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Recent cases highlight the importance of clear drafting and proper execution of documents to avoid disputes and clarify the terms of a Zurich new-homes insurance policy.
Cohen v Teseo Properties  EWHC 2442 (Ch)
In Cohen, a seller sought a declaration that a contract for the sale of a property to the buyer had terminated, leaving the seller free to deal with the property as he chose. The buyer counterclaimed for specific performance of the contract and the sale of the property to it.
The issue was the interpretation and intended effect of a clause entitling the buyer to an extension of time if planning permission had not been obtained (the effective date) by a long-stop date.
The High Court noted that although the contract seemed to have been professionally drafted, the drafting was poor. The inter-relationship between important provisions was not clearly explained.
It was, therefore, particularly important to have regard to business common sense in drawing inferences as to the parties' intentions expressed in the contract, construed according to the usual objective approach.
The court decided that a sensible interpretation of the contract and business common sense meant that if the long stop date came and went without a request for an extension of time, it took effect as the termination date, and the effective date could not occur thereafter.
Further, even if there had been conflict between the literal language of the contract and business common sense, in the context of a poorly drafted agreement such as this, the interpretation indicated by business common sense would have prevailed over a contrary literal interpretation.
The buyer had not served notice requesting an extension of time by the long stop date and so the seller was free from any obligation to proceed with the sale of the property to the buyer.
The buyer's application for repayment of its deposit in exercise of the court's discretion under the Law of Property Act 1925, s 49(2) was also dismissed. The court should not exercise such discretion to return a deposit to a buyer who had failed to complete, in the absence of something special or exceptional to justify overriding the ordinary contractual expectations of the parties. That was not the case here.
Bank of Scotland v Waugh  EWHC 2117 (Ch)
Bank of Scotland involved an application for summary judgment in proceedings forming part of a long-running dispute between the bank and Mr Waugh and other members of his family. The bank had provided banking facilities to the family trust relating to property development since 2002. It had provided loans to the trust pursuant to various facility letters and taken a number of securities.
This action was concerned with the charge granted over a particular property and the monies due under a facility letter.
The court decided that:
Bache v Zurich Insurance  EWHC 2430 (TCC)
In Bache, Mr and Mrs Bache entered into agreements for lease with Gold Homes to buy flats in a block that was yet to be built. Gold Homes was required to construct and complete the flats. This never happened. By letter dated 16 February 2010, Mr and Mrs Bache's solicitors wrote to Gold Homes, purporting to accept its failure to complete the construction as repudiation of the agreements for lease and seeking the return of the deposits, totalling £357,800, and costs.
Gold Homes was placed in administration on 8 April 2011 and dissolved in early January 2013.
Mr and Mrs Bache had the benefit of a Zurich Insurance PLC (Zurich) insurance policy provided at the behest of Gold Homes. Zurich provide a competitive insurance product comparable to the NHBC cover which--at least at one stage--provided the only well-known 10 year cover for newly built dwellings.
The Zurich cover related to two periods, first up to the time when the building in question had been acceptably completed and the second thereafter. For the first period, Zurich said in the introduction to the policy that 'the policy protects you if your developer goes into liquidation...against the loss of contract exchange deposit...'
Zurich did not pay out.
The relevant section of the policy read:
'What we will pay before the new home is completed:
1 We will pay where, due to the developer's bankruptcy, liquidation or fraud, the developer fails to complete the construction of the new home in accordance with the requirements and the buyer loses a deposit paid to the developer under the terms of the purchase contract for the new home, we will at our option
(a) Pay the reasonable cost of completing the home to the original specification; or
(b) Pay to the buyer the amount of any such lost deposit.'
It was accepted by Gold Homes that liquidation included dissolution.
The High Court decided, as a preliminary issue, that subject to the other defences and proof of the assumed facts, Mr and Mrs Bache were entitled to claim under the policy, because:
Cohen highlights the importance of best practice in drafting and proof-reading documentation in the first place. The court noted that at two points in the agreement for lease necessary cross-references to other provisions were left out and instead the text 'Error! Reference source not found' appeared in bold type. It confirmed that no-one appeared to have noticed or bothered about this.
Bank of Scotland demonstrates the need to ensure documentation is properly executed to ensure it achieves what the parties intend.
Bache will be welcomed by residential buyers with Zurich policies.
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