Stuart Jeremy Peter Wilkie V. Direct Line Insurance Plc

JurisdictionScotland
JudgeLord Carloway,Lord Clarke,Lord Coulsfield
Neutral Citation[2009] CSIH 70
CourtCourt of Session
Published date29 July 2009
Year2009
Docket NumberA1586/01
Date28 July 2009

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Carloway

Lord Clarke

Lord Coulsfield

[2009] CSIH 70

A1586/01 and A1595/01

OPINION OF THE COURT

Delivered by Lord Carloway

in causa

STUART JEREMY PETER WILKIE,

Pursuer and Reclaimer

against

DIRECT LINE INSURANCE plc,

Defenders and Respondents

___________

Act: Party

Alt: Hofford, Q.C.; HBM Sayers

28 July 2009

1. The Pleadings
[1] This litigation concerns two actions raised in May 1998. In each, the pursuer seeks a declarator that:

"in terms of their 'Policy of Insurance No. 91539300/CWK1', the defenders are obliged to indemnify the pursuer for losses sustained by him as a result of fire to his property at Achanellan, Glen Loy, Fort William, on about 6th December 1992".

In the first, the pursuer seeks payment of £179,340; being the costs of re-instating his former house at Achanellan. In the second, he seeks a further £22,000 for the loss of the contents of that house. The pursuer had bought the house in June 1989. He had renovation works carried out by a builder, namely George Brown, from September 1989 to March 1990. He avers [Closed Record p 6B-C]:

"On or about 29th July 1991 the pursuer made application by telephone to the defenders for home insurance. In response to said application the defenders sent to the pursuer a Home Insurance Proposal Confirmation Form which the pursuer signed on 25th August, 1991 and returned to the defenders. Said document bears to form the basis of Policy No. 91539300/CWK1 for the period 29th July, 1991 to 28th July, 1992".

The terms of the Proposal Confirmation form are narrated in the pleadings. They include the following:

"This Proposal Confirmation records information given to us orally and it forms the basis of the Contract of Insurance. You must check this form carefully. If it is correct and complete please sign and return one copy to us. If incorrect, please initial any changes, sign the form and still return one copy to us.

This document forms the basis of Policy Number: 9139300/CWK1

HOME INSURANCE PROPOSAL CONFIRMATION

...

This insurance is based on the following statements made by the policyholder (subject to any amendments detailed overleaf).

The Home

...

3. is in a good state of repair and will be kept so

...

IMPORTANT

Failure to disclose all relevant facts could invalidate all or part of your policy. If you are in doubt as to whether certain facts are relevant or not please ask us. In particular, you should disclose any facts which would influence an insurer in the assessment and acceptance of the risk.

...

DECLARATION

I declare that the statements made by me which are set out above and overleaf are true and correct to the best of my knowledge and belief and will be the basis of the contract between me and Direct Line Insurance plc.

I agree to accept insurance subject to the terms and conditions of the Company's policy, which I have now received.

Date 25th August Signature Stuart Wilkie".


The Policy itself stated:

"The information given to us orally or otherwise and in the proposal confirmation and declaration signed by you forms the basis of this contract. You must tell us of any change in this information as soon as possible as failure to do so could affect the cover provided".

[2] The pursuer admits [7B-C] the defenders' averment in answer [10D-E] that:

"... the Proposal Form declared that the property was 'in a good state of repair and will be kept so'. ... [H]e required to disclose all relevant facts being facts "which would influence an insurer in the assessment and acceptance of risk". ... [T]he pursuer signed a declaration to the effect that the statements within the Proposal Form were true and correct to the best of his knowledge and belief and formed the basis of the contract between him and the defenders".

[3] So far, the averments raise little by way of disputed issues of fact. However, the defenders' response to the pursuer's claim for indemnity as a result of the fire, which affected the house in December 1992, is that:

"The property was not in a good state of repair at the date of the Proposal and this was known to the pursuer ... [10E]

The pursuer had undertaken renovation of the property. He had raised [Sheriff Court] proceedings against the contractor George Brown ... on 29th of November 1990 seeking payment of £18,100. The pursuer alleged in the proceedings that the work carried out by Brown was sub-standard and unprofessional ... In March, 1993 the sum sued for was increased to £105,085 and adjustments were made to allege, inter alia, that the extension was unsafe and unsatisfactory and required to be demolished and rebuilt. The pursuer referred to a Report prepared for him by Architects, Kinghorn Mee, dated 12th November 1991 ... The inspection by Kinghorn Mee was carried out on the 23rd September and the Report issued on 16th October 1991. The Report disclosed substantial defects in the property which defects were present when the proposal had been made ..." [12B-13D].

The defenders refer to the evidence of another builder, namely John McKinnon, who had been instructed by the pursuer for the purposes of the Sheriff Court action which he raised against Mr Brown. In that action the pursuer had maintained that the house required substantial rebuilding. Eventually, after the case had reached the Inner House, the pursuer had been awarded £83,072.31 for remedial and anticipated reinstatement costs. The defenders continue:

"As at the date of the Proposal to the defenders in August, 1991 the property was not in a good state of repair and this was known to the pursuer. Esto it was not known to the pursuer that the property was not in a good state of repair (which is denied) the pursuer signed a Warranty on 25th of August, 1991 that the property was in a good state of repair as at the date of inception of the Policy irrespective of his state of knowledge. Esto the property was in a good state of repair (which is denied) the defects in the work carried out to the property were material facts which would have influenced the defenders in their assessment and acceptance of the risk and, accordingly, required to be declared to the defenders" [15A-D].

At a later point [17D-E] the defenders refer also to a letter, dated 7 October 1991, from Lochaber District Council to the pursuer's solicitors confirming that no completion certificate would be forthcoming in view of the numerous items requiring attention.

[4] The pursuer joins issue with the defenders in respect of the need to declare any state of disrepair. He counters the defenders' position by maintaining [7E-8D] that:

"... substantial renovation works were carried out during the period from May 1990 until June 1991. By about June 1991 all renovation works were complete save for minor cosmetic items. In June 1991 the buildings were in a good state of repair. Defective work carried out by George Brown had been rectified before July 1991. ... Following the departure of George Brown, renovation works in respect of both the original building and the extension were completed. In July 1991 the pursuer applied to the Royal Bank of Scotland for a mortgage over the subjects. For that purpose a valuation was obtained from H.J.G. Samuel & Partners, Chartered Quantity Surveyors, ... on about 18th July 1991. Said firm valued the buildings at £95,000 in their current state".

This last reference is to a Valuation Report for Mortgage Purposes completed by Russ Bones, surveyor. The pursuer refers to the survey, stating that £6,500 of work still remained to be carried out. He avers that he had obtained grant monies of: £5,000 on 12 January, 1990; £2,500 on 4 April 1990; and two sums of around £1,000 each thereafter. He continues [9A-D]:

"... said report by Kinghorn Mee, Architects was instructed by the pursuer's solicitors on about 5th September, 1991. The author of said report visited the premises on 23rd September, 1991 and the report was issued on 16th October, 1991. Said report did not comment on the state of the buildings as at September, 1991. Said report was retrospective and was based upon a video and photographs of the building showing its condition when George Brown left the site. ... Solicitors acting for George Brown produced a report from John D Spencely, Architect, dated 31st March 1992. Said report failed to find any signs of distress in the structure or evidence of roof leaks. Said report specifically noted that the walls were plumb, showed no sign of cracking nor of any water penetration".

[5] On the basis of the facts stated on record, the defenders were thus attempting to prove that the pursuer was in breach of the insurance contract because: (a) he knew that the house was in a poor state of repair at the date of the inception of the policy and had failed to disclose that; (b) in any event he had signed a warranty that it was in a good state of repair and it was not; and (c) in any event, he ought to have declared the Kinghorn Mee defects because they made it clear that the house was not in a good state of repair. But their plea-in-law is simply:

"3. The said contract of insurance having been voided ab initio, the defenders are entitled to decree of absolvitor".

[6] The pursuer's response is that, as at the date of the policy and thereafter, the house was in a good state of repair in terms of the Spencely report. He does not take any point on record about the terms of the letter of repudiation, which is referred to [15E-16A], as limiting the defenders' ability to repudiate to the first of the three grounds set out by the defenders. The letter, which is dated 27 May 1993, states:

"We are in possession of reports on the condition of the property, by Richard Haynes Developments in October 1990 and Kinghorn Mee in November of 1991, both showing that the property was suffering from major structural defects. It is understood that these reports were commissioned by you to assist with a civil action against the builder. On the...

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