Thomas Fitzhardinge Gueterbock & Anor v Alexander Dugald Gregory Macphail & Anor

For insurance purposes, an act is accidental where it has unintended consequences, unless the consequences were intended or were unintended but inevitable because the insured acted with reckless disregard for the risk. The relevant accident is the insured peril, not necessarily the physical act giving rise to it. Recklessness requires conscious appreciation of the risk and an unreasonable decision to take it. A belief that the risk will not materialise does not prevent recklessness where the insured recognises that the contrary position is seriously arguable and deliberately proceeds. On appeal, a trial judge’s factual conclusions and application of law to facts attract substantial respect. The decision may be disturbed only where the facts cannot support the legal conclusion reached.

The appeal concerned an indemnity claim under a development insurance policy. The first defendant had settled trespass and nuisance proceedings brought by neighbouring property owners after a basement constructed at 30 Henderson Road extended beneath the shared passageway towards the flank wall of 28 Henderson Road.

The trial judge found that the developer owed and had breached a contractual duty to build with reasonable skill and care. He nevertheless held that the trespass and nuisance were not accidental within the policy. The first defendant appealed, arguing that the judge had misstated or misapplied the legal test for an accident. The appeal also raised the extent to which the appellate court could interfere with the judge’s factual conclusions.

1. Appeal dismissed. The trial judge’s conclusion that the policy did not respond was upheld.
2. The relevant subject matter of the accident was the alleged trespass, rather than the intentional construction of the basement. An insured act may remain accidental despite being intentional if its consequences were unintended and the insured did not recklessly disregard the relevant risk.
3. Recklessness in this context involves awareness of the risk and an unreasonable decision to take it. The judge’s reference to being willing to take the risk was not a lower or different test from courting the risk. It was a modern formulation of the boundary between reckless and non-reckless conduct.
4. Knowledge could properly be attributed to Henderson Court through Mr Harris, who controlled the works. The trial judge was entitled to find that, even if Mr Harris believed the boundary lay at the flank wall, he knew that the contrary boundary was seriously arguable and that the neighbouring owners were likely to assert it. His concealment of the intended basement extent to obtain consent to underpinning supported the conclusion that he knowingly accepted a substantial risk of trespass.
5. The appellate court was not entitled to re-evaluate the evidence as if it were the trial judge. The trial judge had heard the witnesses and was the primary fact-finder. His findings and the legal conclusion drawn from them were open to him.
6. The judge’s reference to the definition of recklessness in the Law Commission’s report, cited with approval in R v G [2003] UKHL 50, was a helpful touchstone and not a substitute for the applicable insurance authorities.

• High Court, County Court appeal (Chancery Appeals): Appeal from the order of His Honour Judge Parfitt dated 13 July 2022, following his reserved judgment dated 8 June 2022 in the County Court at Central London, appeal reference F10CL42797. The appeal was dismissed.