The recent judgment of Mr Justice Eder in Sugar Hut Group v AJ Insurance [2014] EWHC 3352 (Comm) dealt primarily with quantification of Sugar Hut’s losses following a fire at its Essex nightclub in 2009.

The action was a claim for damages against its insurance brokers alleging negligence for a failure to ensure adequate and effective insurance was in place over the premises prior to the 2009 fire.

The parties agreed liability on a 65% basis and the Judge considered issues relating to damages.

The hearing primarily concerned the business interruption loss under the policy which was claimed at £1,345,794 (gross).

Despite the policy terms contemplating calculation of the business interruption loss by reference to post-fire turnover, the decision was taken by Mr Justice Eder to instead rely on the pre-fire turnover because the post-fire turnover had been generated by what was effectively a ‘new club.’ Over a million pounds had been spent on refurbishment and capacity had increased two fold. Furthermore, following its reopening in August 2010, the club became a permanent feature in the ‘TOWIE’ television series thus benefitting from increased publicity and popularity.

The club’s pre-fire financial information and evidence was however limited and unreliable forcing the Judge to adopt what he described as a ‘somewhat crude and inexact approach’ for calculating the business interruption loss which he awarded in the substantially reduced sum of £568,670 (gross) plus interest.

The case is also important because it provides a stark reminder of the need to adduce convincing evidence to prove losses. Having considered the claim for loss of profits the Judge went on to consider individual heads of claim for damages including not insubstantial claims for:

  • Staff wages – £122,260
  • Alternative accommodation – £6,000
  • Redundancy costs – £5,700
  • Loss of profits for sister clubs – £62,993 and £108,684 respectively
  • Accountancy evidence – £19,275
  • Depreciation – not pleaded and raised only at trial.

All of these heads of claims were dismissed by the Judge for lack of evidence. The Judge went as far as to accept that such costs might be recoverable but in respect of all the claims the lack of cogent evidence, whether by way of supporting documentation or factual witness statements, left him with no choice but to reject the various claims.

The Judge further criticised the claim for depreciation noting that the issue had not been pleaded or considered by the experts.

This case acts a reminder of the need to adduce evidence which is clear, cogent and convincing in order to persuade a trial judge that not only has there been a loss but that the loss was also caused by the Defendant’s breach.

For further information about this topic or any other insurance litigation matter please email Nicola.maher@edwincoe.com

The Judgment can be found at: https://www.bailii.org/ew/cases/EWHC/Comm/2014/3352.html


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