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Bellshill Property LTD against (First) Borland Insurance LTD, (Second) Tradebe Healthcare National LTD and (Third) Grupo Tradebe Medioambiente SL (Court of Session)
Factual and Procedural Background
Plaintiff brought a commercial action seeking recovery of losses said to arise from the total destruction by fire, in July 2021, of a large warehouse-type unit owned by Plaintiff at The City Industrial Estate. The First Defender was the insurance broker that arranged cover; the Second Defender was the tenant using the unit to process clinical waste; and the Third Defender guaranteed the Second Defender’s lease obligations. The Second and Third Defenders maintained that the claim against them was irrelevant, and that issue came before Judge Sandison at debate. [Para 18][Para 20]
Under the lease, Plaintiff had to insure the unit against fire and related risks, while the Second Defender had to pay the premium and refrain from conduct that might invalidate cover or increase the premium without agreement to pay it. A policy was obtained from a Luxembourg insurer, Company A, but it was subject to undisclosed restrictions, including a condition that there were no composite panels and a condition precedent requiring electrical inspection within two months; neither requirement was satisfied before the fire. The Second Defender later changed its process to use gas-fired burners, and Plaintiff said that this was undisclosed, increased fire risk, and caused the fire. [Para 23][Para 25][Para 26]
Legal Issues Presented
- Whether the alleged breach of lease by the Second Defender could be causally relevant where fire cover had already ceased and the insurer later avoided the policy for reasons said to be unrelated to the Second Defender. [Para 40][Para 162][Para 163][Para 194][Para 196]
- Whether the policy’s non-invalidation and exclusion clauses meant that the insurer could, or could not, refuse cover because of the Second Defender’s undisclosed use of gas burners. [Para 57][Para 60][Para 71][Para 78][Para 183][Para 189]
- Whether the pleadings disclosed a relevant case against the Second and Third Defenders sufficient to proceed to proof before answer. [Para 206][Para 209][Para 211]
Arguments of the Parties
Plaintiff's Arguments
- Plaintiff argued that the Second Defender began using gas burners without notice, that this materially increased fire risk, and that the insurer would have been entitled to avoid or refuse cover on that basis. [Para 83][Para 84]
- Plaintiff submitted that, properly construed, Clauses 3 and 4 of the Property Damage section meant that unknown increases in risk should not invalidate cover against the owner’s interest. [Para 70][Para 90][Para 94][Para 95]
- Plaintiff also argued that Clause 8 did not exclude the fire loss here, because it was directed only at damage to the part of the property undergoing heating or treatment, not at fire spread to the wider building. [Para 78][Para 79][Para 173][Para 175]
First Defender's Arguments
- The First Defender resisted dismissal of the case against the Second and Third Defenders and said the claim was relevant enough for proof before answer. [Para 127]
- It argued that Plaintiff’s loss should be characterised broadly as the absence of valid insurance cover at the time of the fire, not narrowly as the avoidance of the particular policy originally placed. [Para 128][Para 132][Para 145]
- It further argued that the Second Defender’s conduct could not be treated as a novus actus interveniens, because the First Defender’s duty was to secure cover against exactly the kind of third-party risk that later occurred. [Para 139][Para 140]
Second and Third Defenders' Arguments
- The Second and Third Defenders said the loss flowed from the insurer’s refusal to pay, which in turn was based on Plaintiff’s own failures to disclose composite panels, the use of industrial shredders, and the failure to comply with the electrical inspection condition. [Para 31][Para 40]
- They relied on the lease and the insurance scheme in support of an argument that the Second Defender’s alleged breach was irrelevant unless it caused the insurer’s refusal to pay, and they invoked Mark Rowlands Ltd v Berni Inns Ltd to describe the contractual allocation of insurance risk. [Para 39][Para 40]
- They also argued that Clause 8 excluded fire damage arising from heating processes, and that Plaintiff’s construction of the policy would make the exclusion and the insurance scheme commercially incoherent. [Para 78][Para 79][Para 80]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mark Rowlands Ltd v Berni Inns Ltd | Insurance arrangements in a lease may show an intention that fire loss is to be recouped from insurance and not pursued again against the tenant. | The case was cited as describing the lease as a shared insurance scheme, which informed the court’s contextual reading of the lease obligations. [Para 39][Para 201] |
| The Seashell of Lisson Grove Ltd v Aviva Insurance Ltd | A non-invalidation clause can protect an insured where an unknown risk increases, even if damage occurs before notice is given, provided the clause’s conditions are met. | The court used it when construing Clause 4, but ultimately held that the clause did not assist Plaintiff because the relevant fire cover had already ceased and the clause did not extend cover to a materially different risk. [Para 70][Para 184][Para 185][Para 186][Para 189][Para 196] |
| Ansari v New India Assurance Limited | Authority on the meaning of insurance wording and the operation of non-invalidation language. | Cited in support of the proposition that “invalidated” points to avoidance of existing cover rather than creation of new cover. [Para 70][Para 95] |
| Re United London and Scottish Insurance Co Ltd | Insurance contracts are construed objectively by reference to what a reasonable person with the relevant background would understand. | Used as the general interpretive starting point for the policy wording. [Para 85] |
| Financial Conduct Authority v Arch Insurance (UK) Limited | The “but for” test usually governs causation; if the later event would have happened anyway, the earlier one is not a cause. | The court relied on it to explain both general causation and the limits of a simple “but for” analysis in cases of concurrent or successive wrongs. [Para 106][Para 146] |
| Glenfiddich Wind Ltd v Dorenell Windfarm Ltd | Context and commercial purpose are relevant to contractual interpretation. | Cited by Plaintiff on the proper approach to construing the policy wording. [Para 86] |
| Greenock Steamship Co v Maritime Insurance Co Ltd | A non-invalidation clause does not oblige an insurer to keep covering a risk it would never have accepted. | Used to support the conclusion that Clause 4 could not transform a materially different risk into covered risk. [Para 95] |
| Baker v Willoughby | Multiple causes can both be legally relevant; an initial wrongdoer cannot always escape liability because of a later event. | The court used it in discussing successive causes and why a later event does not necessarily wipe out the causal significance of an earlier wrong. [Para 115][Para 116][Para 148][Para 149] |
| Williams v The Bermuda Hospitals Board | Successive events can each materially contribute to an indivisible loss. | The court relied on it to support the possibility that both the First and Second Defenders’ conduct could be causally relevant. [Para 117][Para 119][Para 120][Para 122][Para 153] |
| McGhee v National Coal Board | Where cumulative factors cause injury, timing alone may not matter. | Cited in the discussion of cumulative causation. [Para 119] |
| Hotson v East Berkshire Health Authority | Sequence of events can matter evidentially when deciding whether a later event materially contributed. | Used as an example of evidential, rather than principled, limits on successive causation analysis. [Para 120] |
| Performance Cars Ltd v Abraham | A later wrong is not liable where it does not alter the claimant’s position because the relevant damage already existed. | The court distinguished it because the present loss depended on the combined effect of both defenders’ conduct, not on damage already fully exhausted by an earlier wrong. [Para 123] |
| London Joint Stock Bank Ltd v Macmillan | Cited as an authority on responsibility for intervening misconduct that a defender ought to have guarded against. | Relied on by the First Defender in resisting any novus actus argument against the Second Defender. [Para 140] |
| De La Bere v Pearson Ltd | Cited as an authority on responsibility for third-party consequences within the scope of a duty. | Relied on by the First Defender as part of the novus actus discussion. [Para 140] |
| Stansbie v Troman | Cited as an authority on liability where a duty includes guarding against foreseeable third-party wrongdoing. | Relied on by the First Defender in arguing that the Second Defender’s conduct should not break causation. [Para 140] |
| Home Office v Dorset Yacht Co Ltd | Cited as an authority on liability for foreseeable third-party acts where a duty existed to prevent them. | Relied on by the First Defender to support the argument that the First Defender’s duty was to protect against the very sort of tenant conduct that occurred. [Para 140] |
| P Perl (Exporters) Ltd v Camden LBC | Cited as an authority on intervening conduct and the scope of responsibility for foreseeable risks. | Relied on by the First Defender in the novus actus discussion. [Para 140] |
| Maloco v Littlewoods Organisation Ltd | Cited as an authority on causation and intervening acts. | Relied on by the First Defender in support of its causation argument. [Para 140] |
| Weld-Blundell v Stephens | Cited as an authority on the limits of liability where another cause intervenes. | Relied on by the First Defender in the novus actus discussion. [Para 140] |
| Wardlaw v Bonnington Casting Ltd | Authoritative on material contribution in causation analysis. | Cited in the discussion of successive events materially contributing to loss. [Para 153] |
| Anderson v Minneapolis, St Paul & Sault Ste Marie Railway Co | Two independently sufficient causes can each be treated as a cause of the loss. | Used in the explanation of why the “but for” test is not always adequate for concurrent causes. [Para 107] |
| Kingston v Chicago & Northwestern Railway Co | Two independent fires combining to destroy property can each be a cause of the loss. | Used alongside Anderson to illustrate concurrent causation. [Para 107] |
Court's Reasoning and Analysis
The court began by fixing the position in March 2021: fire cover had already ceased because the electrical inspection condition precedent was not met by 7 February 2021, so the absence of fire cover was not caused by anything done by the Second Defender. The insurer’s later avoidance of the policy as a whole for non-disclosure of composite panels was valid, but the purported reliance on undisclosed gas burners was not a valid ground for ab initio avoidance because the burners were not in use at inception or variation, and Clause 21 was not relied on and could not justify retrospective avoidance. [Para 155][Para 162][Para 163][Para 164][Para 168][Para 172]
The court rejected Plaintiff’s broad construction of Clause 8. Properly read, the exclusion removed cover only for damage to the specific part of the property undergoing heating, production or treatment; it did not exclude fire spread damage to the building as a whole. The court likewise construed Clauses 3 and 4 contextually, holding that they allocated risk for unknown occupier acts, but did not convert a materially different and unpresented risk into covered risk. [Para 173][Para 176][Para 177][Para 180][Para 183][Para 188][Para 189]
On causation, the court accepted that the “but for” analysis could not be applied in a way that allowed one wrongdoer simply to blame another. It treated the First Defender’s failure to obtain valid cover and the Second Defender’s alleged later breach as potentially concurrent causes, capable in principle of materially contributing to the same loss, but emphasised that the exact contribution of each would require evidence. [Para 106][Para 107][Para 111][Para 112][Para 113][Para 116][Para 119][Para 122][Para 125]
Applying that analysis to the lease, the court held that Clause 1.2 was not presently shown to have been breached when the Second Defender introduced gas burners, but Clause 1.3 was at least arguably engaged because gas burners may have made an additional premium payable. The court concluded that Plaintiff had a relevant case to attempt to prove that the Second Defender’s alleged breach caused or materially contributed to the absence of fire insurance cover that would have responded to the fire, although that proof was likely to be difficult. [Para 202][Para 205][Para 206][Para 207][Para 208][Para 209]
Holding and Implications
Proof before answer was allowed. The action was not dismissed against the Second and Third Defenders, and the parties were invited to make further submissions on any averments to be refused probation and on the excision of an abandoned alternative case. The decision is interlocutory only: it determines that Plaintiff has a relevant case to try, but it sets no final liability finding. [Para 211][Para 212]
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