Fraser v B. N. Furman (Productions) Ltd, Miller Smith & Partners (A Firm) Third Party
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WINN,LORD JUSTICE DIPLOCK |
| Judgment Date | 10 May 1967 |
| Judgment citation (vLex) | [1967] EWCA Civ J0510-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 1965. F. No. 617. |
| Date | 10 May 1967 |
[1967] EWCA Civ J0510-1
In The Supreme Court of Judicature
The Court of Appeal
Civil Division.
Appeal from Chapman J. London. 4th Nov. 1966.
Lord Justice Wilimer,
Lord Justice Diplock and
Lord Justice Winn.
Mr D. COZENS-HARDY HIRST, Q.C., and Mr RONALD SHULMAN (instructed by Messrs Mellish & Harkavy) appeared on behalf of the Appellants (Third Party).
Mr PETER WEITZMAN (instructed by Messrs J. Lessor & Co.) appeared on behalf of the Respondents (Defendants).
LORD JUSTICE WILLMER: We need not trouble you, Mr Weitzman.
I have asked Lord Justice Diplock to give the first judgment.
This is an appeal from Mr Justice Chapman in third party proceedings arising out of an action brought by Miss Fraser against her employers, Messrs B.N. Furman (Productions) Limited. The third party proceedings were brought in respect of an alleged breach of contract by the third party, who were insurance brokers (and whom I will call "the brokers") who were employed by the defendants, the breach of contract alleged being that they failed to secure adequate insurance cover for the employers against employer's liability. The brokers did notobtain any insurance against this risk. It was contested at the trial whether their failure to do so constituted a breach of their contract with the employers, but the learned judge held that it was a breach of contract, and in that respect the judgment is not assailed in this court. It is common ground that the Eagle Star Insurance Company Limited were contemplated as insurers.
Miss Fraser, who was an employee of the defendant company, sustained an accident at her employers' factory in 1962. In the action claiming damages for negligence and breach of statutory duty under section 14 of the Factories Act 1961 she succeeded and recovered £;3,325 by way of damages. The employers, who, as I say, were uninsured as the result of the breach of contract by the brokers, claimed against the brokers in the third party proceedings the sum of £;3,325 as damages for that broach of contract.
The only point argued on this appeal has been that the employers sustained no damage as a result of the breach of contract. What is said is that, if the brokers had performed their contract, the employers liability indemnity policy of Eagle Star, under which the employers would have been insured, would not have covered their liability to Miss Fraser because the insurers, Eagle Star, would have been entitled to rely upon non-performance of the contract by the employers of condition 4 of the policy, a condition which is stated to be a condition precedent to any liability of the Insurers under the policy, and is in these terms: "The insured shall take reasonable precautions to prevent accidents and disease". That is a common form condition in many policies of this type.
The breach of contract in not obtaining an employers liability indemnity policy is admitted. The employers are accordingly entitled to be put in the same position, so far as money can do so, as if the contract had been performed by the brokers. No question of remoteness of damages obviously arises in this case. If the contract had boon performed by the brokers, the employers would have been parties to a policy of insurance against employers liability in standard form underwritten by a first class insurance company of the highest reputation. As a result of the breach, they were not insured at all.
What damage they have suffered does not depend upon whether Eagle Star would have been entitled as a matter of law to repudiate liability under their standard policy, but whether as a matter of business they would have been likely to do so. What the employers have lost is the chance of recovering indemnity from the Insurers. If Eagle Star would not have been entitled to repudiate liability in law, cadit quaestio; the damages recoverable would amount to a full Indemnity. But, even if they would have been entitled in law to repudiate liability, it does not in my view follow that the employers would be entitled to no damages. The court must next consider, in that event, what were the chances with an insurance company of the highest standing and reputation, such as Eagle Star, notwithstanding their strict legal rights would, as a matter of business, have paid up under the policy.
I turn now to the policy, and I will read first the definition of the risk. It provides as follows: "Now this policy witnesseth that if any person under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease caused in Great Britain, Northern Ireland, the Isle of Man or the Channel islands during the period of insurance arising out of and in the course of his employment by the Insured in the business above mentioned the Company will subject to the terms exceptions and conditions contained herein or endorsed hereon indemnify the Insured against liability at law for damages and claimant's costs and expenses in respect of such injury or disease. There then follow certain supplementary matters into which I need not go.
The employers' liability to Miss Fraser In the action was clearly covered by the words that I have read, and they were prima facie entitled to indemnity. I must, therefore, read the second proviso, which Is as follows: "Provided further that the due observance and fulfilment of the conditions of this Policy which conditions are to be read as part of this Policy shall be a condition precedent to any liability of the Company under this Policy". The conditions referred to are seven in number, of which condition 4 is in the terms which I have already read: "The Insured shall take reasonableprecautions to prevent accidents and disease". If, therefore, this policy had been entered into, and Eagle Star had sought to deny liability, the onus would lie upon them to prove that the condition had not been fulfilled.
The first point to consider is the question of construction of that condition. It must be construed, of course, in the context of a policy of insurance against specified risks. The risks so specified, which are "liability at law for damages, are liability for breach of statutory duty for which the owner or occupier of the factory would always be personally liable, negligence at common law of the employer, for which he would be personally liable, and also the negligence of his servants, for which he would be vicariously liable. Therefore, when one approaches the construction of the condition, one does so in this context, and applies the rule that one does not construe a condition as repugnant to the commercial purpose of the contract.
There are three considerations to be borne in mind on the wording of this condition. (1) It is the Insured personally who must take reasonable precautions. Failure by an employee to do so, although the employer might be liable vicariously for the employee's negligence or breach of statutory duty, would not be a breach of the condition. That was established in, and was the ratio decidendi of, the case of Woodfall & Rimmer Limited v. Moyle, (1942) 1 King's Bench Division, page 66. (2) The obligation of the employer is to take precautions to prevent accidents. This means in my view to take measures to avert dangers which are likely to cause bodily injury to employees. (3) The third word to be construed in this context is "reasonable". "The Insured shall take reasonable precautions to prevent accidents". "Reasonable" does not mean reasonable as between the employer and the employee. It means reasonable as between the Insured and the Insurer having regard to the commercial purpose of the contract, which is inter alia to indemnify the Insured against liability for his (the Insured's) personal negligence. That, too, is established by the case that I have cited. Obviously the condition cannot mean that the Insured must take measures toavert dangers which he does not himself foresee, although the hypothetical reasonably careful employer would have foreseen them. That would be repugnant to the commercial purpose of the contract, for failure to foresee dangers is one of the commonest grounds of liability in negligence. What in my view is "reasonable" as between the insured and the Insurer, without being repugnant to the commercial object of the...
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