England and Wales Court of Appeal (Civil Division) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		12 November 2003

Lord Justice Auld:

1. This is an appeal by Direct Travel Insurance ("Direct Travel") from an order of His Hon. Judge Darlow, of 27^th November 2003 in the Bristol County Court that Shirley McGeown, the Respondent, is entitled to a contractual payment of £50,000 under what has been called a "catastrophic injuries clause" of a single trip holiday insurance policy.

The Facts

2. In October 1998 Mrs. McGeown, a healthy and fit housewife and mother of three, went on holiday to Turkey. Shortly before going, she obtained insurance cover from Direct Travel, which, under section 6 of the policy, entitled her to a lump sum payment of £50,000 in the event of her suffering any one of the consequences for which it provided.
3. On 28^th October 1998, in the course of the holiday, Mrs. McGeown was involved in a road traffic accident while a passenger on an air transport bus. She suffered serious injuries from which she has made good, but not complete, recovery. Some nine months later, in July 1999, solicitors on her behalf notified Direct Travel of a claim for payment under section 6(3) of the policy in respect of the injuries she had suffered in the accident. Section 6, which was headed "Personal Accident", provided for one of a number of risks covered by the policy. It was in the following terms:

"What each insured person is covered for.

We will pay you or your legal representatives one of the following amounts for accidental bodily injury. The accident must be caused by something external and visible. The accident must be the only cause of you losing your sight, a limb, become permanently disabled or dying within a year of your journey or one-way trip.

1. Death - £25,000

2. Total and permanent loss of sight in one or both eyes or total and permanent loss of use of one or both hands or feet - £50,000

3. A permanent physical disability which prevents you from doing any paid work (if you are not in paid work, we will provide the same cover for any permanent disability which prevents you from doing all your usual activities) - £50,000 "

4. Mrs. McGeown's initial position was that she had suffered such serious injuries that she had been left permanently disabled in a large number of respects, preventing her from undertaking many activities of an intimate, domestic, social and sporting nature, and also rendering her incapable of work. In her solicitors' opening letter to Direct Travel of 9^th July 1999, they stated that she had suffered a broken back which had left her with "a permanent physical disability which prevent[ed] her from doing work or her usual activities", thus entitling her to claim under section 6(3). In a further letter of 7^th December 1999, with which they enclosed a medical report, they reiterated that claim, saying that a full recovery was not anticipated and that she would "continue to suffer from a permanent physical disability which [would] prevent her from doing work or her usual activities".
5. Direct Action rejected the claim, maintaining that Mrs. McGeown's injuries were not such as to bring her within section 6(3), since she was still able to undertake some work and many of her former usual activities. Mrs. McGeown's solicitors, in an attempt to persuade Direct Travel of the seriousness and wide extent of her overall disability wrote, on 9^th November 2000, describing her condition as follows:

"… Before the accident Mrs. McGeown was a very active, independent and athletic person. She enjoyed walking, swimming, jogging, cycling, ten pin bowling and, in particular, horse riding. She also enjoyed going out with her friends, dancing, entertaining, to the theatre, cinema etc. She did all the housework, went out and did all the shopping and provided as a mother would want to for her children.

Mrs. McGeown prior to the accident was entirely pain free.

Shortly before the accident our client had looked at returning to work. We enclose a copy of a letter … confirming that a position had arisen, but due to the nature of our client's injury she was unable to accept it.

The accident has completely turned Mrs. McGeown's world upside down. She has been unable to return to work. She is unable to participate in any of the activities that she previously enjoyed so much. She is barely able to run a home and provide for her family in the way that any mother would want.

She is in constant chronic pain in her back. She faces the prospect of submitting to further difficult surgery.

Mrs. McGeown is now unable to care for herself hygienically. She cannot clean herself after going to the toilet. She cannot get in to and out of a bath unaided. She cannot wash her hair. She cannot cut her toe nails.

Mrs. McGeown is now incontinent … [and] … relies permanently on medication …"

6. Mrs. McGeown, in her pleaded case, in reliance on medical reports and witness statements, continued to pitch her case on the basis of the many and serious disabilities she suffered in most aspects of her life. However, at the outset of the trial, the Judge indicated to counsel his understanding, from his reading of the medical reports, of the parties' respective cases. He said that it did not appear to be Mrs. McGeown's case that she could not pursue each and every one of her usual activities and that Direct Travel appeared to accept that she was permanently disabled so as to prevent her from carrying out at least one of those activities, namely horse riding. On counsel for both parties agreeing with that understanding, he expressed the view that the outcome of the case would depend on his construction of the policy, not on a consideration of the evidence as to the extent of the activities she could no longer pursue as a consequence of her disability. He said that, therefore, unless either party sought to adduce oral evidence, he would not require it. In the light of that indication, neither counsel sought to call oral evidence.

The Issue

7. Accordingly, Mr. Paul Cadney, who appeared for Mrs. McGeown and appears for her again on this appeal, relied on a much narrower factual case than that pleaded. As she had not been in paid work at the time of her accident, he based her claim on the second and alternative limb of section 6(3), which, he said, entitled her to recover if she was unable to pursue "all [her] usual activities" in the sense of being unable to do any one or more them. Mr. Simon Davenport, who appeared for Direct Travel and also appears for it on this appeal, submitted that those words should be interpreted in the context of section 6 as a whole, which was clearly aimed at providing a one-off payment for major disability radically affecting the insured's whole way of life, not just preventing her from following one or more of her usual pre-accident activities. This is how the Judge characterised the respective cases in concluding from them at the beginning of his analysis that the provision was ambiguous:

"… In my judgment, the clause is clearly ambiguous because if Mrs. McGeown was asked the question in the context of this case, 'Does your disability prevent you from doing all your usual activities?', she could reasonably and perfectly properly reply in one of two ways.

It might elicit the response: 'No, it doesn't. Whilst I can no longer ride a horse or lift and carry to the extent and in the manner I did before the accident, I am still able to carry out some, or even (the insurers would say) many of my usual activities'. …

The second answer could be diametrically opposite: 'Yes, it does. I am now prevented from doing all those things I was previously able to do'.

In the former … the insured would be using the word 'all' as being synonymous with 'each and every one of' her activities. In the latter, she would be using the word 'all' to mean an entirety, a cohesive and indivisible whole amongst a spectrum of usual activities that comprised her everyday lifestyle."

The Judgment

8. From the starting point that the provision was ambiguous, the Judge said that it should be construed contra proferentem, that is, against Direct Travel, because "[i]f the insurers choose to put forward a clause that is ambiguous, they cannot be heard to complain when the court interprets it in favour of the insured". In approaching his task in that way, he rejected the absurdities that could flow from factual extremes of the respective arguments - an insured recovering £50,000 because of inability to follow just one just of his pre-accident usual activities, however inconsequential, or the insurer successfully resisting recovery to a severely disabled claimant because he could still pursue one such activity. He also rejected the "purposive" approach for which Direct Travel contended, namely that section 6 as a whole was directed to providing a substantial lump sum payment for injury causing permanent and catastrophic disability. He did so because there were no words of that sort in section 6, and he considered that the words in section 6(3) "permanent physical disability which prevents you from doing all your usual activities" could be met in Mrs. McGeown's case by proof, which he accepted, of her permanent inability to follow one or more of her usual activities, for example, horse-riding. He also rejected a contextual approach for the same reason, saying that it was unnecessary to look any further than the words "permanently disabled" in the opening words of section 6, or even further than the second limb in section 6(3) so as to look at the first limb of it, "permanent physical disability … from doing any paid work", since he considered the second limb a "standalone" provision. He added that, even if assistance could be derived from the first limb, it would have to be glossed so as to read "any relevant paid work", relying on the ruling of this Court in Sargant v. GRE (UK) Limited [1997] PIQR Part 5, Q128, that the words "permanent total disablement from attending to any occupation" in a personal accident insurance policy meant, in its context, disability from following any particular occupation or an occupation of the kind the insured had had at the time of the accident.
9. At that point, the Judge, apart from some recourse to absurdities flowing from factual extremes (which he had abjured in the early part of his analysis), appears: 1) to have fallen back to the starting point of his analysis that the provision was ambiguous; 2) that the contra proferentem rule applied; 3) that, reading the words in the second limb section 6.3 on their own – "any permanent disability which prevents you from doing all your usual activities" – Direct Travel had not satisfied him that the ambiguity should be resolved by a purposive or contextual approach; and 4) that, at the very least, Mrs. McGeown's permanent inability to pursue her former hobby of horse riding was enough to entitle her to recover.

The submissions

10. Mr. Simon Davenport, on behalf of Direct Travel, challenged that train of reasoning, in particular the Judge's opening decision that the words of section 6(3) were ambiguous, without first considering their ordinary and natural meaning in the context of the policy document and, in any event, section 6 as a whole. He submitted that, putting extremes aside, the phrase in the second limb of section 6(3), "all your usual activities", if construed in a common-sense way, clearly meant a range of disability in relation to all significant non-working activities as distinct from, say, all ordinary and mundane daily personal and domestic actions. He accepted that there was necessarily a line to be drawn between what were and were not significant activities for this purpose – a line that, on the facts of any particular case, it might not always be easy to draw. However, he pointed to the way in which Mrs. McGeown, through her solicitors, first pitched her case as illustrating the level and range of disabilities that they seemingly understood at that stage would be required to establish an entitlement to recovery.
11. Mr. Davenport also urged on the Court the need at an early stage of its search for the ordinary and natural meaning of the words, to put them in context of the policy document as a whole, also that of section 6 and, in particular, of the whole of section 6(3) of which they were part. It is clear from that contextual examination, he submitted, that the provision of a lump sum £50,000 cover in section 6 was for permanent disability in an extreme, life-altering form. That was so whether it was in the form of loss of eye-sight, or of a limb, or of any - in the sense of all - paid work appropriate to the insured's aptitude and capabilities, or from all usual activities in the sense for which he contended. Each of them provided for a similar threshold of physical deprivation and/or inconvenience. If the Judge had adopted that approach, he submitted, he could not have found that Mrs. McGweon's disabilities met the threshold required by the provision, even if he had heard evidence on the matter.
12. Mr Paul Cadney, on behalf of Mrs. McGeown, relied upon the Judge's reasoning that the words "all … [her] usual activities" in section 6(3) were ambiguous when looked at on their own or when later considered in their context, and that, therefore, in a standard form of travel insurance such as this, the Judge correctly looked to the contra proferentem rule as a reason for construing them against Direct Travel. His submission was that, when a court "discovers" an ambiguity in the meaning of a clause, it may construe that ambiguity against the maker of the document rather than investigate other parts of the document "in order to rescue the maker from the consequences of his own drafting". He maintained that no assistance was to be derived from looking at the second limb of section 6(3) in its context, in particular, that of the alternative condition of entitlement to recovery in the first limb, of a permanent disability preventing an insured from doing "any paid work", since that was afflicted by the same ambiguity. And he dismissed any role for a purposive approach to resolution of this issue, since there were no antecedent negotiations, correspondence or other extrinsic material that would throw light on the construction of these standard terms.

Conclusion

13. In my view, the Judge erred in his exercise of construction in two respects. The first was in the route of his reasoning, taking as his starting point the conclusion that the words of the second limb of section 6.3, "all your usual activities", looked at on their own, were ambiguous, and then applying the contra proferentem rule in favour of the claim unless ousted by a purposive and/or contextual analysis. A court should be wary of starting its analysis by finding an ambiguity by reference to the words in question looked at on their own. And it should not, in any event, on such a finding, move straight to the contra proferentem rule without first looking at the context and, where appropriate, permissible aids to identifying the purpose of the commercial document of which the words form part. Too early recourse to the contra proferentem rule runs the danger of "creating" an ambiguity where there is none; see R v. PIAOB, [2002] Lloyd's Rep IR 41, per Langley J at 43. The second error of the Judge was in his treatment or negation of a contextual argument by asserting that the second limb of section 6.3 was a "standalone provision" and in the alternative dismissing the first limb as of no assistance because it was afflicted with a similar ambiguity. It is no answer to the need for a contextual or, where appropriate, a purposive approach, to dismiss them because they conflict with the meaning of the words looked at on their own as derived from application of the contra proferentem rule.
14. The task of the court, as Lord Hoffmann said, in his much cited speech in ICS Ltd. v. West Bromwich BS [1998] 1 WLr 896, HL, is to look at the document and its background, as well as the words the meaning of which is in dispute, and also, where necessary, allow for linguistic mistakes that may, considered purely semantically, conflict with the only common-sense meaning of the document. I set out paragraphs 4 and 5 of the familiar passage from his speech, at pages 912. to 913:

"(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749.

(5) The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. …"

15. Those observations apply a fortiori to expressions which, when looked at in isolation from the rest of the document of which they are part, are capable of two or more different linguistic meanings. Here, looking at the first limb of section 6(3), disability preventing the insured from doing "any paid work", may mean "all paid work of any sort" or "any one particular form of paid work" or "the particular form of paid work undertaken by the insured at the time of the accident or one that he might reasonably have been expected to undertake after it but for the accident. Looking at the second limb, disability "prevent[ing] you from doing all your usual activities" may mean, at one extreme, prevention of the insured from doing every one of the things that she usually did before her accident, including all social, sporting, domestic and family activities and the myriad of actions involved in her daily life. Or, at the other extreme, it may mean any one of those activities. Clearly, the true meaning of the words in issue, whether or not looked at in the context of the document as a whole, cannot be found by comparing absurdities resulting from extreme applications of conflicting interpretations. Some intermediate meaning has to be identified which those offering and those seeking such insurance cover would reasonably apply to the words in question to accord with business common sense.
16. Given the range of possible meanings, looking at the material words on their own and alongside those in the alternative first limb in section 6(3), it is only sensible to seek some guidance in section 6 as a whole and the policy document of which it forms part. In the circumstances, it seems to me helpful to start with the policy document rather than the section – pace Clarke, The Law of Insurance Contracts, paragraph 15-3; and see Sargent v. GRE (UK) Ltd., per Mummery LJ at Q130. It provides, in return for a single premium, for a range of risks associated with holiday or other travel. In sections 1 to 5 and 7 to 12 the scheme of cover is to provide "up to" a specified sum in the event of an occurrence of the relevant loss.
17. Section 6, which is headed "Personal accident", differs in that it provides for all or nothing substantial lump sum payments for what, on any reading of the section, are consequences of the most grave nature. These include, as I have indicated, death and, as Mr. Davenport described them, catastrophic injuries entitling the insured to payment of £50,000, namely permanent total loss of sight in one or both eyes and permanent total loss of use of one or both hands or feet. The permanent physical disability for which section 6(3) provides in its alternative limbs, also entitled an insured who satisfied either limb to a lump sum of £50,000. In my view, it is plain, having regard to the gravity of each of the various risks and the lump sum of £50,000 payable in respect of the occurrence of any one of them, that the provision, as a whole and in its separate provisions in paragraphs (2) and (3) for permanent disability was intended to provide for consequences, as defined, of the most catastrophic or calamitous kind. And, in my view too, that is how the ordinary person seeking such insurance would read them, as indeed Mrs. McGeown's solicitors appear to have done when first presenting her claim.
18. It may be that the figure of £50,000 would be an insufficient compensation for the consequences of the section 6(3) permanent disability in some cases and excessive in others, when compared with damages that might be recoverable at common law. However, the figure, all or none of which is payable depending on the severity of impact on an insured's way of life, is clearly intended to be a rough and ready contractual mark of the extent and gravity of that consequence, and is payable irrespective of other rights of recovery that the insured may have. Accordingly, in my view, both limbs of section 6(3) need to be considered as requiring, in their different ways, a broad range of serious consequences of the permanent disability specified in section 6(3) to entitle recovery of the lump sum for which it provided.
19. Looking now more closely at the two alternative limbs of section 6(3), it is plain that they are intended, and could only be reasonably regarded by those seeking cover, to provide cover for broadly the same level of permanent disability. As Mr. Davenport observed, they are clearly presented as alternatives in the same provision; each of them is concerned with the consequences of permanent disability; they are described in the provision as "the same cover", namely £50,000; and, if a common sense meaning is given to "any paid work" in the first limb, namely any work that the insured had at the time of the accident or which is similar to it, the two limbs are broadly consistent in the level of deprivation of activity for which they provide in their different ways. That such should be the common sense interpretation of the words, "any paid work", in this context has strong support from authorities on analogous provisions; see Hooper v. The Accidental Death Insurance Company (1860) 5 H & N 546, per Pollock CB at 554; Pocock v. Century Insurance Co. Ltd. [1960] 2 Lloyd's Rep 150; and Sargent v. GRE (UK) Ltd., per Mummery LJ at Q 130-131 and Leggatt LJ at Q131-132.
20. I have noted most of the features that the second limb of section 6(3), in common with those of the first limb, mark it out to the ordinary reader as providing substantial, albeit rough and ready, cover for permanent disability in a number of closely defined, but catastrophic respects. Its all or nothing basis, coupled with the fact that the section does not, elsewhere, provide comprehensive personal accident cover, underlines the exceptional nature of the permanent disability for which it is intended to provide. In my view, looked at with those considerations in mind, there is nothing ambiguous, as distinct from vague (see Clarke, op cit, para 15-5) about the second limb in section 6(3). In providing cover for "permanent disability which prevents … [an insured] from doing all … [his] usual activities", it is intended to include all significant non-working activities of, say, a social, sporting, domestic or personal nature which, taken in the round, constitute so substantial an intrusion on his way of life as to compare with an inability to pursue his normal occupation, if he had had one at the time of the accident, or one similar to it.
21. Clearly, the list of activities for consideration and their relative significance will vary considerably from case to case. And an insured's ability to manage many of the normal incidents of living, such as reasonable mobility, coping with domestic chores and personal care, may or may not prevent him or her from crossing the section 6(3) threshold. Though, if a number of such mundane and often largely automatic aspects of living are among the activities lost as a result of the accident, they would obviously weigh strongly in favour of the insured's claim that he can no longer pursue "all … [his or her] usual activities. In short, determining whether an insured has reached the imprecise threshold required by section 6(3) is a highly fact sensitive matter, requiring careful consideration of the evidence as to the full range and significance of the various activities upon the loss of which the insured relies. Certainly, it would not be sufficient to pick on one of a number of significant activities on the basis that "all" in this context meant "any one" and to rely, as the Judge did here, on the apparent agreement of the authors of the medical reports that Mrs. McGeown could no longer pursue one of her pre-accident activities, horse riding.
22. Accordingly, I would allow the appeal so as to quash the order of the Judge in favour of Mrs. McGeown and to direct that there should be a rehearing in which the Judge should determine the matter, according to the construction of section 6(3) that I have indicated, in the light of any relevant evidence as to the range and significance of activities that Mrs. McGeown claims she is unable to pursue as a result of the accident.

Lord Justice Mummery:

23. I agree.

Lord Justice Keene

24. I also agree.
Order: (i) Appellant's appeal allowed; (ii) Judgment in favour of the respondent and the order of costs in her favour made by His Honour Judge Darlow in the Bristol County Court to be quashed; (iii) Case to be remitted to the Bristol County Court for a re-hearing; (iv) Respondent to pay the appellant's costs of the appeal and of the initial trial hearing on the standard basis, such costs to be subject to a detailed assessment if not agreed. (Order not part of approved judgment)