Ashfaq v International Insurance Company of Hannover Plc, Court of Appeal - Civil Division, May 12, 2017, [2017] EWCA Civ 357

Issuing Organization:Civil Division
Actores:Ashfaq v International Insurance Company of Hannover Plc
Resolution Date:May 12, 2017
 
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Case No: A1/2016/0167

Neutral Citation Number: [2017] EWCA Civ 357

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

LEEDS DISTRICT REGISTRY

TECHNOLOGY AND CONSTRUCTION COURT

HIS HONOUR JUDGE BEHRENS

LOWER COURT NUMBER: B50LS710

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 12/05/2017

Before:

LORD JUSTICE McFARLANE

LORD JUSTICE BRIGGS

and

LORD JUSTICE FLAUX

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Between:

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Mr Jeffrey Terry (instructed on a Direct Access basis) for the Appellant

Mr Richard Sage (instructed by RPC) for the Respondent

Hearing date: 4 May 2017

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JudgmentLord Justice Flaux:

Introduction

  1. The Appellant (to whom I will refer as ``the insured'') appeals with the permission of Jackson LJ from the judgment dated 30 November 2015 of His Honour Judge Behrens in the Technology and Construction Court in Leeds, whereby the judge entered summary judgment in favour of the Respondent (to which I will refer as ``the insurer'') dismissing the insured's claim for an indemnity under the Residential Let Property Insurance Policy issued by the insurer to the insured, following a fire at a property in Huddersfield owned by the insured. The judge also ordered the insured to repay interim payments made by the insurers under the policy in the sum of £41,303.

    The factual background

  2. The insured was the owner of a residential property at 9 Inglewood Avenue, Huddersfield. The property was let out to students. On 30 January 2012, the insured made an application through his insurance brokers, Total Insurance Solutions Ltd (``the brokers''), for a Residential Let Property Owners insurance policy with Gresham Underwriting Limited (``Gresham''), which held a binding authority to underwrite such insurance business on behalf of the insurers. The brokers completed an online proposal form on behalf of the insured which included a Statement of Facts. The online proposal form when completed stated that ``The client has been made aware of the content of ALL of the Statement of Facts'', and that ``the client AGREES to the facts''. The proposal form also stated that the ``Occupancy Status'' of the property was ``Students''.

  3. The Statement of Facts, so far as relevant, provided as follows:

    ``The quotation and any subsequently offered insurance are subject to compliance with ALL the following statements (except where otherwise agreed in writing by Underwriters)

    This Statement of Facts will form the basis of any contract entered into with Insurers

    ...

    You or any joint or co-insured have never... been convicted, or have any prosecutions pending, in respect of any offence other than motoring offences''.

  4. On 1 February 2012, Gresham provided a quotation on the basis of that proposal form and Statement of Facts, which was accepted. Gresham then issued the Residential Let Property Insurance Policy on behalf of the insurers, providing cover from 1 February 2012 to 31 January 2013. In so far as relevant, the Policy provided as follows:

    ``The Insured carrying on the Business described herein and no other for the purpose of this insurance and having paid or agreed to pay the premium as consideration for such insurance during the period stated in the Schedule or any subsequent period stated in the Schedule for which the Insurers shall have accepted the premium required for this Policy.

    The Insurers and the Insured agree that:

    · This Policy, the Schedule [...] and any Endorsement shall be considered one document and any word or expression to which a specific meaning has been attached shall bear such meaning wherever it appears

    · The proposal or any information supplied by the Insured shall be incorporated in the contract

    ...

    · The Insurers will provide the insurance described in this Policy subject to the terms and conditions specified herein.''

  5. The ``Business'' was defined in the Policy as follows:

    ``That of a buildings owner where a minimum of 30% of each and every Premises covered by this policy is self-contained private residential accommodation, and where the Premises is wholly or partially let to others''.

  6. The Schedule to the Policy identified the ``Business'' as ``Residential Let Property Owner'', the ``Reason for Issue'' as ``New Business'', and the ``Policy Type'' as ``Residential Let Property Scheme''. The coverage provided included for damage to buildings in the sum of £280,000 and loss of rent for up to 12 months in the sum of £56,000.

  7. On 6 July 2012, the property was extensively damaged by fire, and the insured made a claim under the policy. By April 2013, the insurers had made two interim payments totalling £38,232, but subsequently became concerned that the claim was fraudulent (although the nature of those concerns are not relevant to this appeal). In the course of investigating the suspected fraud, the insurer's loss adjusters discovered that the information given in the Statement of Facts as part of the proposal form, that the insured had not had a prosecution pending at the time that the application for insurance was made, was not correct.

  8. In fact, the insured had been charged with common assault contrary to s.39 of the Criminal Justice Act 1988 and with criminal damage, all arising out of an altercation with a former work colleague on 29 July 2011. He pleaded not guilty at Kirklees Magistrates Court on 13 October 2011. He had been due to stand trial in December 2011, but the case was adjourned. On 14 January 2012 (so only a matter of weeks before the application for insurance was made and the Policy incepted), a new trial date was set for 7 March 2012. In the event, only the charge of common assault was pursued by the prosecution before the Magistrates and the insured was convicted and sentenced to a restraining order for 24 months and a fine of £100.

  9. Having discovered that this prosecution had been pending at the time of the application for insurance, the insurers declined to make any further payments to the insured and reserved their position. The insured instructed Chambers Solicitors of Bradford who issued proceedings on his behalf in October 2014 against the insurers and settled both the original Particulars of Claim and Amended Particulars of Claim after the brokers had been joined as defendants. The insurers avoided the Policy for material non-disclosure and misrepresentation on 9 January 2015.

  10. In their Amended Defence and Counterclaim served in May 2015, the insurers raised three defences which arose out of the failure of the insured to disclose the pending prosecution to the insurers and which were relevant to the subsequent summary judgment application:

    (1) That the provision in the Statement of Facts: ``The quotation and any subsequently offered insurance are subject to compliance with ALL the following statements'' was a condition precedent to any insurance coming into existence, which had not been complied with;

    (2) That, given the presence of the ``basis of contract'' provision in the Statement of Facts as incorporated in the Policy, there was a breach of warranty by the insured, since the negative answer to the question about pending prosecutions was not correct, which breach of warranty entitled the insurers to avoid liability for the claim;

    (3) That that negative answer and the failure to disclose the pending prosecution constituted a material non-disclosure or misrepresentation entitling the insurers to avoid or rescind the Policy ab initio, which they had done.

  11. The insurers counterclaimed for the return of the interim payments made to the insured. Chambers Solicitors had originally settled a Defence to Counterclaim on behalf of the insured, alleging that the insurers had been aware of the pending prosecution when the insurance was taken out. That allegation was abandoned when, in an Admission of Facts dated 26 August 2015, the insured admitted that he had had a pending prosecution for criminal damage and common assault (described as battery) at the time of the application for insurance and that he had not informed the brokers or the insurers about that pending prosecution. The claim against the brokers was settled at some point.

  12. The insurers issued their application for summary judgment on 7 September 2015, supported by statements from Ms Melanie Eales of RPC, the insurers' solicitors and Ms Karen Hubbard, the underwriter at Gresham who had underwritten the Policy. The insured's evidence in response was due by 2 October 2015, although an extension to 16 October 2015 was agreed, but no evidence was served by that deadline. The hearing originally listed for the last week of October 2015 was relisted for 30 November 2015, with the insured's evidence to be served no later than 23 November 2015. Chambers Solicitors had been instructed to prepare the insured's response to the summary judgment application, but in the event, no evidence in response to the application was filed by the insured. There was already a witness statement from him dated 30 April 2014, evidently prepared with the assistance of those solicitors, which was in response to a letter written by RPC on behalf of the insurers dated 6 March 2014 raising various queries arising out of the investigations by the loss adjusters. The only reference in that to the pending prosecution was a suggestion that he had informed the brokers about this when he instructed them on 27 January 2012, an allegation which, as I have said, has since been abandoned.

  13. On 18 November 2015, the insured terminated the services of Chambers Solicitors, as he had learned that they were under investigation by the police and were not prepared for the summary judgment hearing. On 26 November 2015, RPC were notified that the insured would be acting in person at the summary judgment hearing, and forwarded the hearing bundle (comprising some 88 pages) to him.

    The hearing and judgment

  14. The insured attended the hearing on 30 November 2015 in person and made an application...

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