In Ted Baker PLC v (1) AXA Insurance UK PLC (2) Fusion Insurance Services Ltd (3) Tokio Marine Europe Insurance Ltd [2017] EWCA Civ 4097 Ted Baker PLC (TB) suffered significant business interruption losses as a result of goods stolen by a trusted employee. TB subsequently made claims against its insurers for those losses. At first instance, TB’s claim was rejected for two main reasons: first that TB was in breach of a condition precedent, on the basis that it failed to produce certain documentation required by the policy; and second, that the nature of the thefts was such that no single loss exceeded the excess in the policy. Eder J, at first instance, stated that he had not reached these conclusions “with any great enthusiasm”.

TB appealed. On the issues of quantum, the Court of Appeal upheld the first instance decision and held that no single loss exceeded the excess in the policy. As such, TB was ultimately unsuccessful in its appeal.

However, the Court of Appeal reversed Eder J’s decision in relation to the breach of the condition precedent and in doing so made some important findings as to the relevance of a “duty to speak” in the context of estoppel.

The policy contained a provision which required TB to deliver various financial materials to the insurers if they were “reasonably required” for the investigation or verification of claims (Special Condition 2). During the course of the adjustment of the claim, the loss adjusters requested various documents from TB, including copies of profit and loss and management accounts for certain periods (referred to as “Category 7” material in the judgment). TB took the position that it was unwilling to produce all of the documents requested (including the Category 7 material) until AXA had confirmed that it would provide indemnity under the policy. This position was communicated to the loss adjusters, who informed TB that they would take instructions from insurers on the issue and would revert once instructions were received. Ultimately, the insurers did not provide a response, and TB did not produce any of the requested documents, including the Category 7 material. TB believed that all the requests, including those for the Category 7 documents, had been “parked” pending a response. Later, in their pleadings, the insurers relied on TB’s failure to provide the documents as a breach of Special Condition 2. As indicated above, at first instance, Eder J held that the Category 7 documents were “reasonably required”, that they could have been easily obtained and that no estoppel had arisen which would prevent the insurers relying on Special Condition 2.

The Court of Appeal disagreed that no estoppel had arisen. It held that an estoppel could be created as a result of a “duty to speak” “if, in the light of the circumstances known to the parties, a reasonable person in the position of the person seeking to set up the estoppel (here TB) would expect the other party (here the insurers) acting honestly and responsibly to take steps to make his position plain”. In the present case, it was held that if the insurers had regarded the accounting documents in question as outstanding then, “acting honestly and responsibly, they should have told [TB]. Not to do so was misleading.” As such, an estoppel was established such that the insurers were not permitted to rely on Special Condition 2. This conclusion was reached notwithstanding that it was accepted by the Court of Appeal that that there was no bad faith in this case (in the sense of “hoodwinking” by the insurers – ie deliberately keeping quiet about the obligation to provide information so as to subsequently deny cover); as Sir Christopher Clarke put it “An estoppel of this nature in a contract of this kind does not require dishonesty or an intention to mislead; nor any impropriety beyond that inherent in the conclusion that the insurers should have spoken but did not.”.