Concrete Foundations Ltd. v Family Housing Association

This is an appeal against the decision of His Honour Judge Reynolds at the Central London County Court on the 30^th June 2003 when he rejected the Claimant’s application for summary judgment. Permission to appeal that decision was initially refused on paper but granted after an oral hearing by Mr Justice Evans-Lombe.

Family Housing Association (FHA) own a number of properties including 27 Muswell Hill, London N10. Cracks were noticed in that building in about 1990 and FHA notified their brokers, Aon, in 1995 that a subsidence problem existed at the premises. Cunningham Lindsay, loss adjusters, were appointed by FHA’s insurers, Aegon who had come on risk in 1992, and Independent, who had come on risk thereafter. It transpired that some of the damage was sustained before insurers came on risk in 1992 and an agreement was reached between FHA and the two insurers as to how the cost of repairs should be apportioned. The apportionment, FHA 29%, Aegon 53% and Independent 18%, was proposed by the loss adjusters and agreed by FHA through their brokers, Aon, on 20.10.1998.

Cunningham Lindsay were instructed to investigate, and sought tenders in respect of the necessary work in 2000. Engineers, Structural and Civil Design, were appointed to seek and approve the tenders, and communicated with the Claimant who was successful in its tender. Its quotation for the underpinning scheme was accepted on 21 June 2001 with a request that the Claimant contact Mr Richard Brothers of FHA to arrange access, start dates etc. The Claimant was told that invoices should be made out to FHA care of Cunningham Lindsay. Just before the work was due to start Independent, one of the insurers, went into liquidation and the Claimant was informed by letter dated 26 June 2001 from the engineers that there was a problem ‘with the clients insurance’ and was asked not to proceed with any work. FHA agreed to pay the Independent’s 18% share and on 23 July 2001 the engineers formally accepted the Claimant’s quotation ‘on behalf of our clients’.

The work was then performed by the Claimant on time and within budget and without any complaints about the quality of the work. When the invoice was presented via the engineers to FHA, Aegon, the insurers responsible for 53% of the bill, refused to pay, apparently upon the basis that there never had been subsidence cover for 27 Muswell Hill or alternatively because FHA had failed to disclose that the premises had been subject to movement since 1990. The correspondence reveals that, unknown to FHA, Cunningham Lindsay was aware that insurers were considering declining to indemnify in 1996 and 1997. Cunningham Lindsay had been requested by insurers not to reveal the potential underwriting problem to the brokers, and had not done so.

FHA also refused to pay on the grounds that Cunningham Lindsay were at all times acting on behalf of insurers rather than on their behalf but, after being served with a statutory demand, did in fact pay their proportion, namely 47% of the cost without prejudice. The Claimants sued for the 53% balance and FHA denied liability and took Part 20 proceedings against their former brokers alleging delay in commissioning of the work and failure to get cover with Aegon which included subsidence cover. The brokers, Aon, contend that FHA’s knowledge of subsidence before 1992 meant that the risk would have been uninsurable or had a policy come into existence it would have been avoided because of non-disclosure. They also alleged that Aegon was not entitled to refuse to pay its share in view of the agreements as to apportionment in 1997 and 2001.

The Claimant contended before His Honour Judge Reynolds, as it does before me, that the correspondence demonstrates that Cunningham Lindsay had ostensible authority as well as actual authority to act for FHA as well as insurers, and that such authority was not limited to their 47% share but joint, and hence it was liable for the whole sum. Concrete Foundations Limited were unaware of the insurance arrangement between FHA and their insurers, and did not know the identity of the insurers. FHA had allowed work to be done to their premises and in doing so were also holding out that they would pay without any limit to their responsibility. Alternatively this is an unjust enrichment case, and FHA should not be allowed to retain the benefit of the work without paying, and without having paid premiums for insurance to cover the costs or being able to recoup them in the event of repudiation.

The Respondent submitted that there was neither actual or ostensible authority, that no representation had been made by FHA themselves and that any reference to ‘our client’ referring to FHA in correspondence was simply in recognition of the fact that as owners of the building, arrangements and communications had to be through FHA. Cunningham Lindsay at all times acted on behalf of insurers and could not have served two masters at the same time. In any event this was an inappropriate case for summary judgment as evidence would be required as to how Concrete Foundations Limited and others interpreted the letters they sent and received and as to the steps which they took and why they took them. Discovery might also produce more documents such as the tender documents or contract documents which would throw light on the matter essential to the proper resolution of the issue.

His Honour Judge Reynolds concluded that on the facts before him he could not say that the Claimant must succeed. He had not seen the written contract or seen who had signed it nor had he heard any evidence from Cunningham Lindsay as to who they were representing, nor from representatives of the parties who had had direct contact themselves with the matter. There were indications, he said, that the Claimant never looked to FHA to be paid until they realised that money would not be paid by the insurers and he had in mind that an agent cannot serve two masters. He was not impressed by the unjust enrichment argument and said that the Court should look to the strict legal relationship between the parties. Accordingly he dismissed the application.

Before me the Claimant submitted in strong terms that the matter was entirely clear and that there was only one possible outcome between these parties. No further evidence was needed, as such evidence would go only to issues such as Cunningham Lindsay’s relationship with FHA which the Claimant was not a party to or the issues as to insurance of which the Claimant was unaware and which were irrelevant in any event as it transpired there was no insurance.

Mr Howard submitted that there was clear ostensible authority in accordance with the decision in Freeman and Lockyer v Buckhurst Park Properties (Mangal) Limited [1964] QBD 480 and in particular Lord Justice Diplock’s judgment at pages 502 – 504. An agent could represent two masters when they were on the same side of the transaction as they were here. Anglo-African Merchants v Bailey [1969] 1 Lloyds LR 268 at 280 which was relied upon by the Defendants and referred to in the judge’s judgment, did not support any contrary proposition.

The decision in Brown and Davis v Galbraith [1972] 3AELR31 referred to in the judge’s judgment did not assist the Defendant. In that case, unlike the present, the contractor, a garage, had specifically negotiated with the insurers and entered into a written agreement with them on their printed forms. Thus the owner of the car which was repaired by them was only liable in respect of the excess and other charges referable to him as opposed to the main cost of repairs which was payable by insurers. Furthermore that case concerned the financial failure of the insurers which this case does not. Here, it is a case of there being no cover. Consequently this is a classic case of unjust enrichment. It should not be for the Claimant to sue the insurers alleging that they are bound by the loss adjuster’s agency and if that fails, then perhaps to sue the loss adjusters for breach of warranty of authority; it should be for FHA to sue the insurers for their indemnity if they can. Mr Howard contended that that was the reason behind the dicta of Lord Justice Sachs in Galbraith at 40 B where he said:-

“I only pause to add that there was no suggestion at the time or later that for any reason the insurers might repudiate liability to the insured, in which case a quite different position would result.”

The Defendant emphasised before me the need for evidence to be called, submitted that there had been no representation by the principal, and that there was no actual or ostensible authority. Cunningham Lindsay could not have acted for both insurer and FHA as they knew of things which were to the detriment of FHA but did not disclose them at the request of insurers. Thus they made no mention of the fact that insurers were contemplating denying or repudiating liability. Such a situation was inconsistent with them acting as agents on behalf of FHA. As the judge had found, this was not an unjust enrichment case. Had they been acting as principals FHA would not have chosen the same contractor and would generally have dealt with the matter differently. They might even have sold the building. There was no holding out to bind FHA for any amount as all FHA’s dealings with the engineers, Cunningham Lindsay and the Claimants were all consistent simply with their role as freeholder. It could not be said that the defence had no real prospect of success.

In reviewing the judge’s decision, I am mindful of the fact that summary judgment may be given if the Court considers that the Defendant has no real prospect of succeeding in its defence and that there is no other compelling reason why the case should be disposed of at a trial. A real prospect is to be distinguished from a prospect which is merely ‘false, fanciful or imaginary.’ The standard of proof upon a Defendant is not high and the Court should consider the evidence that could reasonably be expected to be available at trial. It is not the judge’s task on an application for summary judgment to conduct a mini trial.

Bearing these matters in mind, and the helpful written and oral submissions made by both parties, I am satisfied that this appeal must be dismissed. For my part I consider that there is merit in the Claimant’s argument that Cunningham Lindsay had actual authority from FHA in respect of their apportionment, namely 47%. They did therefore have authority to appoint contractors on behalf of FHA in order to carry out the work to that value. It does not however follow from that, that Cunningham Lindsay had actual or ostensible authority to any greater extent. The Claimant knew on the evidence available at present that loss adjusters customarily acted on behalf of insurers. It is clear that they were appointed by insurers in the first instance in this case. The Claimant would also know as a contractor used to dealing with loss adjusters, that customarily the building owner could be described as the ‘insured’ or the ‘client’ without those words having a meaning of significance other than their use in the ordinary insurance situation in which an insurer paid the bill, or an insurer paid the bill with the insured paying an excess, or the insurer and insured each paid a part of the bill.

It may be that the Claimant’s arguments will win the day but in my view this cannot be safely determined upon the evidence at present available. As Lord Justice Diplock said in Freeman & Lockyer a representation must not only be made, but intended to be, and in fact acted upon by the contractor. Reliance must therefore be established. A similar question was posed in Brown & Davis by Lord Justice Sachs when he said that when there is any issue as to which of two potentially liable persons becomes primarily liable, a vital factor to be taken into account is ‘to whom is credit given?’ (1008) Lord Justice Cairns also noted the relevance of the evidence given on behalf of the garage as to who they considered they were dealing with and who was going to meet the claim.

These issues have to be determined in the present case. Did the Claimant rely upon the representation which they allege, or were they expecting to be paid by insurers and construed the correspondence in the same way as they did all other claims where loss adjusters were appearing on behalf of insurers? Were they giving credit to insurers, or insurers and their insured, or were the facts of this case in some way so different as to make them consider that they were giving credit to the building owner alone? Neither the agency issue, nor the unjust enrichment issue can be determined without the resolution of these matters.

Furthermore the issue of whether an agent can serve two masters may require evidence as to the insurance situation so that it can be determined whether Cunningham Lindsay could, at the material time, have been acting on behalf of FHA in respect of the insurance cover which was then thought to be in place, but in respect of which they were withholding from FHA the insurer’s intention.

It may be that discovery will also throw light upon these issues.

I do not therefore consider that this is one of those clear cases where it is appropriate for summary judgment to be granted. I consider that the Central London County Court judge was correct in his conclusion that this was not a suitable case for summary judgment and accordingly I dismiss the appeal.