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Cite as: [2007] ScotCS CSOH_145, [2007] CSOH 145

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OUTER HOUSE, COURT OF SESSION

[2007] CSOH 145

A1586/01

A1595/01

OPINION OF LORD BRODIE

in the cause

STUART JEREMY PETER WILKIE (Assisted Person)

Pursuer;

against

DIRECT LINE INSURANCE PLC

Defenders:

________________

Pursuer: Party

Defenders: Hofford; HBM Sayers, Solicitors

15 August 2007

Introduction

[1] These two actions, A1586/01 (the "Buildings action") and A1595/01 (the "Contents action") are concerned with a claim on a policy of insurance that covered risks which included the risk of fire. The pursuer in each action is Stuart Jeremy Peter Wilkie who was the insured under the policy. The defenders are Direct Line Insurance plc. They are the insurers under the policy.

[2] The property insured was a house and outbuildings known as Achanellan, Glen Loy, Fort William, of which the pursuer was the proprietor. On 6 December 1992 the property and its contents were destroyed by fire. In each of the actions the pursuer concludes for declarator that in terms of their policy of insurance no.91539300/CWK1, the defenders are obliged to indemnify the pursuer for losses sustained by him as a result of that fire. In addition, in the Buildings action he concludes for payment of £179,340 and in the Contents action he concludes for payment of £22,000. In each case he seeks interest on the respective sums from 6 December 1992.

[3] The actions have some history. Both summonses were signetted on 21 May 1998. Lord Eassie allowed a preliminary proof on prescription in each of the actions by interlocutors dated 11 July 2000. By interlocutors of 12 June 2001 the actions were ordered to be conjoined for the purpose of the preliminary proof. Having heard a preliminary proof, Lord Kingarth repelled the defenders' prescription plea. The defenders marked a reclaiming motion but did not insist upon it. Proof before answer was allowed and the actions conjoined for the purposes of that proof by interlocutor of Lord Drummond Young dated 12 December 2002. The pursuer reclaimed the decision to conjoin the proofs. That reclaiming motion was refused for reasons which appear in the Opinion of the Court dated 30 April 2003.

[4] The conjoined actions came before me for proof on 1 November 2005. The pursuer appeared on his own behalf. The defenders were represented by Mr Hofford, Advocate. While it came to be conceded by Mr Hofford that the onus of proof on the issue of obligation to indemnify was on the defenders, no order had been made ordaining the defenders to lead and no motion to make such an order was made to me. Accordingly, the pursuer began and on 1 November 2005 and the immediately following seven court days, I heard the evidence of the pursuer; Mr David Mee, architect (a witness for the defenders who was interposed in the pursuer's proof); and Mrs Sylvia Whitehead and Mr Colin Whitehead, who were friends of the pursuer. The proof was adjourned on 11 November 2005. It resumed on 5 December 2006 when I heard the evidence of Mr John Spencely, architect. I allowed the pursuer to lodge affidavits from two further witnesses: David J Cottier FRICS (No. 60 of process) and Mr Russ Bones FRICS (No. 61 of process). The pursuer then closed his proof. On subsequent days I heard the evidence of Mr Ian Todd, a loss adjuster employed by Robins McTear Limited in their Inverness office; Mr John McKinnon, a building contractor; Mr Alistair Robin, formerly a Regional Claims Manager of the defenders; Mr Malcolm Cooper, currently the Director of Underwriting of RBS Insurance and formerly Household Underwriting Manager of the defenders; and Michael John Harris, a retired Lloyds Underwriter.

The issues for proof
[5] The defenders admit that the property at Achanellan was destroyed by fire on 6 December 1992. They admit that the building and contents were insured. There is no dispute but that the relevant policy is that numbered 91539300/CWK1. The defenders have, however, refused to pay on the claim. Their defence is focused in their third plea-in-law to each of the actions which is in the following form: "The said contract of insurance having been voided ab initio the defenders are entitled to decree of absolvitor".

[6] The circumstances in which the defenders claim to have been entitled to avoid the policy are summarised in the pleadings in each action as follows:

"As at the date of the Proposal to the defenders, in August, 1991 the property was not in a good state of repair and this was known to the pursuer. Esto it was not known to the pursuer that the property was not in a good state of repair (which is denied) the pursuer signed a Warranty on the 25^th of August, 1991 that the property was in a good state of repair as at the date of inception of the Policy irrespective of his state of knowledge. Esto the property was in a good state of repair (which is denied) the defects in the work carried out to the property were material facts which would have influenced the defenders in their assessment and acceptance of the risk and, accordingly, required to be declared to the defenders".

[7] As I shall mention again below, I consider that the pursuer admits in his pleadings that he granted a warranty that the property was in a good state of repair as at the date of inception of the policy and that it would be kept so (albeit that this statement was warranted as "true and correct to the best of [the pursuer's] knowledge and belief"). He further admits that he was under an obligation to disclose all facts which would influence an insurer in the assessment and acceptance of the relevant risk. He denies, however, that from the date of inception of the policy the property was ever in other than good repair. He makes no admission as to what would influence an insurer in the assessment and acceptance of the relevant risk. The parties are therefore at issue as to the state of repair of the property as at the date of inception of the policy and thereafter during the currency of the contract of insurance; the pursuer's knowledge of the state of repair of the property as at the date of inception of the policy and thereafter; and the materiality of the state of repair of the property from the perspective of a prudent insurer. These are all questions of fact which require to be resolved in order to determine whether the defenders have established that the pursuer was in breach of warranty or was guilty of material non-disclosure either as at the date of inception or thereafter. In the event that the defenders fail to establish either breach of warranty or material non-disclosure, it follows that the defenders are in breach of contract in failing to pay on the policy and that the pursuer is therefore entitled damages. That gives rise to further issues of fact which I must determine, these being whether the pursuer has established (the onus being on him) that he has suffered damage and how that damage falls to be quantified.

[8] While there are matters upon which the parties are at issue, there are a number of matters which on the basis of the evidence and admissions in the pleadings it appears to me fall to be regarded as essentially uncontroversial. Therefore, before turning to consider the evidence on the topics of state of repair of the property, the knowledge of the pursuer, non-disclosure and its materiality, and damages, I shall record my findings in relation to what I did not understand there was serious dispute.

Uncontroversial matters
[9] On 29 July 1991 the pursuer made an application by telephone to the defenders for home insurance in respect of the property owned by him at Achanellan. The pursuer had acquired the property in June 1989 but it had not previously been insured. During the telephone conversation the defenders' representative asked the pursuer certain questions to which the pursuer gave answers. The defenders accepted the pursuer's proposal which was solely in relation to the buildings. Thereafter the defenders sent to the pursuer a Home Insurance Proposal Confirmation Form (No.7/3/31 of process). The pursuer signed that form on 25 August 1991 and returned it to the defenders. The Proposal Confirmation Form included a number of statements. Statement number 3 was that the property was "in a good state of repair and will be kept so". The pursuer signed a declaration to the effect that the statements within the Proposal Confirmation Form were "true and correct to the best of my knowledge and belief". This formed the basis of the contract between him and the defenders. I say that the fact that the Proposal Confirmation Form formed the basis of the contract between the pursuer and the defenders is to be taken as uncontroversial because that is what is averred by the defenders and admitted in his pleadings by the pursuer. In the course of the proof and at the point when he made his submissions, the pursuer sought to raise the content of the telephone conversation between him and the defenders' representative with a view to maintaining that he had answered all questions put to him fully and accurately, that he had made reference to the contents of a valuation report on the property made by Mr Russ Bones, dated 18 July 1991, and that there had been no evidence to the effect that he had been asked by the telesales operator as to whether the property was in a good state of repair. I took the view that these matters were not admissible, given the terms of the Record. Not only were there no specific averments as to what may have been said during that telephone conversation but, in my opinion, anything said must be held to have been superseded by the completion of the Proposal Confirmation Form. The admission in the pleadings that the Proposal Confirmation Form formed the basis of the contract put the matter beyond doubt.

[10] In terms of the proposal by the pursuer, as accepted by the defenders and confirmed in terms of the Proposal Confirmation Form, the defenders undertook to insure the building in respect of loss or damage in the event of fire, with a limit of indemnity of £150,000. The policy reference number was 91539300/1/CWK1. That policy was renewed with effect from 29 July 1992. It was subsequently amended in November 1992, extending the risk insured to include household contents up to the sum of £22,000.

[11] As I have already noted, the property at Achanellan, together with its contents, was destroyed by fire on 6 December 1992.

[12] The pursuer made a claim for indemnity in respect of the building and its contents. The defenders acknowledged the claim by letter dated 10 December 1992 and advised that they had instructed Robin McTear Limited as loss adjusters to deal with the claim.

[13] Mr Todd of Robin McTear Limited took responsibility for investigating and dealing with the claim. As Mr Todd collected information in the course of his investigations, he reported it to Mr Robin, the defenders' claims managers. McTear's and the defenders' respective correspondence files in relation to the claim were lodged as productions. The McTear files are Nos 7/3 and 7/4 of process. The defenders' file is No. 7/2 of process.

[14] Mr Todd's investigation disclosed that there was clear evidence to suggest that the fire had been started deliberately. It further disclosed (because the pursuer provided the information) that from April 1990, the pursuer had been in litigation with a Mr George Brown who had carried out building work on an extension to Achanellan between 1989 and 1990. I must stress that the defenders do not and have not alleged that the pursuer was responsible for setting the fire which destroyed Achanellan but I cannot avoid the impression that the circumstances aroused suspicions on the part of Mr Todd and Mr Robin that were never entirely dispelled. Mr Todd contacted Mr Brown and Mr Sandy Hastings of A J W Hastings & Co, Solicitors, Fort William, who had, at one stage, acted for the pursuer in relation to the litigation against Mr Brown. Mr Todd obtained copies of reports on the state of Achanellan which had been compiled for the purposes of the litigation. Three of these reports had been compiled on behalf of the pursuer: two by Richard Haynes (one headed "Independent Report", the other headed "Secondary Report") and one by Mr David Mee of Kinghorn Mee Architects. The Haynes reports were undated. The Kinghorn Mee report was dated 12 November 1991. The other report, by Mr John Spencely, was dated in March 1992 but was based on a site visit carried out at Achanellan on 12 December 1991. It was compiled on behalf of Mr Brown. Mr Todd also obtained a copy of the valuation report prepared by Mr Russ Bones which had been prepared for mortgage purposes.

[15] A copy of the Amended Closed Record in the action at the instance of the present pursuer against George Brown in the Sheriff Court at Fort William is No.7/4/11 of process. It contains craves for declarator that Mr Brown was in material breach of the contract with the pursuer to carry out building works at Achanellan and for payment of the sum of £105,085.55 as damages. The most recent interlocutor reproduced in the Record is that closing the Record and assigning a diet of debate. It is dated 23 April 1992.

[16] On 20 April 1993 Mr Todd wrote a letter to the pursuer (No.7/3/20 of process) stating that he understood that the pursuer had retained an architect in connection with the action against Mr Brown. Mr Todd asked permission to approach the architect. He also asked for a copy of an estimate for work which he understood that the pursuer had obtained. He advised that he was approaching the surveyor who had prepared an estimate of the approximate cost of reinstatement. This was Mr David Cottier. The pursuer's response was robust. His letter of 26 April 1993 (No.7/3/21 of process) concluded with the instruction: "Do not contact any of my acquaintances or professional advisers on any matter". It would appear that by this time the pursuer had lost confidence in Mr Todd by reason of what he saw as a failure to provide him with assistance and delay in achieving settlement of the claim.

[17] A meeting was arranged for 13 May 1993 between the pursuer and Mr Robin. The meeting was held in the caravan which had been supplied by the defenders and was then occupied by the pursuer. The meeting was attended by Mr Robin, Mr Todd, the pursuer and, accompanying the pursuer, Mrs Anne Campbell. In my opinion, neither the pursuer nor Mr Robin demonstrated an entirely reasonable attitude in relation to Mrs Campbell's participation in the meeting. The pursuer wished her there as an observer but, initially, refused to disclose her name. Mr Robin, for his part, refused to continue with the meeting if Mrs Campbell took notes. In the event Mr Robin got his way. Mrs Campbell gave her name and agreed not to take notes. Although the purpose of the meeting had been to discuss the pursuer's complaints about the way in which Mr Todd had been handling the claim, Mr Robin took the opportunity to question the pursuer about the reports he had obtained on his property prior to the fire. In pursuing this matter, Mr Robin was not being entirely frank. He conceded, in cross examination, that at the time of the meeting he, or at least Mr Todd, had copies of the reports in one or other of their briefcases. The pursuer described this as having the result that he had been subject to "trick questions". He described his own response as being "guarded". As I understood the evidence, at the meeting the pursuer was even less candid than Mr Robin. While it may be, as Mr Todd accepted in response to a question by me, that the pursuer did not give an answer that was literally untrue, he avoided disclosing the existence of any of the reports. Mr Robin came away from the meeting believing that he had been lied to by the pursuer. I did not find that to be surprising.

[18] Mr Robin reported to the defender's Household Underwriting Department. The file was considered by Mr Cooper. He recommended that the policy should be avoided. That advice was accepted and a letter was written by Mr McKie, a Director of the defenders, dated 27 May 1993 in the following terms:

"Dear Mr Wilkie

Fire Claim under Policy No. 91539300

This file has been passed to me from our Glasgow office following investigation into your claim for fire damage on the 6^th December 1992.

We are in possession of reports on the condition of the property, by Richard Haynes Developments in October 1990 and Kinghorn Mee in November of 1991 both showing that the property was suffering from major structural defects. It is understood that these reports were commissioned by you to assist with a civil action against a builder. On the basis of this evidence, I am satisfied that at the time you proposed to Direct Line for insurance, you were aware your property was in a very poor condition, and you failed to advise us of this fact when arranging the insurance. Had you done so, cover would not have been made available to you. I consider your failure to inform us of the true condition of your property to be a misrepresentation of material fact, which regretfully leaves us no option but to avoid your insurance from inception.

Naturally, we are unable to assist you further with your current claim. Payments for alternative accommodation will cease from 28^th May 1993. For your future protection, you should disclose to any prospective insurer your previous loss history and the fact you have had this home insurance cancelled.

Yours sincerely,

C R McKee, Director".

State of repair of the property as at the date of inception of the policy and thereafter

The evidence of the pursuer

[19] The pursuer gave his evidence in chief by way of a statement from the witness box under oath. He was cross-examined (albeit not without difficulty). By way of "re-examination" I gave the pursuer the opportunity, which he took, of clarifying his evidence in a further statement.

[20] The pursuer explained that he had purchased the house at Achanellan, together with some 17 acres of land, in June 1989. He was then a member of the British speed ski team, engaged in international competition. The house was stone-built. It had two stories with two rooms on each storey. It had an extension to the rear. It was about 100 years old. It had last been lived in some 35 years previously, during which period it had been boarded up. It was obviously in need of renovation. The pursuer contracted for this work with Mr George Brown, the manager of the speed ski team who was a builder with a business in St. Monans, Fife. Although it was not clear to me from the pursuer's evidence precisely what it was that Mr Brown undertook to do, an indication of the scope of the work is provided by the plans prepared for the purposes of obtaining building warrant bearing a Lochaber District Council stamp and dated 7 November 1989 (No.7/4/58 of process). It included the building of a new two storey extension; the taking out of the solum; rebuilding the roof; and the fitting of floors, windows and doors. The new extension was to the rear (the north elevation) of the original house and replaced the original extension. It comprised a kitchen, toilet and dining room at ground level and a spiral staircase leading to a studio and bathroom at first floor level. The work included the installation of dormer windows at first floor level on the south elevation and a storm porch, of similar construction to that of the bay windows, at the front door of the original house. In the building warrant plans the original ground floor rooms are designated "Living" and "Lounge". The first floor rooms are designated as bedrooms.

[21] Mr Brown started work in September or October 1989. He last worked on the property in March 1990. The pursuer was away for much of this period, taking part in ski races. When the pursuer had visited the property with his parents in January 1990, he had found water pouring in where the roof had been cut for the fitting of dormer windows. The pursuer returned to Achanellan in May 1990. He was not satisfied with Mr Brown's work. There had been little improvement in the state of the house. Mr Brown appeared to have gone backwards. There were no slates on the roof. There were no floors upstairs. The solum had not been taken out. Windows had been fitted in a temporary fashion. A lintel was missing. A door-frame had been twisted to fit. Mr Brown asked for more money for materials. He left the site when this was not provided.

[22] According to the pursuer, after May 1990 he and a total of 30 others, including a number of different tradesmen, worked to rectify and complete the construction of the house. A damp-proof membrane was installed. The house was re-floored. Proprietary windows costing some £10,000 were installed. The building control officer attended on three or four occasions when work was ongoing. He never requested the pursuer to stop the work or questioned its quality. Moreover, as was demonstrated by the letter from Highland Council dated 25 August 1998 to the pursuer's then solicitors (No.6/89 of process) three interim payments of improvement grant were made in respect of Achanellan on 12 January 1990, 4 April 1990, 17 July 1990 and 27 March 1991. By July 1990 the property was more or less wind and watertight. A professional slater, Mr Newhouse, had rectified the mistakes made by Mr Brown. By about August 1991 everything that required to be done had been done up to the required standard, barring only small cosmetic matters, although no completion certificate was issued because roughcasting had been delayed by rain. The pursuer had celebrated his thirtieth birthday in the house on 21 June 1991. The photographs in No. 6/130 of process were taken on that occasion and showed the interior of the house at that time. In about July 1991 the pursuer applied to the Royal Bank of Scotland for a loan to be secured over the property. A surveyor, Mr Russ Bones, came and carried out an inspection of Achanellan. His report, dated 18 July 1991, was No.7/2/214 of process. It described the property as "still under reconstruction" with roughcast, a balcony, kitchen units, a patio, a small area of decoration and plasterboard and fencing to be completed. The valuation for mortgage purposes was stated as £95,500 in its then current condition and £102,000 when completed. The pursuer explained that the balcony mentioned in the report (planned for the west elevation) was never proceeded with. Mr Brown had done work that was not true to the floor plan in the drawings. That could not be corrected.

[23] No. 6/102 of process comprises three photographs which the pursuer explained showed Achanellan at different dates, as indicated by their captions. Photograph C is captioned "rear view property as purchased 21^st June 1989 ..." Photograph A is captioned "front view Autumn 1990". Photograph B is captioned "3/4 view prior to proposal confirmation in August 1991".

[24] In cross-examination the pursuer was challenged by Mr Hofford about the employment of some 30 workers between May 1990 and August 1991. The pursuer had produced no invoices for their alleged work. He had not mentioned names other than Mr Newhouse and Mr Riddell when he had given evidence at the proof in the action against George Brown in Fort William Sheriff Court in March 1994. The pursuer responded that all his papers had been destroyed in the fire. He did not wish to get those who had done "homers" into trouble. Some of them were simply returning favours. He paid for some work by bartering his Jaguar motor car. That was the way people did things in the Highlands.

[25] Mr Hofford put to the pursuer that in the Closed Record in the Sheriff Court action against George Brown, raised on 29 November 1990, there was no reference to the pursuer having carried out the remedial work which he had described in his evidence in chief in the present action. The pursuer's response was that there had been an amendment to the original Sheriff Court pleadings to reflect what would be said in evidence by Mr McKinnon. This amendment had been made against the pursuer's instructions. The condition of the property in November 1990 was not as was described in the Sheriff Court Record.

[26] Later in the cross-examination Mr Hofford sought to put to the pursuer part of the transcript of Mr McKinnon's evidence at the Sheriff Court proof. The pursuer objected on a basis that he would repeat on a number of occasions: that evidence of the condition of the property subsequent to the date of his proposing for insurance was irrelevant as it could not relate to the state of repair of the property or the knowledge of the pursuer as at the time when the contract of insurance was concluded. I allowed the evidence under reservation of the objection. I would now repel this objection. This was a proof before answer. There are averments relating to the Sheriff Court action against Mr Brown and to the evidence given in that action by Mr McKinnon. Mr McKinnon was to be a witness in this action, giving evidence as to what he claimed to have seen when he visited the property. The fact that that visit came after the pursuer had proposed for insurance and had signed the Proposal Confirmation Form does not necessarily have the result that Mr McKinnon could not have anything to say that might bear on the condition of the property at an earlier date. If, for example, there was work that required to be done in January 1992 that might yield the inference that it had required to be done in July or August 1991. Moreover, the defenders rely, first, on a warranty that the property "was in a state of good repair and will be kept so", and, second, on an obligation to disclose material facts not only at inception but also at renewal. Accordingly, the action is not only concerned with the state of the property in July or August 1991. It is concerned with the state of the property throughout the period of the insurance.

[27] When the transcript of Mr McKinnon's evidence at the Sheriff Court proof was put to the pursuer he repudiated it as inaccurate. For example, contrary to what appears in the Sheriff Court Record, No. 7/4/32 of process, and in the transcript, No. 7/6 of process at page 376, there had, according to the pursuer, been no leaks at the front of the building in January 1992. That was "pure fantasy". The pursuer had completely disagreed with the instruction of Mr McKinnon. Mr McKinnon had an ulterior motive for putting forward his estimate for the cost of re-doing the work on the basis of starting from scratch. Mr McKinnon's evidence had been "inaccurate ... too sweeping ...gilding the lily to make out that things were worse than they were ...embellished ...far from the truth". The pursuer said that he had been totally unhappy with the figure that Mr McKinnon had come up with as the cost of remedying Mr Brown's work. This had resulted in a serious dispute between the pursuer and his then solicitor but "Mr Hastings was a law unto himself". Mr Hofford pointed out that the pursuer had pursued the case against Mr Brown to proof and had thereafter appealed the sheriff's decision insofar as it related to damages. The pursuer responded by saying that he had proposed that the case should revert to what had originally been pled (a claim for £18,100 on the basis that Brown had charged £25,000 for work which was worth about £7000: the position taken in the Independent Report by Richard Haynes). He had not thought that the court would award the cost of rebuilding.

[28] Mr Hofford asked the pursuer why there was no answer in his pleadings in the present actions to the call (which appeared at page 14C of the Record in the Buildings action) to specify the "substantial renovation works" carried out between May 1990 and June 1991 which were the subject of averment by the pursuer at page 7E of the Record. The pursuer accepted that from a date in late 2003 or early 2004 he had appreciated that his pleadings did not provide a full answer to defenders' pleadings, which had been amended in 2003. However, all his documentation had been lost in the fire and he was therefore not in a position to plead more than he had.

[29] Again against the pursuer's objection that it was dated subsequent to the date of inception of the policy, Mr Hofford put to the pursuer the Kinghorn Mee report of 12 November 1991. Again I reserved that objection at the time and would now repel it for essentially the same reason as I have repelled the objection to reference to Mr McKinnon's assessment of the property. The Kinghorn Mee report is specifically referred to on Record but in any event the report and the evidence of its compiler, Mr David Mee, are relevant to the issues of whether the property was in a good state of repair and the pursuer's knowledge of that not only as at the date of Mr Mee's inspection but also prior (and indeed subsequent) to that. In answer to Mr Hofford, the pursuer accepted that Mr Mee had carried out a visual inspection of the property but emphasised that he had relied primarily upon photographs taken in 1990 and explanations provided to him by the pursuer. Mr Mee did not take measurements. He would not have been able to see about 90 per cent of the brick-work. Other things were not visible. His comments on nails, for example, could only have been based on what the pursuer had told him or on what appeared from the photographs. According to the pursuer, what Mr Mee did was to prepare a retrospective report on the condition of the property prior to the remedial work which had been carried out since May 1990. He had been asked to provide comment as to building practice but he had gone beyond that. He had made an assessment as if he had been the architect on the job. Mr Mee had made it clear that he was dissatisfied and that he would have asked for all the work to be re-done.

[30] Again against the pursuer's objection based on the date of the document (again reserved and then repelled for the reasons given above), Mr Hofford put to the pursuer for his comment a letter from Lochaber District Council, dated 7 October 1991, addressed to A J W Hastings & Co, and apparently signed by Mr James Cormack, the Director of Environmental Health Services and Master of Works (No. 7/2/179 of process). The letter bears to report on an inspection of Achanellan carried out on 30 September 1991 by an officer of the Council, Mr Caton. The letter is in the following terms:

"General

The building is not at completion stage with numerous items to be finished for it to comply.

Ground Floor

Windows to the front elevation are not fitted correctly. There is no evidence of d.p.c. and the cill detail is not in compliance with the approved plans. The kitchen window to gable, evidence of water penetration from above. (See note on studio patio door).

Dining Room (New Extension) - brickwork where visible under the patio door cill has irregular mortar joints, some excessive and some with none at all, the d.p.c. at this point varies in height from the proposed finished ground level.

The extension at the gable patio door end is out of alignment by approximately 100mm and the patio door has been set off line (see note on first floor bathroom).

First Floor

The studio patio door and cill has not been fitted in accordance with the approved plans, there is evidence of water penetration and this is causing water to penetrate the cavity and is affecting the kitchen window below on the ground floor.

The bathroom in the new extension is out of square as the dining room below and could cause concern with over spanning of floor-boarding. There is no cavity closure at the window head.

The balcony from the first floor studio has not been started and [I] recommend that the patio door be non-operable till this work is complete.

Roof ventilation to be provided all as the approved plan. Timber cladding to the right of the first floor patio door on the flank wall has not been completed; this omittance (sic) could cause water penetration.

The eaves detail is not as the approved plan."

[31] The pursuer recognised the name of Mr Caton. The pursuer understood that Mr Caton was the building warrant officer. He accepted that he would have seen the letter at about the time of its date. He disagreed with what appeared in the letter. He did not accept that there had been water penetration, although he accepted that, due to a very rainy autumn, damp marks could be seen on the outside of the building. There was certainly no problem with water penetration subsequent to June 1991. Such defects as there were were of a cosmetic or technical nature. They did not prevent habitation of the property. Mr Hofford challenged the pursuer on that last point under reference to the transcript (No. 7/6 of process pages 447 to 455) of the evidence of Mr Arthur Watt, a building control officer with Lochaber District Council, who had been a witness at the Sheriff Court proof in lieu of Mr Caton. When referred by the pursuer's counsel to the letter of 7 October 1991 Mr Watt had stated that under section 9 of the Building (Scotland) Act 1959 no person could occupy a building without having obtained a completion certificate. The pursuer's response to Mr Hofford was to say that he had never been asked not to live in Achanellan.

The evidence of Mr and Mrs Whitehead

[32] In evidence in chief Mrs Sylvia Whitehead gave evidence of visiting Achanellan in the spring of 1991. This was on one of at least three occasions when she had visited the house. At that time building work seemed still to be in progress. She remembered scaffolding in position but it did not seem that it was structural work that needed to be done. Rather, what was outstanding were things like putting in skirting boards. The work was unfinished but in its final stages. There was, however, no porch at the front door. Mrs Whitehead remembered seeing a piano, tables and chairs, a three-piece suite, ski equipment, a harness and saddles, and a pool table. There was a spiral staircase. The fittings were of quite good quality. They displayed a good quality of workmanship. Mrs Whitehead had also visited in the autumn of 1991. She had been accompanied by her husband and daughter. Then a different situation presented itself. The house looked completed. Its appearance was consistent with what was shown in the photograph, number 6/102B of process. There had been a porch. She remembered there being a Rayburn stove.

[33] Mrs Whitehead was shown No. 6/101 of process which is a quotation for the supply of various household items. She had not seen the document before but she could recollect that when she visited Achanellan there had been a rush chair, beds, an ottoman, a pool table and a pianola.

[34] Mr Colin Whitehead spoke to three visits to Achanellan, in spring 1991, in autumn 1991 and in summer 1992. In spring 1991 he found the house to be almost completed. From the autumn visit he remembered dormer windows, pine panelling, a working Rayburn stove, a three-piece suite, a bath room walled with plasterboard, functioning electrics, and a carpet in one of the bedrooms. By the time of his visit in summer 1992 there was a porch. The kitchen was fully equipped. There was some painting to be done but the house seemed to have been completed. Mr Whitehead thought it very nice. Hazarding a guess he would have valued it at £100, 000.

The affidavit evidence

[35] No 61 of process is a statutory declaration by Russell Grenville Gardiner Bones FRICS, dated 30 November 2006. Attached to it is a Royal Bank of Scotland Valuation Report for Mortgage Purposes. That report is a copy of the top sheet of the two page report which is lodged as No. 7/2/214 of process. Mr Bones identifies the Valuation Report for Mortgage Purposes as having been prepared by him. It is dated 18 July 1991. The property is described as still under construction. The value for mortgage purposes is given as £95,500 with retention against completion of £6500. The reinstatement value is given as £150,000.

[36] No 60 of process is a sworn affidavit by David John Cottier FRICS, dated 30 November 2006. Attached to it is a copy letter under the letter head of H J G Samuel & Partners, Chartered Quantity Surveyors, dated 13 April 1993. The letter states that the reinstatement cost of the fire damaged house at Achanellan would be in the region of £145,000 excluding contingencies, VAT and professional fees.

The evidence of the architects
[37] As I have already indicated, I heard evidence from two architects: Mr David Mee of Messrs Kinghorn Mee, Chartered Architects; and Mr John Spencely. Both had been instructed to prepare reports for the purposes of the Sheriff Court action at the instance of pursuer against Mr Brown. Mr Mee was instructed on behalf of the pursuer by Mr Hastings in terms of a letter dated 5 September 1991. He met the pursuer at Achanellan on the afternoon of 23 September 1991 when he made a walk round inspection of the property in conditions described in his subsequent report as "wet and stormy". He spent about an hour and a half at the site. He did not go on the roof. He had a recollection of there being other people on site at the time. He was prepared to accept in cross examination that repair work may have been going on in relation to a sill detail. His objective was to determine whether Mr Brown had complied with the standards to be expected of a competent tradesman (in cross-examination he said that he had been asked to look at the building as a whole but his focus was on the area of new work). He prepared a report which was dated 12 November 1991, No 7/4/65 of process (the Kinghorn Mee report). Mr Spencely had been instructed on behalf of Mr Brown with a view to giving an opinion on Mr Brown's workmanship, having regard to the terms of the Kinghorn Mee report and the pleadings in the Sheriff Court action. He was aware of the terms of the letter from Lochaber District Council, dated 7 October 1991, No. 7/2/179 of process. Mr Spencely visited the site and inspected the premises on 12 December 1991. His report was dated in March 1992. A copy is lodged as No. 7/4/2 of process.

[38] A common feature of the evidence of both of the architectural witnesses was their very limited recollection, given the passage of time, of the respective visits that they had made to Achanellan. They both faced the problem that work done by Mr Brown had been covered up by later work. As Mr Mee explained: "To be honest I do not have a recollection of what I saw. ...I believe that the inspection report was based on what I saw but I was further advised by progress photographs ...Mr Wilkie would have provided a commentary. The photographs represented the work as it developed. My purpose was to record work that had subsequently been covered up."

[39] Because of their understandable difficulty in remembering what they had seen, both Mr Mee and Mr Spencely relied very much on the terms of their respective reports. In large part, Mr Mee's evidence in chief consisted of him reading his report and providing explanations of the terms used. He stated that it was not his intention to go beyond the terms of his report. Mr Spencely said expressly and repeatedly that he "stood by" his report. This being so the evidence in chief of these two witnesses is best recorded by direct quotation from their respective reports.

[40] As far as material the Kinghorn Mee report was in the following terms:

"Structural Integrity: By visual inspection on 23 September 1991, and by examination of site progress photographs supplied by Mr Wilkie, it is evident that the works do not conform with adequate building practice, or the requirements of Building Warrant approval. Structural masonry work fails to comply with B55628: Part I: 1978 (1985 as read with BS 5628): Part III 1985.

Setting Out: it is evident that in setting out the works, no accurate check for squareness was carried out either by diagonal measurement or other means. There is no evidence that clearly marked storey or gauge rods (or other necessary templates) have been provided by the Contractor to ensure the accuracy of the walls and the openings in them. The starting courses have not been set out to allow for the position of openings etc. to ensure that broken or irregular bond and cutting is kept to a minimum. Bricks and blocks are not laid in true and regular courses on full, fairly smooth level bed of mortar with all joints filled. Contrary to the provisions of British Standard Codes of Practice, joints are not kept to a consistent average thickness of 10mm (nor evenly modified to suit adjacent work).Where work is to be coordinate with adjacent work, normal good practice would require that overall panel sizes be checked in order to establish the correct joint thickness before commencing the works. It is clear that this process was not followed. Bonding of masonry units has not been selected to reduce cutting to a minimum and avoid irregular or broken bond, contrary to normal good practice. Perpendicular joints and quoins are not constructed plumb. The [perpendicular joints] are not in alignment vertically and are not of the same thickness as the horizontal joints. There is no evidence of effective precautions having been taken to exclude mortar or debris from cavities in cavity wall construction, nor has any provision been made (by means of leaving temporary openings) for cleaning out of cavities. At openings in masonry wallings, lintels do not have consistent adequate bearing on the wall at the sides of openings and occasionally bear on short lengths of cut block. Codes of practice require that minimum of 100mm end bearing be provided at concrete lintel installation. This requirement has not been met. Codes of practice further require that joist hangers be built in plumb, bearing directly onto walls at the correct level (any adjustment to levels to be made at bed joints below the top course) and tightly abutting the wall face. This requirement has not been met.

Structural work of timber fails to comply with BS5268: Part II: 1989 and BS5268: Part III: 1985. Timbers are not sawn truly square. There is a general failure to make joints and provide bearings in a manner that brings and maintains all surfaces in full contact. Failure to make tight joints and bearing surfaces will considerably reduce strength of joints and the ability to resist lateral and rotational forces on the structure. There is evidence that inappropriate fixings have been used in that nails of inadequate length to provide a secure fixing are used. Nails are not driven on the slant so that the connection does not loosen under load. Nails are used instead of screw fixings in locating joinery components which may become loose due to inappropriate methods of fixing. Where joist hangers are used there is a general failure to ensure that all supporting or fixing surfaces are in close contact with the background and the timber beam supported. Codes of Practice allow a maximum gap of 6mm between ends of joist and hanger back plate. This maximum tolerance is not adhered to. The further requirement that joists should be properly levelled and that any unavoidable notching should be carefully and accurately undertaken and adhered to. Codes of Practice further dictate that wall plates should be fixed in one piece between changes of direction wherever possible, or otherwise that 100mm lap joints should be made. Wall plates should be bedded in mortar, truly level and fixed with straps where necessary, this standard is not achieved. Where openings are formed in roof structure, there is a failure to make suitable joints (or provide joist hangers) for trimming construction. Upper and lower surfaces are not correctly aligned and trimmers do not generally fit tightly (thereby reducing strength of the construction). Further failure to comply with Codes of practice occur in construction of timber studding, noggings, failure to adequately block next to walls, blocking and strutting between joists, bracing, laying and fixing of [tongue and groove] floor boarding and in many other items of basic construction detailing. General setting out of the works displays extreme inaccuracy and has posed problems of structural stability and integrity. Formation of slappings in existing structures and construction of new door and window openings are of unsound construction. General construction fails to make adequate provision for the exclusion of rising and penetrating dampness. There is inadequate provision of damp proofing at openings in external walls to provide for exclusion of penetrating damp. Cavity construction brick walls incorporating damp-proof courses, flashings and other materials and components are not constructed in accordance with the relevant recommendations of BS5628 ("Codes Practice for use of Masonry, Part III; 1985, Materials and Components, Design and Workmanship") using a construction as specified in the approved drawings and specification to suit the degree if exposure to wind and rain, in accordance with Clause 21 and as described in BSI Draft for Development DD93: 1984. Repairs and modifications to masonry walls of natural stone are not constructed in accordance with the relevant recommendations of Section 3 of BS 5390: 1976 'Codes of Practice for Stonemasonry'.

General Construction: The general construction displays a lack of attention to basic constructional detailing and good practice. There is a general failure to relate to specification contained in the relevant approvals and implied contract terms. The works are not carried out in accordance with adequate good building practice. General precautions to ensure structural stability, exclusion of dampness and general integrity of the works have not been taken, to the extent that considerable remedial works will be required to bring the works to an adequate standard of stability, integrity and completion."

[41] On being shown the letter from Lochaber District Council, dated 7 October 1991, Mr Mee accepted that its terms were consistent with his report. Mr Mee had given evidence in the Sheriff Court action along the lines indicated by his report. He had read the transcript of that evidence prior to giving evidence in the present case. His recollection was that the pursuer had been present when he had given evidence in the Sheriff Court action. Mr Mee did not believe that the pursuer had been in any way unhappy with what he had said on that occasion.

[42] In cross-examination Mr Mee accepted that there was a storm porch in position when he arrived. The general appearance of the house was as was shown in the photograph No. 6/102B of process. Notwithstanding his criticisms, it was not in imminent danger of collapse. The new work on the house had not achieved the level he would expect but that was not to say that there were many such buildings in the Highlands that were performing competently. He was not saying that the house was worthless or un-sellable. Although he had an imperfect memory, Mr Mee's recollection was of a house that was partly roughcast and white-washed and partly scratch-coated. Mr Mee acknowledged his reliance on photographs in order to come to a view about parts of the building that had been covered up. He had not gone on the roof. He could not remember whether he had looked into the loft. He had not taken measurements on site. He recollected there being furniture in the house. He accepted that it was conceivable that work that did not comply with the relevant British Standards could nevertheless be approved by the building authority.

[43] The purpose of Mr Spencely's report was to provide a response to the criticisms of Mr Brown's work that appeared in the Kinghorn Mee report, the letter from Lochaber District Council and the Sheriff Court pleadings (referred to in Mr Spencely's report as the "Statement of Claim"). Within the report Mr Spencely incorporated a schedule in which he sets out the various complaints and his observations in relation to each ("JDS Observations"). I set out this schedule below.

A	Masonry	JDS Observations
1	Setting Out not Square	True with respect to extension
2	Wall and opening heights inaccurate	True for Windows on North elevation
3	Broken/irregular bond/cutting not minimised	True
4	Coursing not true/regular	True
5	Mortar beds not regular/true	True
6	All joints not filled	True
7	Average Joint not consistent 10mm	True
8	Perps/Quoins not plumb	None seen where visible for inspection
9	Perps not aligned	True
10	Perp/bed joints not same width	True
11	Wall cavities may not be clean	Not visible for inspection: no sign of damp inside
12	No evidence of cavity cleaning	Not visible for inspection: no sign of damp inside
13	Lintol bearings less that 100mm structural	Not visible for inspection: no evidence of distress
14	Joist hangers not plumb	None seen where visible for inspection
15	Joist hangers at wrong level	True
16	Joist hangers not tight on wall	None seen where visible for inspection

B	Structural Timbers
17	Timbers not sawn square	None seen where invisible for inspection
18	Joint surfaces not in contract	True
19	Fixing nails too short	None seen where invisible for inspection
20	Nails not driven aslant	True
21	Nails used instead of screws where screws required	True
22	Gap between joist/back hanger plate exceeds 6mm	None seen where visible for inspection
23	Excessive notching of joists to level	None seen where visible for inspection
24	Wall plates not in one piece between changes in level	Not visible for inspection
25	Wall plates joints not lapped 100mm	Not visible for inspection
26	Wall plates not bedded in mortar	Not visible for inspection
27	Wall plates not level	Not visible for inspection
28	Wall plates not fixed with straps	Not visible for inspection
29	Roof structure openings: trimmers not jointed	True where visible at one hatch
30	Trimmer joint surfaces not in contact	Not visible for inspection
31	Trimmer joints not tight	Not visible for inspection
32	Inadequate timber studding	Not visible for inspection
33	Inadequate noggings	True
34	Blocking & Strutting to walls inadequate	Not visible for inspection
35	Blocking & Strutting of joists inadequate	True
36	Inadequate bracing	Not visible for inspection
37	Inadequate laying of T & H boards	Not true
C	Other Items
38	Slappings unsound	Not visible for inspection
39	Door openings unsound	Not visible for inspection
40	Window opening unsound	Not visible for inspection
41	Inadequate DPCs at openings	Not visible for inspection
42	Cavity Wall DPCs not to spec. BS5268 cl 21	Not visible for inspection
43	Flashings not spec. BS 5268 cl 21	Not visible for inspection
44	Existing stone wall repairs/mods not to BS 5390	Not visible for inspection

D	Lochaber Items
45	Building not complete	True
46	Ground Floor front windows lack DPC/correct cill	Drawing not yet seen
47	Water penetration at kitchen window head	True
48	Brickwork below patio door cill irregular joints/DPC	True
49	Extension misaligned	True
50	Patio door misaligned	True
51	Studio/patio door/cill not in accordance with drawings	Drawings not yet seen
52	Bathroom out of square	True
53	Bathroom window lacks cavity closer at head	Not visible for inspection
54	Patio door opens onto non-existent balcony	True
55	Roof ventilation not in accordance with drawings	Drawing not yet seen
56	Timber cladding at first floor incomplete	Now complete
57	Eaves detailed not to approved plan	Drawing not yet seen

E	Statement of claim
58	Roof Leadwork defective	Not visible for inspection
59	Gable end French windows incorrectly bedded	Not visible for inspection
60	do lack DPC and fixings	Not visible for inspection
61	Bathroom window not central	Central in room within 50mm
62	Bedroom door widths specified as 2'9"; built at 2'3"	Specification not seen: they are 2'6"
63	Kitchen doorway lintols missing	Not visible for inspection
64	Cracked window lintol	Not visible for inspection
65	Workshop doorframe damaged	True
66	Velux roof lights damaged	True

[44] Mr Spencely summarised his findings as follows:

"Of the 66 items contained in this schedule, I confirm that 25 exist, that 26 were not available for inspection, that 7 were not seen to exist when (a limited number were) visible for inspection, that for 5 comparison with the design drawing or specification was not possible as these have not been supplied, that 1 was no longer open to complaint (an incomplete item was complete), and that 2 were not valid complaints. Of the 25 items which I found to exist, none appeared to be causing structural stress or failure or water penetration. For the 7 items for which limited inspection only was possible, none appeared to be causing structural stress or failure or water penetration. For the 5 items for which could not be made with the drawings and/or specification, none appeared to be causing structural stress or failure or water penetration."

[45] In the final, opinion, section of his report Mr Spencely made a number of points which he was to reiterate in the course of his oral evidence. To describe a failure to comply with a British Standard or Code of Practice as a defect is only meaningful if the contract has specified that the Standard or Code is to be complied with. The building was functioning. There were no signs of failure or cracking or water penetration. There was no evidence of roof leaks.

[46] Although not mentioned in his report, Mr Spencely agreed with the pursuer that when he inspected the property on 12 December 1991 he had advised the pursuer that the spiral staircase to the first floor was inadequately supported and therefore unsafe.

[47] When cross-examined, Mr Spencely explained that his disagreement with Mr Mee over his references to British Standards and Codes of Practice was not as to whether the relevant work conformed to the Standard or Code but as to the relevance of the Standards and Codes to the particular contract between the pursuer and George Brown. Mr Spencely had not seen anything, either by way of a written contract or drawings which imposed the obligation on Mr Brown to meet particular British Standards or comply with particular Codes of Practice. That said, as appeared from his report, there were some respects in which this building did not meet Mr Spencely's own minimum standards and he would have condemned some of the work. He accepted that Mr Mee's report appeared to be comprehensive and competent. He had seen some of the things referred to by Mr Mee and he had said so in his report. Mr Spencely did not dispute that matters that were the subject of complaint in the Kinghorn Mee report had been shown in photographs that Mr Mee had seen. However, there were items included in the Kinghorn Mee report that Mr Spencely had not seen and, in his opinion, no architect could speak to a defect on the basis of photographs taken some months previously. Site progress photographs show what they show. They do not show what has happened since they were taken. Mr Spencely confirmed that he had given evidence in the Sheriff Court action. He could not recall what that evidence had been but he accepted that it was as was recorded in the transcript, No. 7/6 of process at pages 283 to 352. He accepted as accurate that the work was rough and ready, that the brickwork was not as he would have wished it to be (transcript, page 311), and that it had been done to a standard that he would not have accepted had he been responsible for supervision of the job (transcript, page 337). When it was put to him that Mr John McKinnon, a building contractor who had been asked to look at the property in January 1992 had declined to do anything other than knock it down and replace it at a cost of £68,000 (plus VAT), Mr Spencely said that he was not surprised. A new contractor will always be very nervous about taking on the responsibility for someone else's work.

John McKinnon
[48] Mr McKinnon has been a joiner since he was 15. He is now 58. He has had a building business for 29 years. His current recollection of matters relating to Achanellan is now very limited but he had given evidence on behalf of the pursuer in the Sheriff Court action at Fort William on 15 March 1994. No 7/6 of process contains a transcript of that evidence at page 370 and following. Mr McKinnon was prepared to adopt that evidence for the purposes of the present action. It appears from the transcript that Mr MacKinnon visited Achanellan either on or a few weeks prior to 15 January 1992. That is the date of an estimate prepared by Mr McGillivary, one of his employees. The purpose of the visit was to carry out an inspection with a view to preparing an estimate to rectify work done by Mr Brown. He described that work as half finished. He agreed that both the masonry and joiner work were defective. He was shown the Lochaber District Council letter of 7 October 1991. His only surprise at its terms was that other matters had not been included for criticism. On the day of his visit the roof had been leaking. His assessment was that the blockwork had to be taken down with a view to starting again. The estimate for taking down and reinstatement conforming to Building Regulations was £68,021.31 plus VAT.

[49] Mr Hofford showed Mr McKinnon the Kinghorn Mee report. He did not think that he had seen it before but, after a fairly cursory look, agreed that it corresponded with his own assessment of the property as recorded in the transcript. He offered the view that the property had not been wind and watertight as at the date of his visit.

[50] In cross examination Mr McKinnon maintained that he had a memory of there having been leaks when he had made his visit, as indicated by a piano which had been covered in a plastic sheet. He remembered exposed timber above the bathroom and a bathroom window not having been fitted. He insisted that the property was not wind and water-tight. His impression was that the slater-work had not been completed. What appeared in Mr Spencely's report did not tally with his recollection of the building. The extension had not been roughcast. Blockwork was clearly visible. He did not remember the spiral staircase. He did not remember the porch. What was shown in the photographs in No 6/130 (taken, according to the pursuer, on the occasion of his thirtieth birthday on 21 June 1991) was not consistent with his memory. However, as cross examination progressed Mr McKinnon became less certain of the date or dates of his visit or visits and by the stage of re-examination was happy to concede that he had made two visits: an earlier visit when the construction of a pond was discussed and a later visit instructed by Mr Hastings.

Assessment of the evidence on the state of repair of the property
[51] An obviously important part of the evidence about the state of repair of the property during the period of the insurance is that provided by Mr Mee and Mr Spencely, both of whom appeared to me to be competent professional men who were attempting to assist the court to the best of their respective abilities. I considered that there were only limited inconsistencies between them as to what they found on their respective investigations. Insofar as there were inconsistencies, I have preferred Mr Spencely. I have done so by reason of Mr Spencely's very much greater experience as an architectural expert witness and investigator for forensic purposes. This gave him an authority that was readily apparent from both the terms of his report and his oral evidence. He was precise in expression and my impression was of someone who carefully weighed what he said. It is true that Mr Spencely was careful to stress that in this action he regarded himself as a witness speaking to the factual state of what he had found rather than a witness who was offering an expert opinion but it is with a factual state of affairs that I am concerned.

[52] Important as the architectural evidence may be in considering what the defenders have proved about the state of repair of the property during the period of the insurance I require to have regard to all of the evidence led. Accordingly, before saying more about what I made of what was spoken to by Mr Mee and Mr Spencely, it is appropriate that I record my assessment of the other sources of evidence bearing on the condition of the property.

[53] Mrs Whitehead's evidence was not tested by effective cross-examination. This was by reason of the pursuer's vociferous, repeated and, in my view, unjustified objections. In the end Mr Hofford gave up his attempts to question her, although not before, as Mr Hofford came to submit, Mrs Whitehead had become rather argumentative. I do not consider that this matters very much. I have no reason to disbelieve either Mrs Whitehead's or her husband's evidence. However, it was the evidence of friends of the pursuer who had made a few social visits to his house. It was no part of their purpose to make a critical inspection of the property.

[54] Having regard to the terms of section 2 (1) of the Civil Evidence (Scotland) Act 1988 the affidavit evidence is clearly admissible. I accept it as far as it goes. By that I mean that I accept that Mr Bones inspected Achanellan and prepared the Valuation Report for Mortgage Purposes dated 18 July 1991 and that Mr Cottier wrote the letter dated 13 April 1993. I accept that insofar as these documents contain opinions, their authors have the necessary professional competence to express such opinions. As far as the documents contain statements of fact, I accept that they are honestly stated. However, I did not have the opportunity to hear either Mr Bones or Mr Cottier give evidence on oath or to see how they fared under cross-examination. Importantly, in relation to Mr Bones, I do not know just how he carried out his inspection, nor do I have his comments on what appears in the Lochaber District Council letter, the Kinghorn Mee report or the Spencely report. In a case where parties are very much at issue as to the condition of the property this all goes to the weight that can be attached to the affidavit evidence.

[55] In contrast to my approach to the evidence of the Whiteheads and the affidavit evidence, I am not prepared to attach any weight whatsoever to the evidence of Mr McKinnon. He appeared to me to be an uncomfortable witness. His agreeing of the terms of the Kinghorn Mee report as consistent with his assessment of the property after the most cursory of examinations of the document did not suggest someone who was being very careful about the evidence he gave. In common with other witnesses, and as is hardly surprising, he had little memory of the events of nearly fifteen years ago. Although he initially talked of one visit to Achanellan, in or about January 1992, he came to concede that he had made an additional, earlier, visit. Mr Hofford took him through passages of the evidence that he had given in the Sheriff Court action. Significant parts of that evidence had been given in response to leading questions and, as Mr McKinnon acknowledged in his evidence before me, in response to looking at photographs which had presumably been taken (and not by Mr McKinnon) prior to his visit in January 1992. Mr McKinnon's recollection of the state of the property was not consistent with that of Mr Mee or Mr Spencely. When shown the Spencely report Mr McKinnon acknowledged that it did not tally with what he remembered. It may very well be that this is to be explained by confusion on Mr McKinnon's part as between what he saw in January 1992 and what he had seen on his earlier visit or what he had seen in photographs. At all events, I cannot rely on what he had to say as fairly reflecting the condition of Achanellan during the period of insurance and I accordingly simply lay it aside. That is of course not to say that I rejected the uncontroversial evidence that he had made a visit to the property in or about January 1992, that he had been instructed to do so by Mr Hastings in order to assist with preparation of the action against Mr Brown, and that the pursuer had been aware of his visit and its purpose.

[57] The position in relation to the pursuer's evidence is rather more complicated than that in relation to other witnesses. I am of the opinion that the pursuer is not a witness upon whom I can unreservedly rely. That said, I do not consider it either fair or reasonable simply to reject his testimony in the way that I have rejected Mr McKinnon's evidence. Rather, I have considered it appropriate to approach the pursuer's evidence on all matters with caution and to look at how it squares or does not square with the totality of the rest of the evidence. Where it has been contradicted by other acceptable evidence I have preferred that other evidence.

[58] In coming to the view that I have about the pursuer, I have had regard to broadly four sources of information: the circumstances in which the pursuer came to give his evidence; the content of that evidence and the manner in which he gave it; the manner in which he conducted himself in the role of party litigant; and the inconsistency as between the position adopted in these actions on the one hand and in the Sheriff Court action on the other.

[59] Turning first to the circumstances in which the pursuer came to give his evidence, he shares the difficulty that applies to other witnesses, that his testimony cannot be described as fresh or spontaneous. At best it must be regarded as an amalgam of information from a variety of sources only some of which form part of the pursuer's direct experience. The relevant events to which the pursuer spoke occurred a long time ago. They are events that have been the subject of an action in the Sheriff Court to which the pursuer was a party. The pursuer gave evidence in that action (as, of course, did Mr Mee, Mr Spencely and Mr McKinnon). He sat through the evidence of other witnesses. He represented himself before me. This will have involved him in a significant degree of preparation including the reading of productions. The productions include the transcript of the Sheriff Court action. It appears to me that as a result the pursuer's own recollection will have become confused, or at least suffused, with what he has heard and read. The present actions are of considerable importance to him. It is unrealistic to expect him be detached and, particularly with the passage of a significant amount of time, it would be unsurprising were he to have become convinced of the truth of what he had to say, irrespective as to what might be the actual position.

[60] As far as the content of the pursuer's evidence and the manner in which he gave it, I do not go the distance of indicating that I found him to have deliberately lied on any particular matter of fact when he was on oath. However, the pursuer's evidence, taken with what he said ex parte in the course of his conduct of the case, led me to form the view that he is someone who is prepared to be economical, in other words selective, with the truth. He is not someone to offer qualifications or explanations if they do not assist the position he wishes to advance. He accepted that he had been less than frank as to whether he had reports on the condition of his property during the meeting he had with Mr Robin and Mr Todd on 13 May 1993. Moreover, the pursuer behaved obstructively during cross-examination. On occasion he avoided answering or simply refused to answer questions. On 4 November 2005 after criticising the conduct of Mr Hofford over the course of more than an hour, he concluded by saying that it was extraordinarily unfair to ask him to return to the witness box (because of the way Mr Hofford was said to have behaved). After this, although I required the pursuer to resume the witness box (and he reluctantly did so), Mr Hofford chose not to cross-examine further.

[61] I have borne in mind the difficulties and consequent stresses experienced by anyone when acting as an advocate in his own cause. The circumstances of the pursuer and his perceptions of others are likely to have added to these stresses. As I have already mentioned, the case is important to him. For whatever reasons he has been compelled or has felt compelled to present it himself, without legal representation. His financial means seem to be limited and perhaps for that reason he had not lodged the caution required in order to lead witnesses. Rightly or wrongly he feels that he has been very badly treated by the defenders. His view of the defenders has extended to comprehend the solicitors and counsel acting for the defenders. He has felt unfairly treated by the bench. He advised me that he was in pain during the course of the proof and that he was taking medication that had had an adverse effect on his temper. I have thought it proper to make allowances for these matters and have attempted to do so. Nevertheless that does not excuse the pursuer from the scrutiny that must be applied to any witness whose testimony is challenged as incredible and unreliable. The court has an opportunity to scrutinise a party litigant both while he is giving evidence and while he is carrying out the role of an advocate. While I have borne in mind that when giving evidence the pursuer was under oath, whereas when discharging the advocacy role he was not under oath, I have found it impossible not to take into account when assessing the pursuer's general truthfulness, his conduct qua advocate as well as his conduct qua witness. As it happened, I had occasion to stress the importance of absolute accuracy in giving information to the bench. That the pursuer understood that this was the obligation of a professional advocate was clear because he was persistent in his complaint that Mr Hofford had given me inaccurate information (on the matter of the date that Mr Spencely's report had been lodged with the court). In the circumstances it seems to me appropriate to take into account whether or not the pursuer could be described as having been candid when making statements to the court. In relation to at least one matter I consider that the pursuer lied to me when making an ex parte statement and in relation to another matter I found him to be less than entirely candid. It was my assessment that the pursuer lied to me when recounting his understanding of the consequences of the proof being conjoined. He claimed that he understood that he had the opportunity to lead three witnesses in the Buildings action (including himself) and two in the Contents action (including himself). This was at a point before the discussion had been complicated by the question as to whether the pursuer, as may be required of a party litigant, had lodged caution for witnesses' expenses. Now I accept that it is difficult to be certain as to whether someone is lying about his state of belief, but my very strong impression, given the way in which the pursuer departed from his previous statement when challenged, was that the pursuer had not been truthful when telling me what he had understood he was entitled to do in a situation where the proofs had been conjoined. The occasion when I formed the view that the pursuer was less than entirely candid was when, despite previous discussion about witnesses, it was only on 11 November 2005 that the pursuer revealed that he had not obtempered Lord Glennie's order in relation to caution and that in consequence there were no more witnesses that he was in a position to lead.

[62] While describing himself as a person of principle who lived by a code (this was during an episode when he was refusing to answer questions because he felt that he had been slighted by Mr Hofford), the pursuer did not appear to me to be someone who is punctilious about telling the whole truth. I have already mentioned a passage of his evidence and incidents arising in the course of the proof which have led me to that view. Moreover, the position taken by the pursuer in the Sheriff Court action against Mr Brown was, as I took the pursuer to accept, simply inconsistent with the position that he takes in the present actions. Put very shortly the pursuer's position in the Sheriff Court action, both as a matter of pleading and as a matter of evidence, was that the work done by Mr Brown up to March 1990 was so defective that it required to be entirely redone at an estimated cost of £79,985.55 (inclusive of VAT), and that that work had not been done as at January 1992. It is true that in a passage of the transcript of the Sheriff Court proof to which my attention was drawn (No. 7/1 of process, pages 131 to 132) the pursuer, in the course of his evidence in that action, refers to his having carried out remedial work. It cannot be said therefore that he was concealing that fact from the sheriff. Indeed, the sheriff made a finding of fact that the pursuer had expended money in purchasing materials for interim remedial works and in an attempt to complete the alterations (see Opinion of the Court dated 30 May 2003 in Stuart Wilkie v George Brown). However, the position that the pursuer took in that litigation was that the property required to be rebuilt and in support of that position there was led the evidence of Mr McKinnon and Mr Watt. In contrast, in the present actions the pursuer repudiates the evidence of Mr McKinnon and the terms of the Lochaber District Council letter (the terms of which Mr Watt had been was asked by Mr Wilkie's counsel to confirm) as inaccurate and as always having been known to him to be inaccurate. If that is so then the pursuer allowed a case to be presented on his behalf to the sheriff that he knew to be false. The pursuer ascribes responsibility for this to the late Mr Hastings. Now, I can understand that a litigant might find himself adopting a position in a litigation that he does not really understand, and that he is therefore not well placed to control. That does not seem to have been the case here in that the pursuer spoke in his evidence to me about there having been a serious dispute between him and Mr Hastings over the latter's choice of tactics. He was therefore well aware of what was being done in his name. On his account to me, at the very least he acquiesced in the case going forward to proof before the sheriff and then to appeal to the Inner House on the basis of what he would have me believe in the present actions was false evidence. I have difficulty in seeing that as the act of a man of principle. While it may be that the pursuer is entitled to approbate a body of evidence for the purposes of Stuart Wilkie v George Brown and then reprobate the same body of evidence for the purposes of the present actions, his doing so says nothing for his honesty. Either he was trying to mislead the sheriff or he was trying to mislead me.

Conclusions on evidence as to state of the property
[63] What I take from the evidence summarised above, taken together and considered in the round, is that in June 1989 when the pursuer acquired Achanellan it required renovation, having lain empty for some 35 years. In October 1989 Mr Brown began work on what were intended as quite extensive alterations to the existing house and its original extension. That work included building or extending walls; constructing new floors and roofs; breaking out openings and fitting new windows. The pursuer was not satisfied with Mr Brown's work. It was his view that there had been little improvement in the state of the house. As at May 1990 when Mr Brown left the site there were no slates on the roof. There were no floors upstairs. The solum had not been taken out. Windows had been fitted in a temporary fashion. A lintel was missing.

[64] I accept the accuracy of the Kinghorn Mee report except in relation to its criticism of the laying of tongue and groove flooring. This is item 37 of the 44 items identified in that report by Mr Spencely and listed by him in his schedule. It is the only item which Mr Spencely challenges as "not true". When, and indeed by whom, this flooring was laid was not explored in the evidence. Items 11 and 12 relate to the possibility of debris having entered between the leaves of the walls. I would understand Mr Mee's view on that to be speculative and do not find it established. Otherwise I accept that the Kinghorn Mee report accurately describes defects in the work for which Mr Brown had been responsible before leaving the site. The question then arises as to whether it can be regarded as an accurate description of the condition of aspects of the building in September 1991 when Mr Mee made his visit. I would understand the position of the pursuer as being that that question should be answered in the negative. The Kinghorn Mee report was, he emphasised, retrospective. It relied on information given to Mr Mee by the pursuer including information provided by site progress photographs. Considerable work had been done on the property after Mr Brown left site and it would have been impossible for Mr Mee to have seen everything that he reported on. I accept that work had been done on the property between Mr Brown leaving the site in 1990 and Mr Mee's visit. That much is clear from the photographs that were lodged as productions, the evidence of Mr and Mrs Whitehead, the terms of Russ Bones's report, and the evidence of Mr Spencely. However, I do not accept that the work done after March 1990 remedied the defects described by Mr Mee and itemised by Mr Spencely in his schedule, with the possible exception of item 43 (flashings not spec BS5268) which, although not specifically discussed in the course of the evidence, is the sort of thing that might have been redone when the roof was slated subsequent to March 1990, as I would accept it must have been.

[65] I take the view that the defects listed in the Kinghorn Mee report (other than items 11, 12, 37 and 43) were probably still in place in September, and indeed December 1991, for the following reasons. The defects relate in the main to substantial structural matters: masonry, structural timber, slapping, door openings, damp proof courses and repair of pre-existing stonework. Remedying these would have involved extensive down-taking. Although the pursuer talked in broad terms about the subsequent work having put right what Mr Brown had failed to do, I did not hear him speak specifically about re-doing masonry or taking down and replacing floor and roof timbers. Indeed, he expressly accepted that it had not been possible to remedy Mr Brown's failure properly to set out the masonry work. Nor do I think it likely that the pursuer, with only modest funds at his disposal, would have undertaken radical down-taking if he thought that what was there was at all serviceable. His complaints about Mr Brown, at least before he met with Mr Mee, seemed to be about how little Mr Brown had done and how much he had charged rather than about the quality of his work. When giving evidence, Mr Mee conceded that he had relied in part on what he had been told by the pursuer and the photographs that he had been shown but, nevertheless, I understood him to be saying that his report was intended to describe the property as it was in September 1991 and not simply as it had been at some earlier date. I accept the terms of Mr Spencely's report which include the observation that many of Mr Mee's items were not visible for inspection on 12 December 1991 (and, I take it, not visible when Mr Mee visited on 23 September 1991 either). That is not to say that they were not there. Almost without exception when Mr Spencely is able to see an item he confirms Mr Mee's assessment, as he confirms all but one of the items on which he is able to comment in the Lochaber District Council letter. I do not see anything in the affidavit evidence of Mr Russ Bones or the evidence of Mr and Mrs Whitehead to contradict the view that the Kinghorn Mee report and the Lochaber District Council letter provided broadly accurate pictures of Achanellan in the latter part of 1991 and indeed later. I can understand that Mr Russ Bones may not have been looking for and in any event did not see the defects described in the Kinghorn Mee report. By the time of the final visit by Mr and Mrs Whitehead Achanellan may well have appeared satisfactorily completed to someone who was merely on a social visit. That does not mean that it had in fact been satisfactorily completed.

[66] Thus, with the exceptions noted, I conclude that the Kinghorn Mee report taken together with the Lochaber District Council letter accurately describe Achanellan as at 25 August 1991 and subsequent dates, in particular 23 September 1991, 12 December 1991 and, because I heard no evidence of any work on the property during 1992, thereafter up until the date of the fire on 6 December 1992 (and therefore on 29 July 1992).

The pursuer's knowledge of the condition of the property
[67] As the pursuer came to submit, the inception of the policy was prior in date to the inspections of Achanellan by Mr Mee and Mr Spencely and their subsequent reports. It was also prior to the date of the Lochaber District Council letter. That is not to say that the pursuer had no indication that anything was amiss with Achanellan prior to 25 August 1991; but it means that I cannot find that he knew everything that was recorded in the Kinghorn Mee report and the Lochaber District Council letter prior to 23 September 1991 in the case of the former and sometime shortly after 7 October 1991 in the case of the latter. There is a question as to when the pursuer saw the Kinghorn Mee or Spencely reports. I cannot find that Mr Mee sent a copy of his report directly to the pursuer. I understood the pursuer's position to be that he had only learned of the existence of the Spencely report when it was lodged as a production in the present actions, and I accept that to be the case. As far as the Lochaber District Council letter is concerned the pursuer accepted that he had seen it not long after its date and therefore he can be taken as knowing its contents at that time. The position with the Kinghorn Mee report is not quite so clear-cut. The report is dated 12 November 1991. Mr Mee sent a copy to Mr Hastings. He probably did not send a copy directly to the pursuer. I would find it surprising if Mr Hastings did not forward a copy to the pursuer after he had received a copy from Mr Mee and, indeed, the pursuer accepted in cross-examination that he "may have been sent a copy". I consider that he probably was sent a copy of the Kinghorn Mee report by Mr Hastings but, in any event, I take the pursuer to have to have learned, at least in all material respects, of Mr Mee's assessment of the then current state of the property from the discussion he had with him on 23 September 1991. The evidence of both the pursuer and Mr Mee was that much of the information about the items in the Kinghorn Mee report and certainly all the information about the items that Mr Spencely did not find to be visible came from the pursuer, and the picture I derived from the evidence of the pursuer and Mr Mee was of a quite detailed discussion over photographs and plans. Achanellan was not a large property. On his own evidence the pursuer had been actively engaged on the building work that had been going on since about May 1990. By September 1991 I take him to have been very familiar with the property and what Mr Mee was to identify as its defects. As I have already indicated, I consider it probable that Mr Hastings sent him a copy of the Kinghorn Mee report when it became available on or shortly after 12 November 1991. I also think it probable that Mr Hastings sent the pursuer a copy of the Record in the Sheriff Court action which was closed on 23 April 1992 and which repeated, more or less verbatim, the terms of the Kinghorn Mee report as well as referring to the assessment contained in the Lochaber District letter and making the other complaints noted by Mr Spencely in the final part of his schedule. The pursuer confirmed in evidence that he was aware of the way in which the Sheriff Court action was pled.

Materiality of the condition of the property
[68] The defenders led Mr Cooper and Mr Harris in support of the case of material non-disclosure, the critical question being as to whether the state of the property was a fact which would have affected the judgement of a prudent or reasonable insurer in assessing the risk and fixing the premium (cf Hooper v Royal General Insurance Co Ltd 1993 SC 242, MacGillivray Insurance Law para 17-35). Mr Hofford put a number of hypotheses to the witnesses and asked them to assume them to be the fact and then asked whether it would have affected their judgement as reasonable underwriters when considering whether to underwrite the risk.

[69] When asked to assume that the condition of the property was as described in Mr Russ Bones's report Mr Cooper said that this would have affected his judgement in that it indicated that the property was still under construction. That would have raised questions. The reference to (old) settlement was also important: "we are very sensitive to the subject of structural movement". However, in cross-examination Mr Cooper retreated from what I had previously taken his position to be on the basis of the Bones report in that he accepted that there was no reason to be concerned on the basis of that report alone. Mr Cooper did not pretend to understand the technical matters described in the Kinghorn Mee report but its tenor indicated to him a property that was in a poor state of repair and he would not have provided insurance. However, when asked to assume that the condition of the property was as described in the Spencely report, there was no question but that Mr Cooper would not have wanted to provide cover had these facts been presented at the time of the proposal for insurance. He would not, however, have considered that the condition of the spiral staircase, taken alone, would have entitled an insurer to repudiate if not disclosed. The absence of a completion certificate would have led to more questions but he would not necessarily have refused insurance cover. However, the terms of the Lochaber District Council letter would have affected his judgement.

[70] When asked to put himself in the position of the reasonable underwriter and to assume that the condition of the property was as described in the Lochaber District Council letter, Mr Harris characterised what was set out in the letter as "a litany of problems" and indicated that he would not accept the risk on any terms, conditions or price. He gave the same response when asked to assume that the condition of the property was as described in the Kinghorn Mee report. After a false start, he indicated that he would not have accepted the risk had the condition of the property been as described in the Spencely report. If he had been told that Mr Spencely had regarded the spiral staircase as being unsafe, that would have affected his judgement.

[71] Mr Cooper was not an independent witness. He had been involved in the decision to repudiate liability under the pursuer's policy and therefore had an interest to defend that decision. He was familiar with the contents of the defenders' file. That file includes information or supposed information about the pursuer and the property at Achanellan which is not favourable to the pursuer's position but which I have not found to have been established; the hearsay attributed to Mr and Mrs Glen and Mr Hastings is an example. It would be remarkable if that information and the robust style with which the pursuer has advanced his claim on the policy with his associated criticisms of the defenders (also evident from the file) have not affected Mr Cooper's view of the pursuer and his entitlement to indemnity. I have borne this in mind when considering Mr Cooper's evidence but, while his inevitable association with the defenders' position goes to the weight to be attached to his evidence, my assessment of Mr Cooper was that he was an honest witness who, although initially just a little glib, understood his responsibilities to the court and gave a considered response to the questions that he was asked.

[72] I had more reservations about Mr Harris. I do not doubt his qualifications to give opinion evidence on the materiality of particular facts in deciding whether to underwrite a risk and the terms upon which the risk should be underwritten. He gave an account of having had a successful career as an underwriter, with experience of underwriting risks on domestic properties. He retired in 1994. That means that his experience was contemporary with the underwriting of the risk in relation to Achanellan, without that experience having been diluted with or confused by more recent experience. He conceded in cross-examination that he was not familiar with the "telephone insurance area" but I am not satisfied that this is of importance, given the issues in the present case. I accordingly accept that Mr Harris was qualified to give expert evidence on what would have affected the judgement of a reasonable underwriter in 1991 or 1992. He explained that he had been trained by the Expert Witness Institute and that he understood that his duty was to the court rather than to his instructing solicitor. While this is not an acknowledgement that has yet to be formally required of expert witnesses giving evidence in a Scottish court, it is reassuring to hear. However, while I have no reason to doubt that Mr Harris was doing his honest best, for all his experience and for all his training, I was left wondering just how well he understood and just how well he was able to perform his role as an expert witness in this litigation. At the beginning of cross-examination the pursuer put to Mr Harris that he had approached or at least spoken to Mr and Mrs Whitehead when they had been sitting waiting to give evidence outside the courtroom. This allegation related to the first week in November 2005 when Mr Harris had attended in the hope of being called to give his evidence, whereas it was fully a year later, at the continued diet, that Mr Harris came to be in the witness box and was required to respond to the pursuer's challenge. Mr Harris accepted that he had sat with a lady and gentleman whose names he could not remember on the only available bench (outside court 11). He further accepted that he had spoken to them but he said that he had not discussed the case. It was no more than a friendly gesture on his part. I had some sympathy with Mr Harris in the socially awkward situation that he found himself in presumably because he had not been directed to a witness room. I exclude any sinister intention on his part (which seemed to be the pursuer's suggestion). Nevertheless, while I do not pretend to have come to any resolution of the precise nature of the exchange between Mr Harris and the Whiteheads, I was left with the impression that Mr Harris may have erred in the direction of good-natured affability rather than in the direction of the professional reserve more commonly associated with the expert. Like Mr Cooper, Mr Harris had read the defenders' file in relation to the pursuer's claim. He had also been asked to look at the transcript of the proof in the Sheriff Court action. I can see that that may have been seen as the most practicable way of instructing him (and, in any event, the easiest way of instructing him), but it has had the result that Mr Harris has been exposed to information or purported information that, for aught that has been established to the contrary in the present actions, was prejudicial to the pursuer and yet false. It may have served to confuse Mr Harris as to what was required of him. As an expert being asked for an opinion, it was not necessary for Mr Harris to be concerned with what the condition of the property actually was or the sufficiency of particular sources of information as an indication of that condition. As was demonstrated by the way in which Mr Hofford took Mr Harris's evidence in chief, his opinion, as an underwriting expert, could be provided on the basis of a hypothesis of fact without him needing to concern himself whether the hypothesis was true or not. It is true that matter was complicated by the pursuer's cross-examination of Mr Harris which ranged beyond the structure which Mr Hofford had been at pains to establish in chief, but I was not satisfied that Mr Harris always had the distinction between hypothesis and fact in the forefront of his mind. A clear instance of that was when Mr Hofford asked him to assume that the condition of Achanellan was as described in the report by Russ Bones and then asked him on that basis whether the condition of the property would have affected his judgement as a reasonable insurer. Mr Harris's response was "Ironically no, because I have seen a lot of crazy bank surveys." This was the fifth hypothesis that Mr Hofford had put to Mr Harris and I would have expected him to have understood that he was being asked to give his opinion on a hypothetical state of affairs rather than to say what weight he would have given to a particular source of information. When Mr Hofford put as a hypothesis that the property was as described in two file notes, Nos. 7/2/104 and 7/2/135 of process, Mr Harris's response was that he preferred not to answer on the basis of "hearsay, well after the fire". Again, this was to offer a view on the reliability of the source of the information which was being put on a purely hypothetical basis. This was not what he was being asked for. In the course of his cross-examination of Mr Harris (in response to an intervention by me when he was asking Mr Harris about views ascribed to Mr Glen) the pursuer observed that Mr Harris seemed to be convinced that the property was in a poor condition. I consider that there is something to be said for the pursuer's observation. In fairness to Mr Harris, he was not given the opportunity to comment on the proposition that his approach had been affected by his understanding, based on a reading of the file and the transcript, that Achanellan was indeed in a poor condition at the relevant times, but the tenor of his replies to questioning, both in chief and cross, did suggest that he had taken it as fact that there was little good to be said about the property and that this had coloured his view of its acceptability as a risk as a matter of fact. When shown the Spencely report (again with a view to him considering it on the hypothesis that it accurately reflected the condition of the property) which he had not seen before, despite being given the opportunity to read it, his first reaction was to say that it probably would not have affected his judgement. With a little help from Mr Hofford Mr Harris came to amend that answer by saying that on the basis of the Spencely report he would not have accepted the risk. That turnabout was not very impressive in itself but that passage of evidence suggested to me that Mr Harris had come to the case with a view of the facts shaped by a reading of the file which was not going to be shaken by apparently contradictory information (albeit that the Spencely report is not actually inconsistent with the Kinghorn Mee report). It did not suggest great care on Mr Harris's part in answering questions. As Mr Hofford felt constrained to observe, Mr Harris was emphatic in his language. When shown the Secondary Report said to have been prepared by Richard Haynes, one of the less critical documents associated with Achanellan, Mr Harris indicated that he would not have accepted the risk under any terms, condition or price. This trenchant expression was to be repeated by Mr Harris when asked to consider other hypotheses put by Mr Hofford, including the hypothesis that the condition of the property was as described in the Lochaber District Council letter and the hypothesis that it was as described in the Kinghorn Mee report. He went on to describe the condition of the property as described in the Secondary Report as "imperfect". This was taken up in cross-examination when Mr Harris confirmed to the pursuer that he would only insure a building that was "perfect", albeit that in re-examination he explained that he regarded "perfect" as synonymous with being in good repair. To the layman it is a little surprising to learn that there are risks that a reasonable insurer will not underwrite under any terms, condition or price but I take it to be so if only because Mr Harris appeared to be using the expression as a term of art. Nevertheless, by using the language that he did, Mr Harris was associating the reasonable underwriter with a very risk averse approach. Mr Harris's reasonable insurer is a very cautious gentleman indeed.

[73] The pursuer led no expert evidence to contradict Mr Cooper and Mr Harris. That does not mean that I am obliged to accept their opinions but unless I entirely reject them I must have regard to what they had to say, looked at in the context provided by the whole of the evidence. Whatever may have been the case had I been considering the evidence of Mr Harris in isolation, I do not consider that I have a basis for rejecting the evidence of these two witnesses which, in its critical aspects, is mutually corroborative. On the basis of that evidence I find the condition of Achanellan, as it was known to the pursuer by the time of the visit of Mr Mee in September 1991 and, in any event, no later than March 1992, and therefore on 29 July 1992 was such that it would have been material to a reasonable insurer in assessing the risk.

Submissions, discussion and decision
[74] As the onus was on the defenders to establish their entitlement to avoid the contract I invited Mr Hofford to address me before asking the pursuer to respond. Very helpfully, both Mr Hofford and the pursuer provided me with typed submissions to which they referred during their oral presentations.

Submission for the defenders

[75] Essentially repeating the averments I have recorded at paragraph [6] of this opinion Mr Hofford advanced the following propositions in support of his contention that the defenders were entitled to avoid the contract of insurance ab initio: (1) the pursuer was in breach of a warranty that the property was in good repair at inception of the policy and that it would be kept so; (2) there was a material non-disclosure at the inception of the policy in that the property was not in good repair; and (3) even if the property was in good repair at the inception of the policy there were facts relative to the condition of the property which were sufficiently material to have affected the defenders' judgement of the risk had they been informed and which therefore had to be declared at renewal. Mr Hofford further came to submit that irrespective as to whether the defenders had made out their defence on entitlement to avoid the policy, the pursuer had failed to quantify his loss and no award of damages should be made.

[76] Mr Hofford reminded me that there was no case on record for there being any other basis for the contract of insurance other than the Proposal Confirmation and Policy Schedule. He went on to identify the applicable legal principles, very properly setting them out in some detail, given that the pursuer was a party litigant. Contracts of insurance, he explained, are exceptional in being uberrimae fidei: parties must behave towards one another in the utmost good faith. This has the result that there is a positive duty to disclose all material facts to the other party: The Spathari 1924 SC 182 at 196. Material facts are all those that are relevant to enable the other party to make an accurate assessment of what he is undertaking: Hooper v Royal London General Insurance 1993 SC 242 at 245. They are therefore those facts which in the judgement of a reasonable insurer would influence him in deciding whether to take the risk. There is no requirement that the material or relevant facts be specifically requested on the proposal form. Breach of this duty renders the contract voidable at the instance of the insurer. No fraudulent intent is required for an insured to be in breach of his obligation. However, the obligation on the insured is to disclose all material circumstances that are known to him or which ought to have been known to him and which would influence the judgment of a reasonable insurer in the assessment and acceptance of the risk, as opposed to circumstances that are not know to him. The obligation is incumbent on the insured when proposing for insurance (and subsequently until the contract is concluded and the policy delivered) and when a new contract is made at renewal or when the contract is varied, for example by extension of cover. Where, as here, the insurer has purported to avoid the contract the onus is on him to establish that he was entitled to do so. A contract of insurance may require the insured to give a warranty. With a warranty (as opposed to non-disclosure or misrepresentation) the materiality of the information or fact warranted is irrelevant: Dawsons v Bonnin [1922] 2 AC 413 at 420. Thus, the validity of the contract is periled on the accuracy of the warranty. The warranty can be in respect of past, present or future facts. It is what may be described as a promissory term in that the insured promises that a given state of affairs existed or exists or will continue to exist during the currency of the risk. Breach discharges the insurer's liability from the time of the breach. It is in the nature of a condition precedent to the liability of the insurer: MacGillivray Insurance Law paras 10-1 and 10-2. Where a warranty is in the form of an opinion that the answers to questions or statements are true to the best of the proposer's knowledge and belief, the qualification "to the best of ... knowledge and belief" will not always excuse inaccuracies or relieve the proposer of a duty to make inquiry, a guess, for example will not suffice: McPhee v Royal Insurance Co Ltd 1979 SC 304, Unipac (Scotland) Ltd v Aegon Insurance Company (UK) Ltd [1999] Lloyds Law Reports 502. The existence of a warranty is a question of the parties' intention and not of the particular language used: Stephen v Scottish Boatowners Mutual Insurance Association 1986 SLT 234 at 242, McGillivray supra at 10-3). Breach of warranty entitles the insurer to avoid the contract ab initio, there being no requirement to show that the fact warranted was material or that the breach was relevant to the circumstances of the loss.

[77] Here the pursuer had warranted that the property was in good repair and would be kept so. That warranty was qualified only to the extent that it is to the best of the pursuer's knowledge and belief. The expression "good repair" should be given a common sense meaning. It meant wind and watertight, capable of being lived in by a respectable occupant. It was relevant to ask: would normal people find the property acceptable. Here the evidence was that there were so many aspects of the property that were faulty that it could not be regarded as having been in a good state of repair. Mr Hofford submitted that on the basis of that evidence I should hold that the property was not in good repair on 29 July 1991 but if that had not been established that I should nevertheless hold that there were occasions between that date when the property was not in good repair, that the pursuer knew this or could easily have obtained knowledge of this, and, accordingly that the pursuer was in breach of warranty. Mr Hofford further submitted that the state of repair of the property as at 29 July 1991, which the pursuer had not revealed to the defenders, meant that there had been material non-disclosure at the inception of the policy, but even assuming that that had not been established, it had been established that the property was not in good repair as at the date of renewal of the policy on 29 July 1992 when there again arose a duty to disclose all circumstances material to the risk. The pursuer had not disclosed the state of the property at that time. He therefore had failed in his duty of disclosure at renewal. The defenders were accordingly entitled to avoid the contract. Cover under the policy had been extended to include contents in November 1992. As at that date there was a limited duty to disclose matters material to the decision by the insurer to vary. Again, so Mr Hofford submitted, there had been a failure to disclose circumstances material to the acceptance of the additional risk. On that view the defenders were entitled to avoid the agreement to add the contents to the policy.

Submission for the pursuer
[78] The pursuer began by submitting that if insurers wish to repudiate a policy, their entitlement to do so is to be tested by reference to the material that they used to make the decision. Reference was made to Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2003] 1 AC 469. He drew my attention to the terms of the repudiation letter of 27 May 1993, with its reference to a report from Richard Haynes Developments and the Kinghorn Mee report. No other sources of information were mentioned. The pursuer then stressed that this was a case where the contract of insurance followed from a proposal made by telephone. There had been a dearth of information in the evidence led at proof about this sort of business which was crucially different from the sort of Lloyd's business with which Mr Harris was familiar. None of the cases cited had related to insurance arranged by telephone. What was of importance here was the information which had been given by the pursuer to the member of the defenders' telesales staff. If an insurer in the position of the defenders had significant information, that information should be disclosed. Mr Cooper had said that the contents of the telephone call between the pursuer and the defenders' representative would still be held by the defenders on computer. No computer expert or other witness had been led to explain why this information had not been produced. The telephone call when the pursuer proposed for insurance was the basis of the contract, not the Proposal Confirmation Form. The defenders knew exactly what had been said during that telephone call. The pursuer did not. Where a party "spoils" (which would include destroying or concealing) evidence, then all should be presumed against that party. The evidence available to the pursuer at the time of the telephone call on 29 July 1991 was the Russ Bones report and the first report by Richard Haynes (the Independent Report), which had a May 1990 date. The first Haynes report had suggested that George Brown had charged £25,000 for work which, if done properly, was worth about £10,000. It had not been done properly with the result that its value might be stated at £7000. It was on that basis that the pursuer had sued Mr Brown for £18,100. However, subsequent to the date of the first Haynes report the pursuer had received payments of improvement grant in respect of work to the bathroom, electrical wiring and windows. The first Haynes report was accordingly superseded and could be "scored out" from the repudiation letter. David Mee had been reporting retrospectively but, in any event, the defenders could only rely on what appeared in the Kinghorn Mee report if they established that the pursuer had knowledge of it. For his part the pursuer had relied on the Russ Bones report, the contents of which he had read over to the telesales operator when he proposed for insurance on 29 July 1991. As at that date he had no reason to go beyond that report. He had told the telesales operator that no completion certificate had been issued. He had acted as a proposer for insurance should. There was no evidence to indicate that he had been asked whether the house was in a good state of repair. The fact that the defenders had not disclosed their records of the telephone call allowed the court to infer that they were withholding evidence for their own benefit. In any event the defenders had failed to prove that the property was not in a good state of repair. The pursuer commended Mr Spencely as a thoroughly credible witness. If, as Mr Harris had suggested, good repair was to be equated with perfection then there was no building in the country that was insurable. Certainly, Parliament House in Edinburgh would not be insurable. Perfection was not achievable. It was to be borne in mind that Mr Brown's work at Achanellan related principally to the extension which was of relatively small floor area when compared with that of the rest of the property.

[79] The condition of the property as at the date of renewal of the policy had not been explored in the evidence. The onus should be on the insurer to ask questions. The ordinary lay person should not have to volunteer information about, for example, the thickness of joists. The word "warranty" did not appear in the Proposal Confirmation Form. It was understandable that the pursuer had thought there was little wrong with the house when everyone commented on how nice a place it was.

Discussion and decision
[80] I would regard the legal principles enunciated by Mr Hofford to be uncontroversial, with one exception. In a case which is not governed by the Marine Insurance Act 1906, I would wish to hear fuller argument before offering an opinion as to how far the duty of disclosure extends beyond facts within the actual knowledge of the insured. Cases of wilful blindness apart, there appears to me to be difficulty about requiring that an insured disclose facts that are not within his actual knowledge. However, I do not consider that this is a matter which requires decision in this case.

[81] The pursuer's approach in these actions is to concentrate on the initial proposal made during the telephone call on 29 July 1991, his knowledge as at that date (based on the report by Russ Bones and the first Haynes report) and his actions as a reasonable proposer for indemnity insurance. I see this to be misconceived. It is to ignore the pleadings, disregard what was established and what was not established at the proof and fail to take account of the applicable law. As I have previously indicated, the pursuer admits the terms of the Proposal Confirmation Form. There are no averments about anything that was said during the telephone call on 29 July 1991. In particular, there are no averments that the pursuer disclosed anything about the property additional to what appears in the Proposal Confirmation Form. The warranty that to the best of the pursuer's knowledge and belief the property would be kept in good repair and the fact that the policy was renewed prior to the property being destroyed by fire meant that the property's condition subsequent to 29 July 1991 and the pursuer's knowledge of that condition was of relevance. It could not simply be a question of what the pursuer may have understood from the terms of the Russ Bones report, taken in isolation. I have held that the pursuer must be taken to have known of the contents of the Kinghorn Mee report and the Lochaber District Council letter well before the date when the policy was renewed. That the question of what ought to be disclosed by an insured should be tested by reference to what the reasonable insured would consider material rather than what the reasonable insurer would consider material was argued but rejected in Hooper v Royal London General Insurance supra. That decision is binding on me.

[82] I accept the pursuer's submission that the defenders can only found on a factual ground for avoiding the policy which is referred to in their letter of 27 May 1993. I am not sure that the citation of Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd supra was entirely apposite but the opinions in that case include reference to a decision of the Supreme Court of Connecticut, Rego v Connecticut Insurance Placement Facility (1991) 593 A2d 491. In that case, as Lord Scott noted in Manifest Shipping Co Ltd, Callahan AJ, in whose opinion the other Justices concurred, said this:

"If the insurer denies liability and compels the insured to bring suit, the rights of the parties are fixed as of that time for it is assumed that the insurer, in good faith, then has sound reasons based upon the terms of the policy for denying the claim of the insured. To permit the insurer to await the testimony at trial to create a further ground for escape from its contractual obligation is inconsistent with the function the trial normally serves." (p 497)

[83] That dictum at least touches on the principle that I understood the pursuer to be relying on. The defenders purported to bring the contract to an end on 27 May 1993 for the reasons set out in their letter. The question then is whether they were entitled to do so and not whether they might have been entitled to do so on other grounds. However, I would not accept that that limits the defenders to the first Haynes report and the Kinghorn Mee report as the only available sources of evidence to support the assertions that appear in the letter: that the property was suffering from major structural defects, and that the pursuer was aware that the property was in a very poor condition when he arranged insurance. Nor do I consider that it is of importance that in the letter the defenders refer to what they found on as misrepresentation of material fact, whereas what is founded on in the actions are breach of a warranty that the property was in good repair and would be kept in good repair and failure to disclose material facts.

[84] For the reasons set out above I take the condition of the property as at the date of proposal to be as described in the Kinghorn Mee report to the extent that that report is not contradicted by the Spencely report and as supplemented by the Lochaber District Council letter. There is no evidence that significant remedial work was done after the date of Mr Spencely's visit, other than in relation to one window cill. I find the pursuer to have been fully aware of that state of affairs but not until after the inception of the policy. He was however aware of it prior to the date of renewal of the policy. Again as I have explained I regard the condition of the property as I found it be to have been material to assessment of the risk by a reasonable insurer. The question remains as to whether for the purposes of the warranty given by the pursuer the property was other than in a good state of repair. What amounts to a "good state of repair" will depend on circumstances but I consider what was said by Lord Patrick in Burns v NCB 1958 SLT 34 at 39 to be of assistance in understanding what is comprehended by the notion of "repair" and I have accordingly had regard to it in coming to my conclusion. Lord Patrick said this:

"It is true that the primary meaning of the word 'repair' is to restore to sound condition that which has previously been sound, but the word is also properly used in the sense of 'to make good'. Moreover the word is commonly used to describe the operation of making an article good or sound irrespective of whether the article has been good or sound before. Few people, seeing a hole in a piece of cloth being darned, would inquire whether the hole was left in the process of weaving or developed afterwards, in order that they might choose whether to describe the process of darning as one of completing the process of manufacture or as repair of the cloth. The normal person would simply say that the cloth was being repaired."

This is not a case where there was a failure to restore to sound condition that which had previously been sound. Rather, the contention of the defenders is that because of defects consequent upon the way in which construction work had originally been carried out the property had never been in a good state of repair. As the above passage from the opinion of Lord Patrick in Brown v NCB illustrates, that is a legitimate use of language and, in my opinion, given the terms of the Kingdom Mee report, which I accept as substantially accurate, it is proper to conclude that the property was not in a good state of repair as at the date of inception of the policy or any date thereafter. In so concluding I have had regard to the evidence of Mr Spencely. I accept that the fact that workmanship does not comply with a relevant British Standard does not necessarily have the result that a property so constructed is not in a good state of repair. Mr Spencely found no evidence of structural failure or cracking or water penetrations. That said, the criticisms made by Mr Mee and not disputed by Mr Spencely were significant and numerous. When they are taken together they point unequivocally to the property not being in a good state of repair.

[85] I am not satisfies that the defenders have proved that the pursuer was aware of everything that appears in the Kinghorn Mee report at the time he signed the Proposal Confirmation Form thereby giving the warranty relied on by the defenders. Accordingly, while I am satisfied that the property was not in a good state of repair at the date of inception of the policy the pursuer has not been shown to have been in breach of his warranty that the property was in a good state of repair because, for all that has been proved to the contrary, the pursuers statement, made on 25 August 1991, may have been true to the best of his knowledge and belief. However, the warranty given by the pursuer was not only that the property was "in a good state of repair" but that it would be "kept so", during the course of the insurance. I have found that the pursuer became aware of all the information contained in the Kinghorn Mee report, probably no later than 23 September 1991 when he discussed matters with David Mee. Thereafter, because he did not remedy the condition of the property (which may very well have been impractical) or renegotiate the terms of the insurance contract he was in breach of warranty and the defenders were accordingly entitled to avoid the policy. Taking the pursuer as having been unaware of the state of the property as revealed by the Kinghorn Mee report as at the date when he proposed for insurance, I do not find him to have failed in his duty of disclosure at the time of inception of the policy. However, the pursuer again came under an obligation to make disclosure of material facts and circumstances when the policy was renewed on 29 July 1992. As I have found, the state of the property was a material fact. It is not averred and has not been proved that the pursuer provided any information to the defenders about the state of the property subsequent to his signature of the Proposal Confirmation Form. He must therefore be held to have been guilty of material non-disclosure at the time of renewal of the policy. The defenders were therefore entitled to avoid the policy on that ground also.

Quantification of loss
[86] Given my decision that the defenders were entitled to refuse to indemnify the pursuer and therefore that they are not in breach of contract, there can be no question of an award of damages to the pursuer. It is nevertheless appropriate that I indicate how I would have quantified damages had the issue been live. The onus is on the pursuer to establish his damage and it was Mr Hofford's submission that he had entirely failed to do so with the result that no sum of damages could be assessed. I disagree. The report by Mr Russ Bones, dated 18 July 1991, valued the property for mortgage purposes at £95,500 in its then current condition. That report, supported only by Mr Bones's affidavit and not by his oral testimony, is admittedly a rather fragile piece of evidence. I take Mr Bones's figure, as I understand the pursuer encouraged me to do, to have been reached on the basis that, other than in the respects identified in the report, the property was in good repair whereas I have held that it was not in good repair. It is not clear to me to what extent the valuation comprehends the land held by the pursuer together with the house. Obviously, notwithstanding the complete destruction of the house in the fire, the pursuer retained the land which would have had some value. I shall come to the letter and accompanying affidavit of Mr Cottier but other than the affidavit evidence all I heard in relation to the value of Achanellan was Mr Mee confirming that even in the state that he described in his report the property was not valueless and Mr Whitehead guessing a figure of about £100,000. The defenders led no valuation evidence whatsoever (other than what Mr McKinnon said about Mr McGillivary's estimate of the cost of putting things right). Mr Cottier's letter states that the reinstatement cost of the fire damaged house at Achanellan would be in the region of £145,000 excluding contingencies, VAT and professional fees. I do not see that information as being directly relevant to the question of indemnity (although it might be seen as providing some sort of check on Mr Bones's valuation) even where the pursuer was entitled to reinstatement under his policy. He did not choose to reinstate. His damage is the value of the asset lost.

[87] In these circumstances the only indication that I have of the value of Achanellan at the time of its destruction is the figure provided by Mr Bones. Accordingly, I would assess damages in respect of the heritable property at £95,500. That may be relatively straightforward if, contrary to my finding, the property is taken to have been in good repair, as I imagine Mr Bones assumed it to be. The matter is a little more difficult if damages have to be assessed on the assumption that the property was not in fact in good repair and yet the defenders were not entitled to avoid the policy. That would be the case if I were to be wrong in concluding that the pursuer was aware of the material aspects of the condition of the property. It would seem likely that the value of Achanellan was connected with its condition and therefore its state of repair as at December 1992. However, I heard no evidence to indicate just what the effect of that connection might be. In the absence of such evidence I do not feel able to depart from Mr Bones's figure as the best available indication of the value of the property. I recognise that Mr Bones may have revised his valuation downwards had the Kinghorn Mee report been put to him. I further recognise that by reason of his evidence being limited to an affidavit, Mr Hofford did not have the opportunity to cross-examine on the hypothesis that the property was not in fact in the condition that Mr Bones assumed it to be. However, had Mr Hofford so wished it would have been open to him to cite Mr Bones or to lead other valuation evidence. He did not choose to do so.

[88] I heard even less evidence in relation to the value of the contents of Achanellan as at the date of the fire than in relation to the house itself. There was evidence that at least in 1991 the house contained a piano, a pool table, a Rayburn stove (which I take to have become part of the heritage) and some furniture. There was mention of skiing equipment and riding tack (which may have been insured under a separate policy). No.6/103 of process is a letter from the pursuer with an inventory of items but the pursuer did not give evidence in terms to the effect that these items had been in the house at the time of the fire or as to their value. In this state of the evidence I conclude that there probably were items in the house at the time of the fire which would have been covered by the contents insurance had the policy not be avoided. They will have had value but I heard nothing to indicate what that value might be. In the circumstances I would have assessed damages in the Contents action at the essentially arbitrary sum of £1000.

Conclusion: disposal of pleas
[89] I shall repel the pursuers' pleas in each of the actions. I shall uphold the defenders' third plea-in-law in each of the actions and assoilzie the defenders. I shall reserve all questions of expenses.

Post script
[90] The pursuer accused the defenders, their agents and Mr Hofford of various improprieties during the course of the proof. Because I was disinclined to become involved in collateral matters I did not accede to the pursuer's invitation to investigate the allegations and therefore I am not in a position to comment upon them. I would, however, record that the pursuer complained that a false date had been added to one of the reports by Richard Haynes and that the existence of the report by Mr John Spencely had not been revealed until a late stage. Whatever the basis for the pursuer's complaints (and, for all I know, there may be no basis whatsoever), as matters transpired I did not see that the pursuer had suffered prejudice in the conduct of the proof by reason of anything relating to them. I did not hear evidence from Richard Haynes and I have left the content of his reports entirely out of account. Mr Spencely was led as a witness under reference to his report which the pursuer had fully a year to consider between the first and second diets.