We use cookies to improve this site and enable full functionality. You can change your cookie settings at any time using your browser. Our cookie policy.

Aviva loses £3m dispute with Scottish council

Aviva loses £3m dispute with Scottish council

Aviva loses £3m dispute with Scottish council UK insurance giant Aviva has lost a £3 million legal dispute with a Scottish council over the restoration of open cast mines in South Lanarkshire.
 
The South Lanarkshire Council has been awarded a £3.1 million payout from Aviva, which the local authority claimed was due under a “performance guarantee bond,” the Scottish Legal News reported.
 
According to the report, the council granted the Scottish Coal Company Limited (SCCL) in 2001 planning permission for coal excavation at the Broken Cross Muir site near Douglas Water.
 
In September 2012, the council also granted SCCL planning permission consenting to further development at the site. 
 
As part of the 2012 planning permission, the council sought a performance guarantee bond backed by Aviva to ensure that restoration works would be carried out, The National reported.
 
In October 2015, the South Lanarkshire Council notified Aviva to finance the restoration works which the council had to organise itself, the report added.
 
Aviva refused to pay up, saying that “on a proper construction of the Bond the liability ... was a merely a secondary liability as guarantor.”
 
In the Court of Session, Lord Doherty ruled that that Aviva must pay up under the performance guarantee bond that it entered into in 2012.
 
“In my opinion it bears the hallmarks of a performance bond payable on a breach of the underlying obligation being asserted, and on the presentation of documents. Nomenclature is not decisive, but it is significant that the bond is headed ‘PERFORMANCE GUARANTEE BOND’,” Lord Doherty said in his written opinion, as quoted by The National.
 
Lord Doherty said reasonable persons placed in the position of the contracting parties at the time of the granting of the bond would have been fully aware of the law relating to performance bonds.
 
“On a proper construction of the bond it is not an ordinary guarantee. It is a performance bond. The defender (Aviva) assumed an autonomous obligation to make payment to the pursuer (South Lanarkshire Council) in the circumstances referred to in the bond,” Lord Doherty said.
 
“The notice which the pursuer served complied with the bond’s requirements. The defender became liable to make the payment claimed in the notice within thirty working days of its receipt,” he added.
 
A South Lanarkshire Council spokesman said they welcome the court decision, according to a report by The National.


Related stories:
Foo Fighters sue Lloyd’s over unpaid claims after Paris attacks
FIFA official wins lawsuit against Lloyd’s of London