{"id":137,"date":"2019-03-11T00:00:00","date_gmt":"2019-03-11T00:00:00","guid":{"rendered":"https:\/\/fenchurchlaw.hostingsystems.co.uk\/uk\/blog\/2019\/03\/11\/zagora-management-limited-others-v-zurich-insurance-plc-and-others\/"},"modified":"2024-08-21T17:02:11","modified_gmt":"2024-08-21T16:02:11","slug":"zagora-management-limited-others-v-zurich-insurance-plc-and-others","status":"publish","type":"post","link":"https:\/\/fenchurchlaw.com\/en-uk\/zagora-management-limited-others-v-zurich-insurance-plc-and-others\/","title":{"rendered":"Zagora Management Limited & Others \u2013 v \u2013 Zurich Insurance PLC and others"},"content":{"rendered":"

In this recent decision, the Technology and Construction Court allowed claims brought by the leaseholders under \u201cStandard 10 Year New Home Structural Defects Insurance Policies\u201d (\u201cthe Policies\u201d), but rejected all the claims against the Approved Inspector. <\/strong><\/p>\n

The case concerned a development of two blocks of flats in Hulme, Manchester (\u201cthe Property\u201d). The claimants were the freeholder, Zagora Management Ltd (\u201cZagora\u201d), and 26 long leaseholders, who between them owned 30 flats. The defendants were (1) Zurich Insurance plc (\u201cZIP\u201d), which had issued the Policies to the leaseholders; and (2) Zurich Building Control Services Ltd (\u201cZBC\u201d), which had undertaken the role of building inspector and issued final certificates under the Building Regulations (\u201cthe Certificates\u201d).<\/p>\n

As against ZIP, the Claimants sought to recover under the Policies the cost of remedying a number of serious defects at the Property, pleaded at \u00a310.9m. Zagora also sued ZIP based under what was referred to as an \u201cagreement to rectify\u201d.<\/p>\n

As against ZBC, thirteen of the Claimants, including Zagora, claimed damages representing the diminution in their respective interests as the Property, on the basis that ZBC knew that the statements made in the Certificates were untrue, or was reckless as to their truth.<\/p>\n

The claims against ZIP<\/u><\/strong><\/p>\n

(i) Zagora\u2019s claim under the Policies<\/em><\/p>\n

Zagora claimed that it was entitled to sue ZIP under the Policies because it had a freehold interest in the Property as a whole. By contrast, ZIP argued that Zagora was not, and never had been, insured under the Policy.<\/p>\n

It was common ground that Zagora had never been issued with a certificate identifying it as the buyer; however, Zagora claimed that did not matter, as it became a co-insured in relation to each flat when it acquired the freehold of the Property in 2013.<\/p>\n

Although acknowledging the ingenuity of Zagora\u2019s argument, the Judge (HHJ Stephen Davies) had no difficulty in concluding that it was wrong. Each insurance certificate identified the buyer by name; the only situation provided for in the Policy where the buyer\u2019s identity could change was in the event of an onward sale of the flat in question. That did not apply in this case, as Zagora\u2019s predecessor was never issued with an insurance certificate. Further, the Policies did not allow for there to be more than one insured with separate interests in the same flat. In the circumstances, the Judge held that Zagora was not an insured under the Policy.<\/p>\n

(ii)\u00a0The leaseholders\u2019 claims under the Policies<\/em><\/p>\n

The Judge found that the Property was seriously defective and that the leaseholders were entitled to recover the reasonable cost of repairs. Before coming to that conclusion, however, the Judge addressed a number of issues of policy construction; in particular, ZIP\u2019s contentions that (a) the claims were subject to a maximum liability provision (\u201cthe Cap\u201d), and (b) the Policies did not indemnify the cost of repairs that the claimants never intended to carry out.<\/p>\n

Zagora asserted that the Cap imposed a maximum liability of \u00a325m. ZIP\u2019s case, by contrast, was that the Cap limited each leaseholder\u2019s claim to the declared purchase price of its flat, with the result that the total maximum liability was the declared value of 30 flats i.e. \u00a33.634m. The Judge agreed with ZIP, and found that it was not unreasonable for it to have wanted to limit its cover for a 10-year policy. Accordingly, the leaseholders\u2019 claims were capped at the total purchase price of their flats.<\/p>\n

As to the correct indemnity, the Claimants contended they were entitled to recover the reasonable cost of repair without<\/em> first having to undertake those repairs. Whereas ZIP argued that the Policies did not cover repairs which would never be carried out.<\/p>\n

The Policy provided that ZIP would pay \u201cthe reasonable cost of rectifying or repairing the physical damage [or] the reasonable cost of rectifying a present or imminent danger<\/em>\u201d. The term \u201creasonable cost\u201d was, in the Judge\u2019s view, neutral as to whether it was a cost already occurred or a cost to be incurred. Accordingly, there was no obvious reason why it should have the limited meaning for which ZIP contended.<\/p>\n

(iii) The \u201cagreement to rectify\u201d claim<\/em><\/p>\n

Zagora claimed that at a meeting in June 2013, ZIP agreed to resolve certain defects, regardless of the strict position under the Policies.<\/p>\n

The Judge commented that, where parties have no pre-existing contractual relationship, it would be necessary to show that they agreed on all matters essential to the formation of a contract. However, the need to do so would be less acute where there was<\/em> a pre-existing contractual relationship. The difficulty here, however, was that the relationship between Zagora and ZIP did not fit neatly into either category, given that by the time of the crucial meeting, there was a dispute as to the claimants\u2019 contractual rights under the Policy.<\/p>\n

In any event, the Judge found that what was actually agreed between the parties was merely a \u201cstep along the road\u201d to what the parties would have expected to be a pragmatic resolution of a serious problem, and did not represent a binding and enforceable contract. Accordingly, Zagora\u2019s claim failed on the basis that the agreement lacked contractual certainty.<\/p>\n

The claims against ZBC<\/u><\/strong><\/p>\n

The Claimants contended that they would not have acquired the individual flats, or (in the case of Zagora) the freehold, had they known the true position regarding the value of their interests. As their claim was brought in deceit, the Claimants were required to show not only that ZBC knew that the representations in the Certificates were untrue or were reckless as to their truth, but that they also relied on those representations.<\/p>\n

It was common ground that ZBC knew at the time that it had not taken reasonable steps to satisfy itself that the Building Regulations had been complied with, and had thus been reckless. The issue therefore turned on reliance.<\/p>\n

ZBC\u2019s evidence was that it never anticipated that Zagora, as a subsequent purchaser of the freehold, would have relied on the Certificates. The Judge accepted Zagora\u2019s evidence, and found that it was \u201cimpossible\u201d to conclude that it intended Zagora to rely on the certificates 2 to 3 years after they were issued. Accordingly, Zagora\u2019s claim failed.<\/p>\n

Contrary to the position vis-\u00e0-vis Zagora, ZBC accepted that it did<\/em> anticipate that the leaseholders would rely on the Certificates. However, there was a complete absence of evidence that the leaseholders or their solicitors were provided with the Certificates either before exchange or completion. Therefore, even though the Claimants were able to prove deceit on ZBC\u2019s part, their claims also failed at the reliance hurdle.<\/p>\n

Conclusion<\/u><\/strong><\/p>\n

The case illustrates the various complexities and challenges facing policyholders, and particularly leaseholders, when bringing claims under new home warranties. The case is also a reminder of the practical difficulties of bringing claims against Approved Inspectors. Indeed, in the recent decision in The Lessees and Management Company of Herons Court v Heronslea and others<\/u><\/em> [2018] EWHC 3309 (TCC), a claim against an Approved Inspector failed, this time because Approved Inspectors were not subject to the Defective Premises Act 1972.<\/p>\n

Alex Rosenfield<\/a> is an associate at Fenchurch Law<\/p>\n","protected":false},"excerpt":{"rendered":"

In this recent decision, the Technology and Construction Court allowed claims brought by the leaseholders under \u201cStandard 10 Year New […]<\/p>\n","protected":false},"author":12,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[4,78,152,179,272,273],"class_list":["post-137","post","type-post","status-publish","format-standard","hentry","category-news","tag-fenchurch-law","tag-claims","tag-alexander-rosenfield","tag-zurich-insurance-plc","tag-zagora-management-limited","tag-zip"],"acf":[],"yoast_head":"\nZagora Management Limited & Others \u2013 v \u2013 Zurich Insurance PLC and others - Fenchurch Law UK<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fenchurchlaw.com\/en-uk\/zagora-management-limited-others-v-zurich-insurance-plc-and-others\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Zagora Management Limited & Others \u2013 v \u2013 Zurich Insurance PLC and others - 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