PROVING THINGS 237: CLAIMANT FAILS TO PROVE ITS CASE, FAILS TO PROVE IT HAD SUFFERED DAMAGES HAD IT SUCCEEDED (SOMETHING ABOUT EXPERT EVIDENCE TOO)

In  Hamsard One Thousand And Forty-Three Ltd v AE Insurance Brokers Ltd [2024] EWHC 262 (Comm) the claimant failed to establish its case.  The judgment shows  many issues with the claimant’s evidence, in particular the problems that flowed from issues with the expert evidence and a failure to bring evidence to court to prove the losses claimed.

 

“There is no evidence before the Court of the damage actually done in May 2014 or of the nature and extent of the work that would have been required to repair it. I would at the very least have expected a detailed schedule of the work that needed to be done to have been prepared at the time. This was not done”

THE CASE

The claimant company brought an action for damages against an insurance broker, alleging that it was breached of duty by the broker that led to an insurer avoiding a policy.  The claimant claimed £2,648,769.99.

Lionel Persey KC, sitting as a High Court  Judge, dismissed the claimant’s case.  There are some interesting observations in relation to the evidence. The judgment in relation to the

 

THE EXPERT EVIDENCE

The judge found much of the expert evidence called by the claimant could not be relied on for various reasons.   The evidence called in relation to broker’s practice was most probably not needed.

    1. Each party called a broking expert and an underwriting expert. Hamsard also called an expert to address the quantum of their claim.

 

 

    1. Hamsard called Mr Roger Flaxman as their broking expert and Mr Victor Broad as their underwriting expert. AE called Ms Sue Taylor as their broking expert and Mr Stephen Hartigan as their underwriting expert.

 

 

    1. It appeared from the Joint Statements produced by the experts following their meetings that they had agreed many of the issues between them and AE suggested that supplemental expert reports be dispensed with. Hamsard’s solicitors refused and instead put a number of leading questions to Hamsard’s experts which can fairly be said to challenge some of what had been agreed by them in the Joint Statements. This was, in my view, inappropriate.

 

 

    1. Mr Flaxman had not read some of the important messages between the parties and his evidence was at least in part based upon information that had been provided to him by Mr Beresford. Mr Broad had also received information directly from Mr Beresford without disclosing this in his reports and did not appear to understand that his role was not simply to act as a conduit for the views of his client and the instructions of his appointing solicitors. I did not find either of these two witnesses to be satisfactory.

 

 

    1. Ms Taylor and Mr Hartigan were good witnesses. They were both clearly experts in their respective fields.

 

 

    1. I should, however, say that I have my doubts as to the need for calling this sort of expert evidence in a case of this nature. I have very much in mind the observations of Leggatt J (as he then was) in Involnert Management Inc v Aprilgrange Limited & Others [2015] EWHC 2225 (Comm) at [294]:

 

“… Without any disrespect to these witnesses, all of whom are clearly very experienced brokers, I am doubtful of the value of much of the evidence from broking experts which was adduced in this case and is typically adduced in cases of this kind. It is common place, and this case was no exception, for broking experts to be asked to give their opinions on whether the defendant brokers owed duties to do the various things which they were allegedly negligent in failing to do. The general duties of insurance brokers have, however, been considered by the courts in many cases and, to a substantial extent, have become a matter of law …”

I will make only limited reference to the broking and underwriting evidence below.

 

  1. Ms Fellows is a very experienced RICS Registered Valuer and Director at Savills (UK) Limited. She produced a well-structured report and was a good witness. However, her report was founded upon a number of faulty assumptions and her approach and conclusions did not, through no fault of her own, accord with the reality of the case. Hamsard’s pleaded claim was for reinstatement costs for the damage that had allegedly been caused during the sale of the machinery and fixtures and fittings at the Premises, together with loss of rent. Ms Fellows was, however, instructed to prepare a valuation report. Her report valued the Premises in 2016 and also estimated their hypothetical rental value. She had been instructed to value the Premises in an assumed undamaged state as at their date of sale and on the assumption that they were fully let. She was also encouraged to assume a hypothetical rental value of between 2.80 to £3.00 per sq. ft even though the contemporaneous estimate was £2.00 per sq. ft after refurbishment. The effect of this was to lead to a vast increase in both the hypothetical valuation of the Premises and of their rental value.

 

THE CLAIM FOR DAMAGES

Even if liability had been established the judge found that the vast majority of the claim had not been proven.

(1) Reinstatement costs of the Premises   £1,512,500

(2) Loss of rent (20 weeks during reinstatement) £106,538.40

(3) Ongoing loss of rent (since the date, after 20 weeks, when reinstatement works ought to have been concluded)   £1,745,711.60

(4) Damage to fixtures and fittings (assuming maximum cover under a valid policy in the terms of the policy) £10,000

Against these heads of claim Hamsard gives credit for the net sale price achieved for the Premises (un-reinstated) in the sum of £683,598.00 and for rent received in the sum of £42,382.01.

 

    1. Reinstatement costs. This claim is in respect of the reinstatement cost of the damage allegedly done to the buildings on the Premises in May 2014 when equipment was removed and sold by the Administrators. There is no evidence before the Court of the damage actually done in May 2014 or of the nature and extent of the work that would have been required to repair it. I would at the very least have expected a detailed schedule of the work that needed to be done to have been prepared at the time. This was not done. Whilst I have no doubt that some damage was caused during the removal of equipment by the Administrators I am quite unable to assess just how much damage was done or what it would have cost to rectify.

 

 

    1. Loss of rent during reinstatement. This claim is difficult to understand. The claim assumes that the reinstatement would have taken 6 months. However, no rent was being received and no tenancy was imminent at the time. Even if loss of rent cover had been obtained there would have been no recoverable loss of rent.

 

 

    1. Ongoing loss of rent. This head of claim is in truth a claim for the alleged consequential losses of rent which would have been received by Hamsard had the Premises been fully let prior to their sale. The claim was not, however, pleaded in this way and I refused an application by Hamsard to amend their Particulars of Claim to put the case in this way at the outset of the trial.

 

 

    1. I can, however, say that had the claim been open to Hamsard then I would have found against it. This is because consequential losses arising from non-payment of an indemnity are not usually recoverable in broker’s negligence cases: Verderame v Commercial Union Assurance Co Plc [1955-95] PNLR 612; Ramwade Ltd v WJ Emson & Co Ltd [1987] RTR 72 and Sprung v Royal Insurance (UK) Limited [1999] 1 Lloyd’s Rep 111. Hamsard drew my attention to the cases of Arbory Group Ltd v West Craven Insurance Services (A Firm) [2007] Lloyd’s Rep IR 491 and Manchester Building Society v Grant Thornton UK LLP [2022] AC 783 and said that these were authorities supporting their claim for consequential losses. I do not agree. Arbory was a case involving business interruption insurance. Manchester Building Society is a case relating to the application of the SAAMCO principle in the context of the alleged negligent advice given by a firm of auditors. There is no mention of either Verderame or Ramwade in the judgments of the JSCs. The only reference to broker’s negligence in the Manchester Building Society case is to the case of Aneco Reinsurance Underwriting Ltd v Johnson & Higgins Ltd [2001] 2 All ER (Comm) 929. I consider that the editors of Colinvaux’s Law of Insurance (13th Ed) are correct when they observe at §16-148 that “it follows from Aneco that there is no general rule that the broker cannot be liable for a sum greater than the amount of the lost cover, and that the sole question is whether the broker’s duty extends solely to placing insurance cover of the type sought or whether the broker has also assumed duties akin to those of an investment adviser, the position found in Aneco“. In the present case AE did not take on any extended duties beyond placing insurance cover of the kind sought by Hamsard. Nor has Hamsard pleaded that AE took on any such extended duties. Hamsard’s losses are, therefore, restricted to the shortfall in the sum which would have been recoverable under the policy: see Verderame.

 

 

  1. Fixture and fittings. The Fusion Policy provides cover for fixture and fittings in the sum of £10,000. Hamsard claims this as a direct loss that would have been recoverable under the policy had it not been avoided. AE simply say that there is no evidence in support of this claim. No evidence has been specifically drawn to my attention by Hamsard. I am, however, satisfied that if Hamsard had persuaded me that AE were liable for the breaches of duty alleged against them then I would have found this sum proven.