Ted Baker Plc & Anor v Axa Insurance UK Plc & Ors

A condition precedent requiring an insured to provide documents does not automatically determine the scope of a professional accountants clause. Such a clause ordinarily covers accountants’ work extracting and verifying particulars or evidence, but not copying existing management or profit-and-loss accounts readily available to the insured. An insurer is generally under no duty to warn an insured about policy conditions. However, estoppel by acquiescence may arise where the circumstances known to both parties would lead a reasonable insured to expect the insurer, acting honestly and responsibly, to identify outstanding information. Dishonesty or an intention to mislead is unnecessary. An insurer that remains silent in those circumstances may be unable to rely on non-compliance with the condition precedent.

The appellants claimed business interruption losses under insurance policies following the theft of stock by a trusted employee. Eder J rejected the claims. He found that the appellants had failed to provide management and profit-and-loss accounts reasonably requested under the claims conditions, and that the evidence did not establish recoverable losses exceeding the £5,000 excess for each theft.

The appeal challenged the construction and application of the professional accountants clause, the finding that production of the accounts had not been parked, the insurers’ alleged duty to speak, and the judge’s factual and quantum findings. The central issues were whether the insurers could rely on the condition precedent and whether the loss had been proved.

The appeal was dismissed overall. The appellants succeeded on the duty-to-speak issue, but failed to establish recoverable losses exceeding the policy excess.

1. Professional accountants clause. The claims condition and the professional accountants clause were not coextensive. The clause covered reasonable accountants’ charges for extracting particulars and producing proofs, information or evidence required to investigate or verify the claim. It did not ordinarily cover copying existing management or profit-and-loss accounts which the insured could readily provide. Eder J was entitled to find that the clause was irrelevant to Category 7 of the document request.
2. Parking of the document request. Whether the parties agreed, or whether the insurers represented, that production had been parked was an objective composite question of fact. The judge was entitled to distinguish between the expensive and difficult material in Categories 2–6 and the readily available accounts in Category 7.
3. Duty to speak. An insurer is generally under no duty to warn an insured about compliance with policy conditions. Nevertheless, estoppel by acquiescence may arise where, in the circumstances known to both parties, a reasonable person in the insured’s position would expect the insurer, acting honestly and responsibly, to clarify that information remained outstanding. In the present circumstances, the insurers should have told the appellants that Category 7 remained due before the requested instructions were communicated. Their silence was misleading in the relevant equitable sense. No dishonesty or intention to mislead was required, and it would have been unjust and unconscionable to permit reliance on the condition precedent. The court did not decide whether the uberrimae fidei character of insurance contracts enlarged the duty, although that feature would increase its likelihood.
4. Quantum and appellate restraint. Modelling and inference could be used where direct evidence was difficult, but the insured event and an actionable head of loss still had to be proved on the balance of probabilities. The principles in Equitas v R & Q Reinsurance Co (UK) [2009] EWHC 2787 (Comm) and Municipal Mutual Insurance Ltd v SEA Insurance Co Ltd [1998] Lloyds Rep IR 421 were accepted. Findings of fact and expert evidence should not be disturbed unless the trial judge was plainly wrong or had made an identifiable error, applying McGraddie v McGraddie [2013] UKSC 58 and Henderson v Foxworth Investments Ltd [2014] UKSC 41. The assumptions concerning the quantity stolen and the timing of lost sales were highly speculative, and the judge was entitled to reject the claim on both quantum grounds.

1. Court of Appeal (Civil Division) dismissed the appeal. It held that the insurers were estopped from relying on non-compliance concerning Category 7, but upheld the rejection of the quantum case.
2. High Court of Justice, Queen’s Bench Division, Commercial Court (Mr Justice Eder, 2010 Folio 209) rejected the business interruption claims, principally for non-compliance with a condition precedent and failure to prove losses above the policy excess.