Widefree Ltd (t/a Abrahams & Ballard) v Brit Insurance Ltd

The Claimants, Widefree Limited (to whom I shall refer either as “Widefree” or “the Claimants”), are a company owned by Mr. Charles Abrahams. Widefree trades as “Abrahams” from premises at 110 Hatton Garden, London EC1 (“the shop”). Charles Abrahams and his wife, Victoria Abrahams, run Abrahams. In October 2008, Mr and Mrs Abrahams were assisted in the running of Abrahams by two other people, Mr. Anthony Dodge, who was employed as the workshop manager, and Mr. Ricky Downer, who was employed as a security guard.

The Defendants, Brit Insurance Limited (“the Insurers”), are Widefree’s insurers under a Jewellers’ Block Insurance Policy (“the Policy”).

At about lunchtime on the 9^th October 2008, two Arab women came into the shop. They behaved in a manner which made Mrs. Abrahams feel uncomfortable. Mrs. Abrahams showed the women a number of rings. The women did not make any purchase and left the shop.

On the 22^nd October 2008, Mr. Abrahams discovered that a ring worth over £100,000 was missing. The ring was one of the most valuable items that the Claimants had at the shop. Mr Abrahams and his wife searched the shop for the missing ring, but were unable to find it. Mrs. Abrahams remembered the incident on the 9^th October 2008. She thought that the behaviour of the women on that day had been so suspicious that she concluded that they had stolen the ring. She reminded her husband of the incident. Despite a further search by Mr and Mrs Abrahams, the ring was not found and Mr. Abrahams reported the missing ring to his insurance brokers, and contacted the Police.

On the 23^rd October 2008, two police officers, PC Luke Warren and WPC Michelle White, came to the shop. They and Mr and Mrs Abrahams reviewed the CCTV footage of the visit of the two Arab women on the 9^th October 2008. There were, in fact, five CCTV cameras in operation in the shop on the 9^th October 2008, but only the camera known as Camera 2 captured the incident when it was believed by Mrs. Abrahams that the women stole the ring. Mrs Abrahams thought that the footage showed the moment when the older woman transferred the ring from her right hand into a newspaper or leaflet that she was holding in her left hand. PC Warren and WPC White told Mr and Mrs Abrahams that the footage from Camera 2 was the only footage that they wanted, and that Mr and Mrs Abrahams should make arrangements to have that footage downloaded.

Mr. Abrahams contacted Nationwide Security, the suppliers of the CCTV system, and asked them to send a technician to download the footage from Camera 2 that PC Warren and WPC White had said that they wanted retained. The technician attended the shop on the 27^th October 2008, when he was given instructions to download the CCTV footage from Camera 2.

Mr. Abrahams had reported the loss of the ring on to the Claimants’ insurance brokers on the 22^nd October 2008, and on the 23^rd October 2008 the insurance brokers informed the Insurers of the loss. However, it was not until the 6^th November that Mr. Anuj Patel, a partner in Butler Morton Insurance and Jewellery Consultants, attended the shop. Butler Morton are loss adjusters, who were appointed by the Insurers. The delay in Mr. Patel’s visit after the loss had been reported may be explained by reason of the fact that the Insurers had not originally instructed Butler Morton: they had originally appointed Crawford & Company to act as their loss adjusters.

After investigating the loss of the ring, which Mr and Mrs Abrahams said was the result of a theft by the two Arab women on the 9^th October 2008, by letter dated the 21^st January 2009 the Insurers declined cover.

The Policy is dated the 15^th February 2008. The insuring clause provides that the Policy covers “loss or damage from any cause whatsoever”, and that cover is in respect of “Stock, Merchandise (including Sample Cases) and Money (as defined below) as used in the conduct of the Insured’s business, being the property of the Insured or in trust or on commission, or for which they are responsible” (Schedule A –Section1).

The basis of settlement under the insuring provision in respect of property in the custody of the insured is the basis of the insured’s liability to the owners.

In their declinature letter dated the 21^st January 2009, the Insurers denied liability on the basis of the Fidelity and Unexplained Loss Exclusions in the Policy. These grounds for denying liability were repeated in an email from the Insurers to Widefree’s insurance brokers dated the 27^th January 2009.

By the date of the commencement of the proceedings, however, the Insurers were no longer relying on the Fidelity Exclusion. During the hearing, the Insurers’ witnesses were unable to explain why reliance had initially been placed on that exclusion. They accepted that there had been no basis for relying on that exclusion.

At the beginning of the hearing, the Insurers denied that they were liable to indemnify Widefree on three grounds. First, they contended that the loss of the ring fell within an exclusion in the Policy, which is in the following terms:

“Property Insured found to be missing at stocktaking where the Insured is unable to prove the date and circumstances of any loss.”

I shall refer to this provision of the Policy as the “Unexplained Loss Exclusion”.

Secondly, the Insurers contended that there had been a breach by Widefree of a General Condition of the Policy, which is in the following terms:

“The Insured shall in case of a loss or damage and as a condition precedent to any right of indemnification in respect thereof give to the Insurers such information and evidence as to the property lost or damaged and the circumstances of the loss or damage as the Insurers may reasonably require and as many (sic) be in the Insured’s power.”

This was not a ground specifically relied upon in the Insurers’ declinature letter. I shall refer to this provision of the Policy as the “General Condition”.

Thirdly, the Insurers contended that there had been a breach of a warranty of the Policy, which was in the following terms:

“It is hereby Warranted that a SecurityGuard to be in attendance at all times, during business hours, including when opening and closing and equipped with a mobile personal attack button linked to the Insured’s alarm system (sic).”

Again, this was not a ground relied upon by the Insurers in their declinature letter. It was abandoned by the Insurers in their Closing Submissions.

I should preface this section of the judgment by stating that I heard evidence from Mr and Mrs Abrahams, Mr Dodge, Mr Downer and DC Laverick for the Claimants, and from Mr Patel and Mr Paddison for the Insurers. I found all of the Claimants’ witnesses to be honest and credible witnesses. Unfortunately, I did not form the same impression of the Insurers’ witnesses, who were evasive in regard to a number of matters and whose evidence, in a number of instances, I found to be inaccurate.

On the 21^st January 2008 Mr. Abrahams completed the Jewellers’ Declaration for Insurance. Question 35 in the Declaration asked whether there were any “Special Security Measures”. Mr. Abrahams’ answer was that there was “CCTV plus Security Guard”. The Policy came into force on the 15^th February 2008.

After a visit to the shop on the 19^th February 2008 Mr. Mike Fitch of Risktech Limited prepared a report entitled Jewellers “Block” Survey Report for the Insurers. Mr Fitch’s Report was stated to be “provided for insurance underwriting purposes and to assist with risk management”. In his Report Mr. Fitch stated that the shop was in a “pedestrianised arcaded area of the block and the only entrance was the front door”. He also noted that the Claimants employed a security guard who opened and closed the shop with the keyholders, Mr and Mrs Abrahams. He noted that when the security guard was absent the Claimants called on a security guard from Hatton Garden Security to stand outside the shop. Mr. Fitch further noted that there was a four camera CCTV system covering the shop area, and that all cameras were recorded to a hard drive at all times and that the images were retained for at least a week. He noted that there were monitors for the CCTV system in the shop and rear area. In fact, at the time that Mr. Fitch prepared his report, there were five CCTV cameras in the shop.

It is to be observed that there is no reference in the Schedule of Conditions of the Policy to CCTV cameras, although it was common ground between the parties that the Claimants were obliged to maintain the protections that were referred to in the Jewellers’ Declaration for Insurance, and not to withdraw them or vary them to the Insurers’ detriment without the Insurers’ consent.

The Certificate of Insurance shows that the Defendants underwrote 100% of the Jewellers’ Block Insurance.

Mr and Mrs Abrahams gave evidence about the system of record-keeping that they employed. Records were maintained manually by a system which was undoubtedly laborious. However, Mr and Mrs Abrahams told me, and I accept, that prior to the incident which gave rise to this claim and since the incident, no items had been lost, and the record-keeping had proved to be wholly reliable. The items of stock, of which at any one time there may have been approximately 3,000, were kept in the safe overnight.

The record-keeping system that was used by Mr and Mrs Abrahams can be described as follows. When items were received by the Claimants, they were photographed, given a stock number and a stock card was opened. If an item was sold, or returned to the supplier, the precise nature of the transaction was marked on the stock card, and the date of the transaction recorded. If the item was returned to the supplier, the supplier was also requested to sign the stock card. Items that were sold had the stock number recorded on the invoice, and a copy of the invoice was retained with the stock list.

Stocktaking was usually carried out once every quarter, although Mrs. Abrahams’ evidence, which I accept, was that there were no set dates or periods for stocktaking to take place. She did the stocktaking when she had the time. The Policy did not stipulate that stocktaking had to take place at specific periods. Indeed, in the documentation there were only two references to stocktaking. The first reference was in Question 40(f) of the Jewellers’ Declaration for Insurance, where the questions were asked: “Do you carry out full annual stocktaking?”, to which Mr Abrahams answered “Yes”, and “Please state the date of your last stock take(sic)”, to which Mr Abrahams gave no answer. The second reference was in the Unexplained Loss Exclusion.

There are three display cabinets in the front window of the shop. The first cabinet, which is the cabinet nearest to the entrance, contains only round stones. The second cabinet contains what are called “fancy shapes” that is, pear shapes, ovals and cushion-shaped diamonds. The third cabinet contains exclusively square cut stones. At the end of each day, the display cabinets are emptied and all of the jewellery is returned to the safe. Each individual piece of jewellery is collected by hand and placed on a tray before it is put back in the safe. Some of the items are displayed on what are known as “pods”. Pods are finger-shaped, and those used in the shop came in three sizes. The items are displayed on the top of the pods.

On Thursday, the 9^th October 2008 Mr. Abrahams was not present at the shop. He was at home observing Yom Kippur, the Jewish Day of Atonement. Mrs Abrahams, who is not Jewish, Mr. Dodge and Mr. Downer were at the shop that day. Hatton Garden was virtually empty. A large number of the jewellery and diamond merchants who trade in Hatton Garden are Jewish, and they were also observing Yom Kippur. Mrs. Abrahams was in the shop with Mr. Dodge. Mr. Downer was standing outside.

Before the shop was opened the window displays were arranged. That day Mrs. Abrahams was responsible for the window dressing, although on other days the window dressing might have been done by her husband or Mr. Dodge, or by any combination of Mr or Mrs Abrahams and Mr Dodge.

At about 1.48pm Mr. Downer indicated to Mrs. Abrahams that there were customers who wanted to come into the shop. Mrs. Abrahams pressed the security buzzer and Mr. Downer showed two Arab looking women into the shop. One of those women was an older woman, who looked to be about 60 years old. The other, younger woman looked about 30 years old.

Mrs Abrahams’ evidence, which I accept, was that the women looked friendly, but were making a lot of noise as they walked into the shop. They were saying “We Saudi, we Saudi”. They immediately walked up to the middle window display cabinet and started pointing at it. Mrs Abraham walked over to the display cabinet in order to assist them. She tried to identify some of the items in the display cabinet, which might be of interest to the women, but it was not clear what the women were interested in and both of them went outside to try to point to the items which they wanted to see from the street. While the women were outside, Mrs. Abrahams stood behind the middle display cabinet to see if she could identify the items in which they were interested.

When the women came back into the shop they approached Mrs. Abrahams, who was then opening the display cabinet. As she began to take the items from the cabinet which she thought the women had identified, the women moved closer and closer to Mrs. Abrahams. The younger woman was pushing Mrs. Abrahams on her left shoulder and waving her hands in her face. While that was happening, the older woman moved round behind Mrs. Abrahams. Mrs Abrahams felt that her space was being invaded and felt uncomfortable. She directed the women to the desk at the back of the shop and said to them “Price, yes?”. The women moved towards the back of the shop, but then beckoned to Mr. Dodge and asked him to go outside with them.

Mr. Dodge had not being paying a lot of attention to the two women while they were with Mrs. Abrahams, although he confirmed that they appeared to be “very touchy, feely”, and that they were crowding round her at the display cabinet. When he went out of the shop with the two women they walked across the road, and Mr. Dodge thought that they were asking him to go to another shop to look at something with them. He did not do so, and the women walked away and disappeared.

Mr. Downer, who had been outside the shop throughout the time that the women were in the shop noted that they turned right outside the shop and appeared to be going towards Farringdon Road. While the women were in the shop Mr. Downer had been standing by a pillar, which was immediately opposite the shop front. He was trying to keep an eye on what was going on inside the shop.

After the women had left the shop and Mr. Dodge had returned, Mr. Dodge and Mrs. Abrahams began to return the items to the display cabinet. They did not notice that any items were missing. However, Mrs. Abrahams had felt so uncomfortable while the women were in the shop that she telephoned her husband to report the incident to him. She told him about the women’s visit, and how uncomfortable she had felt. She said that she and Mr Dodge had replaced all of the items in the display cabinet. Mr Abrahams told her to check the items in the display cabinet again. She did so, but still did not find anything missing.

On the 22^nd October 2008 Mr. Abrahams wanted to show a particularly high value ring to a very good customer. He could not find the ring that he wanted to show. It was not in the display cabinet, and could not be found in the safe. He asked Mrs Abrahams and Mr Dodge if they had dealt with the ring recently. Neither of them had. Mr Abrahams then remembered his wife’s account of the visit to the shop of the two Arab women on the 9^th October 2008. He wondered whether his wife had been the victim of what is known as a “distraction” theft.

Mr and Mrs Abrahams and Mr Dodge carried out a further search of the safe and the display cabinets and still could not find the missing ring. In fact, Mr Abrahams thought that a second item was missing, a pear-shaped ring.

Mr. Abrahams immediately contacted his insurance broker, Mr. Leonard Ormonde, who was in Israel on holiday. He told Mr. Ormonde of the events of the 9^th October 2008, as they had been told to him by Mrs. Abrahams, and informed Mr. Ormonde that two items were missing: one was a ring worth £98,000, which was the ring that he had wanted to show the customer that day, and the other was the pear-shaped ring, which was worth £65,000.

The ring which Mr. Abrahams had wanted to show to his customer on the 22^nd October 2008 consisted of a 6.03 carat oval shaped diamond. Mr. Abrahams had received that diamond on approbation from a Mr. Danny Maman on the 21^st May 2008. The diamond was valued by Mr. Maman at £115,000. It had been made into a ring by the Claimants, who had added two small diamonds as supports on either side of the larger diamond. The ring and diamonds together were valued at £120,400. The sale price was estimated to be £145,000, out of which Mr. Abrahams would have paid Mr. Maman £115,000 for the diamond and divided the profit equally with Mr. Maman.

After talking to Mr. Ormonde, Mr. Abrahams contacted the Police. He was told that they would send someone out to investigate, but that he should not expect a police officer to arrive until the following day. Accordingly, Mr and Mrs Abrahams locked up the shop and went home. They were naturally very shocked and upset at the loss of two valuable rings.

The following day, the 23^rd October 2008, Mr. and Mrs Abrahams arrived at the shop early. They spoke to a Mr. Mike Smith of their insurance brokers and told him of the visit of the two Arab women on the 9^th October 2008. Mr. Abrahams told Mr. Smith that he would be reviewing the CCTV footage that day.

After speaking to Mr. Smith, Mr and Mrs Abrahams began to set out the stock so that they could dress the window. While they were doing so, the pear-shaped diamond ring, which they had thought was missing, was found inside the safe. Mr. Abrahams immediately contacted Mr Smith to tell him that that ring had been found. He also told Mr. Smith that the figure of £98,000 that he had given Mr. Ormonde the previous day was just an estimate, and that he now had the correct figure in front of him, which was £115,000 for the diamond and £5,400 for the setting and small diamonds. Mr. Smith confirmed that he would inform the Insurers accordingly.

That same morning two police officers arrived at the shop. They were PC Luke Warren and WPC Michelle White. Mrs. Abrahams told the police officers what had happened on the 9^th October 2008, and Mr. Abrahams told them that they would be able to see the incident on CCTV. The CCTV footage was reviewed with the police officers. The CCTV footage from each of the cameras appears in a composite picture, and it was apparent that only one of the cameras had captured anything of significance of the visit of the two Arab women on the 9^th October 2008. That was camera 2.

The police officers told Mr. Abrahams that the footage from camera 2 was the only footage that was relevant and was the footage that they wanted. They asked him to download it for them. Mr Abrahams explained that he would have to call out a technician to undertake the task. The police officers gave their contact details and numbers, and left the shop.

Mr. Abrahams immediately contacted the suppliers of the CCTV system, Nationwide Security, and asked them to send out a technician. Unfortunately, the technician did not come to the shop until the 27^th October 2008. Mr. Abrahams instructed the technician to download the CCTV footage from camera 2 that the police officers had identified to him as the only relevant material.

Although the Insurers had been informed on the 23^rd October 2008 of the incident on the 9^th October 2008, that is, as soon as Mr and Mrs Abrahams came to the conclusion that it was on the 9^th October 2008 that the ring had gone missing, the Insurers did not instruct loss adjusters to attend the shop until the 29^th October 2008.

Initially, on the 25^th October 2008, the Insurers had appointed Crawford and Company Adjusters (UK) Limited to act as their loss adjusters. However, on the 28^th October 2008, Mr Paddison, the Insurers’ UK Property Claims Adjuster, decided to appoint another company, and on the 29^th October 2008 Butler Morton Insurance and Jewellery Consultants were appointed.

Mr. Anuj Patel of Butler Morton was unable to visit the shop until the 6^th November 2008. The delay in arranging for loss adjusters to visit the shop and meet Mr and Mrs Abrahams between the report of the loss on the 22^nd October 2008 and Mr Patel’s visit was unfortunate. It may well be that the CCTV footage of the incident on the 9^th October 2008 was automatically wiped off the system during that period.

Mr. Patel gave evidence during the hearing. He produced a transcribed copy of the handwritten notes that he took during his meeting with Mr and Mrs Abrahams. The meeting lasted from about 11.30am to about 2.30pm.

As I have said above, I was not impressed by Mr. Patel as a witness. It was clear that his notes contained a number of inaccuracies, and on occasions he was evasive when answering questions. There were a number of instances in which Mr Patel’s notes were demonstrated to be inaccurate. For example, his notes did not record that Mrs. Abrahams had been present during the meeting, although he accepted that she had been present throughout. Again, his notes recorded: “stock reconciliations undertaken every two months”. In contrast to that note, Mr Patel’s Witness Statement said that Mr. Abrahams told him that the records were updated on a monthly basis by Mrs. Abrahams. I am satisfied that both Mr Patel’s notes and his Witness Statement are inaccurate, and that Mrs Abrahams told Mr Patel that there were no fixed dates for stocktaking, but that she carried out stocktaking when she had the time.

Mr. Patel also said that the pods on which the single rings stood were all varied in height approximately and were one inch wide by two inches deep and arranged in a regular fashion. While that might have been accurate description in the manner in which they were arranged on the 6^th November 2008, it was not an accurate description of the way in which they were arranged on a daily basis. I am quite satisfied that Mr Patel did not ask about the height of the pods, and that neither Mr nor Mrs Abrahams told Mr. Patel the heights of the pods. In Mr Patel’s notes the only reference to the pods is to “tall”or “medium” pods. There is no reference to their dimensions. The estimates of the dimensions of the pods in Mr Patel’s Witness Statement are his estimates, but were not given to him during his meeting with Mr and Mrs Abrahams.

In his Witness Statement Mr Patel says that he asked whether there was any CCTV footage of the incident, and if there was, whether he could see it. He says that he was told that it was in the possession of the Police, who were utilising facial recognition technology to establish whether the perpetrators could be identified. He repeated that statement in the Report dated the 10^th November 2008, which he prepared after his visit.

Mr Abrahams denied that Mr Patel had asked to see the CCTV footage. He said that he told Mr Patel that he had looked at all of the CCTV footage with the police officers, and that they had told him that the only relevant footage was that on camera 2. They had asked him to have that footage downloaded, and he had done so. It was on a DVD, which he had given to the Police.

Mr Abrahams said that Mr Patel only asked to see a copy of the footage that had been downloaded onto the DVD at the request of the Police. In cross-examination, Mr Abrahams said that, if he had asked, Mr Patel could have seen whether there was any footage left on the hard drive, although by the 6^th November 2008 it was likely that the footage of the 9^th October 2008 would have been automatically wiped off the hard drive.

I am quite satisfied that Mr Patel did not ask to see all of the CCTV footage on the 6^th November 2008, and I accept Mr Abrahams’ account of the conversation that took place. Some corroboration of Mr Abrahams’ account of the conversation can, in my judgment, be found in Mr Patel’s letter to the Claimants’ insurance brokers dated the 10^th November 2008. In that letter, Mr Patel says that the “additional information” required from the Claimants included “a copy of the CCTV footage”. Contrary to the case put forward by the Insurers at the hearing, Mr Patel does not say that he had asked to see all of the CCTV footage, but had been told that it was all in the possession of the Police. Mr Patel knew when he wrote this letter that the only footage of the incident that was available was on the DVD which the Police had.

In his Report to the Insurers Mr. Patel recommended that a reserve of £120,000 be maintained against the loss.

On the 9^th December 2008 Mr Patel received a copy of the CCTV footage from the Police. He saw that the only footage retained was, as he had been told by Mr Abrahams on the 6^th November 2008, the footage from camera 2.

On the 11^th December 2008 Mr Patel told Mr Paddison that the CCTV footage was not very good, and that he would speak to the Claimants’ insurance brokers to see if there were other camera angles. It is to be noted that Mr Patel made no complaint about the Claimants’ previous failure to provide all camera angles, and did not attempt to contact Mr and Mrs Abrahams direct to protest at being misled.

Mr. Patel’s investigations did not move very fast, and it was not until the 30^th December 2008 that he sent an email to the Claimants’ insurance brokers to inform them that enquiries with the Police were ongoing. This letter was written in response to an enquiry from the insurance brokers about the progress of the claim. Again, Mr Patel did not suggest that he had been misled on the 6^th November 2008 about the extent of the available CCTV footage.

In the light of the importance that the Insurers placed during the hearing to the necessity of seeing footage from all of the CCTV cameras, it is significant that they did not show the same urgency at that stage of their investigation, and it was not until the 19^th January 2009 that Mr Patel wrote to Nationwide Security asking for further information. In particular, Mr Patel wanted to know about other camera angles. Mr Patel’s letter was responded to by someone called Jason of Nationwide Security.

There is in the trial bundles a transcription of the telephone conversation. The transcription is undated, but Mr Patel states that it took place on the 20^th January 2009. The transcription contains the following exchanges:

“AP Problem with the camera angle that they provided us with, it doesn’t actually show the actual incident, all it shows is a couple of women milling around with the insured but not them actually taking the item in question so the purpose of my communication with you was to establish whether you know why the other angles weren’t backed up I mean, did you have the opportunity to look at any other angles when you were there?

J There wasn’t another camera set up on the other angles

AP Oh wasn’t there?

J No

.....

AP You say you looked at the other footage then and that didn’t show it at all

J No”

The Nationwide Security Report dated the 27^th October 2008 to which Mr Patel had referred in his letter had stated, inter alia: “Data from all cameras not backed up only main camera in incident”.

On the 21^st January 2009, the day after Mr Patel’s conversation with Jason, the letter of declinature was written. In that letter Mr. Patel said, inter alia:

“I understand that the sub-brokers had suggested that other angles had been viewed by the Police. Having spoken to the investigation officer I am informed that the only angle which is available is that which has been provided to us and ultimately yourselves.

In addition given the fact that the alleged incident occurred on the 9 October, however was only discovered on 22 October this does raise concerns regarding the Insured Stock check.

The ring in question which is subject to a diamond certificate had a central stone of 6.03 cts is one of the more expensive items that the insured currently stock and for its loss not to be discovered for some two weeks raises questions in relation to the circumstances given (sic) rise to the alleged incident.

Given the aforementioned, my principals have considered there (sic) position fully and have asked me to formally deny liability on their behalf due to the infidelity and unexplained loss exclusions under the policy.”

It will be noted that Mr. Patel did not refer to the General Condition or rely upon the failure to provide CCTV footage from all 5 cameras that were operating at the shop on the 9^th October 2008 as a basis for declining cover. In relation to the CCTV footage Mr Patel states that he had been informed by the Police that the only camera angle available had been provided. As a result of his conversation with Jason the previous day, Mr Patel knew when he wrote that no other CCTV camera had shown footage of the incident.

These proceedings were commenced on the 10^th March 2009. The Insurers’ original Defence was served on the 6^th April 2009. The Defence was amended on the 8^th June 2009 to plead the breach of warranty relating to the attendance of the Security Guard. That allegation was, as I have indicated above, abandoned during the hearing. On the 30^th September 2009 the Defence was re-amended to plead the breach of the General Condition.

As has been seen, the declinature letter stated that liability was declined on the basis of both the Infidelity and the Unexplained Loss Exclusions under the Policy.

On the 27^th January 2009, Mr. Paddison sent an e-mail to the Claimants’ brokers. He stated in the e-mail, inter alia:

“The Insured intimated that the police had seen all four angles (of the CCTV coverage) which we now believe to be false information.”

There was no basis upon which the Insurers could have concluded that that was false information. That assertion is unsupported by any evidence. Mr. Paddison went on in the e-mail:

“With all the above taken into account we are firmly of the opinion that both the infidelity exclusion … and/or unexplained loss exclusion applies.”

When asked what the basis was upon which the Infidelity Exclusion was referred to and relied upon in the letter Mr. Patel was unable to provide any explanation. Nor, when asked, was Mr Paddison able to provide an explanation. Both Mr Patel and Mr Paddison admitted that there was no evidence in the Insurers’ possession which supported declinature on that basis. I have to say that I find it astonishing that responsible Insurers and loss adjusters could make an allegation of Infidelity without any supporting evidence.

Subsequently, on the 14^th September 2009, that is some nine months after Mr. Paddison’s e-mail, PC Warren responded to an e-mail from the Insurers’ solicitors dated the 4^th September 2009. In answer to the first question:

“Do you recall viewing CCTV from more than one camera angle during your visit to the venue?”

PC Warren said:

“I do not recall viewing more than one camera angle as it was so long ago but I do recall an angle that was facing towards the display where the ring was taken from.”

In answer to the second question:

“If so, do you recall advising Mr and Mrs Abrahams on specifically which angles they should retain and which they should delete?”

PC Warren responded:

“It is my understanding that the victims were advised to retain CCTV as a general rule without specifying which cameras.

This letter, written nearly 11 months after PC Warren had seen the CCTV footage, is written in such vague and general terms that I cannot place any weight upon it. I am quite satisfied that if they had been advised to do so Mr and Mrs Abrahams would have retained the footage from all of the CCTV cameras and ensured that the footage was downloaded onto the DVD. It would have made no sense for them not to do so, and I formed the very clear impression of them that they were a sensible and careful young couple. I have no doubt that PC Warren and WPC White, who did not respond to the communication from the Insurers’ solicitors, told Mr and Mrs Abrahams that the only relevant footage which should be downloaded was the footage from camera 2, and that no advice was given to them to retain the footage from the other cameras.

On the 23^rd February 2009 DC Laverick of the International Unit of the Specialist Crime Directorate received a communication from the French authorities, who were seeking information about a female suspect for a series of high value jewellery thefts across several European countries. The French authorities provided a photograph, a description and a description of the modus operandi. They asked that enquiries be made in the Metropolitan Police area for similar offences.

On the 12^th March 2009 DC Laverick received a further communication in which he was told that a Monique Nourri had been arrested for a similar offence to that which had taken place in the Claimants’ shop in Paris. He was also provided with information which showed that Ms. Nourri had been in the United Kingdom in the latter part of 2008.

DC Laverick’s enquiries identified a number of similar offences in Central London: all of those took place between August and November 2008. In fact, there were two others within days of the theft from the Claimants.

DC Laverick said that he had examined stills taken from the CCTV footage which had been provided by Mr. Abrahams and also CCTV footage from a theft at the De Beers franchise at Harrods. In his Witness Statement, DC Laverick said that he had no doubt that the person he saw in the CCTV footage and from De Beers and the stills provided by Mr. Abrahams was “identical” to Ms. Nourri. In evidence, DC Laverick told me that the evidence that he had seen was sufficient for him to have a reasonable suspicion that the person involved was responsible for the theft from the Claimants’ shop. He added that there were sufficient similarities between the younger woman shown in the stills from the Claimants’ shop and in a photograph provided to him by International Jewellery Security and a woman who was known to work with Ms. Nourri to give him a reasonable suspicion that the younger woman was Ms Nourri’s accomplice that day. He told me that Ms. Nourri was based in Southern France and had a criminal network of about 30 or 40 people. The younger person was believed to be a cousin of Ms. Nourri who was of Algerian origin.

In addition to the oral evidence which I have attempted to summarise above, I was shown the CCTV footage from camera 2. Although it was not clear from the footage precisely what had happened on the 9^th October 2008, I found the CCTV footage to be helpful evidence, when taken together with the evidence from Mrs. Abrahams, which I unhesitatingly accept, and the evidence of DC Laverick.

The evidence satisfies me, on the balance of probabilities, that on the 9^th October 2008 the ring was stolen from the Claimants’ premises. I am also satisfied that the women who went into the Claimants’ shop on the 9^th October 2008 were Ms Nourri and the younger woman, who is thought to be her cousin. The CCTV footage is sufficiently clear to show both Ms Nourri and the other woman to be the same women as appear in one of the photographs circulated by International Jewellery Security.

I turn now to consider the defences which have been advanced by the Insurers.

Unexplained Loss Exclusion

First, I deal with the Unexplained Loss Exclusion. It will be recalled that the exclusion applies to “Property Insured found to be missing at stocktaking where the Insured is unable to prove the date and circumstances of any loss”.

In the light of my finding that I am satisfied, on the balance of probabilities, that the ring was stolen from the Claimants’ premises on the 9^th October 2008, I can deal with this defence very shortly. I should, however, make clear that in reaching my conclusion I have taken into account the submissions made by Mr Noel Casey, on behalf of the Insurers, that the Claimants have failed to prove the date and circumstances of the loss.

Mr Casey’s submissions ran as follows: Mrs Abrahams was experienced in the jewellery business and is very security conscious. She was astute to place herself in front of the display cabinet. Whatever may be the conclusion as to the identity of the women who came into the shop on the 9^th October 2008. Mrs Abrahams would have been able to see if anything was taken, as would Mr Downer from his position outside the shop. After the women left the shop, Mrs Abrahams was sufficiently concerned to check the items in the display cabinet. Neither she nor Mr Dodge thought that there had been a theft at the time. Nor did Mrs Abrahams think that there had been a theft when she re-checked the display cabinet after talking to her husband. If, as Mrs Abrahams surmised, the women had taken the pod as well as the ring, Mrs Abrahams would surely have noticed that a pod was missing.

These are all valid points, and they were powerfully made by Mr Casey. I have taken all of them into account. However, the evidence of the accuracy of the Claimants’ record-keeping; the fact that they had never previously or since lost an item; the attendance at the shop of women who, I am satisfied, were Ms Nourri and her accomplice; the strange behaviour of the women both inside the shop and outside when they simply disappeared, have lead me to conclude that, notwithstanding Mr Casey’s submissions, the balance of probabilities is very firmly tilted towards the conclusion that on the 9^th October 2008 Ms Nourri and her accomplice did steal the ring from the Claimants.

In addition, as I have said, I found the evidence of DC Laverick to be extremely helpful. When an experienced police officer expresses himself in the terms in which DC Laverick felt able to express himself, considerable weight must be given to his evidence. It was known that Ms Nourri was in the United Kingdom in the latter part of 2008. DC Laverick identified her as the person who carried out a similar theft to that carried out at the Claimants’ shop at De Beers at Harrods. Mr Casey urged on me that not all distraction thefts succeed, and pointed out that one attempt was recorded by the International Jeweller Security as having failed. I have also taken that submission into account.

For the reasons which I have explained above, however, I have come to the conclusion that the Claimants have proved the date and circumstances of the loss.

In the light of that finding it is perhaps unnecessary to spend much time on an issue that was hotly debated during the hearing about the meaning of “stocktaking” in the Policy. However, out of respect for the submissions of Mr Marcos Dracos and Mr Casey, I will state briefly my conclusions as to the meaning of the word.

It is to be noted that no definition of what is meant by “stocktaking” is contained in the Policy. Nor is there any obligation to conduct stocktaking at any specific times or periods. It was the Insurers’ submission that “stocktaking” in this Policy meant “the act of assessing what stock is available”. Mr Casey submitted that when, on the 22^nd October 2008, Mr and Mrs Abrahams began searching for the missing ring and the other ring that they thought was missing (but which was found), they were “stocktaking” within the meaning of that word in the Policy.

I reject that submission. “Stocktaking” is an ordinary English word. It is defined in the Shorter Oxford English Dictionary as:

“The process of making an examination and inventory of the stock in a shop, warehouse etc.”

I am quite satisfied that that definition is the ordinary usage of the word “stocktaking”. I do not accept that stocktaking is something which occurs every time a person assesses what stock is available. If that is the meaning which the Insurers had wished to give to stocktaking, it would, in my judgment, have been necessary for them to define stock taking in those terms.

On the 22^nd October 2008 Mr and Mrs Abrahams were searching for the missing rings. They were, as might be expected, in a panic. I do not think that the fact that they were in a panic is decisive as to whether “stocktaking” was taking place, but I do find that it is a relevant fact to take into account in deciding whether what then took place was “stocktaking”. In my judgment, “stocktaking” in the Policy refers to a structured, organised process which is undertaken at regular intervals, whether monthly, quarterly, half-yearly or annually. That conclusion seems to me to accord with commercial common sense.

The Insurers’ submitted that the Claimants’ construction produces an unreasonable result. Mr Casey attempted to make that submission good by giving examples of the diligent shopkeeper, who performs a weekly stocktaking, and the less diligent shopkeeper, who performs stocktaking on an ad hoc basis. His submission was that the diligent shopkeeper would not be able to claim on the Policy, but the less diligent shopkeeper would be able to claim. This submission seems to me to be wholly without merit. Both of the shopkeepers would be able to claim. Indeed, the diligent shopkeeper would seem to have a better chance of proving the date and circumstances of the loss than would the less diligent shopkeeper.

If the Insurers’ construction of the meaning of “stocktaking” were correct, it would mean that every time an insured searched for an item, he would be “stocktaking” within the meaning of the Policy. I do not believe that such a construction accords with commercial reality or the intentions of the parties objectively assessed.

Mr Dracos submitted that as the Policy was on the Insurers’ standard form, I should construe it contra proferentem. The contra proferentem rule would only be relevant in the present case if I were of the view that the Unexplained Loss Exclusion was ambiguous. I do not consider it to be ambiguous. I am of the view that, looking at the provision objectively, the true construction of the word “stocktaking”,as it appears in that provision, is as I have stated above.

However, even if I were to accept the Insurers’ definition of “stocktaking”, I am quite satisfied, as I have made clear, that the Claimants are able to prove the date and circumstances of the loss. As I have found, the loss occurred on the 9^th October 2008 while the two Arabic women, Ms. Nourri and her accomplice, were in the shop. Accordingly, the Unexplained Loss Exclusion defence does not succeed.

General Condition - Notification of Claims

The Insurers’ next defence is based upon the General Condition. Again, the terms of that General Condition have been set out above. For convenience, however, I set the provision out again here. It provides that:

“As a condition precedent to any right of indemnification the Insured shall give to the Insurer such information and evidence as to the property lost or damaged and the circumstances of the loss or damage as the Insurers may reasonably require and as may be in the Insured’s power.”

It is the Insurers’ submission that the Claimants should have asked the Defendant if they wanted to see the film from all five CCTV cameras, and that their failure to do so was a breach of the General Condition. The Insurers submit that, in the circumstances, the condition precedent to their liability has not been satisfied, and that the claim must fail.

I have already found that Mr. Patel did not ask the Claimants to provide him with the film from all five CCTV cameras. He would have known that there were at least four cameras at the shop as a result of Mr. Fitch’s report. The Defendants had provided all of the coverage to the Police, who had told them that the only relevant material was shown by camera 2. I have accepted that the Police told Mr and Mrs Abrahams that it was only camera 2 which provided any relevant evidence. Mr. Paddison accepted that if the Police had given that advice, which I have found that they did, that was a relevant fact, although he would still have wanted to see film from all angles, and there would, in his view, still have been a failure to satisfy the condition precedent. Mr. Paddison also told me that he was not aware that CCTV footage might be retained for less than four weeks. I found that surprising evidence in the light of Mr. Fitch’s report which made clear that images were retained only “for at least a week”. It was equally surprising that a person in Mr Paddison’s position should not have known that such footage was not retained indefinitely, but was wiped off systems at regular intervals.

This General Condition is a co-operation provision, which excludes liability unless the condition precedent is satisfied. As such, the Insurers have the burden of proving that the Claimants failed to satisfy the condition precedent, and any doubt or ambiguity as to the meaning of the General Exclusion will be construed against them and in favour of the Claimants.

In order to satisfy the condition precedent, the Claimants were required by the General Exclusion to give to the Insurers such information as to the property lost and the circumstances of the loss “as the Insurers may reasonably require and as may be in the Claimants’ power (emphasis added).

Earlier in this judgment I have found that Mr Patel did not ask for all of the CCTV footage when he visited the shop on the 6^th November 2008; that he was told that only the footage from camera 2 had been downloaded onto a DVD at the request of the Police; and that he asked to see that DVD.

The Insurers knew, or should have known, that the CCTV footage was not retained indefinitely. In fact, they knew, or should have known, that the images that were recorded by the CCTV cameras were retained “for at least a week” (Mr Fitch’s Report to the Insurers dated the 19^th February 2008) and knew, or should have known, that CCTV footage was regularly wiped off hard drives in order to prevent the hard drive becoming too full for the CCTV cameras to record.

In my judgment, although the General Condition might have placed an initial responsibility on the Claimants to retain evidence as to the circumstances of the loss as the Insurers might reasonably require, it was proper for them to download only the footage that the Police advised them might be relevant to proving the commission of the theft and the circumstances of the loss. The evidence that the footage from the other CCTV cameras was not relevant comes not only from Mr and Mrs Abrahams account of what they were told by PC Warren and WPC White (which I find to be true), but also from the account given by Jason of Nationwide Security to Mr Patel, which I have set out above.

It is, in my judgment, significant, that the Insurers did not request all of the CCTV footage in their correspondence with the Claimants’ insurance brokers, and did not complain about the fact that they did not receive all of the footage when they declined cover. The complaint about the failure to make all of the CCTV footage available bears all of the hallmarks of a last, desperate attempt to defeat the Claimants’ claim.

Nonetheless, if the condition precedent has not been satisfied, the Insurers would be entitled to succeed, however unmeritorious their case may be. Happily, I have come to the conclusion that, on the evidence, it does not succeed.

I do not accept that the General Exclusion required the Claimants to attempt to guess what the Insurers might want to see by way of evidence. Mr and Mrs Abrahams saw the CCTV footage from all of the cameras in the company of PC Warren and WPC White. They were told that only the footage from camera 2 should be retained. They told Mr Patel the position on the 6^th November 2008. By that date, a month after the incident, all of the footage had probably been wiped off the hard drive automatically. Mr Patel knew that there were 5 CCTV cameras in all, but did not ask to see the footage from all of them there and then. He asked only to see the footage from camera 2 that the Police had told Mr and Mrs Abrahams was the only relevant footage.

I have come to the conclusion that on and after the 6^th November 2008 it was not reasonable for the Insurers to require the Claimants to produce footage from all of the CCTV cameras, and that, in any event, that footage was probably no longer in the Claimants’ power at that time. Furthermore, I have concluded that it was perfectly proper for the Claimants to download only the footage from camera 2 in the light of the advice from the police. Between the 23^rd October 2008 and the visit by Mr Patel on the 6^th November 2008 the Insurers could have asked for all of the CCTV footage to be retained. They did not do so. Nor did they do so through Mr Patel on the 6^th November 2008. Nor did they do so thereafter. I do not believe that the General Condition required the Claimants to try to guess what the Insurers might want to see.

In my judgment, the structure of the General Condition demonstrates that the Insurers’ contention is incorrect. It will be noted that the provision is drafted so that the Insurers’ request precedes the insured’s obligation. Thus, I conclude that the true construction of the condition precedent is that the insured is under an obligation to provide the Insurers with such information and evidence as to the circumstances of the loss as is in the insured’s power when the Insurers request that information or evidence.

The Insurers submitted that such a construction would mean that an insured could destroy relevant evidence, and still be able to recover. I do not agree. If an insured knows, or should know, that evidence or information is or might reasonably be required by his insurers and does not retain it, that insured runs the risk of being unable to satisfy the condition precedent. But if the insured has been told by a responsible person, in the present case, the Police, that the information is not relevant and is of no use as evidence and as a result does not retain it, I do not think that he will be unable to satisfy the condition precedent. The insured would not, in such a case be required to conclude that although the police had advised that the information was not relevant, or even “evidence”, the insurers might take a different view so that if the information or “evidence” were not retained, the condition precedent had not been satisfied and his claim would be defeated. A court would be reluctant to construe the General Exclusion in a way that produced such a draconian result.

The Insurers submitted that in failing to retain the footage from all of the CCTV cameras, the Claimants were failing to co-operate with the Insurers. Again, it was, in my judgment, not a failure to co-operate on the part of the Claimants to have taken the action that the Police advised them to take, namely, to keep the images only from Camera 2.

Accordingly, I have no hesitation in rejecting the Insurers’ defence based on the General Condition.

The Claimants’ claim the sum of £120,940 as an indemnity under the Policy, or damages in the like amount. Under the Policy the basis of settlement of a claim was, in respect of their own stock, cost price plus 10%, and, in respect of items in their custody, the basis of their liability to the owner of the item.

The diamond was valued at £115,000, and that is the sum that the Claimants are liable to pay to Mr Maman, who owned it. Indeed, they have paid Mr Maman fortnightly amounts of £2,500, which Mr Maman agreed to accept in satisfaction of their indebtedness to him. The Claimants have produced cheque stubs and bank statement which prove that they have paid Mr Maman the sum of £115,000, and have now fully satisfied their liability to him.

The two supporting diamonds that Claimants fitted together with the ring cost £5,400. Accordingly, the Claimants are entitled to £5,940, namely, £5,400 plus 10%, which together with the £115,000 in respect of the diamond amounts to £120,940.

There will, therefore, be judgment for the Claimants for £120,940.