City & General (Holborn) Ltd v Royal & Sun Alliance Plc

This is an appeal from a judgment of Christopher Clarke J sitting in the Technology and Construction Court setting aside a without notice order made by Ramsey J extending time for the service of a claim form. The claim form was issued on 16^th January 2009 but not served within the required 4 month period which expired on 17^th May 2009. An application to extend the time for service was made shortly before expiry and on 1^st June Ramsey J extended the time for serving the claim form to 16^th June and the claim form (together with Particulars of Claim) was served on 15^th June. On 10^th July the defendants applied to set aside the service of the claim form; that application was heard on 23rd July and on 18^th August Christopher Clarke J handed down his judgment setting aside the without notice order of Ramsey J. On 21^st December he refused permission to appeal as did the single Lord Justice on the papers. But after an oral hearing, permission to appeal was granted on 23^rd February 2010.

The claim is brought by City & General (Holborn) Ltd (“C & G”) the developers of the former Patent Office at Southampton Buildings against both their contractors’ all risks and their property damage insurers in respect of damage allegedly suffered as a result of:-

It will be seen at once that C & G’s claims against their insurers have potential limitation problems:-

It was in these circumstances that the judge set aside the without notice order extending the time for service of the claim form. He held that there was no good reason for failing to serve the claim form and, further, that it was arguable that, if an extension was granted, the insurers would be deprived of a time-bar defence. Arguments about time-bar should, he said, be decided in a fresh action.

That was a decision reached by the judge in the exercise of his discretion and it would normally be impossible to attack the exercise of that discretion in this court. Mr Baatz QC for C & G has, however, been given permission to advance three grounds of appeal:-

The short answer to this ground of appeal is that the judge was never asked to consider the extension of time on this basis and it is, too late, on appeal to ask this court to do so for the first time. Both parties contended for an all or nothing approach and the judge cannot possibly be criticised for adopting the same approach.

Moreover, any such approach would not only be complicated, it would almost certainly not be justified in a case in which there were arguments about precisely when each claim became time-barred. It is well-settled that when debatable issues of limitation arise, it is inappropriate to attempt to decide them on an interlocutory application for an extension of time for service of a claim form. If the claimants’ argument that the claims are not time-barred is correct, they can always begin a fresh action in which, if a time-bar is asserted, it can be adjudicated upon. It is enough for a defendant to show that he might be deprived of a defence of limitation if time for service of a claim form is extended; if he can show that, an extension should not be granted or, if granted without notice, such extension should be set aside, see Hashtroodi v Hancock [2004] 1 WLR 3206 (paragraph 18) and Hoddinott v Persimmon Homes (Wessex) Ltd [2008] 1 WLR 806 (paragraph 52).

As already pointed out, any cause of action in this respect is likely to have arisen in April 2002 and to have, therefore, become time-barred in April 2008 well before proceedings were issued on 16^th January 2009. C & G wish to argue, however, on the basis of Darley Main Colliery v Mitchell (1886) 11 App. Cas. 127 that each separate ingress of water gave rise to a separate cause of action either in itself or when it caused additional damage to that caused by any previous water ingress.

The court was concerned to know whether this argument was made plain to the judge and an examination of the transcript showed that counsel did allude to the point although he did not cite Darley Main Colliery or any other authority in support. This is a difficult area of the law. Darley Main Colliery was not about water ingress but about withdrawal of support in the context of mining operations. It does appear from the case that the House of Lords did consider that fresh damage, arising from withdrawal of support, did give rise to a fresh cause of action in favour of the landowner from whose land the support had been withdrawn. It would perhaps be arguable that, in a similar way, successive water ingresses causing fresh damage each time they occurred would give rise to successive causes of action against a tortfeasor causing such ingress and thus, also, against a contractors’ all risk insurer or a property insurer who undertakes to indemnify an insured in respect of damage consequent upon a relevant event. But any such argument would be by no means straightforward and would have to take account of Rix LJ’s observations in Hambury Houtimport v Agrosin Ltd (The Starsin) [2001] 1 Lloyds Rep. 437,459 as approved by Lord Bingham and Lord Hoffmann when the case went to the House of Lords, [2004] 1 AC 715 paras 40 and 91.

What is entirely clear is that Christopher Clarke J was not purporting (in paragraphs 37 and 40 of his judgment) to be coming to any conclusion on this difficult point in relation to which no authority had been cited to him. There can, therefore, be no question of C & G being precluded (whether by issue estoppel or otherwise) from making this point in any second action in respect of water ingress if insurers take the time-bar point in such second action. Indeed, in the light of the authorities cited in paragraph 7 above it would have been quite wrong for the judge to make any decision on the point on an application for extension of time for service of the claim form and I am, for my part, satisfied that he did not make any such decision. Indeed when Mr Roger Stewart QC finally got to his feet for the insurers he made it plain that whatever may have been “injudiciously” stated in correspondence, insurers would not, in any second action, be saying that the point based on Darley Main Colliery was not open to C & G to argue, if they wished to do so. He also made it clear that insurers did not, of course, accept that the argument was correct.

Mr Stewart also pointed out that the Darley Main Colliery point was a considerable after-thought on the part of C & G. If one looked at the claim form it was described as a flooding claim and only in the interstices of the Particulars of Claim did the term “water ingress” start to appear. It is for this reason that I have called this claim, a claim for “flooding or water ingress” in case there is any distinction to be made between the two.

Be that as it may, it follows from the above that the second ground of appeal for interfering with the judge’s discretion must be rejected.

This is a wholly new point for the purposes of this appeal and has considerable difficulties of its own. The letter of 27^th March 2007 made an open offer of £25,000 in respect of the water ingress claim of £1,197,638.89 and an open offer of £24,022 in respect of the crane damage claim presented in the sum of £552,291. It is not immediately obvious that an open offer of a small amount, in response to a claim of a much larger amount, is an acknowledgment of a claim in that much larger amount. It might, no doubt, be said that it is at least an acknowledgment of the claim in the smaller amount, see Surrendra Ltd v Sri Lanka [1977] 1 WLR 565, but it would be a question whether it would be right to extend time for service of a claim form merely to enable that much smaller amount to be claimed. As if that was not enough, there is the further difficulty that section 29(5) only applies

“where any right of action has accrued to recover … any debt or other liquidated pecuniary claim.”

C & G’s claims against insurers under the contractors’ all risks and property damage policies are not, on the face of it, claims for a debt or other liquidated claims. Not only are they not currently quantified but there is a considerable amount of authority that claims under an policy of indemnity are claims for unliquidated damages (for failure to pay a proper claim), see Chandris v Argo [1963] 2 Lloyds Rep. 65, Edmunds v Lloyd Italico [1986] 1 Lloyds Rep. 326 and The Italia Express [1992] 2 Lloyds Rep. 281,292.

So, once again it would not be appropriate to extend the time for service of the claim form in the present case so as to enable this doubtful response to the time-bar defence to be taken. If it is correct, it can easily be taken in any second action which the C & G may wish to pursue.

The fact, of which C & G’s arguments in this case encourage the court to lose sight, is that the judge found that there was no good reason why the claim form was not served within four months of its issue. The reason proffered was that C & G could not establish with any certainty the proper extent of their loss and damage until the building contractor’s claim against C & G had been determined by arbitration. The judge quite rightly held that that was an insufficient reason and that aspect of his decision has not been (and could not be) appealed. The arguments about limitation are only reasons additional to this main reason given by the judge. As it is he was right to take limitation issues into account in the defendants’ favour; even if he had not been, it would by no means have necessarily followed that his exercise of discretion would have been held to be erroneous.

I would dismiss this appeal.

I agree.

I also agree.