Orakpo v Barclays Insurance Services Company Ltd
| Jurisdiction | England & Wales |
| Judge | Staughton,Hoffmann L JJ,Sir Roger Parker |
| Judgment Date | 29 March 1994 |
| Date | 29 March 1994 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal.
Staughton and Hoffmann L JJ and Sir Roger Parker.
Andrew Phillips (instructed by Jarvis and Bannister) for Commercial Union.
The appellant appeared in person.
The following cases were referred to in the judgments:
Black King Shipping Corporation & Anor v Massie (The Litsian Pride)UNK[1985] 1 L1 Rep 437.
Britton v Royal Insurance CoENR(1866) 4 F & F 905; 176 ER 843.
Crane v Colonial Mutual Fire Insurance Co LtdUNK(1920) 28 CLR 305.
Liverpool City Council v Irwin & AnorELR[1977] AC 239.
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of IndiaUNK[1990] 1 L1 Rep 391.
Reid & Co Ltd v Employers' Accident and Live Stock Insurance Co LtdENR(1899) 1 SC 1031.
Insurance Whether policy void ab initio by reason of misrepresentation concerning state of property at outset Whether fraudulent claim discharged insurer from all liability in absence of express contractual clause.
This was an appeal by the owner of a property against the dismissal of his claim under an insurance policy on grounds, first, that there was misrepresentation in the insurance proposal he had signed, and secondly, that his claim was fraudulent with the result that all the benefit under the policy was forfeited.
The appellant, O, was the owner of a large house divided into 13 bedsitting rooms. Barclays Bank plc (the bank) as mortgagees required the building to be insured. O insured the property through Barclays Insurance Service Co Ltd, cover being provided by a number of companies including Commercial Union Assurance plc, the second defendants. In 1985 the building was dilapidated, although in the insurance proposal form early in 1985 O declared the building to be in a good state of repair. In July 1985 the local authority served a repair notice and sent a copy to the bank as mortgagees. It was not passed on to Barclays Insurance. Repairs were not carried out. In January 1987 frost damage to pipes caused flooding and consequential damage. There were three tenants only at that time. In October 1987 storms damaged the roof leaving gaping holes which were not repaired, thereby causing further extensive damage. The last tenant left shortly afterwards. In March 1988 O first made an insurance claim to Barclays Insurance. Commercial Union instructed loss adjusters to investigate the claim. By letter the loss adjusters advised O to protect the roof with tarpaulins and employ a surveyor to draw up a specification of remedial works required, for the costs of which there was cover under the policy. Vandals were responsible for further damage. Some repairs were done but the most of the damage remained until the house was set on fire and destroyed by vandals. The local authority sought to recover from O 26,000 spent on emergency safety measures. O made a claim against Commercial Union as insurers for 265,321 with interest. The trial judge gave judgment for Commercial Union on the grounds that there had been a misrepresentation in the proposal form and a fraudulent claim as a result of which the entire benefit of the insurance policy was forfeited. O appealed.
Held, dismissing the appeal:
1. The bank, which was served with a copy of the repair notice in July 1985, was not an agent for the insurers but co-insured, and accordingly the insurers had neither actual nor constructive knowledge of the repair notice.
2. The letter from the loss adjusters appointed by Commercial Union did not contain an unequivocal representation as to the existence and validity of the policy, but merely as to its contents. Since an unequivocal representation was a necessary requirement of estoppel, it followed that Commercial Union was not estopped by the statements of the loss adjusters from declaring the policy to be void.
3. The insurance proposal form signed by O contained material misrepresentations relating to the state of repair of the property at that time, and accordingly in the absence of estoppel, the defence of misrepresentation succeeded.
4. (Per Hoffmann LJ and Sir Roger Parker) The insured was under a duty to act in good faith not only in relation to statements made in the insurance proposal form but also claims under the policy. Where fraud in the making of the claim was averred and proved the insurer was discharged from all liability under the policy. As O had knowingly put forward a claim he knew to be largely false, the claim was fraudulent. Accordingly the insurers were accordingly entirely discharged from liability under the policy.
5. (Per Staughton LJ) In the absence of an express term in the contract stating that any false or fraudulent claim would result in all benefit under the policy being forfeited, such a term was not to be implied into the contract. Although there was a duty not to make fraudulent claims, an insured who knowingly exaggerated a claim in some degree should not as a matter of law be disqualified from any recovery under the policy.
Staughton LJ: Mr Orakpo was in 1985, and still is, the owner of a large house at 200 Bedford Hill, London SW12. It was divided into 13 bedsitting rooms with bathrooms or shower rooms for use in common. All or some of the bedsitting rooms were let, so as to bring in an income for Mr Orakpo. He had borrowed money on the security of the house from Barclays Bank plc and was required by them to effect insurance on the building. That was done through the company named as first defendants in this action, whom I will call Barclays Insurance. They are no longer a party as the claim against them was struck out. The insurance was effected with the second defendants Commercial Union Assurance plc, amongst others.
Already in 1985 there was a need for repairs at 200 Bedford Hill. The London Borough of Wandsworth served a notice to that effect in July of that year; and I do not suppose that local councils are particularly swift in such matters or tend to act prematurely.
Then it is said that in January 1987 there was frost damage to pipes in the building, and consequent flooding, so that some of the ceilings fell down. At that time there were only three tenants in the house. Something had already made it unattractive to others.
A further disaster is said to have occurred in October 1987, when there was a great storm over much of the South of England; the roof of the building was damaged and gaping holes were left.
Soon afterwards the last of the tenants left and vandals moved in. They stole anything that was worth taking, and deliberately damaged what they could not take. Dry rot was now apparent in the house to a substantial extent. Some repairs were done in the summer of 1985, and more in April 1991. But in the main the damage from all of these causes was still unrepaired when the action came to trial in the summer of 1992. Since then a further misfortune has occurred. The building has been set on fire and destroyed by vandals. Wandsworth Council has spent 26,000 on emergency measures for the public safety, and seek to recover that amount from Mr Orakpo.
A claim was made against the Commercial Union as the insurers. The surveyor engaged by Mr Orakpo summarised the cost of repair before the fire as follows:
(1) Damage attributable to storm and burst pipes 39,093.
(2) Works attributable to dry rot 22,805.
(3) Works attributable to malicious damage/vandalism 32,803.
(4) Works relating to contents 10,770.
(5) Works relating to maintenance 14,571.
(6) Professional fees 21,607.29.
In addition there was a claim for loss of rent for two years and nine months amounting to 77,233 and VAT at 17.5 per cent. The total of the loss pleaded in the statement of claim was 265,321 and interest.
Shortly before the trial there was a consent order, providing that the issues of liability and damages be tried separately. Only the issues of liability were tried by Judge Mildon QC, sitting as a judge of the Queen's Bench Division. There was nevertheless some examination of figures for reasons which will appear later. In the event the judge (dismissed the claim and gave judgment for Commercial Union, on two distinct grounds. First, he found that there was misrepresentation in the proposal for insurance which Mr Orakpo had signed; and secondly, that the claim was fraudulent with the result that all the benefit under the insurance policy was forfeited.
Mr Orakpo has appealed to this court. For the present he seeks only a determination that the Commercial Union are liable for his loss. If he obtains that, there will then have to be an assessment of the damage which he has suffered. That, he says, will now be at the very least a total loss under the policy on his building. Although the insurance has long since expired, he would argue that the damage caused by fire occurred because the Commercial Union had failed to pay, and he could not afford to repair and protect the property; the same argument would apply to the damaged furniture, which was not itself covered by insurance; and possibly to some of the damage by dry rot or vandalism.
This is in a document headed Barclays Personal Insurance Plan. When something called a plan is offered to the public, one usually finds that it includes a good deal which the customer does not want, as well as something that he does. This case is no exception.
The document provides that for home buildings and home contents policies the insurers would be eight companies, of which Commercial Union are named first and bear 20 per cent. By way of introduction it states:
Your Personal Insurance Plan is a contract between the Insurers of each Policy as I listed on the cover opposite and you the insured. The proposal form and declaration which you signed is the basis of the contract.
That was signed:
M A Pitcher, Managing Director, Barclays Insurance Services Co Ltd.
Mr Orakpo protests that he did not know that Commercial Union were involved. He also at times argues that the insurers were Barclays Bank or...
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