England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHELMSFORD COUNTY COURT
(His Honour Judge Thompson)

		Royal Courts of Justice Strand, London, WC2A 2LL
		2 December 2004

Lord Justice Scott Baker:

1. On 28 January 2000 the appellant was returning home from a five day residential course at the Professional Golf Association ("PGA") premises at the Belfry in the Midlands. He stopped at a lay-by to make a call on his mobile phone. When he had completed the call he pulled out of the lay-by and two other motorists collided. Sadly, one of them was killed. The appellant was later prosecuted for careless driving but was acquitted.
2. This appeal concerns the appellant's motor insurance policy with the Lloyds Syndicate KGM Motor Polices who repudiated his policy for material non-disclosure. The judge held they were right to do so.
3. There is no question of any deceit on the appellant's part. It is accepted, and the judge found, that his non-disclosure was entirely innocent.
4. The claim on behalf of KGM was for a declaration and was brought by Andrew Hazel on behalf of all the names comprising Lloyds Syndicate 260 (KGM Motor Policies at Lloyds). The declaration the judge gave was in these terms:

"1. The claimant is entitled apart from any provision contained in the policy to avoid the policy on the ground that it was obtained by the non-disclosure of material fact or facts namely that:

i) The defendant did not disclose that he was a trainee golf professional.

ii) The defendant did not disclose that he was intending to use (or during the course of the policy decided to use) his vehicle to and from a place of work, which was other than his permanent place of work."

I omit paragraphs 2, 3 and 4, which are of no direct relevance.

"5. It is declared that the defendant's aforesaid non-disclosure was innocent and involved no intention to mislead the claimant"

The facts

5. The background facts are not in dispute. In July 1997 the appellant registered with the PGA to join their training programme. His desire was to become a professional golfer and indeed he did eventually become a club professional and he now has a job as such in Austria. Registration with the PGA does not make one a member but merely enables one to undergo training with the view of becoming a member. There are quite rigorous standards to be met, including ability at and knowledge of the game of golf and the necessary skill to give golf lessons.
6. When the appellant applied he was already working at a golf shop as a shop assistant. He started this in 1996 when he was 17 or 18. Experience of working in a club/shop is one of the requirements of the PGA. The other requirements are to maintain a category one handicap (less then 4), to play in four or five tournaments a year in the county of employment, to attend a residential course of one week every year, and once a year to take examinations over the course of a day.
7. The appellant was not required to apply to train as a golf professional; it was something that he wanted to do. Both before and after his application to the PGA he worked in the same shop for 6 days a week; nor was his salary affected by his application.
8. The appellant played in tournaments in his own time either on his day off or by taking a day's holiday. On occasions he would swap his day off with someone else in the shop in order to take part in a tournament. The tournaments were amateur tournaments open to those amateurs who had the necessary handicap qualification. For his annual day of examinations the appellant would either take a day's holiday or switch his day off with somebody else. He attended the week's residential course as unpaid leave. Although he paid for the course, his employer made a contribution towards it.
9. The following common ground was emphasised by Mr Norman for the appellant:

The appellant was working full-time as a shop assistant in a sports shop connected with a nine-hole golf course;

He had aspirations to become a professional golfer;

He was not a professional golfer but had signed up for a training course with the PGA;

If he wanted to qualify as a member of the PGA he would have to play golf consistently to a specified standard and would need to attend an annual one week residential course and pass related exams;

His decision to pursue the PGA course was not a requirement of his employment;

He received no remuneration for playing golf or for his efforts to pursue the PGA course, albeit his employer made a ex-gratia payment towards the cost of his course;

He had neither completed the course nor passed the necessary exams at the material time but had a further three years study before he could hope to attain the status of professional golfer.

10. The proposal form for the appellant's motor insurance is dated 20 April 1999. The insurance ran for 12 months from 1 minute past midnight on 26 April 1999. The appellant had previously submitted a signed hand-written proposal form to his broker dated 16 April 1999. With some alterations the broker produced the printed form which the appellant subsequently signed and dated 20 April 1999. It was this printed form that formed the basis of his insurance contract. The printed form is of slightly different layout to the hand-written form. There is an additional box in the printed form in which the proposer is required to complete his employment status i.e. employed or self-employed. The broker completed this, obviously correctly, "employed". This is followed by two other boxes both relating to employment. These boxes appear in both forms. The first is headed "occupation and nature of business – both full and part-time." The broker had printed in "shop assistant retailing." The second is headed "employer and business address", to which the broker has printed in Worthing Road Horsham. In the original hand-written form the appellant had described his occupation and nature of business as shop assistant retail but had given more complete information in the second box which he completed "Neil Burke – Horsham Golf + Fitness Worthing Road."
11. There were other differences between the original hand-written form and the printed one sent back by the brokers. Both were more favourable to the appellant. I do not, however, think they are of any direct relevance to the issue in these proceedings. Driving experience was increased from 5 to 9 years + (which suggested the appellant had been driving since aged 15 or earlier). The vehicle was said to be kept in a locked garage as opposed to being on the public highway or elsewhere. Neither of these matters was explored at the trial nor referred to by the judge in his judgment and there is no explanation for the alterations.
12. As May L.J pointed out in argument, the way the printed form is set out – employment status, occupation and nature of business both full and part-time, employer and business address, are one after the other – suggests that the insurers are interested in the three together. That accords with the evidence of Mr Alsford, the claims director of KGM, who when asked in cross-examination if it was the nature of the appellant's employment that was of concern replied in the affirmative. The risk profile was, he said, all about the appellant's occupation, his business.
13. It seems to me most unfortunate that the broker, who is of course the agent of the insured, changed the proposal form by excluding references to Mr Burke the appellant's employer and to Horsham Golf and Fitness, both of which gave a slightly more detailed picture of the appellant's actual occupation.
14. An experienced broker will know of and use the system operated by insurers whereby information from the proposal form is keyed into a computer in order to obtain a quotation. That is what happened in this case. The Association of British Insurers ("ABI") have agreed with their members software that sets out codes for business categories, occupations categories and employment categories. KGM, who are participants, use this software and are very restrictive about the categories of occupation and business for which they will provide motor cover. They are only prepared to provide cover for those occupations that present a low risk. By adopting this policy they are able to charge competitive rates of premium. In the present case the broker put the information on the printed claim form into the computer and obtained the premium quotation of £175.82. Mr Hunter QC, who has appeared for the respondent, submits that if the information on the hand-written form, and in particular the word "golf," had appeared on the printed form the proposal would have been rejected by KGM.
15. The way KGM's system operated was as follows. I take the description from KGM's reply to the appellant's request for information dated 7 October 2003. The reply was confirmed as correct by Mr Alsford in his evidence.

i) KGM provided underwriting information to a third party software house which supplied computer programmes to insurance brokers.

ii) The programme enabled a broker to input information about a proposer into a standard form and then to search through in order to see which insurers were prepared to provide a quotation and, if so, the amount of the premium.

iii) A standard list of occupations and employer's businesses was drawn up by ABI.

iv) Each insurer would then specify whether the occupations and businesses on the ABI list were acceptable, unacceptable or subject to special conditions.

v) The following rules applied:

a) If a broker inputted an occupation which was not recognised than the software failed to obtain a quotation from KGM;

b) If either the proposer's employer's business or the proposer's own occupation was unacceptable then no quotation from KGM would be listed by the software;

c) If either the main or any part-time occupation was unacceptable then no quotation from KGM would be provided by the software;

d) If a substantive occupation was unacceptable then, ipso facto, a trainee for such an occupation was unacceptable.

e) KGM did not authorise any quotation other than within the limits of the software programme described.

16. Lists of businesses and occupations were annexed to KGM's reply. Those proposer's occupations that appeared on the list and would have been rejected if inputted on the appellant's behalf included sportsman, professional sportsperson, sports coach, golfer and golf club professional. As to the proposer's employer's business, sports professional would have been rejected as unacceptable. KGM argues this is relevant because it was a requirement of the PGA that the appellant should be employed by a golf professional during the course of his training. There was however no finding, and I do not think there was any evidence, whether Neil Burke was or was not a golf professional. We were, however told that he was the manager and head professional and responsible for the appellant's supervision.
17. The only reference in the list to a trainee is "trainee manager". The evidence was that if "trainee" had been inputted with any other suffix such as "trainee golf professional" it would have been rejected as an unacceptable risk because it was not a description on the list and would not have produced a quotation.
18. The judge found that had the word "golf" appeared in the appellant's professional business address or his employment it would have triggered rejection. The unanswered question is why the broker removed it from the box headed "Employer and Business Address." It is beyond dispute KGM was not prepared to insure and excluded from cover those in many types of employment. By doing so and by being restrictive about those whom it was prepared to insure KGM was, as I have said, able to offer very favourable rates. It was perfectly entitled to pursue such a policy. There was no obligation to explain (nor was there any evidence before the court) why certain categories of occupation presented a higher risk than others for motor insurance.
19. The judge also found that if a disclosure of "part-time golf trainee" had been incorporated in the proposal form the cover would have been rejected. At the end of his judgment the judge said that the appellant failed to make a disclosure about his part-time activity but that he was different from the amateur sportsman who played his sport four nights a week. A little later he said:

"The fact is that he was a trainee professional and that seems to me to be the true category."

20. The judge's analysis does not make it entirely clear whether he is saying the appellant should have disclosed he had a part-time occupation as trainee golf professional or whether "shop assistant retailing" was a misleading or incomplete description because he was in reality a trainee golf professional. Reading the relevant paragraph as a whole it seems to me that the judge was in reality finding the latter. In my judgment it is not possible to sever the golf element of his occupation from that of working in the shop. The shop is part of the golf club premises; it sells golf equipment and the other things ordinarily sold in a golf professional's shop. When he could, the appellant went out to play on a nine-hole course – the evidence was about four times a week. He worked in a golf environment and used his spare time to further his ambition to become a professional golfer. The appellant's argument seeks to put his golf into an entirely separate compartment from his work in the shop, suggesting that in his working life he is a shop assistant and his recreation is golf, albeit he had aspirations one day to become a professional golfer. It is implicit in this argument that nothing really changed after he signed on with the PGA; he was still a shop assistant.
21. In my judgment this is an unreal approach. If someone had asked the appellant in the weeks before the accident: "what do you do?" his likely answer would have been: "I am a trainee golf professional" rather than: "I am a shop assistant."
22. The respondent places strong reliance on what the appellant told the police when he was interviewed about the accident. The police officer asked him: "Just in your words, if you want to explain what you had been doing for the day." He replied: "um, well, as a professional, I am actually doing an apprenticeship as a golf professional." When asked about this in cross-examination the appellant said he was not yet a professional he was training to be a professional and was employed as a shop assistant. Of greater significance in my view is the fact that when he made his witness statement in the criminal proceedings he described himself as a trainee golf professional. It was, submits Mr Hunter QC a correct and accurate description of what he was. It is also to be noted that on the claim form while the appellant responded in the negative to the question was the vehicle being used for travelling to or from work? he answered affirmatively to the question: was the vehicle being used in connection with the occupation of the insured or driver?
23. One of the arguments advanced by the appellant was that he was paid to be a shop assistant and not to be a trainee golf professional. This was illustrated by the fact that his remuneration and indeed hours of work remained unchanged after he registered with the PGA. However, I am not persuaded that the question in the proposal form: occupation and nature of business – both full and part-time is limited to paid employment. For example 'charity worker' appears in the list of occupations and so does 'voluntary worker'. In short the respondent was interested in the whole picture of what the appellant was doing and not just any part for which he was paid. Bearing in mind that what was being provided was motor cover there is logic that this should be so. Gainful employment is not in my judgment a necessary feature of occupation.
24. The judge cited the following passage from the 10^th Edn of McGillivray on Insurance at para 17.8 that records the general rule:

"……the assured must disclose to the insurer all facts material to an insurer's appraisal of the risk which are known or deemed to be known by the assured but neither known nor deemed to be known by the insurer. Breach of this duty by the assured enables the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms."

25. The proposal form contained the following warning, albeit in small print at the bottom of the form:

"If you have any doubt about a particular fact being material to this insurance you should disclose it. Failure to disclose all material information may result in the insurance not being operative. It is an offence under the Road Traffic Acts to make any false statement or to withhold any material information for the purpose of obtaining a certificate of motor insurance."

As Lord Denning M.R said in McNealy v Penine Insurance Co Ltd [1978] RTR 285, 288D:

"All facts are material which are, to the knowledge of the proposed assured, regarded by the insurers as material: and that extends to the knowledge of his broker also. "

26. The present case is not one in which one is concerned with material facts that are outwith the questions posed in the proposal form. This case is about answers given to questions that were posed, in particular in relation to the appellant's occupation and nature of business. The proposer's occupation is material in motor insurance because experience has shown insurers that some occupations carry significantly higher risks of accident rates and losses than others.
27. As McGillivray points out at 17.17 the questions put by insurers in their proposal forms may either enlarge or limit the applicant's duty of disclosure. It is necessary therefore to look rather carefully at the questions posed in the present case. The insurers wished to know about the appellant's occupation i.e what he did, and his employer's name and address.
28. I have come to the conclusion that he gave an incomplete and misleading answer to these questions. It is accepted that he did so in good faith and very probably because of the alterations that his broker made when he produced the printed form. The fact that the appellant did not deliberately mislead the insurer is nothing to the point as this was a contract of insurance. There was, in my judgment, ample evidence for the judge to come to the conclusion that the appellant was a trainee golf professional and that that was the correct description of his occupation and business rather than 'shop assistant retailing.'
29. There is one other aspect of the case to which it is necessary to refer briefly. Part of the declaration by the judge was that the appellant did not disclose he was intending to use (or during the course of the policy decided to use) his vehicle to and from a place of work, which was other than his permanent place of work. The appellant was asked in the proposal form whether the car would be used for transport to and from various places of work to which he replied, in my judgment perfectly properly, "no." He had already said it would be used for travelling to and from his permanent place of work. I do not think travelling by car on an annual visit to a course at the Belfry or occasional visits to amateur competitions in order to try to maintain his handicap can realistically be regarded as transport to and from various places of work. Mr Hunter does not seek to support the judge's implicit finding that he was returning from his place of work when the accident occurred. Accordingly I do not think that declaration should have been made.

Conclusion

30. This case contains a cautionary tale. Because of the duty of disclosure of material facts, those who fill in motor proposal forms, be they the insured or his broker, should do so with care and should make sure that the questions are answered accurately and completely. For if the insurer finds himself saddled with a risk other than the one he had anticipated the insured may find that he has no cover because the insurer is entitled to avoid the policy. That is what happened to the appellant in this case because he told the insurer he was a shop assistant when in truth he was a trainee professional golfer.
31. I would therefore allow the appeal but only to the extent of discharging the second paragraph of the declaration namely that relating to non-disclosure of the use of his vehicle to a place of work other than his permanent place of work.

Lord Justice May:

32. I agree that this appeal should be allowed to the limited extent which Scott Baker LJ has indicated; but that otherwise on the main issue the appeal should be dismissed. I agree with Scott Baker LJ's reasons for these conclusions.
33. The part of Mr Whitlam's proposal form which has featured in this case is where his broker typed "shop assistant – retailing" in the box requiring information of "Occupation and nature of business – both full and part time". This came between a box asking for his "Employment status" and a box asking for details of his "Employer and Business address". In answer to the last of these, the broker typed simply "Worthing Road, Horsham". This did not name Mr Whitlam's employer, nor did it give the employer's full address. The proposal form which Mr Whitlam had himself completed in manuscript had been more explicit. It gave the answer "Neil Burke – Horsham Golf and Fitness, Worthing Road". The broker, it seems, had altered this answer.
34. We know that it was the broker who obtained a quotation for this insurance by himself putting an electronic version of the proposal into a computer system made available to brokers by the motor insurance industry. From this, it can readily be seen, as I think, that the answer "shop assistant – retailing" was a material non-disclosure of Mr Whitlam's occupation and the nature of his business, at least in conjunction with the materially incomplete answer to the succeeding question. I agree with Scott Baker LJ that the judge was entitled to come to the conclusion that Mr Whitlam was, for the purpose of this proposal form, a trainee golf professional. Another way of putting essentially the same point is that the answer "shop assistant – retailing" may not have been a material non-disclosure, if the form had gone on to give the full name and address of Mr Whitlam's employer. There would then have been disclosure of the kind of shop in which Mr Whitlam worked, and the computer would have rejected the proposal for these insurers. But without proper information of the employer and his address, "shop assistant – retailing" was materially incomplete.
35. The broker is not a party to these proceedings and has not had the opportunity to give evidence. But the indications suggest that the broker, who was Mr Whitlam's agent, must have been aware of this.
36. I would only wish to add that, in my view, this appeal turns on its own unusual facts. It should not be seen as deciding questions of broad application about answers in proposal forms for motor insurance.

Lord Justice Auld:

37. I agree that the appeal should be allowed to the limited degree indicated by Scott Baker LJ for the reasons that he and May LJ have given.

ORDER: Appeal dismissed; the appellant to pay the respondent's costs of the appeal; the appellant's application for permission to appeal to the House of Lords refused.

(Order does not form part the approved judgment)