COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
MR JUSTICE LANGLEY
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
SIR MARTIN NOURSE
| Tektrol Limited
|- and -
|International Insurance Company of Hanover Limited and another
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr D Railton QC and Mr G Wheeler (instructed by Squire & Co) for the respondents
Crown Copyright ©
Lord Justice Buxton :
i) The source code was held in five ways: on two computers located at Tektrol's business premises; on a laptop of the managing director (Mr Shlaimoun); on a computer at a remote site operated by an independent company known as Compwise Systems; and on a hard copy print-out stored in a pilot case kept at Tektrol's business premises.
ii) On 19 December 2001, Tektrol received an e-mail with an attachment apparently consisting of a Christmas card from a firm of solicitors which Mr Shlaimoun opened on his laptop. In fact the e-mail was a virus program deliberately created by "a malicious person or persons" which had the effect of deleting the source code held on the laptop.
iii) To quote paragraph 20 of the Assumed Facts: "The virus author had no knowledge of or connection to (Tektrol) or its source code. Although he did not intend to erase the … source code, he intended the virus program to spread around the world and knew that whenever the virus program was activated by the opening of the 'Christmas Card' attachment, computer data could be erased on the computer concerned"
iv) Mr Shlaimoun realised what had happened, believed that the remote site had not been corrupted, and repaired and reloaded the laptop from the remote site.
v) On about 2 January 2002 Tektrol's business premises were burgled. The burglars stole various items including the two computers and the hard copy print-out.
vi) The burglary was discovered on 7 January and it was then found that the virus had also deleted the source code held at the remote site and thus it had not been restored on the laptop.
vii) All copies of the source code had therefore been lost. The virus had erased the copies on the laptop and at the remote site and about a fortnight later the burglars had stolen the two computers which held the other copies and the only hard copy.
"IN THE EVENT OF any building or other property used by the Insured at the Premises for the purpose of the Business being accidentally lost destroyed or damaged during the Period of Insurance and in consequence the business carried on by the Insured at the Premises be interrupted or interfered with then the Insurers will pay to the Insured in respect of each item in the Schedule the amount of loss resulting from such interruption or interference provided that…"
"Sections 1 & 2 do not cover:
7 DAMAGE caused by or consisting of or
CONSEQUENTIAL LOSS arising directly or indirectly from
a) disappearance, unexplained or inventory shortage, misfiling or misplacing of information
b) in respect of Section 2:
i) erasure loss distortion or corruption of information on computer systems or other records programmes or software caused deliberately by rioters strikers locked-out workers persons taking part in labour disturbances or civil commotion or malicious persons
ii) other erasure loss distortion or corruption of information on computer systems or other records programmes or software unless resulting from a Defined Peril in so far as it is not otherwise excluded.
13 DAMAGE or CONSEQUENTIAL LOSS in respect of computers or data processing equipment other than such DAMAGE or in respect of such CONSEQUENTIAL LOSS caused by
i) a Defined Peril
ii) theft or attempted theft involving breaking into or out of the buildings of the premises by forcible and violent means
iii) robbery or attempted robbery committed in the premises in so far as it is not otherwise excluded."
"CONSEQUENTIAL LOSS", in capital letters, shall mean loss resulting from interruption of or interference with the Business carried on by the Insured at the Premises in consequence of accidental loss or destruction of or damage to property used by the Insured at the Premises for the purpose of the Business.
"Defined Peril" shall mean fire, lightning, explosion, aircraft or other aerial devices or articles dropped therefrom, riot, civil commotion, strikers, locked-out workers, persons taking part in labour disturbances, malicious persons, earthquake, storm, flood, escape of water from any tank apparatus or pipe or impact by any mechanically propelled vehicle or by goods falling therefrom or animal."
"…in a case of real doubt, the policy ought to be construed most strongly against the insurers; they frame the policy and insert the exceptions. But this principle ought only to be applied for the purpose of removing a doubt, not for the purpose of creating a doubt, or magnifying an ambiguity, when the circumstances of the case raise no real difficulty."
In the present case, as will be seen, there are some genuine difficulties in determining the factual situations to which the clauses absolving the insurers from risk, read in context, can properly be applied. It is at least a relevant factor in such an enquiry to recall that the insurers indeed could have made things much clearer in their own favour if that was indeed their intention when they drew the policy.
"The draftsmen traditionally employ linguistic overkill and try to obliterate the conceptual target by using a number of phrases expressing more or less the same idea."
And in the context of insurance he said of an agreement between Lloyd's names and underwriters in Arbuthnott v Fagan  CLC 1396:
"In a document like this, however, little weight should be given to an argument based on redundancy. It is a common consequence of a determination to make sure that one has obliterated the conceptual target. The draftsman wanted to leave no loophole for counter-attack…..It is no justification for construing the language so as to apply to a situation which, on a fair reading of the general purpose of the clause was not within the target area."
Lord Justice Carnwath :
Sir Martin Nourse :