Lonham Group Limited v Scotbeef Limited & Anor

The appeal concerned the characterisation of pre- and post-contractual assurances in an insurance policy under the Insurance Act 2015, and whether particular provisions in the policy were representations falling within Part 2 (the duty of fair presentation) or warranties falling within Part 3 of the Act. The Court of Appeal held that the judge below erred in reading sub-clauses (i)–(iii) of the policy’s "Duty of Assured" clause together. Sub-clauses (ii) and (iii) were properly construed as future warranties and conditions precedent to indemnity rather than as pre-contractual representations under section 3. Because the First Preliminary Issue finding (that FSDF terms were not incorporated into the contract between DS and Scotbeef) is binding, those warranties were breached and, by section 10(2) of the Insurance Act 2015, the insurer had no liability in respect of losses occurring after the breach and before remedy. The Court further held that the statutory transparency rules in sections 16–17 did not assist the insured because the policy did not seek to contract out of the statutory warranty regime.

This appeal arose from two preliminary issues in litigation between Scotbeef (the claimant) and D&S Storage Ltd (the assured, now in liquidation), with Lonham Group Ltd as insurer joined later. The central legal question was whether certain provisions in DS’s insurance policy should be characterised as pre-contractual representations governed by the duty of fair presentation in Part 2 of the Insurance Act 2015, or as warranties/conditions precedent governed by Part 3.

Background and procedural posture

• DS (warehousekeeper) held a liability policy with Lonham. In its policy declarations DS stated it traded on standard trade terms (originally UKWA, later FSDF).
• Scotbeef suffered loss when meat stored by DS was found to be contaminated and destroyed; Scotbeef sued DS for damages.
• At the First Preliminary Issue (trial, HHJ Kelly, 14 October 2022) the court found that the FSDF terms had not been incorporated into the contract between DS and Scotbeef.
• DS went into liquidation; Lonham was joined and a Second Preliminary Issue (24 October 2023) was ordered as to whether DS had any right of indemnity under the policy that Scotbeef could enforce under the Third Parties (Rights against Insurers) Act 2010.
• At first instance the judge held that the relevant policy clauses were representations and that Lonham was liable to indemnify; Lonham appealed.

Nature of the claim / relief sought

• Scotbeef sought to obtain the benefit of DS’s policy indemnity via the 2010 Act. Lonham defended on the ground that DS had breached conditions precedent/warranties in the policy (by contracting on terms other than those declared) and so no indemnity was due.

Issues framed by the Court of Appeal

1. Whether sub-clauses (ii) and (iii) of the policy’s "Duty of Assured" clause are pre-contractual representations within section 3 (Part 2) or future warranties/conditions precedent within Part 3 of the Insurance Act 2015.
2. If they are warranties, whether the insurer’s reliance on them sought to contract out of statutory protections such that sections 16–17 (transparency/contracting out) applied.

Court’s reasoning and conclusion

• The Court emphasised ordinary contractual construction: clauses must be construed in context; specific provisions receive greater weight than general wording. Sub-clause (i) (a declaration of current trading conditions at inception) is a pre-contractual representation; sub-clauses (ii) (continuing to trade under declared conditions during the policy) and (iii) (taking reasonable steps to incorporate declared trading conditions into future contracts) are forward-looking and regulate the assured’s conduct during the policy term.
• Accordingly (ii) and (iii) are future warranties and, as the policy itself stated, conditions precedent to Underwriters’ liability. Given the binding First Preliminary Issue finding that FSDF terms were not incorporated into DS’s contract with Scotbeef, those warranties were breached.
• Section 10(2) of the Insurance Act 2015 provides that an insurer has no liability for loss occurring after breach of a warranty and before remedy; none of the statutory exceptions applied. The insurer therefore had no liability to indemnify DS for the claimed loss.
• The Court also held that sections 16–17 did not assist the insured because the policy did not seek to contract out of the statutory warranty regime and did in terms incorporate the Insurance Act 2015 and LMA5264; consequently the transparency rules were not engaged.

Wider context

The judgment is an early appellate authority on classification of representations and warranties under the 2015 Act. It reinforces that careful contractual construction is the starting point, and draws a clear distinction between pre-contractual disclosures (duty of fair presentation) and forward-looking, operational promises (future warranties/conditions precedent), with consequential differences in remedies under the Act.

Appeal allowed. The Court of Appeal held that the judge below erred in construing sub-clauses (i)–(iii) of the policy together. Sub-clauses (ii) and (iii) are future warranties and conditions precedent to liability; the First Preliminary Issue finding that FSDF terms were not incorporated meant those warranties were breached and, by section 10(2) of the Insurance Act 2015, the insurer had no liability for the losses. The statutory transparency requirements in sections 16–17 did not alter that result.

Appeal from the High Court of Justice, Business and Property Courts in Leeds (Technology and Construction Court (KBD), HHJ Kelly). First Preliminary Issue trial and judgment (14 October 2022) determined that the FSDF terms were not incorporated into the contract between DS and Scotbeef. DS entered liquidation (order dated 24 November 2021). Lonham was joined and a Second Preliminary Issue was tried (24 October 2023) at first instance, where the judge held Lonham liable; Lonham appealed to the Court of Appeal, which allowed the appeal on 5 March 2025 ([2025] EWCA Civ 203).