England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MEDWAY COUNTY COURT
(HIS HONOUR JUDGE HARGROVE)

		Royal Courts of Justice The Strand London WC2
		25th January 1999

LORD JUSTICE EVANS: This is an application for leave to appeal against a judgment given by His Honour Judge Hargrove QC in the Medway County Court on 27th August 1998. The judgment was given in third party proceedings. The plaintiff, in a personal injury claim, was a Mrs Jacobs. She sued Mr James Coster who was trading at the relevant time as Newington Commercial Service Station. In fact, on the evidence, it was Mrs Coster rather than her husband who was responsible for running the service station at the relevant time. Those proceedings were compromised and the defendant, Mrs Coster, by third party proceedings claimed an indemnity from his insurers, the Avon Insurance Company. The learned judge found in favour of the insurance company on the ground that there was a breach by the insured of condition no. 5(a) in the policy which reads as follows:

"5. If any event gives or is likely to give rise to a claim, the insured (or his representative) must:

(a) report the details immediately to the company and send a written claim within thirty days but within seven days ... "

Clause 8 of the policy provides, in summary, that any breach of those conditions shall constitute a breach of a condition precedent to the liability of the company to make any payment under the policy.

The relevant accident occurred on 23rd March 1994. The plaintiff, Mrs Jacobs, was a customer at the service station. She slipped and fell and came to the kiosk where Mrs Coster was, complaining of a hurt ankle or leg. She, Mrs Coster, called an ambulance and the plaintiff was carried to it. Mrs Coster did not know whether the ankle was broken or merely sprained. In fact the plaintiff's leg was broken. On any view it was a serious accident and the learned judge said: "Here was a situation of some gravity". Clearly he said that by reference to the seriousness or apparent seriousness of the injury which Mrs Jacobs had suffered.

The defendants, Mr and Mrs Coster, heard nothing more of the matter until they received a letter dated 13th October from solicitors who were acting for Mrs Jacobs. The letter alleged that the forecourt was slippery, extremely slippery and in bad condition and that it was the slipperiness of this particular part of the forecourt that had caused their client's accident. The defendants, Mr and Mrs Coster, promptly on receipt of that letter did notify the third party, their insurers. It was in fact a short time before the insurers were able to respond, that was on 3rd November 1994. Their representative attended on Mr and Mrs Coster and took statements from them towards the end of January 1995 and then, by letters dated 8th March 1995 and 25th April 1995, they repudiated liability on the grounds that the defendants had failed to comply with condition 5(a); that is to say that they had failed to report the original accident to the insurance company as they were required to do by that clause.

For that reason the issue which fell for decision was whether the event was one which "was likely to give rise to a claim".

Because we are granting leave I can deal with the matter shortly. The learned judge correctly approached the construction of the clause and its application to the facts of this case, in the light of the judgment in Layher Ltd v Lowe, The Times, 8th January 1997. The decision apparently was on 17th December 1996 and the judgment of the court, in effect, was given by Saville LJ. There is a reference in Chitty on Contracts, paragraph 39/057 to the fact, in circumstances as this:

"If drafted precisely, the provision will enable the insurer to escape liability even if the breach occurred through no fault of the assured, or has not even prejudiced the insurer."

This appears to be such a case where the insurer seeks to take advantage of the clause, notwithstanding that no fault or no other fault is alleged against the insured and notwithstanding that the insurer has not been prejudiced by the failure to report the matter promptly. The skeleton argument placed before the learned judge on behalf of the insurers did suggest, in common form, that there was prejudice because the third party was unable to make an early investigation of the accident and claim in question. The chances of that contention establishing any substantial prejudice in the present case must be severely limited by the fact that, even when the matter was reported as a claim, that was in October 1994, it was something like three months before the insurer's representative made any active inquiries into it.

In the light of the authorities, without expressing a final view, the following assumptions can be made: first, if there was a breach of condition no. 5(a), then the insurers are entitled to repudiate liability, notwithstanding the absence of any prejudice; second, that the court should adopt what is called an objective approach in assessing whether this accident was "likely to give rise to a claim"; third, that that question must be judged on the basis of what the assured knew at that time. As will appear, Mrs Coster gave evidence that she did make a prompt investigation and there is no allegation apparently that she should have done more than she did, nor that any constructive as opposed to actual knowledge should be attributed to her. So one comes to the question whether objectively assessed this accident should have been regarded by Mrs Coster as an event which was likely to give rise to a claim.

A point taken in the skeleton argument for the defendant before us is that the burden of proof lay upon the insurers and that they called no relevant evidence in relation to it. I would say, again not expressing a final view, that the task for the judge quite clearly was to decide this issue on the evidence which was in fact put before him, and it seems that that was the evidence of Mrs Coster which was not challenged or not effectively challenged by the insurers. What she said, according to the judgment, as did her husband was this:

"On the other hand, the evidence of both the Defendant and Mrs Coster was that after the accident they both inspected the forecourt, in order to ascertain whether there was anything which had caused the Plaintiff to fall, not only from the point of view of ascertaining the Plaintiff's position, but also for the safety of their own customers."

Although the learned judge does not say so in terms, Mrs Coster's evidence was that she looked for signs of slipperiness which might have been caused, for example, by petrol spillage and she could find none, at least not in the area where she had supposed that the plaintiff was when she did fall.

The learned judge found that the situation was of some gravity, as I have already quoted, and clearly he based his decision upon the seriousness of the injury that had occurred to the plaintiff. What he did not, on the face of his judgment, take into account was the state of mind of Mrs Coster when she knew not only of the accident but also of the results of her immediate investigation of the state of what she thought was the relevant part of the forecourt. It seems to me that it is at least arguable, and I would add probably correct, that the learned judge should have taken account of the results of the examination which Mrs Coster did make. She having that investigation and found no signs of slipperiness for which responsibility could be attributed to the defendants, then the question would be whether in those circumstances she should regard it as likely that a claim would be made.

It seems to me that that is an issue which was not considered in the judgment. Given that this is a case where the insurance company rely upon this breach in the absence of any prejudice or substantial prejudice to themselves, it seems to me that that is a matter which should be considered by this court and I would give leave accordingly.

MR JUSTICE WILSON: I agree.

ORDER: Application allowed. Notice of Appeal to be filed within 21 days. Costs of this application to be costs in the appeal.

(Order not part of approved judgment)

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