The proceedings arose out of a serious fire at the Sugar Hut Club, Essex in 2009. A dispute arose as to, among other things, the amount of business interruption losses to which the claimants were entitled. In particular, the parties disagreed as to the calculation of the overall loss of turnover.
Sugar Hut Group and others v A J Insurance: Queen’s Bench Division, Commercial Court (Mr Justice Eder): 20 October 2014
Claim – Business interruption losses – Fire occurring at nightclub – Nightclub being closed for almost one year – Claimants claiming entitled to recover losses from defendant insurance broking partnership
The proceedings arose out of a serious fire at the Sugar Hut Club in Essex (the club) in September 2009. The first claimant was the ultimate holding company of the Sugar Hut group, which promoted and organised the group from offices on the same premises as the club.
The other claimants were companies in the Sugar Hut group and the trading companies for Sugar Hut clubs in Brentwood, Fulham, Basildon and Hertford. The defendant, AJI, was an insurance broking partnership which procured the claimants’ insurance cover in March 2009. A trial of liability between the claimants and AJI followed.
Shortly before the trial, AJI conceded liability on the terms set out in a consent order. The present proceedings concerned claims which were still in dispute. The various claims were considered by forensic accountants. B, instructed by the claimants, calculated lost turnover based on an average between two perspectives. B’s first perspective (P1) was, in effect, based upon an extrapolation of the club’s turnover in the period before the fire. B accepted that the difficulty with that exercise was the lack of reliable data before the middle of October 2008.
Accordingly, B sought to identify what, if any, trends there were within the period of approximately 11 months prior to the fire to seek to measure the impact of the changes which were said to have been made to the underlying business. It was common ground between the experts that it was reasonable to exclude bank holiday weekends and the pre-Christmas period, which resulted in ‘spikes’ in turnover (the excluded period).
B’s second perspective (P2) was based upon the actual turnover achieved post-fire, after the club had reopened in August 2010. The evidence of S, who had been instructed by the defendant, was that the averaging exercise carried out by B was flawed and unreliable. S concluded that the club’s turnover in 2009 to 2010 would only have increased by the relatively modest amount of the consumer price index (CPI).
The issue before the court was, inter alia, the measure of business interruption losses to which the claimants were entitled. In particular, the court considered the assessment of the overall loss of turnover during the period immediately following the fire, until the club reopened in August 2010.
The court ruled: the appropriate approach to the calculation of the overall loss of turnover during the period immediately following the fire would be to increase the weekly sales figures for 2008 to 2009 up to the week ending 28 February 2009 by 20%, apart from the six-week excluded period, which should be increased by 10%, to arrive at a projected turnover in the equivalent weeks following the fire in 2009 to 2010.
Thereafter, a notional increase equivalent to the CPI should be applied to the remainder of the period in 2010, until the reopening of the club. It was then necessary to consider what, if any, account should be taken on the turnover actually achieved after the club reopened. In principle, such an exercise was potentially relevant.
However, the P2 exercise was not comparable, provided no real assistance in the circumstances of the present case and should be ignored. It followed that B’s averaging exercise would fall away. Therefore, the lost turnover should be assessed by reference to B’s P1 exercise, as modified (see , ,  of the judgment).
The claimants were entitled to recover the net amounts calculated in accordance with the judgment, together with interest, at a rate of 5% per annum (see ,  of the judgment).
Richard Slade QC (instructed by Thomas Cooper LLP) for the claimants; Angus Piper (instructed by Caytons Law) for the defendant.