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Case No: QBCMF/98/0692/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION COMMERCIAL COURT
Mr. Justice Coleman
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday, 11 February 2000
B e f o r e :
LORD JUSTICE PETER GIBSON
LORD JUSTICE WALLER
and
LORD JUSTICE BUXTON
|
ALFRED
MCALPINE PLC
|
Respondent
|
|
-
and -
|
|
|
BAI
(RUN-OFF) LIMITED
|
Appellant
|
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Mr. Richard Lynagh Q.C. and Mr. Jonathan Woods (instructed by Messrs
CMS Cameron McKenna of London for the Respondent)
Mr. Ronald Walker Q.C. (instructed by Messrs Mackrell Turner Garrett of
London for the Appellant)
Judgment
As Approved by the Court
Crown Copyright ©
Friday, 11th February 2000
JUDGMENT
LORD JUSTICE WALLER:
1. This is an appeal from the judgment of Colman J given on 5 May 1998. He
gave judgment against the defendants (BAI). The issue before him, and the
issue on the appeal, relates to a condition in a policy of insurance requiring
the insured to give notice of any occurrence which may give rise to a claim "as
soon as possible ... in writing, with full details". BAI submitted before the
judge that the condition was a condition precedent, and that failure to comply
relieved the insurer from any liability. Alternatively they submitted that the
failure to comply amounted to a breach of the insured's duty of good faith or
amounted to a repudiation of the contract of insurance, and that the insurers
avoided the contract or accepted such repudiation and that on that basis there
was no liability under the policy.
2. The plaintiffs (McAlpine) submitted that if there was a failure to comply
with the condition that simply gave rise to a right to damages, and that BAI
had failed to establish any such claim.
3. Colman J preferred the arguments of McAlpine. BAI appeal against that
judgment. By a Supplemental skeleton argument they did however make clear that
they did not seek to disturb the judge's finding that the condition did not
constitute a condition precedent.
The History
4. On 1 May 1991 a workman called Mr O'Malley was seriously injured. He was
working on the cementing of a bridge over the A23 when he fell some distance
to the ground. He alleged that the guard-rail was too high, and that there was
thus a gap between the rail and the shuttering which was unsafe and through
which he fell. The allegation thus was that there was a breach of the
Construction (Working Places) Regulations 1966. There was some suggestion that
Mr O'Malley might have suffered an epileptic fit which caused him to fall.
5. Mr O'Malley was employed by one Harry Moss who was responsible for the
concreting pursuant to a sub-contract with RC Construction Ltd.("RCCL"). RCCL
was a sub-contractor of McAlpine, and it was McAlpine who had erected the
scaffolding, and it was thus Moss and McAlpine who were in breach of the
relevant regulations.
6. Loss adjusters acting for insurers for McAlpine investigated the accident
taking various statements, which appear in our bundle from 151 to 178. RCCL
did not notify their insurers after the incident. It was the adjusters acting
for McAlpine or their insurers, (Toplis UK) who notified RCCL of a possible
claim by McAlpine by letter dated 13 January 1992 advising RCCL to notify their
insurers (BAI) if they had not already done so. By this date RCCL had in fact
ceased to trade. However the letter of 13 January was passed to Gibbs Hartley
Cooper Ltd (Gibbs Hartley) who were the insurance brokers acting for RCCL in
terminating their insurance as from the date RCCL ceased to trade, 11 November
1991 (see pages 101 and 104). According to documents in our bundle, on 12
February 1992 Gibbs Hartley forwarded full particulars of a "new" claim from
RCCL, relating to the O'Malley accident, to BAI, but the judge found, and there
has been no appeal from the finding, that this letter was never received by
BAI.
7. RCCL ultimately went into liquidation on 11 March 1992.
8. On 13 May 1992 Toplis UK (McAlpine adjusters) sent a reminder to RCCL
stating that they had still not heard from RCCL's insurers; followed by a
further reminder on 20 May 1992. That led to Toplis UK contacting Gibbs
Hartley direct by letter dated 28 May 1992, and to Gibbs Hartley writing to BAI
enclosing "further" correspondence by letter dated 4 June 1992. At the same
time Gibbs Hartley requested from RCCL "the fully completed claim form".
9. BAI's response to Gibbs Hartley was to recognise that RCCL was in
liquidation, but to ask Gibbs Hartley to endeavour to obtain from RCCL a full
report and relevant documents (page 117); to request details of the main
contractors, and details of the contract between RCCL and Moss. They also
wished to know why it was only now that the accident had been reported to them.
The response from Gibbs Hartley was that their letter of 4 June requesting a
report had been returned and that they felt there was nothing further that they
could do. By letter dated 25 June 1992, BAI accordingly informed Toplis UK
that they regretted that they were unable to obtain a report, and stated "thus
it would seem that there has been a breach of policy condition". The letter
continued "we can therefore only suggest you pursue this matter via their
liquidators." Solicitors for McAlpine's insurers then pursued the matter by
letter dated 30 June 1992 and received the response from BAI by letter of 20
July 1992 that due to breach of policy conditions they were unable to indemnify
their insured.
10. No attempt was made at this time by anyone to contact the liquidators of
RCCL.
11. On 7 January 1994 O'Malley issued proceedings against Moss and McAlpine.
12. Solicitors acting for McAlpine and their insurers pursued BAI again by
letter of 23 June 1994, but received the response by letter dated 30 June 1994
"apart from advising our insured would seem to be in breach of policy
conditions, we do not feel that we are required to give you more details".
13. By letter dated 22 December 1994 again those acting on behalf of McAlpine
spelt out to BAI the likely course proceedings would take and asked for details
of the breach of policy conditions. By their response dated 10 January 1995
BAI made clear they were relying on the breach of the condition "requiring
notification as soon as possible in writing with full details". That condition
provided as follows:-
"In the event of any occurrence which may give rise to a claim under this
Policy, the insured shall, as soon as possible, give notice thereof to the
Company, in writing, with full details and as far as practicable there shall
not be any alteration or repair until the Company have had an opportunity of
inspecting."
14. I would pause here just to comment. First, BAI had by June 1992 received
notification in writing. The judge doubted however whether it could be said
they had received full details (see page 7 penultimate paragraph), and there is
no appeal against that finding. What they had received was a copy of the 13
January 1992 letter. That letter certainly gave some details. One suspects
that BAI's real concern was that they had not been notified of the incident "as
soon as possible". On any view sufficient details were made available for BAI
to take some action. Second, although BAI had not received "full details", BAI
made no attempt to approach the liquidators of RCCL in order to obtain those
details. In my view it is not right to say that RCCL had ceased to exist as
the judge held. They were in liquidation, and it would not have been
impossible for the liquidators to supply fuller details or arrange for them to
be supplied. Thirdly, BAI were never interested in taking any part in the
proceedings by virtue of which they could if they had so desired obtained much
fuller details than those with which they had been provided. They wished to
stand on their rights as they saw them to rely on RCCL's breach of the
condition. Fourthly, although it is pleaded that at some stage BAI "accepted a
repudiation" by RCCL, there does not seem to have been any communication by BAI
to RCCL's liquidators to the effect either that a failure to provide details
within some specified point in time would be treated as a repudiation of the
contract or at least as founding a right to reject the claim, nor that the
non-compliance with condition 1(a) was being treated as a repudiation of the
contract of insurance or as a right to reject the claim.
15. The remaining history is that McAlpine served third party proceedings on
RCCL on 11 April 1995. Mr O'Malley accepted a payment into court on 21
February 1996, and judgment was obtained against RCCL on 20 May 1996 for
£243,000 and costs.
16. Thereafter on 13 May 1997 McAlpine commenced these proceedings under the
Third Parties (Rights against Insurers) Act 1930. BAI rightly submit that
McAlpine can be in no better position as assignees than RCCL. On that basis
BAI maintain that by virtue of the breach of condition 1 (a) by RCCL, BAI have
no liability.
The Law
17. As the judge commented, the law as to the effect of notice clauses of this
nature is remarkably unsettled. But at least on one point there was no
argument before us because there was no challenge to the judge's finding that
condition 1(a) was not a condition precedent.
18. Once that point is disposed of, the question is what remains, having regard
to the fact that at least by the time these proceedings had been commenced BAI
did have full details of the incident from McAlpine.
19. If BAI could establish a repudiation of the contract of insurance or a
failure to act in good faith, and establish that they accepted that repudiation
or avoided the contract, then they would be entitled to resist liability. This
is their pleaded case.
20. As to breach of good faith, I am at present not absolutely clear what is
alleged. There is no allegation of dishonesty. It is not said, for example,
that personnel within RCCL, knowing that the incident might lead to a claim
under the policy with BAI, deliberately decided to conceal the fact that the
incident had taken place in order to make it impossible for BAI to investigate
the claim. I assume that all that is relied on is the non-supply of full
details. In The Star Sea [1997] 1 LLR 360 this court considered certain
passages from the judgment of Hirst J in The Litsion Pride [1985] 1 LLR
437 and said this:-
"As refurbished by Mr. Pollock, the underwriters' defence resembles that of the
underwriters in the Royal Boskalis Westminster N.V. v. Mountain, Dec.
18, 1995 (unreported), of which part of the transcript of the judgment was
shown to us. The underwriters in that case alleged non-disclosure amounting to
deliberate concealment and misrepresentation amounting to a deliberate lie, and
submitted that in relation to each the presentation of the claim was
deliberately and culpably misleading and palpably dishonest. Mr. Justice Rix
decided on the facts that the plaintiffs were not guilty of making a fraudulent
claim, but were guilty of deliberate and culpable misrepresentation and
non-disclosure. He then had to decide in the light of the The Litsion
Pride whether on the reasoning of Mr. Justice Hirst there is an implied
term attaching to a non-fraudulent post-contractual breach of the duty of
utmost good faith that would similarly go to the forfeiture of the whole policy
or only to the particular claim in connection with which the breach arose.
After reviewing that case and referring to the judgment of Mr. Justice Tuckey
in the present case, Mr. Justice Rix, as we see it, drew a distinction between
a breach of the duty of good faith, in the form of non-disclosure or
misrepresentation, which might lead to avoidance of the settlement induced
thereby (see p. 256), and the making of a fraudulent claim with its Draconian
remedy of avoidance. As regards the latter he noted that the only remedy for
breach is forfeiture or avoidance, asked himself where the principle stops if
it goes beyond fraud, and took the view that the possible distinction
contemplated by Mr. Justice Tuckey between disclosure in connection with a
claim and disclosure in connection with a defence to a claim might be hard to
draw in practice. Mr. Justice Rix summarized his view at p. 246 of the
transcript by saying -
. . . These considerations lead me to doubt that the duty of good faith with
its Draconian statutory remedy of avoidance is intended in the claims context
to extend outside the context of fraudulent claims."
. . . .
"Conclusion
We agree with that analysis, and we come unhesitatingly to the conclusion in
the present case that no enlargement of the duty not to make fraudulent claims,
so as to encompass claims made "culpably", is warranted. Such statements as
were made in The Litsion Pride (sup.) to the contrary, were wrong. In
our judgment there is no warrant for any widening of the duty so as to embrace
"culpable" non-disclosure. Either it does not enlarge the scope of fraud, in
which case it is not needed, or it does, in which case the extent of the
enlargement is unclear and the concept should be rejected."
21. In my view mere negligence in supplying details of a claim cannot
constitute a breach of the obligation of good faith. Dishonesty would have to
be established. Even if as per Hirst J something between negligence and
dishonesty were a possibility that something must involve "culpability" beyond
negligence, and BAI has never alleged even culpable conduct.
22. As regards repudiation of the contract as a whole, as the judge pointed out
it is not easy to contemplate that a failure to comply with an ancillary
provision relating to one claim under a policy could amount to a repudiatory
breach of the whole contract of insurance. He said:-
"The notification clause in the policy is one of a number of provisions which,
as I have held, are ancillary to the entitlement of the assured to claim to be
indemnified under the policy. In other words, they are not in themselves
ordinary promissory terms which can be characterised as conditions in the
contract properly so called or innominate terms. Mere non-compliance could not
amount to a repudiatory breach of the whole policy. It would by its nature, as
I have explained, affect only the particular claim arising from the occurrence
which had not been timeously or insufficiently full detail notified to the
insurers and not subsequent claims under the policy: see Hood's Trustees v
Southern Union Insurance Co. Of Australasia [1928] Ch. 793 per Tomlin J. at
page 806-807 Reid & Co. v Employers' Accidents Insurance Co. (1899)
1 F 1031."
23. What however is argued is that "prejudice" suffered by the insurer can turn
a breach into a repudiatory breach. Mr Walker QC took us to five cases in
support of this proposition as he had done before the judge. Three of those
cases were concerned with policies containing conditions precedent, and with
the question whether an insurer must demonstrate that he has suffered prejudice
before he can rely on a condition precedent. See Barrett Bros (Taxis) Ltd v
Davies [1966] 1 WLR 1334; Farrell v Federated Employers Insurance
Association Ltd [1970] 1 WLR 1400; and Pioneer Concrete v National
Employers Mutual Insurance GAI Ltd [1985] 1 LRR 274. In agreement with the
judge, I do not see how those cases assist in supporting an argument that
"prejudice" will, without more, entitle an insurer to treat a contract as
repudiated. In my view The Vainqueur Jose [1979] 1 LLR 557 a decision
of Mocatta J relating to the exercise of discretion by a P&I Club takes the
matter little further. In Taylor v Builders Accident Insurance Ltd.
[1997] MCLC 247, a decision of Judge Byrt QC, there does appear to be support
for Mr Walker's proposition, although Judge Byrt found in the particular case
prejudice had not been suffered so as to entitle the insurers not to pay the
claim. In that case Judge Byrt, in reliance on Farrell (supra) and
Pioneer (supra), said at 253:-
"Neither of these cases are direct authority for the proposition I have had to
determine. Both these cases are dealing with clauses and conditions in
insurance policy which were expressly stated to be conditions precedent. But
there are comments in those judgments which, though obiter dicta, lend
some credence to submissions Mr Lewers has made. They are suggestive that if
there is a breach of a condition which has caused the insurers to suffer
prejudice in respect of their rights to investigate a claim, and defend their
position, then they can repudiate. - - (I pause to reiterate that I do not
believe the cases can be relied on as so suggesting.) - (He continues) I
surmise the position to be, and I find, that in this case clause 1(a) was
obviously an important term of the contract and that it would be clear to any
assured person why it was. I think the law is that if the assured so conducts
themselves as to deprive or prejudice the insurers of their rights to
investigate and defend their position, that would be a breach which would
enable the insurance company to repudiate notwithstanding the condition
breached is not stated to be a condition precedent. It would be a fundamental
breach of an important term in the contract. At that stage one goes back to
considering the facts of this case in order to ask whether the defendants have
been prejudiced?"
24. It will be noted that Judge Byrt is contemplating a breach causing
prejudice as being a breach of a fundamental term of a contract which seems to
contemplate a repudiation of the whole contract and an acceptance of that
repudiation. What is not clearly addressed by Judge Byrt is the possibility
that a breach causing prejudice might in some circumstances entitle an insurer
simply to reject a claim without allowing the insured an opportunity to
remedy the situation as far as he was able, and without there being a
repudiation of the total contract. I am not sure the matter was fully
explored before Colman J but two passages from his judgment might be taken as
not accepting such a concept. After the passage of his judgment quoted at
paragraph 22 above he said:-
"Given that the provision has this ancillary or administrative function, it
could be expected that if non-compliance were to operate as a complete defence
to the claim in question, as distinct from entitling the insurer to terminate
the policy as a whole, that would be expressly stated [as] rather than be left
to be inferred."
25. Later he said:-
"As I have held, in a case where the occurrence notification clause is not
expressly or by implication a condition precedent, an assured who advances a
claim for indemnity without first complying with the requirements of the clause
commits a breach of the contract of insurance. The insurers can then prove
that the breach has caused them quantifiable loss and will be entitled to
damages to that extent which they can set off against their liability under the
policy. They will however, only have a complete defence to the assured's claim
if they can prove that had the assured complied with the requirements of the
clause they would have been able to take steps to avoid having to make any
payment by way of indemnity under the policy. There may be extreme cases where
on the facts insurers could make good a complete set-off, particularly where
the claim is brought by a statutory assignee under the 1930 Act, but short of
being able to establish a cross-claim for damages amounting to a complete
set-off, I cannot accept that proof of some prejudice to the insurers would
normally operate as a complete defence. Furthermore, in general one is not
here in the environment of fundamental breach, as Judge Byrt appears to have
supposed, or of fundamental terms. The only possible exception to this, as I
see it, is a case where the conduct of the assured in advancing a claim without
first complying with the notification clause could be said to amount to a
breach of the duty of the utmost good faith, going beyond mere compensation in
damages and amounting to a repudiatory breach of the contract of insurance."
26. I do not myself think that the choice should necessarily lie between a
construction which would involve condition 1(a) being a condition precedent,
and condition 1(a) simply giving rise to a claim for damages. It seems to me
that once a condition such as condition 1(a) is construed as something less
than a condition precedent, it will still be important to ascertain precisely
what its contractual effect is intended to be and what the effect of a breach
of that term will be. For example, if no details of the incident in relation
to which RCCL was making its claim were ever supplied, despite the
insurers' requests for them, would BAI still be bound to pay, and simply be
left with a remedy in damages for breach of the condition? Certainly if the
consequences for BAI were that they had been seriously prejudiced, it seems to
me unreasonable that that should be so. Accordingly it seems to me one should
consider the possibility that a breach of condition 1(a) might in some
circumstances be so serious as to give a right to reject the claim albeit it
was not repudiatory in the sense of enabling BAI to accept a repudiation of the
whole contract. The very fact that condition 1(a) is aimed at imposing
obligations in relation to individual claims which BAI might be obliged to pay,
ought logically to allow for the possibility of a "repudiatory" breach leading
simply to a rejection of a claim.
27. I accept, I should say, that it is possible for the terms of a policy by
express language to be clearer than this term as to what its intended effect
should be. The authorities supplied to us by Mr Walker following argument
demonstrate that point. Hiddle v National Fire and Marine Ins. Co. of New
Zealand [1896] AC 372 and Banting v Niagara District Mutual Fire Ins.
Co. (1866) 25 UCQB 431 are examples of terms being conditions precedent.
Weir v Northern Counties of England Ins. Co. (1879) 4 LR Ir 689 is an
example of a term not being a condition precedent, but on its language being a
term which, until it is complied with, entitles the insured not to meet the
claim. Condition 1(a) does not expressly provide for either of the above
consequences and one must consider where in the spectrum it falls.
28. In considering this question, and on referring to a textbook on reinsurance
law not cited to us at the original hearing, Butler & Merkin Reinsurance
Law paragraph C4.3-07, I noted a case referred to in the footnotes which
appeared to have addressed this problem. That case Trans-Pacific Insurance
Co (Australia) Ltd v Grand Union Insurance Co Ltd (1989) 18 NSW LR 675 as
well as (1990) 6 ANZ Insurance Cases 60-949, a decision of Giles J, seemed to
me to assist. We thought it right in the circumstances to draw the authority
and the passage in Butler & Merkin to the attention of counsel on both
sides and invited further submissions in writing. Those submissions have been
received and I will deal with them in my discussion of the Trans-Pacific
Insurance case. That case was concerned with a marine reinsurance second
surplus treaty. On the placing slip had been added the words "(d) claims
co-operation clause". No such clause however had ultimately been spelt out in
the reinsurance treaty. That treaty enabled certain risks to be ceded to the
treaty. The parties had at all times conducted themselves upon the basis that
the treaty gave rise to binding obligations between them and in relation to one
particular claim the reinsured had refused to provide further information
pending acknowledgement of liability by the reinsurer and consequent thereon
the reinsurer had purported to avoid the whole treaty. However at the hearing
the reinsurer abandoned the argument as to avoidance of the whole treaty and
simply argued an entitlement to avoid liability in relation to the particular
claim. Giles J held that there was no standard co-operation clause and that
thus the slip should be read as stating and doing no more than stating that the
reinsured should co-operate with the reinsurer in relation to claims. He
further held that as a matter of construction the manuscript addition "claims
co-operation clause" did not import a condition precedent to the reinsurers'
liability. Furthermore, although he did not expressly deal with the point, he
did not construe the term as one entitling the reinsurer not to pay until there
had been full compliance with the condition. That however as we shall see, was
the effect of his judgment. It is fair to say that he also held that where
there is a notification and a cession of a risk to a reinsurance treaty then
upon "that act a separate contract of reinsurance in relation to the particular
risk is concluded." This point is understandably stressed by Mr Lynagh in his
submissions on this authority. Giles J was thus able to approach the matter on
the basis that the risk in relation to which the reinsurer was repudiating
liability was a risk under a separate contract. He then considered the nature
of the term in the reinsurance treaty and in his language concluded that it did
not have the "essentiality" such that any breach would entitle the reinsurers
to terminate their contractual obligation in relation to the claim being made.
He then however continued at 702F as follows:-
"I note that, in Phoenix General Insurance Co of Greece, SA v Halvanon
Insurance Co Ltd [1988] QB 216 at 241; [1985] 2 Lloyd's Rep 599 at 614;
(1985) 4 ANZ Insurance Cases ¶ 60-724 at 74,319, Hobhouse J commented that
certain implied terms relating to keeping full and proper records,
investigating claims, and making records available on request to a reinsurer
were "innominate" (which in current terminology distinguishes them from
essential terms, see Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha
Ltd [1962] 2 QB 26) such that:
". . . the consequences of any breach for any particular cession or any
individual claim or, indeed, for the contracts as a whole, must depend on the
nature and gravity of the relevant breach or breaches."
Apart from illustrating obligations of a similar nature to the claims
co-operation obligation being viewed otherwise than as essential, it may be
observed that his Lordship envisaged that breach may have consequences for a
particular cession or an individual claim."
29. Thereafter he concluded:-
"I do not think that by the breach of the claims co-operation obligation
Trans-Pacific evinced an intention no longer to be bound by the reinsurance
contract relating to the "New Dolphin" or showed that it intended to fulfil the
contract only in a manner substantially inconsistent with its obligations."
30. Thus on the facts of the particular case he held that the reinsurer was not
entitled to reject the particular claim.
31. It seems to me that condition 1(a) does not have what Giles J described as
a quality of "essentiality" for the reasons he gave in relation to the
co-operation clause in that case. He said that it must have been obvious that
there could be major or minor failures to co-operate, disagreement on what did
or did not amount to co-operation, or breaches which could be readily rectified
without any prejudice to the reinsurer. The same goes for the supply of
details. Indeed this case exemplifies how a breach may be major or minor in
that certainly some details were supplied to BAI and details which would have
been sufficient to enable BAI to make such enquiries as it needed.
32. I see no reason however why condition 1(a) should not be construed as an
"innominate" term as per Hongkong Fir Shipping Co Ltd (supra) where the
consequences of a breach may be so serious as to entitle BAI to reject the
claim albeit the breach is not so serious as to amount to a repudiation of the
whole contract. Mr Lynagh submits there is no support in the judgment of Giles
J for the proposition that the consequences may be so serious as to give a
right to reject the claim. I accept that Giles J took the view that there was
a separate contract of reinsurance in relation to the risk the subject matter
of that case, and thus did not decide the point. But I do think the inference
to be drawn from the passage quoted at 702F - 703A of the judgment of Giles J
supports the view that I take. I accept Mr Walker's submission in this regard.
It seems to me that the payment of individual claims are severable obligations
and that where an insured is bound to carry out one obligation in order to
receive the benefit of the insurer's obligation by implication the insured is
accepting that if he fails in a serious way to carry out his part of that
bargain he will not receive what he has bargained for.
33. Thus the correct analysis of condition 1(a) I would suggest should be as
follows. Compliance with condition 1(a) is not by the policy made a condition
precedent to liability, thus it is not enough for BAI to establish a failure to
supply full details as soon as possible in order to resist the claim. That
much is conceded.
34. Condition 1(a) is however an innominate term. Breach of it, however
serious, would be unlikely to amount to a repudiation of the whole contract of
insurance. Furthermore, it is not a term the breach of which, or any breach of
which, would entitle the insured not to pay the claim because that would simply
make it a condition precedent. But, in my view, a breach which demonstrated an
intention not to continue to make a claim, or which has very serious
consequences for BAI, should be such as to entitle BAI to defeat the claim. If
a term is a condition precedent to liability, any breach defeats liability but
does not lead to a repudiation of the whole contract. I see no reason why
although a term is not a condition precedent so that any breach defeats
liability, it cannot be construed as a term where a serious breach defeats
liability.
35. It has not in fact been pleaded in this case that there was a breach with
serious consequences entitling BAI to reject the claim as opposed to accept
repudiation of the whole contract. However during argument some attention was
focused on this aspect and it may be said that it formed part of the argument
based on Taylor. On a proper understanding of Taylor it was
however bound to fail unless BAI could demonstrate that there was a serious
breach of condition 1(a) which had serious consequences and that in reliance on
such a breach the claim had been rejected. In my view the breach of condition
1(a) in this case was very limited in that BAI had sufficient details to enable
them to investigate the claim. Furthermore, by the time BAI had at least some
details of the claim they had not suffered any irremediable prejudice. It was
BAI's choice not to pursue the liquidator for details in June 1992, and again
in June 1994. I am also doubtful whether BAI's conduct in 1992 or 1994 could
be said to amount to a final rejection of the claim, but if it did, it was not
justified.
36. Full details were ultimately supplied on any view by McAlpine and in so far
as it was open to Mr Walker to argue that BAI were entitled to defeat the claim
because full details had never been supplied by RCCL, (and I have some doubt
whether on the pleadings it was so open), I would reject that argument. Thus,
although going part of the way with Mr Walker's submission on the
Trans-Pacific Insurance case, I cannot accept his ultimate conclusion.
Summary
37. Thus BAI cannot establish
1. any failure on the part of RCCL to act in good faith, entitling BAI to
avoid the contract of insurance;
2. any repudiation of the whole contract, or acceptance of that repudiation by
BAI (i.e. their pleaded case);
3. any serious breach of condition 1(a) nor any serious consequences for BAI
entitling BAI to reject the claim.
38. Thus BAI's remedy for any breach of condition 1(a) lay in damages and that
claim has been abandoned.
I would accordingly dismiss this appeal.
LORD JUSTICE BUXTON: I agree.
LORD JUSTICE PETER GIBSON: I also agree.
Order: Appeal dismissed; Appellant to pay Respondent's costs; leave to
appeal to the House of Lords refused. Order does not form part of approved
judgment.
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