Court considers meaning of "accidental"

In the context of a boundary dispute, the High Court in Gueterbock & Anor v MacPhail v Anor [2023] EWHC 1035 (Ch) (on appeal from the County Court) considered whether a trespass was "accidental" and therefore covered under a Public Liability policy (the Policy).

The Policy provided cover for the insured's legal liability to pay compensation in respect of "accidental" trespass. It was alleged that the insured's development of a property trespassed onto a neighbouring property, in particular that the basement extension went beyond the boundary line between the two properties.

The Court concluded that the trespass was not accidental and therefore did not fall within the terms of the insuring clause in the Policy. This was notwithstanding the developer's subjective belief that the extension had not crossed the boundary line, since they appreciated that there was a considerable risk that this belief was wrong and had decided to take that risk in extending the basement to the neighbour's flank wall.

BACKGROUND

There was a boundary dispute between the owner of a property being developed – No. 30 Henderson Road – and the owners of the neighbouring property, No. 28.

The planning application for No. 30 stated that a gap of 90cm would be left between the houses in the form of a shared side path, consistent with the other pairs of houses on the road. A new basement extension was built at No. 30 which extended beyond the mid-point of the shared side path and up to No. 28's "flank wall".

The owners of No. 28, brought proceedings against the owner of No. 30 (Mr MacPhail), alleging that the basement of No. 30 encroached on their property, constituting nuisance and trespass. Mr MacPhail settled this claim for £100,000 plus costs.

The corporate vehicle carrying out the development of No. 30 was Henderson Court Limited (HCL). HCL had taken out the Policy which provided that Allianz would indemnify the insured against:

"legal liability to pay compensation and claimants' costs and expenses in respect of accidental… nuisance, trespass, obstruction or interference with any right of way, light, air or water occurring within the Territorial Limits during the Period of Insurance in connection with the Business".

The Policy also contained provisions entitling Mr MacPhail to claim under the Policy.

In the County Court, HHJ Parfitt found that the trespass and nuisance were not "accidental" within the meaning of the Policy and so the Policy did not respond. Mr MacPhail appealed this decision on the basis that either:

• the judge had misstated the legal test as to what constituted "accidental" loss under the Policy; and/or
• the judge had misapplied the law to the facts.

DECISION

Marcus Smith J considered each issue in turn.

Issue 1: The legal test: what is an "accident"?

Marcus Smith J agreed that the relevant subject matter of the "accident" was not the act of extending the basement to the flank wall of No. 28 (as this must have been intentional), but the the level of risk in the mind of HCL that this intentional act ran the risk of trespass (or nuisance), since this was the relevant risk under the Policy. Therefore, the correct question – as the judge at first instance in the County Court had correctly identified – was whether the trespass was accidental based on the level of risk.

Marcus Smith J also agreed that the relevant intention regarding the risk was that of Mr Harris, who was a director of HCL and in control of the works. Did Mr Harris decide to extend the basement knowing that it would be a trespass or willingly taking that risk? If he did, then the trespass would not have been accidental and would not be covered under the Policy.

Marcus Smith J found that the judge at first instance had correctly focussed on the borderline between reckless and non-reckless conduct. The judge had clearly had in mind the correct legal test when he explained that the issue was about recklessness and the attitude of the insured towards the risk that (a) the owners of No. 28 would assert that the boundary was not along their flank wall but was the mid-point of the side path (i.e. 45cm closer to No. 30); and (b) that the owners of No. 28 would be right.

Marcus Smith J considered that HHJ Parfitt's direction as to the law was "unimpeachable" and he then turned to consider its application to the facts of this case.

Issue 2: Application of the law to the facts

HHJ Parfitt at first instance found that there had been a "high level of recklessness" on the part of HCL, which rendered the act of trespass and nuisance non-accidental, so the Policy would not respond.

While there were some gaps in the evidence, the facts found by the first instance judge suggested that there was a certain level of ambiguity about whether the basement of a building could extend beyond the middle-line between the properties. It was also found that HCL had not always been frank with the owners of No. 28 regarding their concerns about the location of the boundary along the shared side path.

Based on this evidence, Marcus Smith J was surprised by the first instance judge's conclusion that HCL believed the flank wall was the true location of the boundary (which was the point to which the basement extended) but noted that this was a conclusion that was open to the judge to make on the facts.

Mr MacPhail sought to argue that Mr Harris' belief about the location of the boundary would preclude any finding of recklessness and so the trespass must have been accidental. Marcus Smith J did not agree, noting that "very few beliefs are absolute" and that the first instance judgment did not say anything about the quality of Mr Harris' belief, i.e. how confident he was in that belief.

The key question was what was HCL's attitude to the risk that this belief was wrong and that the true boundary lay down the centre of the pathway?

HCL's misleading communications about their intentions for the development suggested it was aware and took account of a considerable risk that that the owners of No. 28 would take the point that the boundary was not at their flank wall (and that they could be right about this). HCL's motivation for hiding the truth from them was to minimise the risk that they would raise this point. The judge at first instance was entitled to conclude that there was a high degree of recklessness since, even if HCL believed that the boundary was at the flank wall, they must have known that the contrary was at least arguable and that the owners of No. 28 would almost certainly have taken the point. If HCL thought this was without risk, it would not have needed to mislead No. 28 to obtain their consent. The claim under the Policy therefore failed because the trespass was not accidental.

COMMENT

Although a decision specific to the facts, the case provides a reminder of the legal test for what is "accidental" which will be of broader interest. The borderline between reckless and non-reckless conduct is key. As Marcus Smith J summarised:

"…it is the borderline between reckless and non-reckless conduct that one is focussing on. That borderline really concerns a person's "appetite for risk"…with intentional conduct unequivocally on the non-accidental side of the line, and a state of mind consciously and reasonably not even anticipating the risk on the accidental side of the line."

The decision is also a reminder to policyholders that their subjective belief may not be sufficient to determine if an outcome was accidental, in circumstances where they appreciate there is a (considerable) risk that their belief is incorrect but decide to take the risk and proceed anyway.