Meisels and another v Norwich Union Insurance Ltd [Q]
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE TUGENDHAT,Mr Justice Tugendhat |
| Judgment Date | 09 November 2006 |
| Neutral Citation | [2006] EWHC 2811 (QB) |
| Docket Number | Case No: 2006/0939 |
| Court | Queen's Bench Division |
| Date | 09 November 2006 |
[2006] EWHC 2811 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HON MR JUSTICE TUGENDHAT
Case No: 2006/0939
Mr Michael Soole QC (instructed by Edwin Coe) for the Appellant
Graham Ecklund QC (instructed by Keoghs) for the Respondent
Hearing dates: 25 th &26 th October 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an appeal from the judgment of HHJ Higgins in the Central London County Court on the hearing of an issue of liability. The judge gave judgment for the claimants and the defendant insurers appeal to this court, as it happens by permission which I myself gave on paper. I shall refer to the Appellants as the defendant and to the respondents as the claimants.
The claim is on a contract of insurance on a portfolio of some 48 properties listed in a schedule. One of these, is at Gilda Crescent, London N16, and is the home of the claimants. The others were let. The first claimant makes his living as a property dealer, which involves the buying, renting and selling of both residential and commercial property. The proposal form was dated 6 th December 2001, and the contract was entered into on 14 th January 200The perils insured against included fire, flood and other perils commonly covered by buildings insurance. An escape of water occurred at the claimants' home on 6 August 2002.
The benefits payable under the contract in the event of water damage included the cost of repair and alternative accommodation in the event that the property was rendered uninhabitable. That was what the claimants claimed under the contract. The benefits payable also included loss of rent, although that was not relevant in this instance, because the damage was at the claimants' home.
The claimants claimed that the property was rendered uninhabitable by reason of an insured event namely the escape of water. The claimants have a large family and one of their properties is an hotel in Bournemouth. This also happens to be one of the properties listed in the schedule to the policy. The total value attributed to the properties in the schedule is in excess of £10 million. The defendants resisted the claim on the ground that it has validly avoided the contract. First, it was alleged that part of the claim was false and fraudulent and, secondly, it was alleged that the claimants had been guilty of non-disclosure, misrepresentation and breach of warranty. In the letter of avoidance dated 30 th July 2003, the defendants' solicitors referred only to the allegedly false or exaggerated claim. The other allegations arose only after the claimants had issued proceedings. Some were raised in the Defence served in November 2003, while others were added by amendment and re-amendment in May and November 2005.
The allegation of fraud made by the defendants included that the claimants did not in fact stay at the hotel at all. The judge rejected this defence decisively in his judgement. There is no appeal against it. The appeal relates solely to issues of non-disclosure. A number of points raised were abandoned at various stages of the proceedings. Half the judgement, which runs to twenty three pages, relates to the issue of fraud. The judge found that the claimants and their witnesses were honest and he was very critical indeed of the witnesses for the defendant called in relation to the alleged fraud. He did not accept their evidence. The findings that the judge made in relation to the alleged fraud had some bearing on his assessment of the witnesses in relation to the other defences relied on by the defendant in particular in relation to the issue of inducement. The judge's findings on the non-disclosure points are less detailed than those on the fraud issue, but the appeal is not on the basis that the reasoning is insufficient.
There were in fact two proposal forms signed by the first claimant on 6 th December 2001. Both proposals were made in the name of "Simon Tov Properties and others", which is a reference to Simon Tov Properties Ltd ("STPL") and to other owners whose names were given for the first time in a second schedule, dated 15 th January (the day after the contract was concluded). The first proposal form, to which I have already referred, has been called the "Let Plan Policy Proposal". The second is referred to as the "Property Owners Insurance Application Form". That second proposal form was required in respect of some seven properties that were let to commercial tenants. Its relevance to this claim is that the proposal form contains answers which it is admitted were incorrect when the first claimant signed the form.
The question, to which the first claimant answered No, is as follows:
"Have you or any principal in the business or any company in which you or such principal have or have had an interest … (e) ever been declared bankrupt, the subject of bankruptcy proceedings or of any voluntary or mandatory insolvency or winding up procedures? If yes give details."
In fact as is common ground, there were some 20 companies of which the first claimant had been director which had been removed from the register or dissolved. Most of these had been struck off pursuant to Companies Act 1985 Section 652. But there were four which went to creditors' voluntary liquidation, as follows:
"1. On 3 rd March 1992 Regencydeals Limited, incorporated 1 st July 1985, went into creditor's liquidation and the final meeting took place on 11 th September 1995.
2. On 16 th June 1993 Fivestar Builders Limited, incorporated 12 th March 1975, was the subject of a winding up order and was struck off on 30 th August 1994.
3. On 25 th June 1998 Investtrust Limited, incorporated on 21 st August 1991, went into creditor's liquidation. It was struck off on 10 th October 2000.
4. On 25 th June 1998 Pearl Star Limited, incorporated 21 st December 1994, was put into liquidation. It was dissolved on 10 th October 2000.
The Let Plan Policy Proposal did not contain a question in the terms set out above, nor any question relating to either bankruptcy or insolvency proceedings in respect of any company with which the proposer was associated. It did contain a number of questions the answers to which raise no issues in these proceedings. After the questions it did contain, there appear the following words:
"Disclosure: any other facts which are known to you which are likely to affect acceptance or assessment of the insurance cover you are requesting must be disclosed. Should you have any doubt about what you should disclose, do not hesitate to tell us. Making sure we are informed is for your own protection, as failure to disclose may mean that your policy will not give you the protection you require, or perhaps you may invalidate the policy altogether….
Declaration: I/We declare that the foregoing statements and particulars are, to the best of my knowledge true and complete and that I/We have read the note above, headed Disclosure"…."
The live issues remaining in this appeal arise under two headings: whether there was non-disclosure of material facts and, if there was, whether the defendants were thereby induced to enter into the Let Plan Policy. The facts alleged to be material and not disclosed are under four headings:
i) Facts relating to an Inland Revenue assessment and to accounts and returns which had not been filed or made by STPL.
ii) Facts relating to other companies which had been dissolved for failing to file accounts.
iii) Facts relating to the four companies referred to above which had been the subject of creditors liquidation, and in particular to two of them where the Inland Revenue is identified as a creditor.
iv) The fact that in relation to the property on the schedule to the policy the first claimant was the registered owner, and referred to in the schedule dated 15 January 2002, under an alias "M Hager".
The Law
The judge directed himself as follows in relation to the law on non-disclosure:
"6. With regard to the alleged non-disclosure or misrepresentation of material facts, the insurers must prove, this time to the simple civil standard, that the fact was material and that its omission, or the misrepresentation in relation to it, induced the contract. This involves both an objective and subjective test, although it is commonly accepted that if materiality is proved then there may be a rebuttable presumption (if I may use that expression) in insurers' favour in respect of inducement. In this regard, I refer to the judgment of the House of Lords in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd.
7. The basic test of materiality is to be found in Section 18 of the Marine Insurance Act (1906), which says that: "Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk." In effect, any fact which the prudent insurer would use in the formation of his opinion. In the Pan Atlantic case, Lord Mustill put it this way: "To my mind, this expression clearly denotes an effect on the thought processes of the insurer in weighing up the risk, quite different from words which might have been used but were not such as influencing the insurer to take the risk….
10. Finally, because one of the matters upon which the defendants rely by way of non-disclosure is an allegation against the claimants rather than an unchallenged underlying fact, it is necessary to consider how, as a matter of law, such a situation should be approached. It is recognised that this is a difficult topic because (for example)...
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