Neutral Citation Number: [2015] EWHC 103 (QB)
Case No: 2013 FOLIO 936
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 26/01/2015

Before :

HIS HONOUR JUDGE MACKIE QC
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Between :

	WESTERN TRADING LIMITED
	Claimant	
			
	GREAT LAKES REINSURANCE (UK) PLC
	Defendant	

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Ben Elkington QC (instructed by Edwin Coe) for the Claimant
Bob Moxon-Browne QC (instructed by Kennedys ) for the Defendant

Hearing dates: 24 November to 4 December 2014
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Judgment
Judge Mackie QC : 
1.	This fire insurance claim by the Claimant is resisted by the Defendant on the grounds that the assured had no insurable interest and that there was misrepresentation and non disclosure. The Defendant also claims that if the Claimant does have a valid claim it should not have a Declaration that it is entitled to be indemnified for the cost of reinstatement. The claim follows a fire on 24th July 2012 which destroyed buildings (which I will together call “the Property”) in Central Walsall including a listed local landmark, the Boak Building.
2.	The Claimant is a company which is owned mainly by Mr Chinderpal Singh.  The company secretary is Mr Singh’s wife, Mrs Kaur, who plays an active role in the administration of the Claimant. The Claimant exists to hold and manage Mr Singh’s property portfolio.  Some properties, such as those which are the subject of this claim, are owned by Mr Singh personally, others by the Claimant. The Defendant is an insurance company and a subsidiary of Munich Re. 
The Trial
3.	At the trial thirty one bundles of documents were before the court. I heard evidence from five fact witnesses for the Claimant. These were Mr  Singh, his son Mr Sandeep (“Sunny”) Singh, Mr Philip Jones, a former tenant of the Boak, Mr Altin Gjura, owner of a car wash operated at the Property and Mr Michael Bird, a Walsall Councillor and a former Leader of the Council and Mayor of the Borough. There were four fact witnesses for the Defendant, Mr David Chubb who carried out a survey of the property, Mr John Firminger a director of Cunningham Lindsay, loss adjusters, Ms Lorraine Sheehan formerly director of UK underwriting at Kay International PLC and Mr Mark Fearn, Project Lead at Walsall Council who has formidable knowledge and experience of commercial rating in the area. I found all these witnesses to be straightforward and truthful. Disagreement about the facts involved not a clash of competing recollections but the question of whether what the Claimant’s witnesses said was correct given the material deployed and the questions asked by the Defendant. I will accordingly set out the facts in narrative form dealing with disputed matters as they arise. 
4.	There was also expert evidence. In the area of underwriting the Claimant called Mr Jamie Lye and the Defendant Mr Trevor Clegg. On valuation the Claimant called Mr Robert Taylor and the Defendant Mr Peter Clarke. On quantity surveying the Claimant called Mr Simon Janes and the Defendant Mr George Taft.
Background facts- Insurable interest and misrepresentation.
5.	Mr Singh has been a very successful investor in property, mainly of a modest commercial kind. Thus the Defendant says that by 2003 Mr Singh  already had a large property portfolio, including the Gill and Russell Business Park in Walsall (which he owned with his elder son Mr Sunny Singh), a block of office premises in central Birmingham (Swan House, Beacon House and Gothic House), a valuable retail and warehousing complex in Wednesbury let for £45,000 per quarter, and the Hampstead Business Park in Walsall producing rent of at least £100,000 p.a. which he owned with Mrs Kaur. He has apparently many other properties as well.
6.	Mr Singh came to this country with his family as a child in 1963 and started a business from his father’s shop dealing in and later making garments before moving into property. Mr Singh retains frugal ways and an informal and traditional small business structure. Despite his success Mr Singh is modest and unassuming, commendable characteristics which may have led to misunderstandings when the fire was investigated.  Mr Singh has two sons, the elder being Mr Sunny Singh. I will, to avoid confusion, refer to Mr Singh and his elder son Sunny as “Mr Singh” and “Sunny”. Sunny runs a property business, Property Link (Midlands) Limited (“Property Link”), which operates from the same building as the Claimant with which it shares facilities. The Singh family is close knit.
7.	The Property comprises two neighbouring buildings which were destroyed or damaged by the fire which gives rise to the claim and the Claimant says that it let and managed them both. The first was 1 – 7 Station Street, Walsall known as the Boak Building.  This was an historic listed building, built as a factory at the start of the twentieth century.  It stood close to the railway leading into Walsall and was a local landmark. The second was 8 Station Street.  The upper floors of 8 Station Street have a separate entrance from the road and are sometimes known as 8A Station Street. Mr Singh also owned the properties at 9 – 13 Station Street. All but one of the other neighbouring properties in Station Street were owned by a Mr Parkes.
8.	Mr Singh acquired the Boak building in 2003 buying out his brother’s interest. The property had been in the family since the early 1980s (and, as Mr Singh emphasised, had been insured against fire for over thirty years). He continued its use for manufacturing clothing, but that ended in the late 1990s.  After that it was used for storage.  Prior to 2006 the utilities to the building (water, sanitation, gas and electricity) were disconnected, and it was stripped back to a shell, ready for redevelopment. It followed that any commercial use of the Property would be limited to basic rough storage.  Both parties do or should recognise that the nature of the occupation and tenancy of insured buildings without services was going to be limited. In evidence both Mr Singh and Sunny showed nostalgia for a building which had been a feature of family life for so long.
9.	The Boak building was ‘U’ shaped.  The centre of the U contained a single storey unit, and openings into that area had been blocked up.  Mr Singh and Sunny explained and Mr Jones confirmed that the ground floor of the Boak Building had been converted into offices and a show room with suspended ceilings.  The ground floor had modern aluminium windows with a large pane of glass and grills over them. The Defendant says that the ground floor was nothing more than a shell.
Letting and occupation
10.	That and related disputes arise because the Defendant said, at least until the start of the trial, that the Property had been empty and unused since 2001 at the latest.  The Defendant says that the Property could not be used for storage (or anything else) because since at least 2001 Mr Singh (or Sunny on his behalf) had been claiming an empty rates exemption for both the Boak and No. 8. In the case of the Boak, this was on the basis that the property was an unoccupied listed building, and in the case of No. 8 and 8a, on the grounds that the premises were empty and awaiting demolition. If the premises had been let, business rates of about £14,000 p.a. would have become payable.  This, the Defendant says, was more than could have been obtained for them by way of rent.
11.	Relevance of letting and occupation. These matters are relevant as the Defendant contends that the Claimant had no insurable interest because it did not own or have a tenancy over the premises, and had no interest in their preservation, or exposure to prejudice in the event of their loss. The Defendant says that the Claimant’s sole interest was in the insurance contract, which could not of itself give rise to an insurable interest in the property insured. The insurance contract “was one of naked speculation (i.e. in substance no more than a disinterested wager on whether or not the Boak would burn down).”
12.	Alleged letting to the Claimant. The terms upon which the Claimant let and managed the properties which were owned by Mr Singh were not documented.  The Claimant contends that it had the right to sub-let the properties and to receive and enjoy the rent received from the sub-tenants.  The Claimant says that, in return, it was responsible for and paid for the upkeep and maintenance of the buildings, for arranging insurance for the properties, and for the outgoings on the properties. In his oral evidence Mr Singh explained that this arrangement applied to the Boak building. The Claimant paid all its outgoings, and has a responsibility to replace the Boak building. As part of this, Mr Singh arranged for the Claimant to pay him rent.  The amount of rent was not calculated by reference to the total rents collected by the Claimant, but reflected what Mr Singh thought was a reasonable charge and was what the Claimant could afford to pay. The rent paid by the Claimant to Mr Singh was recorded in its accounts and financial statements.   Similarly, the rent received by Mr Singh from the Claimant was declared in Mr Singh’s personal accounts and in his tax returns.  The rent was recorded as a credit in Mr Singh’s director’s loan account with the Claimant. The Claimant’s accountant and auditor, Wright & Co, has confirmed that rent was paid by sub-tenants to the Claimant, and then by the Claimant to Mr Singh, as described above.  Wright & Co confirmed in writing on 31st October 2012 that the arrangements were quite normal for owner managed properties, had been adopted in the Claimant’s accounts for many years and accepted by HMRC without question, and were entirely acceptable to them as auditors.  The report of Mr Lye, the Claimant’s underwriting expert confirms that his experience in insurance since the 1970s is that the structure adopted here was very common and any potential concerns of underwriters would be allayed by the presence of the owner of the properties on the board of directors. 
13.	I accept Mr Singh’s account of the Claimant’s activities. The Claimant appears to play the role described by Mr Singh. This is consistent with the documents. Further the Claimant granted leases of the properties owned by Mr Singh and also took responsibility for rates liability (albeit without paying any rates for the Property for substantial periods) and, most obviously, insurance for which it obtained cover and paid premium over many years. The commercial structure is a familiar one to this court.
14.	 The Defendant denies that Mr Singh ever let the Premises to the Claimant. The Defendant also denies that the Claimant managed the Premises or sub-let them to tenants. The Defendant says that money paid by the Claimant to Mr Singh and that paid to the Claimant by Property Link was not rent. It says that Mr Singh and Sunny routed some of the large income from their properties through the Claimant, for fiscal reasons, but that fact did not make the Claimant their tenant. Further the Boak and No. 8 were not part of such scheme, since as with other property owned by Mr Singh, neither premises (the Defendant says) generated any rent, at least during the period when insurers were on cover. This business model, which the Defendant says is obviously fiscally driven, demonstrates that the rent paid by the Claimant to Mr Singh is referable to its right to receive rents from properties owned by him. The Claimant may have had an insurable interest in the income producing properties to the extent of the rents derived (assuming, as Insurers do, that the business model described was lawful) but not in the properties held by Mr Singh for other purposes, which did not produce any rent. 
15.	The Defendant points out that the Claimant’s annual accounts as originally disclosed to Insurers included clean audit reports. It subsequently transpired that the versions of the same accounts submitted to Companies House contained audit reports stating that because the auditors had not received the information and explanations they required, they (could) not express an opinion on the financial statements. There appear to be qualified and unqualified auditors reports for two successive years. It is not clear why. The Defendant complains that the accountants are not being called to give evidence, notwithstanding that Insurers have squarely challenged the accounts and accountancy treatments adopted. 
16.	The Claimant was remiss in not disclosing the full version of the accounts as filed at Companies House but that does not invalidate the entries or the views of the position given to the Claimant by its auditors. Reservations expressed by the accountants about aspects of their clients’ accounts do not undermine the truth or accuracy of what they write in their letter about the conventional way in which businesses such as that of the Singh family are organised. It would be remarkable for a firm of Chartered Accountants to write untruths about such matters and there has been no suggestion of evidence or other material from the Defendant that might falsify what those accountants write.  The Defendant has a better point about the reliability of the Claimant’s own view of the figures but the central picture remains unchanged. There was no reason to call the accountants as witnesses. There was no formal challenge to the accounts or request for expert evidence on this topic.
Occupation of the Property from 2006 until the fire
17.	After 2006 the Claimant began to look into developing the Boak Building for residential use.  However, until that occurred the Boak building and 8 Station Street were available for rent.  The Defendant says that from some point the Premises were unoccupied or at least not occupied as claimed by the Claimant when it obtained the policy.
18.	8 Station Street. In November 2006 the Claimant entered into a lease of 8 Station Street with Fellows and Hayward who traded as “Fastline Gate & Fencing Fabrications.” They remained in occupation until February 2008 and paid rent to the Claimant throughout.  The Claimant then let 8 Station Street to a Mr Worthington who traded as “CAM Fabrications” under a lease dated 19th February 2008. The rent was paid in cash. Mr Worthington left in February 2009.  The Claimant says that it then leased the property to a company run by Sunny, namely Property Link (Midlands) Limited (“Property Link”).  There is a lease between these parties dated 23rd February 2009 with initial rent payable of £12,000 per annum.  Property Link says that it used 8 Station Street for storing furniture. Mr Singh and Sunny both gave evidence of that and there is no doubt that the lease was entered into on its date.
19.	The Boak. In October 2007 the Claimant entered into a lease of the ground floor of the Boak Building with Mr Jones, whose company imported Asian handicrafts and exotic furniture.  Rent was paid throughout. Mr Jones gave evidence and said that the L-shaped section of the ground floor he rented was more like a showroom than an industrial unit. It had carpet on the floors, panelled walls and a suspended ceiling. Mr Jones left in early May 2010.  At that point the Claimant entered into a lease dated 21st May 2010 of the ground floor of the Boak building with Property Link at a rent of £13,000 per annum. Property Link claims that it used the Boak building for storing office equipment and furniture.
20.	From 2009 the Claimant allowed the yard area behind the Boak building to be used by a manual car wash operation run by Mr Gjura.  The car wash had started at 9 Station Street in 2007. It operated 7 days a week from 8am to 6pm.  No rent was paid by Mr Gjura to the Claimant beyond the rent he paid for 9 Station Street. Mr Singh informed Mr Chubb in June 2011 that this was “mainly at weekends.”
21.	The leases of the Boak building and 8 Station Street conventionally imposed an obligation on the tenant to pay any business rates or other charges due in relation to the rented property.   Mr Jones said that he did not pay any rates, and did not think any would be payable because the Boak building had no utilities. 
22.	The Claimant says that because of the close family links it allowed Property Link to remain in occupation for some time before requiring it to pay the rent due.  The Claimant says that a time came when it did require a substantial payment of rent. On 28th December 2011 Property Link made a lump sum payment of £50,000.  The receipt of that sum from Property Link appears in the Claimant’s bank statement and it was also recorded as rent received from Property Link in the Claimant’s accounts for the year to 30th June 2012. 
23.	The Defendant complains that the case that Property Link paid rent with a credit entry in the Claimant’s bank account for 28 December 2011 and an entry in its Rent and Rates Journal prepared by the Claimant’s accountants in the course of putting together the 2011/2012 accounts, is not supported by evidence from Property Link to corroborate this. A single payment of £50,000 in December 2011 bears no apparent relation to any rent or combination of rents accrued at that time. It is admitted by Mr Singh that the payment of £50,000 coincided with a payment of the same amount due to Shoosmiths in connection with a property purchase.
24.	The Defendant’s legal team has conducted a detailed and very skilful analysis of the financing of this transaction showing that the £50,000 was used to help pay for the purchase of WestPoint Business Park in Aldridge on 21 December 2011. The Defendant says that this was not for rent, but was instead a contribution towards the purchase of the Business Park.  The Claimant accepts that Western Trading Limited did apply the rent monies received from Property Link towards the purchase of the Westpoint Business Park, but says that the £50,000 was not a contribution to Property Link’s share of the purchase price. It was a sum for unpaid rent which the Claimant collected in order that the Claimant could use it to pay part of its share of the purchase price. (It seems that it was only in the Defendant’s trial skeleton that the suggested link between the £50,000 and the purchase of Westpoint Business Park was raised.)
25.	The Defendant’s claims that the Property was empty after 2001 do not survive the evidence. There is no reason to doubt the validity of the leases  taken by those outside the Singh family, at least, or that the Property was used as the tenants described. Indeed Mr Moxon-Browne QC for the Defendant relies on the occupation by Fastline Fencing Fabrications of Number 8 for a period between 2006 and 2007, and by Mr Jones/Java Furniture of the Boak between 2008 and 2010 to show what he says was the true level for a commercial rent, a maximum of £16,900. 
26.	Similarly there is no reason to doubt that the leases were entered into when they were or otherwise than in good faith. The parties to the leases were free to agree whatever financial terms they wished. Even if one were to assume that the leases were entered into on particularly advantageous terms to one party, they remain valid unless they offend some statutory or other requirement most obviously one relating to fraud, tax or perhaps prejudice to a creditor or minority shareholder.  Moreover there is nothing in the least surprising or uncommon about related family businesses charging each other uncommercial  sums or forgoing payments until they need them. I do not see that the allegedly uncommercial terms are relevant to anything other than an argument that the leases are in some way a sham and not genuine. But that is not and could not on the evidence be the Defendant’s case.
27.	I will assume this. Rent was due but one family company chose not to require another family company mainly belonging to Sunny to pay until there was a perceived need for cash in connection with another deal. Rent was then paid in a sum that did not correspond precisely with what was due but met the need for cash. If this was a case brought by aggrieved creditors or minority shareholders the transactions would be usefully examined closely and with the skill demonstrated by Mr Moxon-Browne and his team. But the issue is whether the Claimant, as opposed to someone else within the Singh family businesses (and there must be someone), has the insurable interest when one of its properties burns down.
28.	While it would have been preferable for arrangements between Mr Singh and the Claimant to have been recorded in writing there seems no doubt from the accounting transactions and the plausibility of the evidence of Mr Singh that these were as claimed. There is no obvious reason why Mr Singh would seek to conceal some other basis and prefer to insure, for years, in the name of the Claimant. The Claimant leased both properties to Property Link as the contemporaneous leases, whose authenticity was not disputed, establish. Suggestions not pleaded but put  in cross examination to Sunny, and rejected by him, that this was not a commercial arrangement were unhelpful. Mr Singh wanted Sunny to make his own way in business but to give him a hand along the way and have his help in the family firms. While the origins of this relationship between father and son may, as Sunny suggested, lie in the Singh family cultural tradition, they are in a classic Midland mould that George Eliot would have recognised. It is entirely credible and proper that the Claimant would go easy on the rent until a need for cash arose and that what was actually paid was an approximate figure or even perhaps one that was linked to some other family transaction. This examination, it needs to be remembered, is being conducted only for the purpose of establishing an insurable interest. When the position as put forward by the Claimant is convincing, involves appropriate compliance with tax and accounting requirements and as regards its own letting is evidenced by formal leases it seems extraordinary that insurers should require it to satisfy some examination of its “business model” or show that arrangements are not “fiscally driven”. The landlord says there is a lease and so does the tenant. Rent is paid. The surrounding evidence shows the Claimant acting on the basis described by Mr Singh. 
29.	Occupation-the Rates. The outgoings included the rates. Mr Fern confirmed that in about 1992 the Council had been informed that the Claimant was responsible for the rates, and agreed that from 1991 to 2003 the Claimant had paid about £100,000 in rates in relation to the Boak building.  He said that the Council had also been told that the Claimant was responsible for the rates on 8 Station Street.
30.	From October 2002 the Boak building was exempt from rates because it was an empty industrial building. Mr Fern explained that the Boak building was listed in May 2005 from which point both the empty industrial building exemption, and the listed building exemption applied.  In 2007 the Council, of its own initiative, switched the Boak building from the former to the latter of those exemptions. From 2008 onwards the bills sent by the Council to Western Trading stated: “Exemption - listed building”.   Those bills stated that nothing was payable.  The bills made no reference to the exemption being applicable because the Boak building was empty.  The Claimant asserts that its understanding was that, insofar as the Boak building was unoccupied, then no rates were payable, because it was a listed building. 
31.	Mr Fern agreed that, if at any time a tenant got in touch with the Council and stated that they were responsible for the rates, then the Council would change its records and send the bills to the tenant.  Mr Elkington QC for the Claimant says that it was therefore reasonable for the Claimant to proceed on the basis that any rates which were payable were being paid by its sub-tenants.
32.	8 Station Street was treated as 2 rateable properties- 8 and 8A.  Mr Fern did not produce any documents relating to 8A.  The bills sent to the Claimant from 2005 - 2008 onwards stated that no rates were payable due to an “empty industrial exemption”.  In 2008 the Council changed its records to record that a Mr Vowles was liable for the rates.  From then on the Council issued its bills for both 8 and 8A to Mr Vowles and no bills were sent to the Claimant.  For the years 2009/10 and 2010/11 no rates were payable because 8 Station Street was below the threshold applicable for each of those years.  Mr Vowles failed to pay the rates due for the 2008/09 period, which prompted the Council to write to the Claimant in January 2013.  The Claimant responded by confirming who had been in occupation of both 8 and 8A Station Street during the 2008/09 period, and enclosing copies of the relevant leases for that period. Unsurprisingly, Mr Fern had experience of tenants disowning knowledge of properties when they were actually there.
33.	In his statement Mr Fearn referred to the fact that in April 2012 Units 8 and 8A were given a zero rateable value effective from 1 April 2010.  It is unclear how that came about. The Claimant was apparently aware that in April 2012 Units 8 and 8A had been zero rated.  
34.	The Claimant says that it is understandable that it should have shown no interest in the rates payable because it was apparently not liable for them.  When the properties were unoccupied no rates were payable, and when they were occupied the rates were payable by the tenants.
35.	If, as the Defendant contends, the Claimant claimed to the Court that the Property was let and occupied for a period for which, to avoid paying rates, it was telling the local authority that they were empty the Claimant’s position would be very unattractive. This would be powerful evidence that the claims about letting were wrong. It might also be reasonable to require the Claimant to live with the consequences of what it had claimed to the local authority. The position is not however as simple as the Defendant contends. The Claimant had paid the rates in the past. After 2005 the Claimant had no liability to pay rates on the Boak Building and the picture on reporting is confused.  On Station Street it appears that rates were either due from Mr Vowles, when he was in occupation, or for the later period, not due because of an exemption. There is no evidence about 8A Station Street. The overall picture remains confused. I accept that Mr Singh would not knowingly allow rates to go unpaid or misrepresent the position to the authority but the Claimant’s records about all this are unsatisfactory. They do not however show the double dealing alleged by the Defendant or undermine the evidence as a whole about letting and occupation. In view of Mr Singh’s expressed wish to regularise any shortcomings over the payment of rates and the discretionary nature of declaratory relief I am minded to make it a condition of the Declaration I propose to grant that the Claimant first ensures, to the reasonable satisfaction of the local authority, that all rates that may have fallen due on the Property are paid. Alternatively I will impose some other requirement that achieves the same result.
Occupation-Property Link 
36.	The Defendant asserts that Property Link did not occupy the Property.
37.	Sunny said in evidence that Property Link rented 8 Station Street, and then the Boak building, in order to store quantities of office furniture from sites vacated by various tenants with whom his company had dealings.
38.	Google Earth images for 2006, 2007, 2010 and 2012 show the site being tidied up, occupied and a cherry-picker, which Sunny claims belonged to him in the yard. The Defendant says that this item could belong to anybody. That is correct but I accept the evidence of Sunny and of Mr Gjura backed by probability that it did belong to Sunny.
39.	Mr Jones, the tenant, stated that when he was still in the Boak, Sunny Singh moved into 8 Station Street.  He also stated that the yard was used by the car wash. After Mr Jones moved out of the ground floor of the Boak in May 2010 he went back to collect some items he had left behind.  He noticed that “it was now occupied with office furniture, such as desks, chairs and tables, and other building items.”  That evidence was not challenged.
40.	When Mr Chubb, the surveyor appointed by the Defendant, visited the site on 3rd and 9th June 2011 he had the policy schedule with him, which stated that the occupancy of the premises was: “Furniture Storage, Carwash, Metal Products Storage, Partially Unoccupied”. During his inspection on 9th June, Mr Chubb referred to a checklist, the second item of which was “Occupancy”. Mr Chubb confirmed in evidence that one of the issues he was focusing on was occupancy.  In his report Mr Chubb described the occupancy status of the property as “fair.” 
41.	Mr Chubb. Mr Chubb’s report relates to other issues in this case so I also at this point mention what it said in substance. The property was owned by Mr Singh and was listed and awaiting redevelopment. The ground floor of the Boak building and 8 Station Street were occupied on short leases.  The uses comprised storage and use of the yard as a hand car wash. “On inspection the use of the premises for storage was minimal, with the exception of some building equipment” …“there was little evidence of any intense use of the occupied areas”. The heating, mains electricity, gas and all water had all been disconnected. There was no “fire protection whatsoever” within either of the buildings, and no automatic fire detection system. There was no security alarm connected within the Property. The overall physical protection of the Property was generally good.  All the lower ground floor windows were secured by fixed metal grills and all secondary entrances were secured by metal secure roller shutters that could be individually locked.  The main entrances were all secured. Mr Chubb proposed three risk improvements to be completed by 14th July. There is no issue about those improvements.
42.	In his oral evidence Mr Chubb confirmed that if he had thought the description of occupancy in the policy schedule was wrong, then he would have said so.  He also confirmed that he did not think the property was vacant when he did his survey (but he could see that storage use of the premises was minimal) and that if he had thought the property was vacant he would have described occupancy as “poor” in his survey report. He said that he reached that view having independently appraised the risk, rather than taking what he was told “as gospel.”  Mr Chubb saw construction equipment and pallets, storage in the ground floor, and activity on site.  Some of that is captured in the photographs he took. There is uncertainty over whether Mr Chubb went into the ground floor of the Boak Building which was occupied by Mr Jones and then Property Link.  Mr Singh recalled that he did not go into that part of the ground floor but Mr Chubb thought that he did. After all this time neither recollection of this mundane detail will be reliable. Mr Chubb did not take any photographs of the ground floor or refer to it in detail. 
43.	The Defendant says that some of Mr Chubb’s report is unreliable because it is based on inaccurate information supplied by Mr Singh. Mr Moxon-Browne QC for the Defendant  submits that Mr Chubb was “thoroughly misled”. There was no sign that Mr Chubb, a strikingly conscientious and detached witness, thought he was misled and one would not have expected someone the Defendant described as a “very experienced chartered surveyor appointed by insurers” to be taken in by someone with whom he had got off to a bad start, through Mr Singh’s fault, and whom he had  categorised in his report as a “moral hazard”. This was a routine insurance visit to one of numerous properties owned by Mr Singh which had been insured without difficulty  for many years. There was no reason for Mr Singh to be on guard or not to tell the truth. As I see it Mr Chubb’s report means exactly what it says and is a record of the conclusions of a skilled professional who knew his job.
44.	Mr Gjura confirmed that from 2009 onwards he regularly used the yard to park cars and to finish off valeting.  He also said that shortly after he started using the yard to 8 Station Street (in early 2009) Property Link started using 8 Station Street for storage, and he often saw Sunny Singh there.  Mr Gjura also explained that Sunny Singh moved his cherry picker into the yard and had furniture and “office stuff” put in.  That evidence was not challenged.
45.	Councillor Bird said in his statement that in early 2012 he looked into the Boak building and saw “a number of items of furniture stored in the ground floor of the building.”
46.	Cunningham Lindsey investigated the fire on behalf of insurers and considered the issue of occupancy. Mr Singh told them from the outset (before any concern about occupancy had been raised) that Property Link used the ground floor of both the Boak Building and 8 Station Street for storage of office furniture. The Claimant relies on this consistency.
47.	The Claimant points to the absence of evidence from the Defendant, for example from local residents, about the occupation question. 
48.	The ground floor of the Boak was photographed by what the Defendant, an insurance company, describes with unexpected charity, as an “urban explorer” (ie a trespasser who breaks in not to steal but because he takes an interest in building heritage). The explorer (who was not called as a witness) posted pictures on the Urbex website on 6th July 2010 three months after Property Link is alleged to have gone into occupation.  The Defendant says that these pictures show that the premises were then empty apart from some rubbish and it cannot be that Property Link was renting them for £25,000 p.a.  However Mr Singh, Sunny Singh and Mr Jones confirmed that the photographs were not of the ground floor of the Boak. The fact that the photographs show light streaming in through multi-pane and unimpeded windows appears to confirm that they are not photographs of the ground floor.
49.	It is common ground that the upper floors of the Boak were unoccupied. Mr Sunny Singh’s recollection had particular conviction as he recalled being required to spend much of his school holidays inside the Boak building, and thus inevitably getting to know all of it very well. For obvious reasons I prefer on this point the live testimony of three witnesses who knew the building well to the internet postings of an unidentified trespasser who did not give evidence.  
50.	The Defendant relies on periodic inspections made on behalf of the Council for rating purposes.  However, Mr Fern confirmed that the inspections were external only and accepted that  if the Premises were only used for storage an inspector might well record the unit as being unoccupied.
51.	The Property comprised old buildings with no services used for storage. Its value as storage was enhanced because it was in the town centre and tenants could store items close to their shops and other retail outlets. Storage as an activity is passive and does not generate many signs of life, particularly when there are no services like power and water. One would not expect to see many signs of business activity. It is common ground that much of the Property above the first floor was empty. Visibility from outside into the ground floor was very limited as the photographs show. Mr Jones and Mr Gjura supported the picture given by the Singhs. The live evidence, particularly that of Sunny, about the use of the ground floor is preferable to inference from the pictures taken by the trespasser. The evidence of Mr Chubb is equivocal about the ground floor but is otherwise consistent with the occupation claimed by the Claimant. I reject claims that Mr Chubb was a victim of misrepresentations by Mr Singh. He relied on his own observations and, cautiously and only to a limited extent, on what he was told. 
The Defence of lack of  insurable interest
52.	At this point I have set out sufficient of the evidence to decide the defence of lack of insurable interest.
53.	There has been no disagreement between the parties about the law and I take the following brief summary from Mr Elkingtons’s skeleton argument. (I have also been greatly helped by the discussion of the issue in the judgment of Waller LJ in Feasey-v-Sun Life of Canada 2002 Lloyd’s Rep IR131):
“In the Law of Insurance Contracts, Professor Clarke states as follows at (4-1D):
To make an insurance claim the insured does not have to prove his or her interest. Lack of interest may be raised as a defence by the insurer, but that is a defence that insurers are slow to raise, because it is bad for the image of the industry to take what is widely perceived as a technical defence, and courts are ill disposed to companies that take premium and then cry “no contract”.
The proper approach of the Court when faced with such an argument was set out by Brett MR in Stock v Inglis [1884] 1 QBD 564 as follows (at 571):
“[i]t is the duty of a Court always to lean in favour of an insurable interest, if possible, for it seems to me that after underwriters have received the premium, the objection that there was no insurable interest is often a technical objection, and one which has no real merit, certainly not as between the insured and the insurer”
The circumstances in which an insurable interest exists are described by the authors of Colinvaux as follows (at 4-013):
“[I]t might be said that an insurable interest exists if: the assured has legal or equitable title to the subject matter; or if the assured is in possession of the subject matter; or if the assured is not in possession of the subject matter but may be either responsible for, or suffer loss in the event of, any damage to the subject matter”.”
54.	Professor Clarke also says this at  4-1C:
“A person may have an insurable interest and something to lose even though its extent is hard to quantify.  If the insurer has an interest, the extent of that interest, the amount recoverable from his insurer and that part of the sum which can be retained are related but sometimes different amounts.  However, it should be underlined from the start that a person may insure the property for an amount that exceeds the value of that person’s interest and recover that amount.  In that case, the excess must be held on trust for third parties whose loss it represents.  This is because property insurance is a contract for indemnity.  A person must not recover and keep more than has been lost.  Further, it should be underlined that more than one person may have an insurable interest in the same subject matter; indeed the aggregate value of their interest may exceed the value of the subject matter in itself.”
55.	The Defendant, to some extent, applies to insurable interest the notion of privity of contract to submit that the Claimant cannot recover a loss sustained by Mr Singh. It is therefore useful  to bear in mind the following extract from the judgment of the then Deputy High Court Judge Mr Sumption QC in Lonsdale & Thompson-v-Black Arrow [1993] 3 All ER 648 at 653:
“If the assured has only a limited interest in the property, being, for example, a tenant or reversioner, a trustee, a mortgagee or a bailee, the value of his own interest may have diminished by much less than the value of the property or the cost of its reinstatement. But it does not necessarily follow that if the assured recovers the whole diminution in the value of the property or the whole cost of reinstatement he will be getting more than an indemnity. That must depend on what his legal obligations are as to the use of the insurance proceeds when he has got them. If he is accountable for the proceeds to the owners of the other interests, then he will not be receiving more than an indemnity if the insurer pays the full amount for which the property was insured. This will be so, whether the assured is accountable to the owners of the other interests as a trustee of the proceeds of the insurance or simply on the basis that he owes them a contractual obligation to pay those proceeds over to them or to employ them in reinstatement. None of this means that a party with a limited interest who insures the entire interest in the property is insuring on behalf of the others as well as for himself. All that it means is that his obligations as to the use of the insurance moneys once they have been paid are relevant in determining whether he will recover more than an indemnity by getting the measure of loss provided for in that policy.”

56.	Mr Moxon-Browne puts his case in summary as follows. In non-marine cases, insurable interest merges with the indemnity principle. The Insured must have something to insure and cannot recover an indemnity unless it has suffered some loss. In most cases where the Insured is not the owner of the Insured property, it is easy to infer that the insurance is taken out by the insured as agent for the owner, and/or the insured holds the proceeds of insurance on trust for the owner. In this case, all of Mr Singh’s property insured by the Claimant is (presumably) insured as a source of rental income to which the Claimant is contractually entitled. It is essential to the Claimant’s business model that it and Mr Singh are kept separate, and that the Claimant’s right to receive the rents as the result of a contract with Mr Singh is carefully respected. If the Claimant and Mr Singh are regarded as simple alter egos, the fiscal model fails. Mr Moxon Browne then applies to  the argument his contention that the money paid by the Claimant to Mr Singh (and to Mrs Kaur) was not rent but a contractual consideration for the right to receive a specific rent roll. Since at least 2010, the insured premises were outside this model. The Claimant was not contractually liable for the preservation of the premises, derived no benefit from them, had no prospect of any benefit from them, and hence had no interest in their continuing preservation. The absence of any such interest is the hallmark of a contract of speculation.
57.	Mr Elkington responds as follows. The Claimant was in possession of the Property and was entitled to and did sub-let it on its own behalf, and to take the benefit of any rent received from any sub-tenants. The Claimant was responsible for managing the Property, for carrying out any necessary repairs to the Property, for insuring the Property and for paying all rates due on the Property. Now that the Property has been destroyed, the Claimant is obliged to reinstate it.  Under cross-examination Mr Singh maintained that the Claimant had a responsibility to replace the building.  As he explained, given that the Claimant had received substantial benefits from renting out Mr Singh’s properties, the Claimant could not then walk away from its obligations.
58.	The rationale for the requirement that an insured must have an insurable interest is to preclude the possibility of gambling by the assured.  That rationale has no application in this case.  
59.	Decision. The Claimant is an integral part of the Singh family business and has been so for many years. The framework of the business is lawful and consistent with the practice of similar businesses. The companies and the individuals within the framework pay their taxes. The Claimant pays rent to Mr Singh and, as it has done for years, manages the Property most obviously by dealing with insurance and rates and granting leases to sub tenants. The Claimant must account to Mr Singh for the Property. The Claimant is at the heart of the business. It seems to me obvious that the Claimant has an insurable interest. If it did not no doubt some other entity within the family business would have assumed the role of insured. There is no suggestion that this business has obtained some advantage by procuring the insurance in the name of one company rather than another. The structure does not have to face examination of its underlying fiscal or business model. That aspect is, as I see it, none of the Defendant’s business. 
60.	It has in the past been unusual for insurers to raise questions of insurable interest except in the context of fraud. This is an issue which, judging by the materials generated when taking the risk, the Defendant neither took an interest in (nor alerted the Singhs to the perceived importance of) until the claim came in.  There is nothing in the proposal forms or other correspondence to alert a broker or  potential customer of Munich Re and its subsidiaries that it should consider the issue closely, and perhaps take legal and accountancy advice, before entering into a policy with them.
61.	 The defence of lack of insurable interest fails. 
Misrepresentation
62.	The law. As the underwriting facts are complex I start by summarising briefly the relevant legal principles which are common ground, taking them from the Claimant’s closing submissions. An insurer can avoid a policy for misrepresentation made, in effect, to the insurer during the negotiations and before the contract is made (section 20(1) Marine Insurance Act 1906 (“the Act”)). The burden is on the insurer to prove that a representation was made, that it was false, and that it induced it to enter into the policy.  So with each representation relied upon by the Defendant, the Court must consider (a) was the representation made (b) if so, was it untrue, (c) if so, would the difference between what was represented and what was actually correct be considered material by a prudent underwriter writing the risk in April 2012, and (d) if so, was the Defendant induced to write the risk by any such material misrepresentation? The insurer must prove that the misrepresentation induced the making of the contract. (see MacGillivray at 16-047 and 17-029). The parties  refer also to the judgment of  Flaux J. in Synergy Health (UK) Ltd v CGU [2011] Lloyd’s Rep IR 500 (at paras 185 – 7):
“Even where there has been material non-disclosure or misrepresentation, the insurers will only be entitled to avoid or rescind the contract if they show that the underwriters who wrote the risk, here Mr Smith and Mr Garbutt, were induced to do so by the facts misrepresented or not disclosed. .. Thus, although, as Rix LJ put it in WISE v Grupo Nacional , the test of inducement is not a heavy one, the Court should approach with care and caution the evidence of the underwriters as to whether they were induced…”
63.	As the Defendant points out, where an insured corrects a misrepresentation or discloses a material fact before an insurer makes or renews a contract, the insurer is not entitled to avoid the contract. However the correction has to be fairly made to the insurer, such that the corrected picture is fairly presented to the insurer, and comes to his knowledge.
Were there misrepresentations?
64.	The Defendant says that the Proposal Form misrepresented that:
i)	 the property was in use for commercial purposes. The Claimant responds that it did not represent in the Proposal Form that the Property “was in use for commercial purposes”. The Claimant also says that the Property was used for commercial purposes, and was not unoccupied. I have found that to be correct.
ii)	the property was regularly occupied by tenants for furniture storage, a car wash and storage of metal products. The Claimant responds that it did not so represent and that the Property was regularly occupied and used for storage of furniture and metal products.  Further, the yard behind the Boak building was regularly used by the car wash based at 9 Station Street.  I have already found that alleged representation to be largely true.
iii)	the tenants had their own alarm. The Claimant accepts that the Proposal Form stated that the tenants had their own alarm but relies on the later Survey Report which recorded that that there was no alarm connected within the Property.
iv)	 the insured  rent loss of £50,000 per annum was properly required. The Claimant says it only indicated that it wanted the benefit of insurance for the loss of rent with a sum insured of £50,000, an annual rent reasonably achievable.  In any event, the properties were rented out for £29,500 per annum, and about 20,000 sq ft remained available for rent. (This is as I see it a complete answer.)
v)	(on 28 April 2011 and 30 April 2012) that there had been no change in occupancy since the previous year’s proposal. The Claimant responds that Ms Sheehan confirmed that all that was being represented to her was that there had been no change in occupancy since the proposal was submitted, i.e. none of the parts of the building which had been occupied had become unoccupied, or vice versa.  Mr Clegg, the Defendant’s underwriting expert, agreed that there was no representation that there had been no change in the tenants. The statement was true or at least substantially correct.  The Proposal Form was submitted in July 2010 and there had been no change in the occupancy of the Property since then.  The Property continued to be partially occupied for use as storage and operation of a car wash.
vi)	(through Mr Singh to Mr Chubb on 3 June 2011) that the ground floors were let on short leases for storage and that there was a car wash at the property mostly at weekends. The Claimant accepts that during the survey on 9th June 2011 Mr Singh informed Mr Chubb that the ground floors of the Boak Building and 8 Station Street were let on short leases for the purpose of storage. It says that those statements were true.
65.	The Defendant also says in its pleading that there was non disclosure by the Claimant in not volunteering the truth about:
- the alleged misrepresentations
-the fact that any rental arrangements between Mr Singh and the Claimant were fictions adopted on the advice of accountants
-the fact that he had no immediate plans to develop the Premises because it would be uneconomical to do so in accordance with the planning consents obtained.
66.	The Defendant accepted at the start of the trial that the allegations of non disclosure would stand or fall with those of misrepresentation. So I do not consider this further.
67.	By the time of the trial these allegations had been refined following the disclosures in the pre trial process, as is clear from Mr Moxon Browne’s opening skeleton which he also adopted as his closing submissions on this issue. He submits that the proposal form contained a clear representation that there were three occupational tenancies, relating to furniture storage, car washing and storage of metal products.  These representations were confirmed at each renewal, including the renewal for the period 2012/13 when the fire occurred. Mr Singh did not confirm this information expressly to Mr Chubb on the occasion of the survey.  However he referred to “lets” in the plural, to the car wash facility (which he explained operated “mostly at weekends”) and was “vague” about other uses. Mr Chubb saw some signs of storage, but described this as “minimal”. The Defendant says that it is plain from Mr Chubb’s statement that his perception of the significance of what he saw was coloured by the information he was given. 
68.	The Defendant says that it will have a complete misrepresentation defence if it can demonstrate that the premises were either unoccupied and were not let to Property Link, or that the level of occupancy was significantly less than was represented to Insurers. For reasons that I have given I do not consider that the Defendant can demonstrate that the Property was unoccupied or not let to Property Link but there remains an issue about the level of occupancy.
Misrepresentation-reliance and how the insurance was placed.
69.	As the Claimant submits that there is no evidence that the Defendant relied on any of the alleged misrepresentations when writing the risk, I next summarise the convoluted arrangements by which the insurance was placed. There is a very detailed and helpful description of these events in the Claimant’s closing submissions. The factual parts are not disputed so I will in this judgment simply highlight certain features.
70.	The Claimant arranged insurance for the 2010 / 11 year for the Boak building and 8 Station Street through its broker, Alan Boswell Insurance Brokers Ltd. On 22nd April 2010 Alan Boswell sought a property owner’s quote from Kay International Plc, an underwriting agency and thus not itself an insurer.  In 2010 Kay had a binder with Catlin, not with the Defendant. An indicative quotation was given “subject to full details of the tenants on the ground floor”. Without receiving these details Kay International agreed to reduce the premium and that quote was accepted.  Kay required the Claimant to complete a proposal form, which was subsequently completed and returned.  Ms Sheehan’s evidence was that it was not her role to look at proposals if a policy was written subject to proposal, and that the proposal was not brought to her attention.  She described the passages in her witness statement (which incorrectly stated that she considered the proposal) as “probably a bit misleading.”  
71.	In October 2010 Kay International entered into a coverholder agreement with JRP Underwriting Limited.  On 7th March 2011, prior to the expiry of the 2010/11 Policy, Kay informed Alan Boswell that it had a new partner, the Defendant and that there would be changes in the policy wording at renewal. The quote for the 2011/12 year stated, under the heading “Warranties” that: “Cover is suspended if any part of the building is unoccupied for a period exceeding 30 days.”  On 28th April, Alan Boswell spoke to Kay International about the proposed warranty.  Ms Sheehan explained that: 
“this only applies going forward if any other unit becomes unoccupied cover for that unit is suspended unless they are told of the unoccupancy.”
72.	Alan Boswell passed this on to Mrs Kaur by e-mail:
“they have explained that they accept that 60% of the building is currently unoccupied and cover applies in full and survey will be carried out shortly in which they will note the occupancy.  However, if any more units subsequently become unoccupied, we must tell insurers otherwise cover in respect of those units will be suspended.”
73.	Alan Boswell sent an e-mail to Ms Sheehan stating that “there has been no change in occupancy since the proposal was submitted last year”. In her evidence Ms Sheehan confirmed that what she understood from this was that none of the units which were occupied at the start of the 2010/11 policy had become unoccupied. The Claimant says that that confirmation was true, since the ground floor of the Boak building and 8 Station Street continued to be occupied, and the yard behind the Boak building continued to be used by the car wash.
74.	The terms were different to those that applied to the 2010/11 policy and there was a new insurer. The Schedule to the Policy recorded the Occupancy of the Premises as follows: “Furniture Storage, Carwash, Metal Products Storage, Partially Unoccupied.” The Policy contained endorsements including a Survey Clause by which cover was subject to receipt by Underwriters of a satisfactory survey report.
75.	Kay instructed Simply Risk Control to carry out a survey.  The survey was carried out by Mr Chubb on 9th June, who met Mr Singh at the Property.  I referred earlier to the substance of the report.
76.	On 17th June Mr Chubb submitted his survey and photographic reports and his proposed risk improvements to Kay and JRP. On 21st June JRP Underwriting sent an e-mail to Sarah Shakeri of Kay International stating as follows:
“Sarah, the risk doesn’t survey too well, and will only be acceptable upon completion of the risk improvements within the timescales specified.  RI 1 forms part of the unoccupancy conditions anyway.”
77.	On 12th July Kay International sent an e-mail to the broker stating “Underwriters will only accept this risk subject to confirmation that all Risk Improvements have been complied with by 14th July 2011”.The Defendant does not contend that the risk improvements were not complied with.
78.	On 28th March 2012 Kay wrote to Alan Boswell inviting renewal of the Policy, subject to an update on occupancy, the Schedule on this point being unchanged. Kay confirmed that no further survey was required. On 30th April Alan Boswell confirmed that there had been no change in occupancy from that advised in the previous year, and accepted the renewal terms.  The Claimant says that that confirmation was again true, because the ground floor of the Boak building and 8 Station Street continued to be occupied, and the yard behind the Boak building to be used by the car wash. Thus the Claimant obtained a second year of insurance cover with the Defendant for the period 30th April 2012 – 29th April 2013 with the policy schedule again recording the occupancy: “Furniture Storage, Carwash, Metal Products Storage, Partially Unoccupied”.
79.	The materiality evidence for the Claimant came from Mr Lye, who has very extensive underwriting experience having worked in that area mainly for what is now Aviva. He was an excellent expert witness. Mr Clegg for the Defendant also has very extensive insurance experience although primarily in claims. He too was an excellent witness. The differences between the experts were not significant and Mr Elkington made his submissions on this subject relying mainly on what Mr Clegg, the Defendant’s expert said in cross examination. 
80.	Mr Clegg described the risk as “a substandard risk in the first instance, for which an appropriate premium has been charged.”  Mr Clegg considered that (apart from the issue of the alarm) Mr Chubb’s survey did not reveal any material discrepancies with the proposal form-“the survey report was consistent with what a prudent underwriter would have thought of the risk, having read the proposal form, save for the issue of the alarm.”  It did not conflict “with what a prudent underwriter would have understood about the risk, having read the proposal.” 
81.	Mr Elkington submits that the following issues should therefore have come as no surprise to, and should have been anticipated by, a prudent underwriter who underwrote the risk on the basis of the proposal form:
i)	The buildings had no fire protection whatsoever.
ii)	The property was owned by Mr Singh.
iii)	On occasion the storage at the property was minimal.
iv)	The property had no heating, no electrics, no sanitation, and no taps. 
v)	The car wash was a hand car wash where the water was obtained from somewhere else.
82.	The underwriting experts agreed that the representation that the premises were regularly occupied for the purposes of furniture storage, a car wash and for the storage of metal products was material, because it indicated a measure of human activity at the premises. If there were in fact no tenants in occupation, there was a material misrepresentation by the Claimant.
83.	Until the hearing there was disagreement about whether the fact that there may have been fewer tenants than were represented would be material. Mr Clegg (but not Mr Lye) indicated initially that such a reduction would be material as this would mean that the level of activity would be less. The Defendant relies on that, but it was clear from Mr Clegg’s cross examination that on reflection, once he had considered the implications of the lettings being limited to storage, his view was much closer to that of Mr Lye.
84.	Mr Clegg’s view was that a prudent underwriter could not infer from the proposal that there would be people coming and going on a daily basis. The tenants referred to might be sole traders using the buildings for long term storage, in which case there might be only a limited number of persons or visits. So far as the number of tenants was concerned, Mr Clegg agreed that the material issue was the level of activity and occupation.  He also said that if the trade or occupation is the same “the identity of the tenant does not matter.” The Claimant says that it follows that, provided there was no difference in the level or nature of activity and occupation, it is immaterial whether there were one, two or three tenants.
85.	Mr Clegg’s evidence was that a prudent underwriter would rely on the contents of the survey report rather than the contents of an earlier proposal.
86.	As a result I conclude that the aspect of misrepresentation on which Mr Moxon Browne places his most emphasis, the claim that there were three tenants, was not material in the legal sense. There were not three separate tenants but only two but for the reasons accepted by the experts this was not material.
Misrepresentation-Reliance and the Proposal Form 
87.	Mr Elkington says that the Defendant was not entitled to avoid the Policy by reason of any false representation in the Proposal Form. The Proposal Form was submitted in relation to the 2010/11 Policy, which was not underwritten by the Defendant. Any representation made by the Claimant in the Proposal Form was not made to the Defendant during the negotiations for the 2012/13 Policy.  Therefore, pursuant to section 20(1) of the Marine Insurance Act 1906, the Defendant is not entitled to rely on any such misrepresentation to avoid the 2012/13 Policy. Further the Claimant did not confirm the accuracy of the Proposal Form prior to the inception of either the 2011/12 Policy or the 2012/13 Policy. The Claimant says that the Proposal Form was scarcely relied on in the first place, it was not addressed to this insurer and was in effect superseded in its relevant parts by the survey report and the decision to write the risk notwithstanding what it disclosed. That submission appears to me to be correct given the undisputed events by which the Defendant came on risk and what emerges from the evidence of Ms Sheehan.
Misrepresentation- Inducement
88.	Ms Sheehan was the director of underwriting at Kay. Unfortunately her evidence in chief did not disclose that she no longer works for Kay but is now doing temporary banking work in Hampshire. This fact should have been disclosed in a supplemental witness statement or at least when she started giving evidence.
89.	Mr Clegg considered that Ms Sheehan did not act as a prudent underwriter would have done in a number of respects. For example having written the 2010/11 policy “subject to a satisfactory proposal” she did not review the proposal when it was subsequently submitted. She was not influenced by the reference in the proposal to “tenants have own alarm” when a prudent underwriter would have been. Having expressly written the 2010/11 policy “subject to survey” she never commissioned a survey. Her evidence was that the “risk as surveyed was not as expected”, whereas Mr Clegg’s view was that it surveyed as a reasonably prudent underwriter should have expected. Having been informed by the survey report about the proposed development, she failed at renewal in 2012 to enquire about the state of the development plans. In addition to this Mr Elkington points to Ms Sheehan having in 2010 given an indication “subject to full details of the tenants on ground floor” without then having obtained those before going on risk. He submits that as Ms Sheehan acted imprudently in so many respects, the Court cannot safely assume that she would (in different circumstances) have proceeded as a prudent underwriter would have done.
90.	Ms Sheehan accepted that the terms offered in 2011/12 could be offered only with JRP’s approval and that JRP did not see the proposal form. 
91.	When the survey report was received Ms Sheehan formed the view that the risk had not surveyed as expected, because the state of repair was worse than she expected, and the occupancy was not as frequent as she had expected. She considered the risk afresh and decided to remain on cover on the existing terms, subject to the requirement that the risk improvements were carried out. Ms Sheehan confirmed that, given the concurrence of JRP, there was no reason for her to “rock the boat”. The Claimant points out that Mr Clegg’s view was that this was “an entirely reasonable and prudent approach”. If the risk improvements were complied with then: “the building would at that point in time have been corrected to a state that was acceptable for that type of risk.”
92.	For the 2012/13 year the quoted premium was calculated by applying the same rates as had applied in 2011/12 against the sum insured (uplifted for inflation).  The 2012/13 policy also contained a survey clause, which Ms Sheehan explained was meant to act as a reminder to the insured to comply with the survey requirements from the previous year.  She confirmed that, as long as those risk improvements were complied with, she was content that the insurer was on risk.
93.	Evidence about inducement is contained in paragraphs 60 – 63 of Ms Sheehan’s statement but it did not survive cross examination.  Ms Sheehan frankly stated: “I don’t remember exactly what I was thinking when I did this risk”.  She said that her evidence of what decision making she might have carried out in different circumstances was very hypothetical. She considered about 2,500 risks a year when she was with Kay. 
94.	The Defence alleges at 19(7) that the Defendant was induced to write the cover by the alleged misrepresentations. This claim was unsupported by Ms Sheehan, the Defendant’s only witness on inducement. She said that she had no involvement in the defence, had never seen it and disassociated herself from key assertions within it.
Q “But you would disassociate yourself with the suggestion that you were induced to write this risk by any reference to ...
A	Yes, I would.
Q	You would disassociate yourself from the suggestion that you were induced to write this risk by what was in the proposal form because you had not seen it when the risk was first written ---
A	I hadn’t seen it in 2010.  It was used when I made my assessment of renewal in 2011.
Q	But by 2012 you had got the survey, had you not?
A	Sorry, for 2012 it was the survey and the proposal form and the confirmation from the broker of whatever we asked for at that point.”
95.	The statement of truth on the Defence was signed by “Nicholas Howells, Claims Manager.”  Ms Sheehan did not know who this was and had never spoken to him. The Defendant prepared a draft statement in the name of Ms Sheehan which contained crucial passages relating to her reliance on the proposal form which she accepted were “a bit misleading.” It must follow that the experts’ comments on those parts of Ms Sheehan’s statement are of limited value.
96.	 Ms Sheehan may have had shortcomings as an underwriter on this transaction but she was clearly a completely honest and candid witness.  With the wisdom of hindsight it seems that both she and the Defendant’s solicitors should have spent more time on completing and testing her statement. The result is that I do not place any reliance on the paragraphs in her statement which are not merely factual as it is clear that they did not receive the careful attention they should have done. Moreover most of what she does say on the question of inducement is refuted in detail and with justification in the Claimant’s closing submissions. 
97.	Ms Sheehan’s evidence is in any event of limited assistance as it was JRP which had the last and the deciding word. She accepted that JRP was happy to write the risk subject to the risk improvements being complied with, and that she would have required JRP’s approval to do anything other than that. There was no evidence from JRP.
98.	 In Paragraph 63 Ms Sheehan sets out what appears to be her main concern with the risk, and states that: “Had I known the extent to which Western Trading had failed to comply with the Risk Improvement requirements, I probably would have cancelled the policy on the basis of the Survey Warranty, or declined the renewal.”  Ms Sheehan confirmed that she did not know that it forms no part of the Defendant’s case that the risk improvements were not complied with.
99.	There is no evidence that Ms Sheehan or JRP, which was the ultimate decider, relied on any of the alleged misrepresentations when writing the risk. The survey was in truth the only matter relied on.
100.	Decision. The defence of misrepresentation fails because to the limited extent to which anything was misrepresented it was neither material nor relied on.
Breach of warranty and the Proposal Form 
101.	The Defendant pleads that the Proposal Form was the basis of the 2012/13 Policy, with the result that, to the extent that the Proposal Form contained misstatements, the Claimant was thereby in breach of warranty (Defence para 21(1)). Relevant facts warranted were that the premises were “regularly occupied”, that there were three tenants, and that the tenants’ trades were, respectively:
“1. Storage of furniture
 2.	 Car wash
 3.	 Storage of metal products”.
102.	The Defendant says that these statements were untrue, there were no tenants at all, and the premises were unoccupied.  There was thus a breach of warranty, as a result of which the policy was voidable.  It is not necessary to prove that the breaches were material to the risk, although on the Defendant’s case they were.
103.	The 2012-13 cover was subject to a number of other warranties, including an unoccupancy warranty, providing “It is a condition precedent to Underwriters’ liability that Underwriters are informed if the premises will be partially or fully unoccupied for a period of more than 30 days …”. The Defendant accepts that if it is wrong and there was a tenancy in favour of Property Link, there would be no breach. As that is the case this aspect of the defence falls away. 
104.	The Claimant responds essentially that there was no breach because the Proposal Form was not the basis of the Policy. The Form was submitted to different insurers, in a different policy year, and in relation to a different policy. Further, the declaration in the Proposal Form was only that, to the best of the knowledge and belief of the signatory, the information provided to the answers in the Proposal Form was true.  It was not a declaration that the information provided in the Proposal Form was true. The Claimant also invokes estoppel and waiver to claim that it would escape any liability in respect of the burglar alarm because the Defendant was well aware of the actual position after June 2011 when it received Mr Chubb’s survey report.
105.	The Proposal Form correctly recorded the tenants’ trades but was wrong to state that there were three tenants. The short answer to the claim of breach of warranty is that the Proposal Form did not form the basis for the policy under which the claim is brought for the reasons I have already given. There was no breach of warranty.
Claim for relief-factual background
106.	 Before turning to the question of relief it is necessary to set out some of the planning and development history so that the competing submissions can be understood.
107.	In 2007 the Claimant and Mr Parkes looked into the possibility of developing Station Street into a residential development.  By June 2007 they had appointed Turner Woolford Sharp Architects Ltd to act on their joint behalf.    The Claimant and Mr Parkes paid about £100,000 on a 50/50 basis.
108.	Various consultants were appointed.  One of these was a firm of structural engineers (Latter Ramsay Consultants) who prepared a due diligence report.  In their report they stated:
“Boak Mill: Preliminary structural assessment.
The basic structural integrity of the existing Mill appears satisfactory and an assessment of the existing floor loading capacity indicates that without strengthening, the existing timber joisted floors are capable of residential loadings, including new partitions and sound proofing.
It can be confirmed that the building is capable of the proposed change of use, without major demolitions or structural alteration.”
109.	Various meetings with the Walsall Regeneration Company and the Walsall Metropolitan Borough Council were held.  At those meetings the importance of the Boak building to the proposed scheme was emphasised.  For example, at a meeting in October 2007 the architects stated:
“The conversion of the Boak – this grade II listed building can become the focal point / landmark of the site, special attention to be paid in terms of scale / mass of any new buildings that adjoin the Boak.”
110.	Mr Singh was advised by a firm of quantity surveyors, Janes Lathwood, in November 2008 that an attempt to convert the building and then sell the flats would probably incur a loss of £2.2m.  The main problem was that the requirement to retain the listed Boak structure severely limited the number of flats which such a conversion would yield. Janes Lathwood’s advice was endorsed by an independent report to Walsall Council from their District Valuer Mr Solomon, dated 22nd December 2008.  This Report was copied to the Claimant.
111.	(The Claimant’s expert valuer Mr Taylor suggested that Mr Solomon may have colluded with Walsall Council to produce an artificially pessimistic conclusion. The poor judgment behind the making of this irresponsible suggestion, based on no evidence, made me cautious about accepting other aspects of his evidence.)
112.	The planning process took some time. In January 2009 listed building consent was granted for the conversion of the Boak building into 31 residential units.  However, by that time the housing market in Walsall had stalled and a decision was made to mothball the development of the Boak building until the market improved.
113.	Mr Singh told Mr Chubb that he intended to commence development of the building in the near future.  However, no contractors had been appointed and “it is uncertain in the current economic climate whether redevelopment of the building in its location is viable”. In evidence Mr Singh confirmed that the Boak building was insured on a reinstatement basis because, in the event that it was damaged or destroyed, he would want to reinstate.  He also confirmed that his intention has always been that the Claimant will develop the Boak building. I refer below to how I see the Claimant’s expressed intention to reinstate but do so briefly because, if a Declaration is granted, the issue does not matter. Similarly there is late but extensive evidence about the Claimant’s experience of development by itself, or the lack of it and, for the same reasons I find it unnecessary to make a finding on the issue. Either the Claimant can and will reinstate or it will not.
114.	The reasons why the intention to reinstate and develop the Boak building is said to be reasonable are these. First Mr Singh has an historic link with the building.  He has owned it for 33 years, and his children have grown up in it. That of itself is a convincing reason. Secondly the Boak building is said to represent a profitable development opportunity for Western Trading, which can then either sell the flats or rent them out. Mr Singh anticipates that if the Boak building were developed into 31 apartments, then a return of about £300,000 pa would be generated.  Mr Clarke, the Defendant’s valuation expert, did not quibble with that assessment although he had not had an opportunity to study it.  He described it as “probably not an unreasonable figure.” These economic considerations are more difficult to evaluate than the personal ones but do not undermine the evidence that the Claimant’s intentions are genuine.
115.	The Defendant contends that given the advice of Mr Taylor, the Claimant’s own expert, its suggested plan to reinstate the Boak using modern materials and architecture appears commercially absurd.  It would effectively blight the site. Mr Moxon Browne points out that Mr Singh has not yet discussed his alleged intentions with Walsall’s planning officers, and it appears improbable that such a scheme could proceed, even if Mr Singh’s expressed intention was genuine (which the Defendant does not accept is the case).
116.	The Defendant submits that it is much more probable that Mr Singh will now dispose of the site, probably by way of letting it on a long lease to a design-and-build developer, with a view to whatever seems the most profitable way to exploit its potential (along with adjacent land, also owned by Mr Singh, where demolition of existing buildings is about to take place).
117.	This proposal has been raised with Walsall Council by Mr Sunny Singh on his father’s behalf, albeit not pursued pending the result of this litigation. His e-mail to Walsall Council dated 25th January 2013 certainly suggests a future for the site closer to the Defendant’s perception than that of the Claimant.
Claim for relief –expert evidence 
118.	There was extensive expert evidence on the cost and economics of redeveloping the site both before and after the fire. I consider it only briefly because, as I see the case, it is largely irrelevant. 
119.	 Mr Clarke considered that the pre-fire scheme for 31 flats would not have been economically viable but that a post-fire scheme for 48 flats would be. As a result a pre-fire site worth about £75,000 is now worth about £500,000. Mr Taylor valued the site pre-fire at £554,420. He valued the site with a 41 flat scheme post–fire at between £543,000 and £623,000. Costings for both pre and post fire schemes were prepared and examined by the quantity surveyor experts Mr Taft and Mr Janes (except for the costings for the 41 flat post-fire scheme which Mr Taylor estimated). The differences between them seemed to me to be within the range of legitimate professional disagreement in hypothetical situations.
120.	Given the assumptions made by the Defendant I accept their expert evidence as to value and prefer the assessment of Mr Clarke to that of Mr Taylor. I do not accept Mr Taylor’s evidence that today the cleared site has no potential and that any attempt to develop it would result in a substantial loss. Indeed that would appear to cast doubt on the feasibility of the Claimant’s plans. That opinion assumes, unrealistically in the light of what Councillor Bird said, what the Council have indicated and of what common sense suggests that the only form of development which would be permitted on the site would be the reinstatement of a structure the same size and in the same form as what was there before.  I do not doubt the view expressed in the Supplementary Report of Mr Clarke that the site now has valuable potential.
121.	 I generally preferred Mr Clarke’s evidence to that of Mr Taylor. His considerable experience as an expert was evident. His views were carefully expressed and based on evidence. He seemed to me to be objective and fair minded and did not hesitate when appropriate to accept a proposition that assisted the Claimant’s case. He had confidence without a trace of arrogance. In contrast Mr Taylor adopted a traditional approach to valuation. A local valuer on the spot who knows the immediate area very well may often have greater expertise than an expert who is more experienced and has up to date research methods but a less down to earth feel for the immediate vicinity. That was not the case here and I have mentioned a doubt I had about the quality of Mr Taylor’s judgment arising not from an absence of integrity but from inexperience of this type of litigation. 
122.	There are however issues about the assumptions made by the Defendant.
123.	A practical as opposed to conceptual reason why market value of the site might be irrelevant is that the Property was, and is, not for sale. The Claimant proposes to develop it into flats, perhaps for renting out. The experts did not have a full opportunity to evaluate that proposed development although Mr Clarke made some helpful and objective comments.
124.	The Boak building is intended by the Claimant to be the focal point of the development of Station Street both on the Property and on other land Mr Singh owns. The value of the Boak building to the Claimant is said to go beyond the value of the Property.
125.	The Defendant’s valuations of 1 – 8 Station Street are said to be flawed in that they assume that any developer who buys the site will be able to persuade someone to sell them land locally to provide car parking spaces, at a cost which does not exceed the price at which the developer can sell those car parking spaces to purchasers of flats in the Boak building.  
126.	The Defendant’s residual valuations are a calculation of what a third party developer would pay for 1 – 8 Station Street.  Mr Clarke had not been asked to consider what 1 – 8 Station Street would be worth to someone who already owned it and intended to develop it (either before or after the fire). Mr Clarke described those as “two very separate exercises.”
Claim for relief-no reinstatement yet carried out.
127.	The right to reinstate damaged property under the policy is dependent upon actual reinstatement-see 5c) of the policy Special Provisions. 5a) requires reinstatement to be carried out “with reasonable despatch otherwise no payment”. The Defendant points out that Insurance reinstatement clauses are almost invariably made subject to actual expenditure by the insured on prompt reinstatement.  The Defendant says that as the Claimant has failed to reinstate with reasonable despatch that is an end of the matter.
128.	The Claimant says that where (as here) the insurer has wrongly denied liability and repudiated the Policy, it cannot rely on the proviso to the reinstatement clause that the costs of reinstatement will only be paid once they have been incurred and there cannot have been an absence of “reasonable despatch”.  He refers to the view of the authors of MacGillivray who state as follows (at 20-022):
“[I]t is rather hard that an insured, who needs the money with which to repair his property, should be expected to incur the cost of reinstatement from his own funds. This is particularly so if the insurers in breach of contract deny liability under the policy or assert that the insured should be compensated on a basis other than reinstatement. It is therefore submitted that the requirement that the insured should commence and carry out the work of reinstatement with reasonable dispatch should only operate if the insurers, in accordance with their contractual obligations, accept that reinstatement is the appropriate measure of indemnity”.

129.	Decision. I respectfully agree with MacGillivray. The requirement on the   assured to reinstate cannot be read to arise until the insurer has confirmed that it will indemnify. Neither will there be an absence of reasonable despatch before the insurer’s obligation is accepted or established. That seems obvious where the assured cannot afford to pay for the reinstatement without the benefit of the indemnity which the insurer withholds.  As I see it, nowadays the same considerations apply even to a successful business. The assured cannot reasonably be expected to take a decision about whether to spend what may be millions of pounds until it knows the fundamental financial ramifications of committing to reinstate. Even a profitable business will reasonably defer a decision whether or not to reinstate until it knows whether the  funding will come from insurers or will have to be diverted from elsewhere to the detriment of some other business activity. So I prefer the Claimant’s approach.
Claim for relief- Declaration
130.	The Claimant seeks a declaration “that it is entitled to be indemnified by the Defendant under the terms of the policy in respect of the losses it has suffered (and is continuing to suffer) as a result of the fire, up to the limits of indemnity contained within the Policy”. It is common ground that the limit is £2,121,800. Only if that remedy is unavailable does the Claimant seek damages, the cost of reinstatement. There is also a claim for damages for loss of rent which I deal with separately. It is striking that, but for the fact that the Defendant claims that a declaration is unavailable, it would be unnecessary to consider whether or not the Claimant genuinely intends to reinstate.  If the Claimant does not reinstate then the Defendant is spared the consequences of the declaration. On this point one might have expected the Defendant to have, in its own interests, taken a different position.
131.	The reinstatement clause conferred a benefit on the insured, the right to be indemnified for the cost of reinstating the lost or damaged property:
“4) 	It is hereby agreed that in the event of the property insured under item 1 of this Section of the Certificate being lost, destroyed or damaged by any peril insured hereunder the basis upon which the amount payable under each of the said Items of the Certificate is to be calculated shall be the reinstatement of the property lost, destroyed or damaged subject to the following special provisions and subject also to the terms and conditions of the Certificate except in so far as the same may be varied.  For the purpose of the insurance under this Memorandum ‘reinstatement’ shall mean:
a)  The carrying out of the following work, namely,
i)  Where property is lost or destroyed, the building of the property, if a building… in a condition equal to but not better or more extensive than its condition when new.
5)	a)  The work of reinstatement (which may be carried out upon another site and in any matter suitable to the requirements of the Assured subject to the liability of the Underwriters not being thereby increased)…
c)  No payment beyond the amount which would have been payable under the Policy if this memorandum had not been incorporated therein shall be made until the cost of reinstatement shall have been actually incurred.”

132.	The clause contrasts with familiar provisions in insurance policies which grant the insurer the option to either (i) pay the insured the value of the property lost or damaged, or (ii) reinstate the property.  Such a clause was present in (for example) Leppard v Excess Insurance [1979] 1 WLR 512; McLean v Ecclesiastical Insurance [1986] 2 Lloyds LR 417 and Pleasurama v Sun Alliance [1979] 1 Lloyd’s LR 389. As I see it this difference undermines the force of the submissions made by Mr Moxon Browne about Leppard and McLean which I mention below.
133.	Declaration- Defendant’s submissions.  Mr Moxon Browne says that Insurers have avoided the policy.  If that was a breach of contract, the Claimant’s remedy is in damages, calculated by reference to the amount of money the Claimant might have received if the policy had responded. It makes no difference to the remedy whether the breach of contract is wrongful avoidance (sometimes called repudiation) or a wrongful refusal to provide an indemnity under a valid policy. He says that this principle was established in Leppard v. Excess Insurance Co Ltd (1979) 2 Ll Rep 91, a decision of the Court of Appeal which, he says, remains the leading authority on the appropriate remedy in cases where the insured property is held for sale or investment purposes. He cites Megaw LJ:
“The learned (trial) Judge (held) “this is an action for specific performance, for a declaration that the plaintiff is entitled to the full reinstatement cost of actual reinstatement …” … I respectfully disagree with the learned Judge’s analysis.  This is a claim for damages for breach of contract”.

134.	At this point I observe first that “repudiation” would be irrelevant absent an acceptance and the concept does not seem relevant to the discussion. Secondly the citation is not apt. The case involved a clause giving the insurer not the insured the option to indemnify by payment, reinstatement and repair. The insurer had no enforceable obligation to reinstate and the action was not even stated to be for specific performance. The judge was obviously wrong. It was a claim for the “full value”, the meaning of which expression was the central issue. The judgment does not at any point suggest that a declaration is generally not available in these cases. 
135.	Mr Elkington makes additional points about this case. There was nothing in the wording of the policy which provided that the loss to be indemnified was the cost of reinstatement. The insurer elected not to reinstate, so the question was what loss the insured had suffered. The insured had never occupied the property, and at the time of the loss, the property was on the market for sale, and the insured was ready and willing to sell it for £4,500. The insured’s loss was calculated by reference to the price at which he was willing to sell the property.
136.	The Defendant says that even if a declaration were technically available here, it would be inappropriate for several reasons.
137.	First Mr Singh has shown no signs of making reinstatement.  The evidence indicates that all along he (or Mr Sunny Singh) was planning to dispose of the site and adjacent land, and in June 2007 engaged selling agents to tender for giving marketing advice and agency services so as to achieve this. Neither Mr Singh nor Sunny have any experience of residential development.  They have however had some experience of selling long leases of their property to parties prepared to enter into building obligations, and it seems likely that this is what will now happen. Even if Mr Singh were to reinstate the premises, there is no evidence that this would benefit the Claimant, or indeed affect its position in any way.
138.	 As I have pointed out the grant of a declaration would remove from the Defendant the concern about whether there was a genuine intention to reinstate or indeed that reinstatement would take place. The issue is no reason not to grant a declaration.
139.	Secondly the Defendant says that there is no room for a declaration to the effect that the Claimant might hereafter become entitled to damages if he follows a course of action which might (or might not) fairly be described as reinstatement. There are difficulties inherent in construing what reinstatement means in the context of a non-standard building. Counsel refers to three differing views of the Court of Appeal Judges in Beaumont v Humberts [1990] 49 EG 46. Staughton LJ said that reinstatement does not mean as nearly as practicable an exact copy, but rather a sensible reconstruction in the same style and general shape. For Dillon LJ reinstatement meant reinstatement of what was there before the fire with appropriate economies in the use of materials. Taylor LJ recognised the difference in the approaches of Staughton LJ and Dillon LJ, and favoured a middle ground. The fact that judges may disagree about the approach in one context does not mean that the matter cannot be resolved in another. Indeed Mr Moxon Browne at the same time submits that the concept of reinstatement is accurately reflected by Mr Janes’ costings for the reinstatement of the Boak in either heritage materials or their modern equivalents and that for the purposes of this case, no further refinement of the definition of the word, or consideration of the cases, is necessary. This illustrates that in the real world many of the alleged practical difficulties invariably invoked by parties opposing the grant of declaratory relief fall away.
140.	Thirdly the Defendant says that there is also uncertainty about who might carry out any proposed reinstatement, and for whose benefit, other than Mr Singh.It says that it  is wrong in principle to make a declaration relating to rights in an hypothetical, uncertain or undefined future event (recently described by the Court of Appeal as “the legal equivalent of shouting in an empty room”- see Pumfrey LJ in Nokia Corpn v. Interdigital Technology Corp (2007) EWHC 3077). 
141.	This is another way of putting the issue of practical feasibility. There is nothing hypothetical or uncertain or undefined in devising a reinstatement plan, with the assistance of professional experts, and applying the approach in Tonkin  to which I refer next. Issues about the detail can be resolved by agreement, some informal or formal ADR or if necessary by the court. Further the grant of a declaration will remove the Defendant’s concern about the Claimant’s intentions.
142.	Mr Elkington cites the consideration of the rights conferred on an insured by a clause very similar to the one in this case by the then HHJ Peter Coulson QC in Tonkin v UK Insurance Ltd [2006] EWHC 1120 (TCC).  The Judge identified that an insured with the benefit of such a reinstatement clause has three options (see paragraphs 153 – 160):
i)	First, to reinstate the property to a lay-out and condition that, as closely as possible, mirrors what was there before.
ii)	Second, to reinstate the building, but, at the same time, to take advantage of its destruction to make certain minor changes so as to improve what was there before.
iii)	Third, so long as it makes it clear to the insurer what it is doing, to make significant changes to improve what was there before.
143.	He submits that whichever of those options is pursued, the insurer’s liability is limited to the cost of reinstating the original property (up to the sum insured).  In this case, there is no dispute that the cost of reinstating the Boak building is more than the sum insured.  Therefore, whichever of the three options set out above the Claimant ultimately chooses, it will be entitled to recover from the Defendant no more (or less) than the sum insured (£2,121,800).
144.	 As I see it there is every reason to accept the statements of principle about implementation of reinstatement set out by a very experienced specialist judge in the field of construction. Mr Moxon Browne has not sought to question the judge’s approach or reasoning.
145.	Genuine intention to reinstate. Mr Moxon Browne cited Reynolds v Phoenix [1978] 2 Lloyd’s Rep 440, a decision of  Forbes J which he says shows that the Claimant must  prove a genuine intention to reinstate, which is not mere eccentricity. He says that Mr Singh’s pleaded intention to reinstate the Boak using modern materials/architecture is eccentric because such a building would have no aesthetic or sentimental value and would serve no commercial purpose. The case is cited by Mr Elkington for another purpose. In Reynolds the plaintiffs purchased some old maltings for £16,000.  The plaintiffs purchased insurance with a sum insured of £550,000, representing the cost of reinstating the maltings.  The value of a modern equivalent building was £55,000.  Following a loss the insurer argued that (i) the plaintiffs were only entitled to recover their loss, which was £5,000, (ii) the loss should be measured by the value of the building (being its market value or the cost of a modern replacement), and (iii) no commercial man in his senses would spend £250,000 in rebuilding an obsolete building if he could buy a modern one for a fraction of the price. The policy in Reynolds did not (as here) entitle the insured to the cost of reinstating.  Therefore the Court considered the extent of the indemnity to which the plaintiff was entitled.  The Judge rejected the argument that the relevant test was what the insured using their own money would have done.  The relevant test was what the insured would do if given the insurance monies. On the facts the judge was satisfied that the plaintiff’s wish to reinstate was genuine and not eccentric.
146.	In this case the Claimant has a contractual right to reinstatement. I do not see that “eccentricity” comes into it.  If it did there would, for the reasons Mr Elkington gives, be nothing eccentric about reinstating a building with which Mr Singh’s family has had long and close connections. It may even be that Mr Singh’s displeasure with the attitude adopted by insurers has strengthened that intention.  The wish to reinstate must be genuine. The test of that is what the Claimant does if and when it has the benefit of a declaration.
147.	Mr Moxon Browne also relies on McClean Enterprises Limited v Ecclesiastical Insurance [1986] 2 Lloyd’s Rep 416.  Mr Moxon Browne is not correct to suggest that Staughton J was considering a reinstatement clause identical to that in the present case. At 426 the judge found that the plaintiffs could not recover on a reinstatement basis because they could not prove an intention to reinstate the property if they had had the resources to do so or if the insurers had paid the claim promptly. This appears to be the application of an established principle to particular facts, albeit by a very distinguished judge in this field.
Declaration –Decision. 
148.	It is very common for declarations to be granted in insurance cases. Mr Elkington refers to liability insurance cases, when an insurer purports to avoid a policy before any judgment has been entered against the insured in favour of a third party. He points to confirmation of this in  MacGillivray at 10-100 and Colinvaux at 9-053. Every day experience in this court also confirms that. For example insurers often start actions for a declaration of non liability. 
149.	The Claimant has an express right to be indemnified for reinstating the Property. That right is different from that on which most of the cases turn. I see no reason in principle why a declaration should not be granted and as I have explained it seems to me to be a particularly suitable remedy in this case as it should protect the interests of the Defendant as well as the Claimant. Any disputes about what is or is not reinstatement can be resolved, or at least substantially narrowed on the basis of the approach in Tonkin, when it is known precisely what form any reinstatement project will take. 
Claim for relief- Damages
150.	As I have decided to grant a declaration the question of damages falls away unless it is later decided that I was wrong to grant that relief. In that event the Claimant claims damages. Although this question is not necessary for my decision I will briefly address it and say something about the relevant evidence.
151.	 Alternatively, for damages in the amount of the cost of reinstatement up to the limit of indemnity in the Policy.  The Claimant’s expert has assessed the cost of reinstating the Property as exceeding the limit of indemnity (£2,121,800).  The Defendant’s expert has not done that exercise but it seems that Cunningham Lindsey believed, after they had investigated the fire, the limit would be exceeded. The Claimant claims there is an alternative claim for damages under the insuring clause of the Material Damage section of the Policy by which the Defendant is obliged “to indemnify the Assured against loss of or damage to the property.”
152.	The Claimant says that the prima facie rule is that the assured’s loss in the event of damage to buildings is the cost of reinstatement (Colinvaux (2013 supplement) at 10-014).  That prima facie rule should apply in this case.
153.	The Defendant says that the policy provides for payment of the reinstatement value of the premises, if they are in fact reinstated with reasonable dispatch. Otherwise the insured is entitled to its actual loss, which in this case means any loss to the Claimant by diminution in the value of the premises as a result of the fire. The correct measure of damages is loss of market value. 
154.	The Defendant submits that, as a result, no damages are payable. Before the fire, Mr Singh’s intention was to sell the Boak site with the benefit of a planning permission for its conversion to flats.  He invited tenders from selling agents with a view to doing this.  He then discovered that the site could not be sold, because the presence of a listed building on it precluded profitable development. The Boak then burnt down.  The site is now empty, and ripe for sale, or letting on a building lease, to a developer, and is hence valuable.  However the site is disposed of, the value will accrue to Mr Singh. Mr Singh has lost nothing by the fire, which has benefited him financially. Nor has the Claimant lost anything, because its interests were not affected in any way.
155.	Mr Moxon Browne argues that the concept that property may gain value as a result of the destruction of the buildings which stand on it is entirely familiar to the law, as is the process of assessing diminution in value or increases in value by reference to the development potential of the site, rather than the intrinsic worth of the buildings on it. Mr Moxon-Browne cites mainly Taylor v. Hepworths Ltd (1977) 1 WLR 659 but that was a tort claim by a Plaintiff against its next door neighbour which had negligently allowed fire to spread, not a claim under a reinstatement clause in an insurance policy.
156.	The Defendant thus says that the Claimant has not suffered any loss, first because it did not own the premises or otherwise benefit from them and secondly because the site is in any event now much more valuable than it was before the fire. The first ground is misconceived essentially because, as explained in Lonsdale, issues between the parties with an insurable interest in the Property are to be resolved between them. The second issue only arises if the questions of site value are relevant. As I see it they are not.
157.	Decision. If I had had to decide this issue my conclusions would have been as follows. The Defendant owes a contractual duty to indemnify the Claimant against the cost of reinstatement. If the Claimant reinstates then the Defendant has to pay the cost up to the limit of cover. If the Defendant fails to pay then it is liable for that cost. The issue involves an explicit contractual commitment not simply the application of the law dealing with the assessment of damages on fire claims. The value of the site before and after the fire seem to me to be irrelevant unless this differential leads the Claimant to a decision not to reinstate. If there is to be no reinstatement then there is no obligation on the insurer to pay because the assured has not invoked the relevant contractual commitment.
158.	The Defendant seems to present its obligation as being to meet the loss as assessed in a conventional fire claim but one where special considerations, similar to the examples given in the supplement to Colinvaux referred to above, require departure from the prima facie rule. I do not consider the Defendant’s approach to be correct or, on the facts, that there are any special features to take the case away from the prima facie rule. It is of interest (but not a point I mentioned at the trial) that when an insurer elects to reinstate the contract ceases to be one of indemnity and becomes one to reinstate, in effect a building or repairing contract – see for example MacGillivray 22-006. The position is presumably similar when the reinstatement right belongs to the assured not the insurer. In any event the obligation to indemnify for reinstatement is explicit and clear, the loss following breach almost obvious. 
159.	The only circumstance in which the Defendant would not have to pay the full cost would be if there were no reinstatement (a risk which the Declaration will protect it against). I have accepted Mr Singh’s evidence that he wishes to reinstate. Why else would his preferred remedy depend on reinstatement? The other evidence suggests that his previous scheme was uneconomic and that what he had in mind until the fire may well have been development of the site by others. There is however no reason to doubt the Claimant’s  sincerity in the situation following the fire where he already owns the site and  sees value in a scheme of reinstatement which will produce income and which, unlike some quite different project, will to a degree be paid for by insurers. Mr Singh is a very successful property investor and has no doubt often seen opportunities which others have failed to spot.
160.	 If the Declaration were unavailable then a solution might be to award damages conditional and payable upon reinstatement taking place.
161.	It is only if I am wrong to grant a declaration and also wrong in my approach to damages that the expert evidence about site value becomes relevant. It is unnecessary to decide it and would be unhelpful to do so at this stage. I will not therefore decide it. Some of the expert evidence was prepared quite late and other matters will soon be out of date. If the issue ever has to be decided there will be a need for further or at least updated expert evidence involving, for example, more about the cost and practicalities of the Claimant’s reinstatement scheme.
Relief– Loss of Rent.
162.	At the time of the fire the rent payable to the Claimant by Property Link was £16,500 per annum in relation to 8 Station Street and £13,000 per annum in relation to the ground floor of the Boak Building. Both leases provided that the rent was no longer payable in the event that Property Link could not occupy the property due to fire damage. By the terms of the Policy the Claimant was entitled to be indemnified for loss of rent.  The indemnity period was 12 months, and the sum insured was £50,000.  The Claimant therefore claims £29,500. 
163.	The Defendant’s response is that no rent was paid or payable. I have found that to be incorrect. In principle the Claimant’s claim is a clear one but I should bear in mind the irregularity with which rent was sought and paid and the strong likelihood that for the period in question that pattern would have continued. There is a fair chance that in reality the rent would have been neither demanded nor paid in part or in whole and for that reason I will reduce the sum by fifty per cent. 
“The Wisniewski principle”
164.	Mr Moxon Browne invokes what he calls “The Wisniewski principle” which he draws from the decision of the Court of Appeal in Wisniewski v Manchester Central Health Authority [1998] PIQR 324. In short the principle is that although cases are decided on evidence, the Court is entitled to draw adverse inferences from the unexplained absence of evidence from witnesses, or in the form of documents, which it would be reasonable to expect might be before the Court. It is always useful to be reminded of the principled base behind the daily task of deciding facts and of doing so not just on the evidence but bearing in mind what further evidence a party might reasonably have been expected to produce. I apply those considerations in this case as in any other. I bear in mind Mr Moxon Browne’s observations about particular points. For example he criticises the absence of Mrs Kaur. She filled out the proposal form but did not identify Property Link as the tenant of the insured premises. He says that in the absence of contrary evidence from her, the Court can infer that the reason for this is that in fact Property Link was not the tenant. But this overlooks the other evidence and the consideration that the court has seen and heard both the landlord, Mr Singh on behalf of the Claimant and the tenant, Sunny who is the governing mind of Property Link. This perceived principle is invoked by both sides. Thus Mr Elkington invites me to draw inferences from the absence of anyone from JRP who took the decision whether or not to cover the risk. As in any case I bear all these factors in mind but do not extend an already overlong judgment by explicitly addressing every aspect.
Conclusion
165.	The Claim succeeds and the Claimant will receive a Declaration, subject to a condition as to payment of any unpaid rates (or to some other requirement that achieves that result), and damages for loss of rent amounting to half the sum claimed.
166.	I am most grateful to Counsel and solicitors on both sides for the admirable way in which the trial was prepared and presented.