure Butterworth Spengler were responsible, have made the XL policy voidable and have justified XL’s subsequent avoidance of the policy? I consider it to be plain that they gave rise to a reasonably arguable case that the policy was voidable. On my view of the correct approach to a case such as the present, however, it is necessary for me to consider whether, on balance, and on the material presented to me, that was actually their effect. In my judgment, they would. The build-up of waste was relevant to fire risk. The issues with the EA, which were themselves focused on the storage of waste, were in my view plainly material. In the context of potentially enhanced concerns about fire risk the information about previous fire incidents was also, I consider, material. The likelihood is that if there had been disclosure of these matters XL, which did not have the benefit of an external storage condition, would at least have adjusted its terms.

[172]The remaining question is whether any of the matters not disclosed on which XL relied to avoid the policy, but for whose non-disclosure Butterworth Spengler were not responsible, of themselves provided valid grounds of avoidance. In my judgment they did not. The matters which Butterworth Spengler contended fall into this category are essentially confined to their contention that, in relation to the 2010 incident, a main jet had been used by the fire brigade to fight the fire, and in relation to the 2011 incident that the fire had not been extinguished by Doumac’s personnel but had had to be extinguished by the fire brigade. There is no evidence that those matters would have been material or would have induced XL, and in the absence of evidence I would consider that they were not material, and that it is highly unlikely that they would have had an inducing effect on XL. I find it highly unlikely that, had they stood alone, XL would have sought to avoid the policy in reliance on them.

The argument that JLS did not own the plant and machinery

[173]Butterworth Spengler contend that Dalamd cannot succeed in respect of a claim for loss of an indemnity under the XL policy because JLS suffered no loss by reason of an absence of indemnity for the plant and machinery because it had no proprietary interest in that plant and machinery and no entitlement to indemnity in respect of it.

[174]The foundation of this argument was that insofar as Doumac had owned some of the plant and machinery, title remained with Doumac, and had not been transferred to JLS; and insofar as the plant and machinery was on hire purchase from Close Asset Finance, which it appears that the great majority of it was, title remained with the original owner until payment.

[175]I do not consider that this argument is correct. JLS as a bailee had an insurable interest in the property bailed to it and could recover under the insurance up to its full value, although it might then have had an obligation to account to the bailor in respect of the bailor’s interest. I consider that an insured bailee would be entitled to sue a negligent broker for the full amount of the indemnity that would, but for the broker’s breach, be recoverable, and the damages would be held on the same basis as the insurance proceeds would have been.

[176]In fact, in the present case, Dalamd and Close Asset Finance have entered into an arrangement in relation to the division of the proceeds. That agreement is either effective, in which the proceeds will be divided in the manner agreed, or it is not, in which Close Asset Finance’s interest would subsist. Either way, I do not consider that it affects the damages which Butterworth Spengler is obliged to pay. Loss 177. Aviva Policy

Loss

[177]For reasons I have given, Dalamd cannot recover for any sums for which an indemnity was provided by the terms of the Aviva policy.

[178]In the circumstances the issue of whether the Aviva policy covered the buildings on a reinstatement or an indemnity basis does not affect the damages recoverable by Dalamd. Business Interruption, Loss of Rent

[179]For reasons which I have given, Dalamd cannot recover any damages in respect of these matters. XL Policy

[180]Dalamd is entitled to recover damages in the value of the plant and machinery, namely £1,600,000.

Conclusion

[181]Dalamd’s claim succeeds in relation to its claim in relation to the XL policy, but otherwise fails.

order

(1) That they failed to disclose to Aviva what they had been told about the Doumac insolvency and/or made a misrepresentation to Aviva about that insolvency.

(2) That they gave inadequate advice in relation to BI cover.

(3) That they gave inadequate advice in relation to loss of rent cover.

(4) That they gave inadequate advice about the existence and/or effect of the External Storage Condition in the Aviva Policy.

(5) That they failed to give disclosure of what they knew and/or gave inadequate advice in relation to the matters which should be disclosed to XL. Breach: Non-Disclosure and/or misrepresentation to Aviva as to Doumac insolvency