Utmost good faith

The decision of David Steel J in Persimmon Homes Ltd v Great Lakes Reinsurance (UK) plc [2010] EWHC 1705 (Comm) for the most part turned on its facts. There were admitted misrepresentations and failures to disclose on the part of an applicant for after the event cover to fund proceedings against a third party. The issues were whether those breaches had induced the insurers to enter into the policy and, if so, whether the insurers were precluded by their conduct from exercising the right to avoid.

Persimmon Homes: the facts

In 1999 CPH (a company operated by BT and PT) was negotiating with NCP to purchase a site for development. CPH ran out of funds, and NCP indicated that it would look for an alternative buyer. In August 1999 Persimmon had discussions with CPH with a view to taking over its negotiating position. What was agreed at that time remained a matter of dispute: Persimmon asserted that there was a binding agreement for Persimmon to take over CPH’s position and to pay CPH’s professional fees; CPH asserted that there was merely an understanding. Persimmon exchanged contracts on the site in November 1999, and in December 1999 there was another meeting between Persimmon and CPH. Again, the outcome was disputed, but CPH’s case was that for the first time there was an agreement under which Persimmon would pay CPH’s professional fees plus an introduction fee of 2%. Persimmon’s view was that nothing new was agreed at that time.