Vivid Housing Limited v Allianz Global Corporate & Specialty SE

Mrs Justice Jefford:

1. This is an application by the defendant (“Allianz”) for summary judgment. Background facts and claims

2. The background is as follows. The claimant (“Vivid”) is the freehold owner of a block of 82 flats at Collins Place, 189 Victoria Road North, Portsmouth, Hampshire. Vivid is, in effect, the insured under a Housing Warranty Insurance Policy issued in respect of the development. The insurance policy was issued by Building LifePlans Ltd. (“BLP”) acting as the cover-holder under a binding authority granted by the defendant, Allianz.

3. The operative clause of the policy on which this application turns is in the following terms: Clause 3(a) Operative Clause “The Insurers agree to indemnify the Insured against the cost of repairing, replacing and/or strengthening the Premises following and consequent upon a Defect which becomes manifest and is notified to Insurers during the Period of Insurance and not excluded herein causing any of the following events: (i) destruction of the Premises; or (ii) physical damage to the Premises; or (iii) the threat of imminent destruction or physical damage to the Premises which requires immediate remedial measures for the prevention of destruction or physical damage within the Period of Insurance.”

4. The Period of Insurance was 12 years from the Date of Inception. By virtue of a Policy Inception Endorsement dated 23 May 2008, it was provided that the Date of Inception was 22 May 2008.

5. Vivid’s claim concerns 5 alleged defects: (i) Defect 1 (Rockpanel cladding): Vivid alleges that combustible RP cladding panels have been installed on a building over 18m high in an untested arrangement in conjunction with combustible foam insulation, absent carrier barriers or with defective barriers, and with combustible debris in the cavities, which provides a vehicle for the spread of fire and/or smoke around the entire external envelope of the building. (ii) Defect 2 (vertical cavity barriers): Vivid claims that no vertical cavity barriers were installed at the required locations (for example between the outer cladding and inner cavity and between floors) which provides a route for fire and/or smoke to spread unseen and uninhibited around the development. (iii) Defect 3 (horizontal cavity barriers): Vivid alleges missing or defectively installed cavity barriers at party walls, slab edges and window openings as a result of which fire and smoke could spread unseen and uninhibited around the development. (iv) Defect 4 (Rockclad bracketry): Vivid alleges that the RP cladding panels were inadequately fixed to the vertical cladding rail with bracketry which was, in some locations, inadequately supported and/or overstressed causing a risk of detachment of the cladding panels and/or physical damage. (v) Defect 5 (building debris): Vivid’s case is that debris was left within building cavities providing an ignition source for fire and/or permitting the spread of fire and, additionally, that the debris provided a bridge for water into the flats causing consequent or additional damage. I would note that this summary of the defects alleged is largely taken from the defendant’s skeleton argument and should not be regarded as any kind of finding by the court as to the nature or accurate description of the defects.

6. There is a dispute between Vivid and Allianz as to whether all of these defects are Defects within the meaning of the Operative Clause. That issue does not arise on this application because Allianz asks the court to determine the application on the basis of assumed facts, namely that Defects 1 to 5 are defects in the Structural Works attributable to a defect in design or workmanship or materials and are, therefore, Defects as defined in the policy. It is convenient to note at this point also that, in its Defence, Allianz relied on clause 4(a)(iv) (Policy Exclusions) which, on its face, excluded cover for the threat of imminent destruction or physical damage arising from or consequent on fire. For the purposes of this summary judgment application, but only this application, Allianz did not rely on this argument or on this exclusion as material to the construction of clause 3.

7. As set out in the Reply, Vivid contends that Defects 1, 2, 3 and 5 caused a threat of imminent destruction and/or physical damage in that, in the event of a fire, physical damage and/or destruction would be imminent. Vivid served a witness statement of Abigail Condry, solicitor, in which there was reference to Defect 5 providing “a bridge for water into the flats”. Ms Ansell KC noted in her skeleton argument that that was not pleaded and that Allianz proceeded on the basis that Defect 5 was relied upon solely on the basis that debris provided an ignition source.

8. Similarly in the Reply, Vivid relies on Defect 4 as causing a threat of imminent destruction and/or physical damage in that as a result of these defects there was a threat of detachment of Rockclad bracketry and/or the cladding panels. Ms Ansell again notes that there is no pleaded case that there was actual damage. Nonetheless, Ms Condry states that there was physical damage because the inadequately fixed and over stressed cladding components created the risk of the cladding panels detaching which is “an adverse change in physical condition in the bracketry and the cladding panels, constituting physical damage.” Ms Ansell says that the only claim for determination on this application is the claim for an indemnity under clause 3(a)(iii) and that Allianz’s position on any, as yet unpleaded, claim under clause 3(a)(ii) is expressly reserved. I proceed on that basis. The notification of the claim under the policy

9. Vivid notified its claim under the policy on or about 19 May 2020, very shortly before the expiry of the period of insurance. Vivid did so by a standard “Latent Defect Claim Form” (“the notification”) and a copy of a Façade Fire Risk Assessment report prepared by CBRE (and dated August 2019).

10. The notification stated that “Details of the defects and damage identified at the premises are set out in the attached report of CBRE” and under “Additional information” a summary of the defects identified in that report was given.

11. Box 5 on the standard form said “If urgent repairs are required, please specify what they are and provide an estimate of the cost”. The answer given was “N/A” for both the request about urgent repairs and estimate of cost. Box 6 asked whether any repairs had been undertaken prior to notification. The response was “Waking Watch” preventative and associated measures”. The date was given as “Throughout” and the cost as “TBC”. Allianz’s argument: summary

12. Allianz’s case was succinctly set out in Ms Ansell’s skeleton argument as follows: (i) On the proper construction of the policy, the indemnity provided under clause 3(a)(iii) is in respect of Defects which cause the threat of imminent destruction or physical damage to the premises and require immediate remedial measures in order to prevent the destruction or physical damage of the premises occurring within the Period of Insurance. (ii) In her skeleton argument, Ms Ansell described the clause as requiring that the damage must be sufficiently likely to happen sufficiently soon in order to be described as imminent: “That is to say that there must be a serious risk (or threat) amounting to a real likelihood that the damage will happen and it will happen soon.” (iii) It did not provide cover in respect of the threat of imminent destruction or physical damage which would only occur if an event occurred which was not imminent and which did not therefore require immediate remedial measures in order to prevent the destruction of or damage to the property within the Period of Insurance. (iv) None of the Defects fell into the category that was covered.

13. Allianz relies on the facts that: (i) Vivid’s response to the question whether urgent repairs were required was “N/A”. (ii) The only remedial measures implemented during the Period of Insurance were the “Waking Watch preventative and associated measures” which it is argued did not and were not intended to prevent damage to the property. (iii) The premises were not damaged during the Period of Insurance despite the fact that no remedial measures were implemented.

14. Allianz also points to the following: (i) Clause 6 of the policy sets out “The Basis of Claim Settlement”. Sub-clause 6(b)(ii) provides that, in respect of a Defect causing the threat of imminent destruction or physical damage “the basis of settlement of the claim shall be the costs necessarily incurred by way of remedial measures to prevent actual destruction or physical damage of the Premises within the Period of Insurance.” It is not Allianz’s case that the remedial works had to be carried out during the Period of Insurance but, as Ms Ansell put it, the clause is consistent with the cover being limited to remedial work which is required to prevent (actual) destruction of or damage to the premises occurring during the Period of Insurance . (ii) Allianz’s construction of the policy, it said, is consistent with the commercial context of the policy. Clauses 3(a)(i) and (ii) provided cover for actual destruction or damage. Clause 3(a)(iii) served to extend that cover to the threat of imminent destruction or damage which required remedial work to prevent actual destruction or damage during the Period of Insurance. That was the context. The policy did not extend to defects which caused “a present and imminent danger to health and safety of the occupants” and in respect of which works were required to comply with the Building Regulations. That extent of cover was provided by the Health and Safety Extension which was not selected by Vivid. Vivid’s argument: summary

15. Vivid’s case is that on its proper construction, clause 3(a)(iii) is engaged where a reasonable observer in the Period of Insurance would have concluded that there was a realistic prospect that physical damage may occur which required immediate remedial measures to be prevented. That was an objective test. On the facts of this case, a reasonable observer would have concluded that there was such a threat (or at least that there was a serious issue to be tried as to whether there was such a threat) because: (i) Defects 1, 2, 3 and 5 made the development vulnerable to physical damage in the event of fire, giving rise to a realistic prospect that imminent physical damage, at the least, might occur; and (ii) Defect 4 put the cladding panels and bracketry at risk of deformation and detachment, giving rise to a realistic prospect that imminent physical damage might occur.

16. Mr Thompson submitted that Ms Ansell’s formulation added a gloss to the words of the policy which was not there, in that there was no requirement that there was a real likelihood that the destruction or physical damage would happen soon. Discussion

17. Returning to clause 3(a)(iii), the risk insured is therefore a (manifest) Defect which causes (a) the threat (b) of imminent destruction or physical damage (c) which requires immediate remedial measures (d) for the prevention of destruction or physical damage within the Period of Insurance.

18. It is common ground that the operative clause must be read as a whole and in accordance with recognised principles of contractual construction. Allianz relied in particular on the decision in Financial Conduct Authority v Arch Insurance (UK) Ltd. [2020] EWHC 2448 (Comm) at [62] – [66] a decision of the Divisional Court where the Divisional Court’s summary of the principles was subsequently approved by the Supreme Court [2021] UKSC 1 at [47]: “The core principle is that an insurance policy, like any other contract, must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean.”

19. The first elements are a threat of imminent destruction or physical damage.

20. There is, in my judgment, no magic in the word “threat”. In other cases and policies, words such as risk or danger are used. They amount to the same thing. Sub-clause (iii) is concerned not with something that has happened (namely actual destruction or physical damage) but something that may happen. So some word that captures the prospective nature of the destruction or physical damage is included in the policy and, in this context, whether that word is risk or threat or danger or something else is immaterial.

21. What the use of any such words does is make clear that for the clause to be engaged there need not be certainty that the destruction or damage will occur but a realistic risk or threat that it will. Mr Thompson argued that the use of the word “threat”, rather than some other term loosened the bond, as he put it, but I cannot see that the use of this particular word has that significance.

22. In this case, however, the threat must be not only of destruction or physical damage but of imminent destruction or physical damage.

23. On the meaning of imminent destruction or damage, Vivid relied on two authorities.

24. The first was Gerling General Insurance Co and others v Canary Wharf plc [2005] EWHC 2234 (Comm) . In that case, the assumed facts were that a jib tower crane collapsed in the last stages of being erected by a self-climbing method causing multiple deaths and damage to the site. The insured therefore decided to erect further cranes using a two crane method by which the two cranes were used to raise each other. That caused two cranes to be diverted from other work which, in turn, caused delay. The insured claimed the costs of delay under the policy arguing that the delay costs had been incurred in consequence of imminent loss and damage.

25. The policy was a contractors all risks and public liability policy. The Operative Clause was in the following terms: “Insurers will indemnify any additional cost of working necessarily and reasonably incurred by the insured in order to prevent or minimise the interruption of or interference with or delay to the carrying out of works in consequence of actual or imminent loss or damage (i) for which liability has been admitted or in the event of imminent loss or damage would have been admitted under this policy ….”

26. The issue that arose was whether the decision to use the two cranes was a consequence of imminent damage to the site. On the meaning of imminent, Christopher Clarke J at [55] said: “I accept that the question of whether damage is imminent is, at any rate in the first instance, to be considered prospectively, and objectively, that is to say by considering whether on the facts available at the relevant time a reasonable man would regard the damage in question as sufficiently likely to happen sufficiently soon that it should be described as imminent. Whether that will be so is a question of fact and degree. The question has, also to be considered in the light of the structure and provisions of the Policy to which I have referred.”

27. On the facts, Christopher Clarke J found that the decision to use two cranes could not be characterised as action taken in consequence of imminent damage. As a result, he said that it was not necessary to consider whether the damage would be regarded as imminent if it would appear to be imminent at “the relevant time” but would cease to be “imminent” if, as a result of facts subsequently discovered, it was apparent that the damage would not or was unlikely to occur. He indicated, without deciding, that he would consider the answer to that question to be in the negative. He expressed the view that, had the change in construction not been made, the likelihood of collapse was sufficiently grave to make that collapse imminent at some stage “probably towards the end of the construction”. He did not think that “in this context, the collapse had to be virtually certain in order to be classified as imminent. A serious risk, amounting to a real likelihood is sufficient.” Although that, on one view, omitted any reference to a temporal element of the risk eventuating sufficiently soon, it seems to me that that was implicit in his conclusion that the risk would otherwise have eventuated in the course of construction and towards the end of construction.

28. In his submissions, Mr Thompson relied on both versions of the meaning of imminent - that is (i) something that was sufficiently likely to happen sufficiently soon and (ii) something that was a serious risk amounting to a real likelihood but without reference to its happening “sufficiently soon”.

29. As a matter of normal usage of the word “imminent”, I prefer the articulation at paragraph 55 of Gerling with its temporal element. It seems to me that in Gerling the judge did not need to add this because if the 2 cranes had been erected by the same method the serious risk of the same events occurring would necessarily be imminent – as he said, in the course of construction or before the end of the construction period.

30. It is not entirely satisfactory to extrapolate from a decision on a particular policy which is concerned with very different risks from those in issue in this case but I do not consider that reading the Operative Clause in this case as including an element that the threat must be one of damage occurring “sufficiently soon” or that “it will happen soon” adds any gloss to the words of the policy and the decision in Gerling is some support for that.

31. Vivid further relied on the decision of HHJ Stephen Davies in Zagora Management Ltd. v Zurich Insurance plc [2019] EWHC 257 (TCC) . The case concerned the construction of 2 blocks of flats and numerous alleged defects.

32. Clause 2.3 of the policy provided for the insurer to pay: “The reasonable cost of rectifying a present or imminent danger to the physical safety of the occupants caused by the failure of the developer to comply with the Building Regulations in respect of the following: ….”

33. As the judge recorded at paragraph 7.6.1 there was a dispute between the parties as to what was meant by present danger to the physical health and safety of occupants and what was meant by imminent danger to their physical health and safety. In the judge’s view at [7.6.2], this was a classic case where the words should be given their natural and ordinary meaning: “…. A present danger is one which is actually occurring at the time in question, even if it is not known about. An example would be if the supports of a tread on a fire escape staircase had so decayed that the tread was liable to collapse if used by occupants evacuating the building. An imminent danger is one which is not present but which requires something else to happen which can properly be said to be imminently about to happen. An example would be if the supports of the tread in the above example had almost but not quite decayed so that at some stage in the near future the tread was liable to collapse.”

34. The judge said that it followed that the claimants could not succeed simply by pointing to the fact that the failure to comply with the Building Regulations would inevitably cause a part of the structure to fail at some time. The words “present or imminent” were there to make it clear that “dangers which may be present or imminent at some time in the future but which are neither present nor imminent as at the current time are not covered.”

35. His Honour Judge Davies’ judgment entirely supports a meaning of imminent danger that has a temporal element. In other words, it is not sufficient that there is a realistic risk or threat or danger that something will happen but also that it will happen sufficiently soon. In the example of the treads, there is no danger to the occupants unless they use the stairs, so it seems to me that the judge accepted, as indeed he said, that an imminent danger could be one that only arose if something else happened. In the one instance, where the occupants used the stairs, there was a present danger. In the other instance, where the occupants used the stairs, there was an imminent danger because the decay is likely to cause collapse in the near future. If that risk is far off in the future, even if within the period of the policy, it is not imminent. The difficulty with reading from that example to another example is that the judge was not apparently concerned with whether the use of the fire escape was likely to occur sufficiently soon. It might be inferred that he considered the risk of fire to be such that the use and, therefore, the danger, could be said to imminent or that simply, in the real world, fire escapes are not only used in the event of fire.

36. Mr Thompson drew the court’s attention to paragraph 10.7.7 in which the judge recorded the insurers concession that the absence of cavity barriers presented a present or imminent danger to occupants. The absence of cavity barriers poses no danger in itself and only if there is a fire. The concession is indicative of an acceptance in that case that the risk of fire was sufficiently seriously and sufficiently likely to happen soon that the absence of cavity barriers was rendered a present or imminent danger to occupants. It may be that that acceptance explains the issue I raised in the preceding paragraph. However, this was simply a concession and of limited relevance to the present case.

37. Mr Thompson further relied on the judge’s decision (at paragraphs 10.8.3 to 10.8.4) in relation to discharge pipework to a cylinder that was plastic rather than metal and did not have a continuous fall (which was admitted to be a breach of the Building Regulations). The issue was whether that represented a present or imminent danger. The evidence showed that for there to be a present or imminent danger, an occupant or their invitee would have to be inside the cylinder cupboard at a time when discharge of high temperature water or steam might occur and the overflow would not be capable of being accommodated. He accepted that the likelihood of all three things occurring at the same time and in such a way as to cause injury was extremely remote but he said that it was a truism that events such as this can and will occur even if statistically unlikely. He concluded that: “In such circumstances, it seems to me that the risk must be present or imminent even if is a remote risk.”

38. I have some difficulty with squaring that latter decision both with the earlier examples and the decision in Gerling . As I observed in the course of argument, I can see the argument that there is a present danger because the danger is present and will eventuate if all three things happen together - like the occupant walking on the decayed tread - even if there is a remote chance of this happening or happening soon. But if “imminent” carries with it the concept of the likelihood of something happening sufficiently soon, it is difficult to see how the danger is imminent if the likelihood of its eventuating is extremely remote. This precise distinction was not material to the decision on this issue in Zagora and the present case must be decided on its own facts and not by trying to align the myriad examples of imminent or not imminent danger that could be contemplated.

39. In the present case, the point seems to me to boil down to the following. Firstly, in the case of Defects 1, 2, 3 and 5 the only pleaded circumstances in which the Defects could actually cause destruction or damage – and in which, therefore, the threat of destruction or damage could exist – would be in the event of fire. Therefore, on one view, the only circumstances in which there is such a threat of imminent destruction or damage is if there is, in fact, a fire.

40. Ms Ansell rightly emphasised that the insured event is a threat of imminent damage or destruction and not an imminent threat of damage or destruction. However, in my view, in many factual scenarios it is not possible to distinguish between the two. In this case, if there is a fire , there will almost certainly be a threat of imminent damage at least and possibly destruction. But it would not make sense if the question of whether there was a threat of imminent damage or destruction was only to be asked and answered at a time when there was a fire. In my judgment, to answer the question of whether there is a threat of such imminent damage or destruction involves asking whether in August 2019 the risk of fire was sufficiently serious and would eventuate sufficiently soon.

41. On Allianz’s case, there is no evidence that there was a threat of an imminent fire or an imminent threat of fire such that there could be a threat of imminent destruction or damage. It is submitted that there is, therefore, no basis on which the court could conclude that a reasonable observer would have concluded that there was such a threat of imminent destruction or damage as at August 2019. So far as the evidence is concerned, Ms Ansell submitted that although Vivid had had months in which to present evidence in opposition to this application, they had adduced no factual or expert evidence that there was any aspect of the alleged Defects which made the prospect of a fire (and consequent damage) imminent. The most that Vivid had done was produce a schedule of fires at various of its properties including two at this property (in 2021 and 2024). There was no reason for the court to conclude that a trial would produce any further relevant evidence. It seems to me that the effect of that argument is that it is Allianz’s case that the policy would only respond to Defects (that for the purposes of this application are assumed to exist) if there was some particular aspect of the property or the Defect that made the ignition of a fire imminent.

42. Ms Ansell further placed some reliance on the fact that the notification identified no urgent repairs and that no remedial works had been undertaken since the CBRE report but only the waking watch. Neither of these arguments seems to me to be material and certainly not decisive. The terms of the notification cannot determine the construction of the policy and the meaning of the insured event and, in any case, the question posed in respect of which the answer “N/A” was given was one in respect of “urgent” repairs which does not reflect the terms of the policy. The waking watch, if anything seems to me, to point the other way and to reflect the concern that if a fire broke out the consequences could be catastrophic damage both to persons and property which is more consistent with a threat of imminent destruction or damage.

43. Mr Thompson on the other hand submitted that the threat of fire is constant and the schedule of fires is indicative of the frequency of occurrence and the variety of causes. In that case there is always a threat of imminent damage or destruction by fire. There is considerable force in that argument. I recognise that, on one view, it would seem to take away or omit any consideration of whether the threat of destruction or damage is likely to occur sufficiently soon. But it would not be a commercial construction of the policy if the insured had to demonstrate an imminent threat of fire in the sense of a fire about to break out so that damage from fire was sufficiently likely to occur sufficiently soon whether because there was some aspect of the property or the Defect that made ignition imminent or for some other reason. If so construed, it is difficult to see how the policy would ever respond to the risk of fire not least because (i) the time at which the Operative Clause was engaged was when the potential cause of damage, namely fire, had eventuated or was about to eventuate and (ii) the insured might be expected to take steps to remove the threat. As I have said, the waking watch reflects the imminent threat because of the multifarious ways in which a fire may occur and at least the view of Vivid that it may occur sufficiently soon.

44. In other words, I do not consider that it can be said that there is no realistic prospect of Vivid establishing that the reasonable observer in August 2019 would form the view that there was a serious risk of fire and the consequent threat of destruction or damage sufficiently soon.

45. I observe that that conclusion is driven by the very specific nature of fire and its causes and the factual assumption for the purposes of this application that the Defects are defects in the structural works within the meaning of the policy. A more obvious example, where the policy is less difficult to construe, is a structural defect that will reduce load bearing capacity over time. At the point it becomes manifest, there may be a threat of destruction or physical damage in the future but not of imminent destruction or physical damage. Whether the threat was of imminent destruction or damage might be established by calculation or investigation or if, for example, the structure might be affected by high winds, evidence of the likelihood of high winds. But the risk of fire may be said to be constant.

46. That answers Allianz’s submission that Vivid’s construction of the policy leads to the conclusion that there would be cover for any defect if there was some risk of destruction or damage. It does not in relation to many types of defect within the meaning of Defect in the policy.

47. That is not entirely an end to the argument as there is a second limb of the clause on which Allianz relies. The threat is not merely one of imminent destruction or damage but also one that requires immediate remedial works to prevent the destruction or damage within the Period of the Insurance.

48. It is self-evident that whether an event falls within this definition will depend on the facts. The most likely scenario would seem to me to be that if there is a threat of imminent destruction, remedial works will be necessary. If the destruction or damage is unlikely to occur or will not occur within the Period of Insurance, the policy would not respond. So in the structural deterioration example, if the failure would not, on the balance of probabilities, occur within that period, the policy would not respond. By the same token the threat would not be imminent. On the other hand, if the threat is one of imminent destruction or physical damage, it is difficult to envisage a case where that would not necessitate immediate repair or, as a minimum, mitigating measures pending repair. In other words, the two elements of the event lead to the same conclusion.

49. In the case of fire, if there is a threat of imminent destruction or damage, remedial works to prevent that occurring within the period of the policy would be necessary and most probably necessary immediately. That would at least be open to argument on the evidence.

50. It is common ground that that is to be judged by the test of the reasonable observer at the time the Defects become manifest. The fact that no remedial works were undertaken immediately may be relied on in evidence as of some relevance but the test is an objective one. In any case, on the facts of this case, there is evidence that there has been a waking watch. Although the foremost purpose of a waking watch is to protect persons, by creating a means of raising the alarm in the event of fire, it also has the effect of preventing or ameliorating the risk of fire spreading sufficiently to cause destruction or damage thereby delaying the need to carry out the remedial works. It would be a surprising result if the effect of taking these steps was to support the argument that there was no need for immediate remedial works.

51. The terms of clause 6 (Basis of Claim Settlement) do not add anything to Allianz’s argument and only provide that the basis of settlement is “costs necessarily incurred by way of remedial measures to prevent actual destruction or physical damage”. That is indicative that remedial works would be anticipated for that purpose but not that a period when remedial works are not carried out demonstrates that there is no threat of imminent destruction or physical damage.

52. I mention lastly in this respect the Health and Safety Extension. As I have said, an aspect of Allianz’s case was that the policy did not include this extension which was the appropriate cover for fire safety risk. The policy was originally taken out by Fleming Developments UK Ltd. (“FDL”) who constructed the property and who did not select this optional extension.

53. The Key Facts Policy Summary summarised the significant features and benefits of the Health and Safety Extension as: “Cover is provided for the costs necessarily and reasonably incurred where there is a present or imminent danger to the Health and Safety of the occupants of the Premises and repair, replacement or rectification is required to comply with the Building Regulations applicable at the time of construction or conversion.”

54. The extension itself was in similar terms and provided that all other terms of the policy remained unchanged. The extension provided cover for remedial works that were required to comply with the Building Regulations applicable at the time of construction in relation to structure, site preparation and resistance to moisture, fire safety, heat producing appliances, hygiene, drainage and waste disposal, protection from falling collision and impact, and safety in relation to impact opening and cleaning of glazing. It is not Allianz’s case that the terms of the Health and Safety Extension were ever sent to FDL.

55. Allianz relied on the Key Facts Policy and the Health and Safety Extension as part of the background knowledge which would reasonably have been available to the parties when they entered into the contract and was, therefore, part of the commercial context which the court should take into account when construing the policy. Vivid accepted that these were admissible background facts but no more and, in particular, submitted that it was illegitimate to take the same approach as might be taken to deleted words in a contract.

56. In my judgment, the most that can be said of the Health and Safety Extension is that it is in different terms from clause 3. It applies where there is a present or imminent danger to the health and safety of occupants and not a danger (or threat) of destruction or physical damage of property. It is clear from the range of matters to which it applies that, whilst there may be some overlap with risk of physical damage to property, it provides cover in respect of matters that could only be contemplated to be material to health and safety. Further, the cover is then expressly in respect of works necessary to achieve compliance with the Building Regulations applicable at the time. There is, therefore, no complete correlation between Vivid’s case on the application of clause 3 and this extension so that, even as part of the commercial background, it is of little or no assistance to Allianz’s construction of the policy. Defect 4

57. I have focussed above on the Defects other than Defect 4 which is, in my view, of a different nature. In this instance, the threat of imminent destruction or damage is said to arise from the risk that the bracketry may fail and the cladding come away. Vivid argues that nothing further is required to happen (in contrast to the Defects concerning fire) and that, therefore, the risk of detachment exists and must give rise to a threat of imminent damage.

58. In my judgment, that does not follow and this defect is more akin to my example above of the load bearing capacity of part of the structure. As at August 2019 or when the claim was submitted, detachment might have been imminent but equally it might have been the case that any detachment would not happen until well into the future once the fixings had deteriorated further or the overstressing had eventually caused failure. It is for Vivid who claim under the policy to adduce the evidence as to whether the threat is one of imminent damage and, as Ms Ansell rightly submitted, there was no such evidence. Such evidence as there was pointed the other way since Vivid had taken no steps to guard against the risk of the cladding detaching. It would, I think, be wrong to construe the policy by reference to subsequent events, but it is the case that, despite the absence of any mitigating measures, there is no evidence that any cladding had or has detached.

59. Accordingly, I cannot see any realistic prospect of success for Vivid on this Defect in so far as it relates to imminent damage rather than any case that may be advanced as to actual damage. Conclusion

60. Allianz’s case was that this was a short point of construction which could be determined on a summary basis and on the basis of assumed facts.

61. For the reasons I have given, in my judgment, Vivid’s case on the construction of the policy clause and whether the policy responds has a real prospect of success in relation to all Defects other than Defect 4 and the application for summary judgment is refused. In respect of Defect 4 as currently pleaded, the application is granted.