Ashfaq v International Insurance Co of Hannover: Court of Appeal considers the meaning of "consumer insurance"

When the insured took out a Residential Let Property Insurance Policy in February 2012 with insurers, in order to insure a property which he owned and let out to students, he agreed with a statement referred to in the proposal form that he had not been convicted and did not have any prosecutions pending. In fact, he was awaiting trial for common assault.

The proposal form contained a basis of the contract clause and insurers denied liability on the basis of a breach of warranty (as well as breach of the duty of disclosure and the breach of a condition precedent).

Although basis of the contract clauses ceased to be valid from 6th April 2013 for consumer insurance policies entered into on or after that date by virtue of the Consumer Insurance (Disclosure and Representations) Act 2012 (and from 12th August 2016 for non-consumer insurance policies entered into on or after that date by virtue of the Insurance Act 2015), neither of those Acts were in force at the date of the inception of the policy in this case. The Court of Appeal here re-affirmed the position confirmed in Genesis Housing v Liberty (see Weekly Update 36/13) that basis of the contract clauses remain valid and enforceable where the insurance policy was entered into before those two Acts.

After summary judgment was ordered in favour of insurers, the insured appealed, arguing that the judge had erred in failing to appreciate that the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR 1999") and the Insurance Conduct of Business Sourcebook ("ICOBS") rules were relevant. Insurers argued that the outcome of the case would have been no different had these been taken into account. The first issue, though, was whether the insured was a "consumer" within the meaning of either UTCCR 1999 or ICOBS.

The Court of Appeal held that he was not.

Reference was made to the Mercantile Court decision of Overy v Paypal [2012], in which it was held that, for the purpose of UTCCR 1999, a party will be acting for purposes outside his trade, business or profession "if, and only if, the purpose is to satisfy the individual's own needs in terms of private consumption" and the business purposes are "negligible or insignificant". ICOBS defines consumer as "any natural person who is acting for purposes which are outside his trade or profession". It clarifies that if a customer is acting as both a consumer and a commercial customer, he will be a commercial customer.

The Court of Appeal held that it was clear that the purpose of the policy here was related to the insured's trade, namely, the letting of the property to students for rent. The fact that the insured was also a company director made no difference: "A person who takes out a policy covering property bought under a buy to let mortgage is a "commercial customer" for the purposes of classification under ICOBS, and it is neither here nor there that that person may also be a company director of a company whose business is unrelated to property letting or also carrying on any other profession". It also made no difference what type of mortgage the insured had taken out. Nor did the reference to "home" in the quotation convert business insurance into consumer insurance. Accordingly, the appeal was dismissed.

One further point of more general interest in the case, though, was that, in relation to the non-disclosure argument, reference was made to the insurer's underwriting guidelines to support an argument about what the underwriter would have done had she known the relevant facts. She gave evidence that, in accordance with the guidelines, she would have declined the risk. However, the guidelines did not give specific guidance on how to respond in relation to pending prosecutions (although they did give specific guidance in relation to offences involving violence). The judge said that he was prepared to assume that it was arguable that the insurer would in fact have proceeded with the insurance, although it was fanciful to suggest that the pending prosecution would not have been material in relation to the fixing of the premium.

Accordingly, even though pending prosecutions were not expressly referred to in the guidelines, this had plainly been a material misrepresentation, entitling the insurers to avoid the policy.

COMMENT: This case touched on the potential problem of guidelines which are detailed but do not cover every eventuality. There is a risk, where the guidelines are detailed, that a court might find that the factors listed were intended to be exhaustive in relation to what an insurer wanted to know. Here, though, the judge was prepared to accept that it was arguable that the insurance might have still been written, but with a higher premium: in other words, to take into account the guidelines as a guide to determining what the underwriter would have done in relation to a matter not expressly covered in the guidelines. That said, the proposal form had asked about pending convictions, and so indicated that the insurers were interested in the issue.

JC & A Solicitors v Iqbal: Court of Appeal holds that insurers cannot recover fixed costs under the old RTA Protocol where claimant does not advance the claim at Stage 2

The Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ("the RTA Protocol") provides a scheme for settling such claims. It came into effect on 30 April 2010 and was amended with effect from 31 July 2013. This appeal concerns the RTA Protocol in its original form. It is estimated that there are over 400 pending cases which raise the same issue as in this case.

The defendant's insurer admitted liability at Stage 1 and paid the claimant the Stage 1 fixed costs. Stage 2 is designed to facilitate settlement. However, the claimant failed to advance his claim in the manner prescribed for Stage 2 and it eventually became time-barred. The insurer then sought recovery of the Stage 1 costs. It won at first instance but that decision has now been overturned by the Court of Appeal.

There is no express provision in either the RTA Protocol or the CPR regarding a right to repayment of Stage 1 costs where the claimant does not pursue the claim after the conclusion of Stage 1. The Court of Appeal held that no such right could be implied either. In reaching that decision, it dismissed fears about what came to be called the "400 Club" point. It was argued that if insurers could not claim repayment, this "might encourage unscrupulous lawyers to seek authority from claimants to commence a Protocol claim simply for the purpose of obtaining £400 + VAT, without any genuine intention of advancing to Stage 2, even in the event of an admission by the defendant's insurers". The Court of Appeal held that there was no evidence that this practice had developed in the past and, since the 2013 amendments, Stage 1 costs are now only payable after the submission by the claimant (where liability is admitted) of a Stage 2 Settlement Pack including a medical report.

Noble Caledonian v Air Niugini: Service within the jurisdiction and whether a foreign company had a place in England "where it carries on its activities"

Clyde & Co (Alex Stovold and Adam Tozzi) for defendant

Where a defendant has not given an address for service (and no business address of a lawyer in the EEA has been given), CPR r6.9 provides (in relevant part) that service must be made (where the company is not incorporated or registered in England and Wales) at "any place within the jurisdiction where the corporation carries on its activities; or any place of business of the company within the jurisdiction". If there is no such place, service must be made out of the jurisdiction.

The defendant in this case is a company incorporated under the laws of Papua New Guinea. The claimant sought to argue that it "carried on activities" in England via its agent (FDL) which is based near Gatwick Airport.

Counsel had informed the judge that there is no prior caselaw on the meaning of "carries on its activities" in the context of CPR r6.9. The judge therefore sought to decide whether the activities of FDL were the defendant's activities, noting that "While an agent may bind his principal, it by no means follows that the business of the agent can be described as that of the principal. An agent need not be an agent for only one principal, but may be an agent for many".

On the facts of the case, the judge found that the requirements of CPR r6.9 were not satisfied here. The most important factor was to look at context. Here, FDL worked for several principals and was limited in its ability to enter into contracts and deprived of any realistic discretion in terms of pricing or contractual terms. Other factors militating against the claimant's arguments included the fact that the defendant exercised little control over the running of FDL and made no contributions to the financing of FDL's business.

Accordingly, the defendant had to be served out of the jurisdiction.

Bath v Escott: Whether court should order release of the audio recording of a judgment/status of judgments

The defendant applied for an order that the audio recording of the judgment of a district judge be released, on the basis that the transcript (generated a year later) did not accurately record what was said in court. The application was rejected, HHJ Matthews making the following points:

(1) An order expresses the court's decision, whereas a judgment only expresses the court's reasons.

(2) It is entirely lawful and proper for a judge to amend the transcript, not only to correct eg spelling mistakes, but also to ensure that the reasons recorded accurately reflect why the decision was made (even if they were not fully articulated before). Furthermore, the judge can also alter even the decision itself when he/she receives the transcript.

(3) The current practice is to reserve judgment and to circulate a draft judgment before handing it down. A judge may alter the draft judgment between circulating it (and receiving comments from the parties) and handing it down.

(4) Even after handing down a judgment, a judge can amend it, and even change the decision, before it is sealed.

Accordingly, the application was bound to fail. The judge suggested that an application might succeed, though, if an allegation is made "that the statement that the judge had revised and approved the transcript was false, or that although the transcript was so revised and approved it nevertheless did not reflect accurately the judge's reasons for the decision, or that the judge had added to the transcript a new point never previously raised (and which the parties had not been able to comment on), and then decided the case on the new basis…. It would be a high hurdle to overcome, for obvious reasons, but I cannot say that it could never be done".

Findcharm v Churchill: Judge warns against "game playing" and cost budgets/Precedent R

For proceedings issued on or after 6 April 2016, the parties are encouraged to use Precedent R (Budget Discussion Report), when preparing their cost budgets. In this case, Coulson J noted that some parties deliberately put very low figures in their Precedent R in order to encourage the court to calculate its own amount, at a point in between the wildly different sets of figures put forward by both sides (and thus reducing the figure put forward by the other side).

This case was an example of that tactic: the defendant's budget was "on any view, an unrealistically low budget". For example, the claimant estimated that disclosure would cost just below £30,000 (which the judge held was reasonable), whereas the defendant estimated just over £10,000, which was said to be unjustifiability low.

Coulson J described the defendant's Precedent R as an abuse of the cost budgeting process and of no utility. Accordingly, the judge disregarded it (and the budget was agreed by the claimant). The claimant's cost budget was held to be proportionate and reasonable, and so was allowed.