The first defendant, Alldown was engaged to carry out certain demolition and excavation works for the claimant, Shinedean’s premises. The excavation works caused the wall of an adjoining property to collapse. Alldown notified its Insurer, AXA of the collapsed wall in September 2002.
Shinedean paid the owner of the adjoining property a substantial sum in settlement and then obtained a default judgment against Alldown for damages to be assessed. AXA refused to indemnify Alldown under the relevant insurance policy. The policy obliged Alldown to provide all necessary information and assistance to AXA, but contained no express time limit for the provision of information. Although some limited documents had been provided by June 2003, AXA considered that Alldown had failed to provide all necessary documentation and was therefore in breach of a condition precedent in the policy. AXA was joined as a party to the proceedings.
The trial judge held that it was an implied condition of the policy that documentation should be provided within a reasonable time. He also decided that a significant amount of information had not been provided to AXA until some two and a half years or more after the collapse of the wall. However the judge decided there was no breach of the reasonable time obligation because one of the tests for judging reasonableness was prejudice to the insurer, and since the insurer in the present case had suffered no prejudice, Alldown’s claim would succeed. AXA appealed.
Is the question of whether AXA had been prejudiced relevant to deciding what was a reasonable time for compliance?
Reference
Their Lordships held there was no absolute principle that the question of whether the insurance company was prejudiced should be included or excluded when assessing reasonable time. Whether to include any prejudice or not would depend on the facts of each case.
There was a duty on the insured to provide documents in reasonable time and the insurance company was entitled to receive the documents in good time. In the present case the provision of the documentation was unreasonably late as they had only been provided by Alldown during the course of the litigation when AXA became a party to the proceedings. Thus, AXA was entitled to say that the information requested was overdue; that the condition precedent in the contract had been breached; and that it refused to indemnify the claimant.
*Fuil case details
Shinedean Ltd vs Alldown Demolition (London) Ltd (in liquidation) and Another, Court of Appeal (Civil Division), Sir Anthony Clarke MR, May and Gage LJJ, [2006] All ER (D) 206
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Postscript
Condition precedents are common in many construction contracts and frequently require some action on the part of the contractor (such as service of a notice or the provision of information) within a set time period as a condition precedent to the contractor’s entitlement to claim an extension of time and/or price adjustment.
This case provides a timely reminder of the importance of complying with conditions precedent under any contract. In this case, their Lordships considered that an insurer is entitled to know where it stands and under the Policy AXA were entitled to receive the information in good time, whether they were in the end prejudiced by failure to achieve this or not.
Similarly, the purpose of such provisions in construction contracts is to enable the owner to consider the position and its financial consequences such that in many if not most cases, the courts will be ready to strictly interpret and apply those provisions, so that failure to give notice or provide information within the period required may deprive the Contractor of all remedy.
