Practical Law

On 5 December 2019, the Court of Appeal handed down its judgment in Manchikalapati and others v Zurich Insurance plc and East West Insurance Company Ltd. The underlying case concerned a large block of flats in Manchester that were seriously defective.

There are a number of lessons to learn from the Court of Appeal proceedings and much that is of use for construction and insurance practitioners alike.

Manchikalapati and others v Zurich Insurance plc and others 

At first instance, the claimants were the freeholder (Zagora Management Ltd) and nearly 30 of the long-leasehold owners of the flats (leaseholder claimants). The claimants complained that the flats had serious defects that rendered them unsafe to inhabit. The claimants brought a claim against Zurich Insurance plc (ZIP) under its new home warranties, and a second claim against Zurich Building Control who had signed off the flats as compliant with Building Regulations. The appeal concerned only the leaseholder claimants, ZIP and its successor insurer, East West Insurance Company Ltd (East West).

Over a three-day hearing, the Court of Appeal dealt with no less than ten grounds of appeal arising out of HHJ Davies’ 184 page first-instance judgment and his separate judgment on interest, both of which followed a four-week trial in the Manchester TCC in October 2018.

Nine of those grounds of appeal, all of which were points of interpretation or insurance law, were brought by ZIP and East West. ZIP and East West were unsuccessful on all their grounds of appeal.

Liability cap in a new home warranty

One ground of appeal was brought by the leaseholder claimants. This ground related to the proper interpretation of a maximum liability cap in the Zurich new home warranties. The leaseholder claimants were successful on this ground of appeal. The result of the Court of Appeal’s decision was that the leaseholder claimants were entitled to recover £10.85 million as opposed to the £3.6 million awarded at first instance. The result makes it possible for the leaseholder claimants to recover most of the cost of putting the defects right.

As East West (but not ZIP) has sought permission from the Supreme Court to appeal the Court of Appeal’s decision on the maximum liability cap, I will say no more about this aspect of the case.

Lessons learned

Instead, here are some lessons learned from the Court of Appeal proceedings that may help practitioners in future:

• Advocates in the Court of Appeal will need to provide an estimate of the length of the hearing. The (informal) guidance from the Court of Appeal is that, absent exceptional circumstances, three days is as long as any appeal to the Court of Appeal should ever be. Even in a case with ten detailed grounds of appeal, three days should be more than enough. Advocates fear under-cooking time estimates but it seems clear that any estimate should be based on submissions that cut out the fat.
• As explained above, the Court of Appeal’s time is short. Putting aside any issue over Ladd v Marshall applications, the Court of Appeal is unlikely to want to get bogged down in disputes over whether it should have regard to new documents that were not before the first instance court (here, standard form mortgage lender documents referred to in a skeleton argument). Ordinarily, parties are well-advised not to waste their energy on such disputes as, given time pressures, the Court of Appeal may prefer to deal with the documents de bene esse and resolve any dispute later, if necessary. It will not be pleased to see bundles of unagreed documents. While each case will turn on the precise documents in question, be wary! Fighting satellite disputes such as this may be a useful tactic at first-instance but it is unlikely to have the same import in the Court of Appeal.
• If the Court of Appeal’s decision will, in any respect, have clear financial implications, make sure that the Court of Appeal is equipped with the necessary information to allow it to assess those financial implications and to put the grounds of appeal in their proper context. The Court of Appeal is unlikely to have the time (and is the wrong court) to work such matters out for itself.
• Finally, apart from checking in advance precisely where your hearing is so that you do not get lost in the neo-gothic rabbit-warrens of the RCJ, and ensuring that you have your wig on properly, one of the most helpful things for your team will be to produce a timetable setting out when steps for the Court of Appeal hearing should be taken. It is fair to say that CPR Part 52 and the accompanying Practice Directions are not abundantly clear. So, get your timetable noted down early (including any specific directions made) and endorsed by the other side. In this case, over 40 authorities were relied on. The Court of Appeal’s preference is for as few authorities to be cited as possible, normally no more than ten. However, if the number of grounds justifies it and the advocates therefore sign the relevant certificate, knowing how much time you have to prepare and mark up the authorities bundles with your opposite number is crucial for your sanity and that of your clients.

Otherwise, from a legal perspective, the Court of Appeal’s decision contains much of use for construction and insurance practitioners alike, and includes an up-to-date summary of the law on claims for interest (and what constitutes a garage…). I commend it to you.