Merchants and Manufacturers Insurance Company Ltd v Hunt
| Jurisdiction | England & Wales |
| Date | 1940 |
| Year | 1940 |
| Court | Court of Appeal |
Insurance - Motor-car - Policy - Insured sued by third parties injured - Insurers claim declaration that entitled to avoid policy - Third parties added as parties to insurers' action - Admission of alleged non-disclosure and misrepresentation by assured - Inadmissible against added parties - Declaration not granted as against added parties - Grant of declaration, in discretion of Court -
Insurers, pursuant to s. 10, sub-s. 3, of the Road Traffic Act, 1934, sued their insured for declarations that, apart from any provision in the policy, they were entitled to avoid it, on the ground that it was obtained by the non-disclosure of material facts or by a representation of facts which was false in material particulars. Plaintiffs, who were suing the insured in an action for damages for personal injuries received from collision with the insured motor-car on the ground of the driver's negligence, and who, if they recovered judgment against the insured, by the terms of sub-s. 1, notwithstanding that the insurers might be entitled to avoid the policy, could, subject (inter alia) to the provisions of sub-s. 3, recover their damages and costs from the insurers, were given notice by the insurers pursuant to the proviso to sub-s. 3, specifying the non-disclosures or misrepresentations on which they proposed to rely. Pursuant to that proviso these plaintiffs were added as parties to the insurers' action for declarations. The insurers claimed two declarations: the first in general terms following the words of sub-s. 3 and the second that they were under no liability to indemnify the insured — the policy holder and his son, the driver of the car — in respect of any damages or costs which might be awarded against them in the action by the added parties. The only evidence tendered on the issue of the insurers' action that the policy was obtained by such non-disclosures and misrepresentations was inadmissible as against the added parties, but although objected to on their behalf, it was admitted. The trial judge held that the insurers by a provision in the policy had expressly contracted out of the right conferred upon them by sub-s. 3, to escape from the liability imposed upon them by sub-s. 1. On appeal it was contended for the defendant insured that the duties of disclosing all, or of not misrepresenting any, material facts were not duties existing at common law or in equity, outside the insurance contract, but that each of them was just an implied condition of the contract which in the case of this policy was superseded by express conditions in the contract, covering the same ground or inconsistent therewith, only negativing liability for payment on breach thereof. The declarations sued for must, by the terms of sub-s. 3, be apart from any provision in the policy. It was contended for the insurers (1.) that the function of the added parties was merely to see that the insurers' case was properly proved against the defendant insured and to watch against possible collusion between the insurers and insured, and (2.) that when once the insurers had proved against the defendant insured that the policy had been obtained by the policy holder by such non-disclosures and/or misrepresentations the insurers were entitled by the very terms of sub-s. 3 to a declaration, ex debito justitiæ:—
Held, that the added parties were defendants to the action and as such entitled to strict proof, as against them, of the facts on which the declarations were founded. Accordingly, the action failed as against the added parties.
The Court, assuming that it had power to grant the declarations sued for as against the insured, in the exercise of its discretion, refused to make either declaration.
Per Scott and Luxmoore L.JJ. Whatever might be the law with regard to non-disclosure of material facts, the right to avoid a contract, whether of insurance or not, induced by misrepresentation, did not depend on any implied term of the contract, but arose by reason of the jurisdiction, originally exercised by the Court of Equity, to prevent imposition: and per Scott L.J. semble the common law duty to make full disclosure of material facts was not merely based on an implied term of the contract.
APPEAL from a judgment of Stable J.
The history and facts of the case were stated by Luxmoore L.J. in his judgment as follows: On September 1, 1938, one Charles Hunt filled in and signed a proposal form and declaration requesting the Merchants and Manufacturers Insurance Company, Ld. (hereinafter called “the company”) to issue to him a policy of insurance in respect of (among other things) his liability to third party risks in respect of a Vauxhall motor car belonging to him and described in the proposal form. The period of the insurance was for one year from September 1, 1938, to September 1, 1939. The proposal and declaration contained a number of questions which were answered by Charles Hunt. Although a number of these questions and the answers thereto were referred to during the hearing out of which this appeal arises, it is only necessary to refer to two of such questions, namely: “7 (d) Have you or any person, who to your knowledge will drive the car, ever been convicted of an offence in connection with a motor vehicle or motor cycle or is any prosecution pending?” Answer: “No.” and “8 (a) Will the car be driven by any person under 21?” Answer: “No.” The declaration contained the following statement: “I hereby warrant the truth of the above statements and I declare that I have withheld no information whatever which might tend in any way to increase the risk of the company or influence the acceptance of this proposal.”
The proposal was accepted by the company and a policy of insurance issued to Charles Hunt in accordance therewith on September 5, 1938. The policy so issued provided, among other things, that, subject to the terms, exceptions and conditions contained therein and of any endorsement thereon, the company would indemnify as thereinafter mentioned Charles Hunt (therein described as “the insured”). The policy sets out under the heading “Indemnities under this policy” the indemnities afforded thereby. These indemnities so far as material to be stated included, under the heading “Section 1: Liability to Third Parties,” a provision that the company would indemnify the insured in the event of accident caused by or through or in connection with the said motor car in Great Britain and certain other specified territories against all sums, including claimant's costs and expenses, which the insured should become legally liable to pay in respect of death of or bodily injury to any person, except where such death or injury arises out of and in the course of the employment of such person by the insured, and that in the terms of and subject to the limitations of and for the purposes of the said section, the company would treat as though he were the insured any person who was driving the said motor car on the insured's order or with his permission, subject to certain provisos which are not material to be stated.
The policy also provided that the proposal and declaration made by Charles Hunt for the policy in question should be the basis of the contract of insurance thereby effected, and should be deemed to be incorporated therein, and that the truth of the statements and answers in the proposal should be conditions precedent to any liability of the company to make any payment under the policy (Proviso (a)). It further provided that nothing in the policy should affect the right of any person indemnified thereby or of any other person to recover an amount under or by virtue of the provisions of, among other enactments, the Road Traffic Act, 1934, s. 10, but that the insured should repay to the company all sums paid by it which the company would not have been liable to pay but for the provisions of (among other enactments) the Act and section above mentioned. The conditions contained in the policy included a condition numbered 8 which provided, among other things, that the truth of the statements and answers in the proposal should be conditions precedent to any liability of the company to make any payment under the policy. The policy issued by the company to Charles Hunt admittedly covers such liability as is required to be covered by para. (b) of sub-s. 1 of s. 36 of the
The company in due course issued to Charles Hunt a certificate of insurance in accordance with the provisions of sub-s. 5 of the same section. This last mentioned subsection provides, among other things, that a policy of insurance shall be of no effect for the purposes therein stated unless and until there is delivered by the insurer to the person by whom the policy is effected a certificate of insurance in the prescribed form.
On October 8, 1938, the insured car, whilst being driven by John Hunt, the son of Charles Hunt, with the latter's consent, was involved in an accident in which the respondents, Percy Thorne and Matilda Thorne his wife (hereinafter referred to as “the Thornes”), suffered severe injuries.
On July 17, 1939, the Thornes issued a writ against Charles Hunt and his son claiming damages against them on the ground that the injuries sustained by them were caused by the negligent driving of the motor-car by John Hunt. This action has not yet been tried and is hereinafter referred to as “the Thornes' action.”
It is provided by sub-s. 1 of s. 10 of the Road Traffic Act, 1934, that if, after a certificate of insurance has been delivered under sub-s. 5 of s. 36 of the
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