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Wheeldon Brothers v Millennium Insurance – condition precedents and waste recycling

Ben Quiney KC recently successfully represented a recycling company in its claim for an indemnity from its property insurer. The case revolved around a number of alleged breaches under the policy relating to the condition of the factory and plant. The Judge accepted: first, the Claimant’s theory of the fire; and second, the Claimant’s case on the interpretation of the policy.

This claim arose from a fire that occurred on 22 June 2014 (“the Fire”). This was at a waste processing plant situated at Kenyon Street, Ramsbottom, BL0 0AB (“the Plant”), which was owned by the Claimant, being Wheeldon Brothers Waste Limited (“Wheeldon”). At the material times it was insured against the risk of fire by the Defendant, being Millennium Insurance Company Limited (“Millennium”). Millennium refused to indemnify Wheeldon following the Fire. Wheeldon sought declaratory relief and an indemnity and/or damages. Wheeldon succeeded at trail.

In its Defence Millennium alleged that the following breaches had occurred:

  1. An alleged failure to comply with Risk Requirement 4 of the Secon Report (Millennium’s surveyor), relating to the storage of combustible waste with 6m of fixed plant/machinery outside of operating hours.
  2. An alleged breach of Memorandum 6, also storage of combustible materials less that 6m of fixed plant outside of operating hours.
  3. An alleged breach of Memorandum 11, relating to the removal of combustible stock and/or waste outside of operating hours.
  4. An alleged breach of WA6, relating to the maintenance of the machinery.
  5. An alleged breach of WA7, relating to the standard of housekeeping.
  6. An alleged breach of the requirements under the Secon Report generally.

At trial the Judge found against Millennium on each of these points. The main reasons for this were based on the evidence and cross-examination of the expert. In short he did not accept Millennium’s theory of the cause and spread of the Fire. However, the decision also offered the following general points on the interpretation of property policies and conditions precedents:

  1. The parties should be taken to understand the nature and limits of the recycling business. “Every underwriter is presumed to be acquainted with the practice of the trade he insures and that whether it is established [the practice] or not”: see Noble v. Kennaway [1780] 2 Doug 511 at 513 (relied upon by HHJ Coulson KC (as he then was) in Margate Theatre v White [2006] LLRep 93 at paragraph 34) For example, the parties must have understood that keeping the machines and buildings tidy and clean in a recycling business is different from keeping machines and buildings clean and tidy in a shop, fruit processing and/or laboratories.
  2. If there is ambiguity in the clauses in issue, such ambiguities should be resolved against the insurer (MacGillivray 13th edition paragraphs 11-33-35).
  3. In the case of terms such as conditions precedent, the courts generally treat them as onerous or draconian terms. Thus, it is incumbent on the insurer to clearly spell out any such terms or the insured will not be bound by them (see Pratt v Aigaion Insurance [2009] 1 LL Rep at paragraph 13 per Sir Anthony Clark). He also relied upon Royal & Sun Alliance v Dornoch [2005] EWCA Civ 238 at paragraph 19: “It is a well-established and salutary principle that a party who relies on a clause exempting him from liability can only do so if the words of the clause are clear on a fair construction of the clause…
  4. When construing the policy the starting point is always the ordinary and natural meaning of the words objectively considered: see Arnold v Britton [2015] AC 15 1619 and Wood v Capita Insurance Services [2017] 2 WLR 1095.
  5. Conditions precedent fall into two categories: Conditions precedent which cannot be remedied and therefore cannot suspend cover (e.g. a condition precedent which required notice to be given by a particular time); and those which can be remedied and therefore suspend cover until they are remedied.
  6. “Combustible”, as used in the Policy, had a meaning which would be understood by a layperson. To take the example given by the experts, a layperson would not consider diamonds and metals to be “combustible”. It was material that was readily ignitable.
  7. “Storage” as used in the Policy has a meaning that imports a degree of permanence and a deliberate decision to designate an area to place and keep material.

The case offers an example of how an insured can secure cover notwithstanding a number of alleged breaches. It is also gives guidance on how an insurer might want to tighten up its wording in specialist policies, such as those dealing with risks such as waste recycling.

The case also raised issues of expert evidence at an earlier hearing, in which Coulson J decided not to restrict one party’s use of an expert where there had been a degree of dual retention of the expert and potential conflicts of interest (see Wheeldon Brothers Waste Ltd v Millennium Insurance Company Ltd [2017] EWHC 218 (TCC)).

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