Peabody Successful in Court of Appeal Judgment

Devonshires successfully acted for Peabody Trust (“Peabody”) in an appeal to the Court of Appeal (see judgment), in Peabody’s claim against the National House Building Council (“NHBC”) for an indemnity under the NHBC Buildmark Choice policy.

The Buildmark Choice policy contains optional contractor insolvency cover which provides the NHBC will pay up to 10% of the original contract sum if the insured housing association has to pay more to complete the new homes as a result of a contractor becoming insolvent (among other things). 

The Court of Appeal was required to consider when a cause of action under the Buildmark Choice policy accrued for the purposes of limitation, the legal rule that parties only have a certain period of time within which to bring legal claims. In other words, when was Peabody required to issue legal proceedings against the NHBC: was it six years from the date on which the original contractor became insolvent? Or was it six years from the date on which Peabody had to pay more to complete the new homes?

The NHBC’s position was that the cause of action accrues, and therefore time begins to run for the purpose of calculating limitation, on the date on which the contractor becomes insolvent. On the NHBC’s case, Peabody’s claim was statute-barred because the original contractor became insolvent more than six years before Peabody issued its claim at the High Court.

In contrast, Peabody’s position was that the cause of action accrued once Peabody had to spend more to complete the new homes: that mere insolvency of the original contractor did not start the clock ticking for the purposes of limitation.

Mr Andrew Mitchell KC, sitting as a Deputy High Court Judge in the Technology & Construction Court, agreed with Peabody in 2024. The NHBC obtained permission to appeal that decision to the Court of Appeal.

The Court of Appeal dismissed the NHBC’s appeal. The Court of Appeal agreed with Peabody’s analysis and concluded that cause of action accrues for the purpose of limitation at the point Peabody had to pay more to complete the homes.

The judgment confirms that when determining the cause of action under policies of indemnity, it is crucial to identify the risk or event that is insured against. That is consistent with the well-established principle that a cause of action under an insurance policy accrues on the happening of the event insured against. In this case, Peabody was not insured only against contractor insolvency; Peabody was insured against the risk of the contractor becoming insolvent and Peabody having to pay more to complete the new homes.

Peabody was represented by Noel Casey KC of 7 King’s Bench Walk and Mek Mesfin of 4 Pump Court, instructed by Mark London, William O’Brien, and Alicia Ogborn of Devonshires.