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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Zurich Insurance Plc v Nightscene Ltd [2019] EWHC 352 (QB) (25 February 2019) URL: https://www.bailii.org/ew/cases/EWHC/QB/2019/352.html Cite as: [2019] EWHC 352 (QB) |
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HIGH COURT APPEAL CENTRE BRISTOL
CIVIL APPEAL from Bristol County Court
Order of HHJ Russen QC Dated 19 December 2017
Case Number B19YM822
1 Redcliffe Street, Bristol, BS1 6NP |
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B e f o r e :
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Zurich Insurance Plc |
Claimant/ Respondent |
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- and – |
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Nightscene Limited |
Defendant/ Appellant |
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Peter Knox QC & Andrew McGuinness (instructed by Carter Lemon Cameron) for the Defendant/Appellant
Hearing dates: 05 December 2018
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Crown Copyright ©
Mrs Justice May:
Facts
(1) An agreement concluded between Zurich and BPDL in or around 19 July 2004 ("the Agreement") by which Zurich agreed with BPDL to provide insurance policies to purchasers from BPDL of new-build homes at the development. BPDL gave certain undertakings under the Agreement, including the following:
"4.8 (a) The Developer shall ensure that the new Home is built to comply with the Requirements [set out in Zurich's technical manual] and in a competent and workmanlike manner to Zurich's satisfaction.
…
4.14 The Developer agrees to honour the terms of the Warranty where it places any obligation or responsibility on him either to Zurich or to a Buyer.
4.15 The Developer agrees to correct any Defect within the time notified to the Developer in writing by Zurich. [defined in clause 1 as "A failure to comply with the Requirements in respect of the New Home"].
4.16 Where Zurich pays any sum relating to the Developer's obligations or responsibilities under this Agreement or a Warranty the Developer agrees that it shall reimburse Zurich with all of the reasonable associated costs Zurich incurs in so doing. ("Clause 4.16")
4.17 The Developer shall reply fully and within 28 days to any correspondence from Zurich that has been sent to the Developer by recorded delivery to the last address notified to Zurich."
(2) A contract of guarantee entered into between Nightscene and Zurich dated 6 December 2004 ("the Guarantee"), setting out the following principal obligation:
"1.1 The Guarantor [Nightscene] hereby:-
(a) irrevocably and unconditionally guarantees to the Company [Zurich]:-
(i) the full and due performance and observance by the Developer of all its obligations under or arising pursuant to the Scheme and/or the Agreement: and
(ii) the due payment and discharge of all sums of money and liabilities which now are or at any time shall be due, owing or incurred, or payable and unpaid by the Developer to the Company pursuant to the Scheme and/or the Agreement: and
(iii) the due payment and discharge of all losses, damages, expenses and costs arising from the Company exercising its rights against the Developer pursuant to the Scheme or/and the Agreement.
(b) Irrevocably and unconditionally undertakes to the Company that if the Developer fails to fully and completely:
(i) Perform and observe its said obligations: or
(ii) Pay and discharge the said losses, damages, expenses and costs
The Guarantor will indemnify and keep indemnified the Company from and against and forthwith on demand pay to the Company all losses, damages, expenses and cost which the Company may suffer, incur or pay as a direct or indirect result of such failure on the part of the Developer."
Grounds of appeal
(1) that the rights under 4.16 were "wholly ancillary to and dependent upon" rights arising under earlier clauses in the Agreement such that once the limitation period had expired for any claims under those earlier clauses then it had also expired for any claim under clause 4.16.
(2) that Zurich's cause of action for an indemnity from BPDL under clause 4.16 accrued once for all upon the first payment made in January 2008.
(3) In the alternative, if it was entitled to maintain a claim for any of the payments made under clause 4.16, Zurich was entitled to do so only in relation to those payments made after 5 June 2009.
The judgment below
(i) The starting point was "the nature of the promise which is said to have been unfulfilled and to have resulted in a claim": [43]
(ii) The underlying breach by BPDL was the failure to reimburse Zurich the cost of the remedial works, contrary to clause 4.16: [44]
(iii) The provisions of clause 1.1 of the Guarantee contain the contractual obligation of Nightscene to pay if BPDL had not: [45]
(iv) For the claim against Nightscene to be statute-barred, applying a 6-year limitation period: "the court would therefore have to conclude that Nightscene was obliged to pay under clause 1.1 sometime before 6 June 2009: that is before BPDL had itself been called upon to pay by the letter dated 28 September 2009:" [47]
(v) On the proper construction of clause 1.1 of the Guarantee Nightscene only became liable to pay only after BPDL had first failed to do so: "This is the language of a secondary obligation which is characteristic of a guarantee". [53 and 54]
(vi) Thus, Nightscene's liability under clause 1.1(a)(ii) or 1.1(b) did not arise until BPDL had been called upon to pay, which did not happen until the written demand of 28 September 2009, at the earliest: [54]
The parties arguments and my conclusions
(i) The nature of BPDL's obligation under clause 4.16
"54 But it is important to distinguish between (a) successive claims in respect of the same cause of action and (b) successive claims in respect of different causes of action. In the example of the debt owed by B to A there is only one cause of action, namely the right to repayment of the debt. That cause of action arises no later than when B first refuses to pay. It is obvious that the mere refusal of payment on the second occasion does not give rise to a fresh cause of action….
56 In my view, the cause of action in respect of an engineer's failure to include a sum in an interim certificate is not the same as the cause of action in respect of the failure to include a sum in the final certificate, even if the two sums happen to be the same."
"Save where it is the essence of the arrangement between the parties that a sum is not repayable until demanded (eg a loan expressly or impliedly repayable on demand) it appears to me that clear words would normally be required before a contract should be held to give a potential or actual creditor complete control over when time starts running against him, as it is such an unlikely arrangement for an actual or potential debtor to have agreed"
"…the claim to recover the debt which was due from BPDL under clause 4.16 of the Agreement but remain [sic] unpaid is one that can be made under clause 1(a)(ii) of the Guarantee (and probably 1(b)(ii) also, even if there was no prior demand upon Nightscene). It is clear from the decision of Neill J in Telfair Shipping Corporation v Inersea Carriers SA [1985] 1 WLR 553,556, - a decision upon which both parties relied – that there may be obligations of indemnity where time does not begin to run against the creditor until the liability of another has first been established and ascertained. That is the position here."
(ii) Time runs from date of first payment in January 2008
"It is no doubt a guarantee that the Association will be repaid by the Nosworthys advances made and to be made to them by the Association together with interest and charges; but it specifies in cl.2 how that guarantee will operate – namely, that it will apply to (ie the guarantor guarantees repayment of) the balance which at any time thereafter is owing by the Nosworthys to the Association. It is difficult to see how effect can be given to this provision except by holding that the repayment of every debit balance is guaranteed as it is constituted from time to time, during the continuance of the guarantee, by the excess of the total debits over the total credits. If that be the true construction of this document, as their Lordships think it is, the number of years which have expired since any individual debit was incurred is immaterial. The question of limitation could only arise in regard to the time which had elapsed since the balance guaranteed and sued for had been constituted."
(iii) Partial time-bar
Conclusion