Scottish Court of Session Decisions

Briside v. Bill Pearson Insurance Services & Ors [2003] ScotCS 108 (8 April 2003)

OUTER HOUSE, COURT OF SESSION
	OPINION OF LORD WHEATLEY in the cause BRISIDE LIMITED Pursuers; against (FIRST) BILL PEARSON INSURANCE SERVICES and OTHERS Defenders; and MESSRS CAMPBELL BROOK & MYLES Third Party ________________

 

 

Pursuers: McSporran, Dundas & Wilson, C.S.

Defenders: Brodie, Simpson & Marwick, W.S.

8 April 2003

1. In this case the pursuers purchased a bar at 26 Tay Street, Perth in August 1992. Subsequently they bought adjoining property with the intention of opening and running a nightclub. To achieve this end the pursuers had to carry out substantial improvements and alterations to the property which they had purchased. In July 1993 they entered into discussions with the first defenders, who are a firm of insurance brokers, in respect of the provision of insurance cover for the refurbished property with a view to running it as a nightclub. A quotation for insurance of the nightclub to include buildings insurance was obtained in the sum of £35,000. The pursuers considered this to be too expensive and decided that they would bear the building insurance risk themselves. However, they wished to explore the best way of insuring the substantial improvements and alterations which they had carried out to the building. The defenders advised the pursuers that the improvements could be carried out under a tenants' improvements insurance policy. To achieve this, the defenders advised that the pursuers would have to arrange to become the tenants of the property as opposed to the owners, and that they should take legal advice in respect of this matter. It is averred by the pursuers and agreed by the defenders that the defenders did not suggest that the necessary cover sought by the pursuers could be provided by a policy covering contents, fixtures and fittings. The defenders maintained that such cover was neither suitable or available. The distinction between these two kinds of insurance is of significance in the present case. In November 1993 the nightclub was destroyed by fire. The pursuers attempted to claim to be reimbursed for their loss but the insurers refused to pay on the grounds that they had no insurable interest. The pursuers therefore claim against the defenders on the basis of alleged professional negligence for the loss which they incurred. The case came out for debate on the defenders' first plea in law which is a general plea to the relevancy and specification of the pursuers' pleadings, and was directed specifically at the averments of loss. There was no appearance for the third party.
2. In essence defenders' counsel argued that the pursuers had not averred a relevant case of loss in their pleadings. In outlining his case, counsel for the defenders emphasised that the dispute centred around what kind of insurance cover should have been recommended and provided by the defenders. The pursuers' case in brief is that the defenders should not have arranged tenants' insurance but rather contents, fixtures and fittings cover. In relation to the loss arising out of that failure, the defenders' counsel submitted that the averments of loss were irrelevant and lacked specification. The defenders' submission was straightforward. The pursuers' case was that the defenders should have put in place a policy covering contents, fixtures and fittings. The pursuers' averments of loss are based on a quantification in terms of loss adjuster's valuation of what would have been recovered for tenants' improvements. In the event, the pursuers were unable to recover their losses in respect of tenants' improvements under the insurance policy as they had no insurable interest. At the material time, there was no lease in place, and the pursuers were accordingly still owners, and had not yet become tenants. The insurance cover in respect of tenants' improvements is separate and distinct from that of contents, fixtures and fittings. Since there is such a distinction between the two kinds of insurance, and as the primary duty of care is averred by the pursuers was to put in place contents insurance, defenders' counsel maintained that it was not relevant to quantify the loss as to what would have been reasonable or payable if tenants' insurance had been in place. The loss cannot be quantified by what might have been recovered under a different kind of insurance. Finally the averments of loss, counsel argued, contained inadequate specification. The pursuers claim is calculated by the loss adjuster. The components of the loss are not specified. Details have not been produced in terms of the pleadings. Under a contents policy different things would have been covered as opposed to what is covered under a tenants' policy and the pursuers are entitled to know and test which components of loss should be recoverable under such a policy.
3. In response counsel for the pursuers submitted that the case should proceed to a proof before answer. He argued that the principal test of whether averments were sufficiently specific was that of fair notice. The proper question to ask is whether the defenders can say that they do not know the nature of the case pled against them and are liable to be taken by surprise in the presentation of evidence in support of the pleadings. However, the defenders' position is clearly laid out on record and in particular they have described the basis for their advice and recommendation to the pursuers as to what insurance should be in place. The defenders themselves aver in Condescendence 4 that contents, fittings and fixtures insurance would have been available on the same terms as tenants' insurance. In essence the pursuers' case is that the real distinction is whether the pursuers should have been in a position of having an interest as a tenant on the one hand and as an owner on the other hand. The fact that the pursuers were still owners and not tenants was not known to the defenders. Had the defenders been tenants, they would have had an insurable interest. Had they been entitled to recover, what they would have received was what the loss adjusters had calculated would have been due under that policy. Although there was no specification of what the loss amounted to, such specification was unnecessary. The defenders had fair notice of the specific nature of the sum now claimed, the basis of what that sum was and who had made the calculations. If they wished to challenge the figures the material was available to allow them to do so.
4. On balance I consider that the defenders' arguments were extremely persuasive, but not sufficiently so to justify dismissing the case at this stage. The pursuers have an arguable case that they have suffered loss through the supposed negligence of the defenders and have related, somewhat tenuously perhaps, the nature of the loss they have suffered as a result. The pursuers' principal case is essentially that the defenders should have recommended that they take out contents insurance. That would have given the pursuers an insurable interest. What the pursuers aver is that if they had an insurable interest, whatever the nature of that might be, what would have been recovered is the measure of the claim available under a tenant's insurance policy. Further, the pursuers have an esto case in both Articles 4 and 5 of Condescendence to the effect that if tenant's insurance was to be recommended the defenders had a duty to see that a lease was in place, which would confer an insurable interest on the pursuers. Clearly if the pursuers succeed in establishing that the defenders are in breach of this alternative duty of care, the natural measure of loss is what would be recoverable under a tenant's insurance policy. The component parts of that loss can be ascertained by the defenders if they so wish, particularly in view of the fact that they themselves are presumably specialists in that particular area. While the way in which the pursuers have pled their case on damages may cause them problems at proof, in all the circumstances I propose to allow a proof before answer with all pleas remaining on Record.