In Robin & Barbara Bache and others v Zurich Insurance
Plc [2014] EWHC 2430 (TCC), the court was asked to determine a
preliminary issue concerning interpretation of a property
development policy. The claimants agreed to lease flats yet to be
built from a developer, paying a 10% deposit under the agreement.
The defendant provided a policy to the developer, for the benefit
of the claimants, which stated that "the policy protects
you if your developer goes into liquidation...against the loss of
contract exchange deposit".
Construction work never commenced and the claimants terminated the
contracts by accepting the failure to complete the flats as a
repudiatory breach. The developer subsequently went into
administration on April 2011 and was dissolved in January 2013. The
defendant denied liability under the policy arguing that the policy
did not attach as the policy words "fails to complete the
construction" imported a subsisting obligation on the
part of the developer to complete the construction and the accepted
repudiation relieved the developer of any obligation to complete
the work.
In determining the meaning of the policy language, Mr Justice
Akenhead cited the dictum of Lord Steyn in Mannai Investment Co
Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 771,
"...the law generally favours a commercially sensible
construction". Akenhead J considered the commercial
reality of the transaction at the date of the policy and ruled
that:
- the fact that the insured purchasers had accepted a repudiation on the part of the developer vendors was not in any way a bar to recovery under the policy;
- the fact that following such acceptance the developer vendors entered liquidation or dissolved was not in any way a bar to recovery under the policy; and
- the fact that at the date of the acceptance of the repudiation the developer was, as a matter of fact, insolvent and/or such insolvency was the reason why it had not started or completed the development, was not in itself a bar to recovery under the policy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.