Aviva Insurance Ltd v Brown
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 25 February 2011 |
| Neutral Citation | [2011] EWHC 362 (QB) |
| Docket Number | Case No: HQ08X04780 |
| Court | Queen's Bench Division |
| Date | 25 February 2011 |
[2011] EWHC 362 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice eder
Case No: HQ08X04780
Mr. Graham Eklund QC (instructed by Greenwoods Solicitors) for the Claimant
Mr. Andrew Burns (instructed by WGS Solicitors) for the Defendant
Hearing dates: 25, 26, 27, 28, 31 January 2011
Mr Justice Eder:
Introduction
The Claimant ("Aviva") is an insurer, formerly known as Norwich Union Insurance. The present action and trial relates to policy number 01–2116392-CBC whereby Aviva insured the Defendant ("Mr Brown") against the risk of subsidence to his property at 13 Friern Barnet Lane, London, N11 3LT ("No.13").
Mr Brown bought No.13 in February 1978 and insured it through Abbey National Home Insurance ("Abbey"). Aviva and its predecessors ("Aviva") were the underwriters of the Policy. (For convenience, reference to Aviva also includes Abbey.) According to Mr Brown, he lived in No.13 with his wife. He was and is an Estate Manager, letting out the house next door, No.15, to tenants as a house in multiple occupation (as 'bedsits'). He had other properties and a caravan. He and his wife are directors and shareholders in Northway Design & Development Co Ltd ("Northway") which owned No.15 from 1968 until about 2005. Mr Brown held 951 of the 1500 issued shares, his wife 49 shares and the balance (500 shares) were held by R G Brown Discretionary Trust.
Mr Brown originally made a claim under the policy for subsidence in 1989. A further claim was made in 1996. After some considerable delay, Aviva admitted the claim but the repair works were not carried out until 2008. Aviva paid the cost of repairs (£176,951.68) and a further amount for damage to a skylight (£3,132.82). As part of the claim, Aviva also paid an amount in respect of alternative accommodation in the sum of £58,500.
Aviva brings this action to recover the sums which it has paid under the policy (together with interest and costs) on the basis that the claim made by Mr Brown in relation to alternative accommodation was fraudulent. Aviva also asserts that it is discharged from any further liability.
Mr Brown denies any fraud on his part. He denies that he is under any liability to pay any sum to Aviva and seeks to claim further sums from Aviva in respect of (i) the cost of repairs which have not been paid by Aviva (a total of £68,314.75 plus VAT) and (ii) alternative accommodation in the sum of £102,266. In addition, Mr Brown claims interest and costs.
The central issue is: Was Mr Brown fraudulent in relation to his claim for alternative accommodation?
The Policy
The Policy was underwritten by Aviva. The introduction to the insurance policy provided:
"[Abbey National] will agree to pay for any damage, liability or losses or costs as set out in this Policy or any amendment agreed between you and Abbey National which occur during any Period of Insurance and any subsequent period for which [Abbey National] have issued a renewal notice and you have paid the premium. This Policy booklet is issued by Abbey National on behalf of the Insurer."
Section 1 of the Policy provided that:
"[Abbey National] will insure your home against loss or damage occurring during the Period of Insurance caused by… Subsidence or ground heave of the site on which the home stands, or landslip… [Abbey National] will pay the cost incurred in rebuilding or repairing the part of the home which is lost or damaged by an insured cause, but not more than its rebuilding cost…"
The Policy also provided:
"We cover
17. Cost of Temporary Accommodation and Loss of Rent if your home becomes uninhabitable due to any cause set out in paragraphs 1–15 we will pay for;
a) the cost of reasonable temporary alternative accommodation for you and your household if you occupy the home"
"General Conditions
5. Fraud
We will not pay any claim which is in any respect fraudulent"
The Oral Evidence
During the trial, I heard oral evidence from the following witnesses:-
A. On behalf of Aviva:
) Duncan Hamilton. He is a Building Surveyor who commenced employment with Cunningham Lindsey Loss Adjusters ("Cunningham") in 1997 and became a Project Manager in September 2003. He took over the project management of the claim at the post tendering stage in March 2007. Mr Hamilton was involved in consideration of the alternative accommodation claim.
) Keeley Yeatman (née Norwood). She started employment with Cunningham in 2004 in the customer service department. In September 2006 she was promoted to customer support team leader and in October 2009 was promoted to customer support person.
) Robin Harris. He is a special investigator with Cunningham and became involved in the claim in July 2008.
B. Mr Brown. In addition, there were called on his behalf:
) Brian Sidney Regler. He is a practising solicitor of some 37 years standing of Colemans Solicitors. He has been friends with Mr Brown for 50 years and has worked as a solicitor for Mr Brown and his family for approximately 35 years.
) Derek Root, his accountant since 1989 and a consultant with Slater Perry & Co, chartered Certified Accountants.
) John Hydon, Director of Surveying at Halsteads Associates, ("Halsteads"), a firm of consulting engineers and surveyors who dealt with the claim.
) Dennis McManus, the director of a building firm which carried out the repair works.
History of the Insurance Claim
Mr Brown first made an insurance claim for subsidence on 14 February 1989. The matter dragged on while the subsidence was monitored over a long period and there was much discussion about repair of the drains. The drains were repaired, but the subsidence worsened and the cracking continued. So Mr Brown made a further subsidence claim in October/November 1996.
Aviva appointed Cunningham (then called Ellis & Buckle) to act as loss adjusters on its behalf and to investigate the claim. Following a lengthy investigation, Cunningham and the appointed engineers, Halsteads, could not agree on the scope of the works.
Cunningham carried out an inspection on 26 November 1996 and submitted a report to Aviva. It noted damage to the rear single storey extension and next to the front two storey bay. It accepted Halsteads' conclusion that the cause was attributed to subsidence due to clay shrinkage with nearby trees being a dominant factor. Two of the trees were on council land and the other was owned by No.15. Cunningham noted that the neighbour "was likely to cooperate and remove the tree". This was because Mr Brown had told Cunningham that he owned No.15.
Site investigations to test movement and boreholes took a long time. Halsteads recommended to Cunningham on 18 December 1997 that they liaise with the insurers of the adjoining property in which Mr Brown had an interest so that the works could be carried out at the same time. Halsteads gave details of Northway's insurers and an engineer proposing a common approach to save cost. Cunningham's file does not reveal what steps it or Aviva took to liaise with Northway's insurers.
Cunningham produced a report dated 1 June 1998. The opening part of that report states: "We last spoke to the Policyholders engineer at the beginning of May and they advised that damage had occurred to the neighbouring attached property to which the Policyholder also has an interest…and we have written to them noting them of our interest as any repairs to the party wall areas are likely to be a joint responsibility". A copy of that report was provided to Aviva at that time.
Cracking to the party walls with No.15 was still an issue a year later in October 1999 as the dispute as to the extent of the subsidence dragged on into another year. The engineers were not instructed by Aviva to draw up the specification for works until April 2000 and these included a reference to the party walls. The contractors were informed in June 2000 that "With regard to Party Wall matters, the Client (i.e. Mr Brown) also owns the adjacent property so access will not be a problem". This was copied to Cunningham.
Halsteads forwarded four tenders for the works to Cunningham in July 2000. However, more delays ensued. Mr Brown told Cunningham that he could not live in the house during the period of works as he had chronic asthma. He provided Cunningham with a G.P. certificate as requested. The Policy provided for the costs of alternative accommodation in such circumstances. Mr Brown was most unhappy with Aviva's reluctance to agree that he could move out during the works. He made plain that he was "fed up" at the time it was taking for his claim to be settled.
The dispute over the alternative accommodation rumbled on and there was no progress. Cunningham produced a further report dated 19 April 2002 which recorded that a "possible solution was agreed whereby the Policyholder would be paid the sum of £9,000 for three calendar months for him to make his own arrangements… He has undertaken to investigate the local market and/or staying with relatives etc and this matter is yet to be agreed". Mr Brown pointed out that he was entitled to alternative accommodation that was equivalent to the insured premises whereas Cunningham noted that he and his wife only lived in part of the house as part of No.13 was tenanted. Cunningham asked again in December 2002 whether there was an option for Mr Brown to stay with family in which case Cunningham stated that they would be pleased to discuss an increased monthly cost.
Further discussions took place with regard to the type and cost of alternative accommodation. Cunningham's position was that the maximum was £3000 per month for 3 months. Mr Brown's view was that this might not be satisfactory but Cunningham were adamant that...
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