Mandalia v Beaufort Dedicated No2 Ltd [2014] EWHC 4039 (QB)

The Claimants own shop premises which were let out to (what they describe as) “bad tenants”. These  tenants failed to pay all rent due and to carry out fit-out works to a satisfactory standard.  Accordingly, proceedings for possession were commenced against them. The Claimants allege that the  tenants thereafter entered the premises and stripped out much of the contents. However, most of the  fixtures and fittings which were removed were owned by the tenants.

The Claimants sought to claim under their commercial combined insurance policy, issued by the defendant. The relevant policy wording covered loss or damage by “malicious persons”. There was also cover for  theft, including damage to the premises, but excluding damage which did not involve “entry to or  exit from that part of the building… by forcible and violent means, or actual or threatened assault”. Although entry was effected using  keys, it was alleged that the exit “took place in an atmosphere of intimidation” and that the  Claimant’s son was assaulted by the tenants’ solicitor.

When the Defendants advised that the claim was not covered, the claimants brought a complaint to  the Financial Ombudsman Service (“FOS”). They were awarded GBP 100,000 but they did not accept  that, since their losses were alleged to be around GBP 200,000. The FOS award was not binding on  the Court.

The Judge examined the meaning of “malicious” in the context of this case. He held that the use of  the word in a criminal context was very different (where, in the absence of self-defence, it is difficult to see how it could  not be “malicious” to, for example,  wound by assault). The Defendant had referred to the OED definition of malice, namely “the desire  to harm someone; ill-will”. The Judge concluded that “it is plain to me, and I find that, the use  of the word “malicious” in this policy was intended to connote an ill intent” which would mean that  there had been “no reason  for the item to be damaged in the course of the tenants removing  property… and it was done with some deliberation with the intention that the same be damaged”.  Here, the circumstantial evidence available led to an inference that the tenants had not intended  to “ransack” the premises, but instead had caused damage by removing items that they felt entitled to remove. Accordingly, much of the claim failed (and it was said that the Claimants should instead  pursue the tenants for failing to deliver up the premises in a proper state).

Nor was the peril of theft made out. There had been no forcible entry or exit on the facts. The  alleged assault  by the solicitor was described as “completely incidental” to any alleged theft.  Furthermore, the assault was not by the tenants themselves and did not prove a malicious course of  action. However, the Judge was prepared to accept that there had been some damage attributable to malicious intent on the part of the tenants when they left the premises (e.g. toilets were  smashed and this was not accidental or incidental to the removal of items of equipment). He awarded  just over GBP 8,000 plus three months loss of rent whilst this particular damage was repaired  (resulting in judgment of GBP 15,750 for the Claimants).

Comment

The Judge’s conclusion as to the meaning of “malicious”  can be contrasted with that in  Atlasnavios-Navegação and The Grecia Express (referred to above), where the Judges held that there  was no need to establish ill intent – a much wider test for maliciousness than that adopted in this  case.