Fisk v Brian Thornhill & Son (A Firm)

This is an appeal against the dismissal on 27 January 2006 by His Honour Judge Yelton in the Colchester County Court of a Part 20 Claim involving a dispute between insurance brokers. The Judge refused the Part 20 Claimant permission to appeal to this court but such permission was granted by Richards LJ on the papers.

The Claimants in the main action, Mr and Mrs Scicluna, have for many years owned and run the Sun public house in Feering, Essex (“the Property”). The main part of the Property dates from the early 16^th Century and is listed Grade II. The Property has two modern extensions one of which has a flat roof amounting to 12% of the total roof area. The main part of the Property is timber-framed with wattle and daub walls. The Judge found that the approximate age of the building is obvious to a casual passer-by at first glance.

The First Defendant in the main action and the Part 20 Claimant, Daryl Fisk, is an independent insurance broker primarily concerned with catering insurance including insurance for pubs. He acts as a retail broker, seeking for his clients insurance on competitive terms. His practice was to visit his clients at least once a year when he discussed insurance for the next year. He had acted for Mr and Mrs Scicluna since 1995 and knew the Property well.

The Second Defendant in the main action and the Part 20 Defendant, Brian Thornhill, is also an insurance broker, carrying on business from West Yorkshire. He did not know the Property. In 2000 he ran an insurance scheme called the Intercounty Combined Insurance Scheme (“Intercounty”), with cover being placed by him as the placing or wholesale broker with Lloyds underwriters. A CD Rom for Intercounty was issued to retail brokers, thereby enabling them readily to obtain quotations of premiums for the insurance of premises of standard construction.

On 4 October 2000 Mr Fisk used Intercounty’s CD Rom to obtain a quotation for the Property. The premium of £1,076.45 for the following 12 months compared favourably with the premium required by the then existing insurer and on 9 October 2000 Mr Fisk recommended to Mr and Mrs Scicluna acceptance of the quotation. However, the Intercounty quotation was expressly stated to be on the assumption that the construction of the premises to be insured was “BSST”, meaning “Brick, Stone, Slates, Tiles”. That is to say, the premises had to be built of brick or stone and roofed with slates or tiles.

Notwithstanding that the Property could not properly be said to be of BSST construction, Mr Fisk obtained Mr and Mrs Scicluna’s agreement to accept the Intercounty quotation. Intercounty’s proposal form was completed on 12 October 2000 by Mr Fisk, with answers supplied by Mr Scicluna to the questions posed in the form. Mr Scicluna, by signing the form, expressly acknowledged that all facts material to the proposal had been declared. The proposal did not in terms ask whether the premises to be insured were of BSST construction. However question 10 asked “Are [the premises] constructed throughout of either brick, stone or concrete?”, to which the answer was given “Yes. Some larve” [by which Mr Fisk must have meant ‘lath’] “and plaster. Timber to internal”. Question 11 was “Are [the premises] roofed throughout with slates, tiles or concrete?” That was left unanswered. Question 12 was in two parts. The first was “Is there any flat roof at the property?” That was answered “Yes”. The second part was “If ‘YES’ does this exceed 25% of the total roof area?” This was answered “No”. The final question, question 39, was “Are there any material facts not already disclosed affecting or likely to affect the proposed insurance?” That was answered “No”.

The completed proposal was sent to Mr Thornhill by Mr Fisk. Cover for one year commenced on 17 October 2000.

By October 2001 Mr Thornhill had ceased to operate the Intercounty scheme and was generally placing cover with the Third Defendant in the main action, CNA Insurance Co (Europe) Ltd (“CNA”). CNA used another company, Mill House, to write policies on its behalf. Mill House, like Intercounty, enabled brokers to generate on their computers quotations for premises of standard construction. Mr Thornhill did a great deal of business with Mill House and was familiar with its policy terms and conditions. He knew that it would only insure buildings of standard construction.

On 9 October 2001 Mr Thornhill sent Mr Fisk a “Renewal Notice” relating to the Property. As the Judge recognised, the term “Renewal Notice” was misleading because Mr Thornhill was proposing not a renewal of the Intercounty policy but a policy with a new insurer, Mill House/CNA. The new insurer was not revealed nor was it disclosed that if the quotation was accepted there would be new terms for the cover. It was, however, stated that a new proposal form would be required. The Renewal Notice quoted a premium of £1,180.27.

Mr Fisk received the Renewal Notice on 12 October 2001. On 14 October he wrote to Mr and Mrs Scicluna recommending the acceptance of the quotation of “the present insurer”. He therefore understood that Mr Thornhill was proposing the renewal of the Intercounty policy.

Mr Fisk was unable to meet Mr Scicluna until the afternoon of Friday, 19 October 2001. Mr Fisk then obtained Mr and Mrs Scicluna’s instructions to accept the quotation. He wrote on the Renewal Notice “Please renew 19/10/01” and faxed it to Mr Thornhill.

On receipt of that request Mr Thornhill sent to Mill House his own computer-generated quotation requesting cover with effect from 19 October. The quotation was not supplied to Mr Fisk or Mr and Mrs Scicluna. Under the heading “Warranties Terms and Conditions” it stated “… Mill House Policy Terms and Conditions apply. It is assumed that all/any buildings are BSST …”. It also stated that acceptance of cover by underwriters was conditional upon a satisfactory proposal within 30 days of inception of cover.

One of the Mill House Policy Terms and Conditions was that the policy-holder should warrant a number of matters to CNA for the purpose of obtaining cover. The warranties included a warranty as to the construction of the premises to be insured in the following terms:

Another standard term which Mill House included in its Certificates of Cover and Debit Notes was:

Nevertheless Mr Thornhill did not obtain and submit a proposal before he placed cover with Mill House. It accepted that the Property was covered with effect from 19 October, as it confirmed and certified on 24 October 2001. It is not in dispute that thereby cover was being given on a temporary basis subject to the warranties which Mr Thornhill gave on behalf of Mr and Mrs Scicluna without specific authority from Mr Fisk or them to do so and to the Mill House terms and conditions which had not been revealed to Mr Fisk or to Mr and Mrs Scicluna other than that a new proposal would be required.

On Sunday 21 October 2001 the Property and its contents were seriously damaged by a flood. Mr and Mrs Scicluna believed that they were insured against such loss and informed Mr Fisk who in turn informed Mr Thornhill of the flood.

On 23 October 2001 Mr Thornhill sent Mr Fisk the Mill House proposal form and requested its completion and return as soon as possible “[d]ue to a change of underwriter”. That was the first express indication by Mr Thornhill that there was such a change. On the same day Mr Thornhill notified Mill House of the flood.

The Mill House proposal form was completed by Mr Fisk with answers supplied by Mr Scicluna who signed the declaration at its end on 26 October 2001. The form posed questions different from those in the Intercounty form. Question 14 was “Are the premises built of brick, stone or concrete and roofed with slates, tiles, concrete, asphalt, metal or slabs composed entirely of non-combustible materials?” That was answered “Yes”, but there was added “Also internal [lath] plaster to internal walls and exposed timber”. The question “How old are the buildings?” was answered “1500 original G[rade] II. Extension 1998 kitchen area”.

By letter dated 5 December 2001 CNA informed Mr Scicluna that it was avoiding the policy. It referred to its loss adjusters establishing that the Property was not of standard construction. It continued:

Mr and Mrs Scicluna brought proceedings against Mr Fisk, Mr Thornhill and CNA. They sued Mr Fisk for breach of contract and in negligence and Mr Thornhill in negligence. Against CNA they contended that it was not entitled to avoid the policy and that it had breached the contract of insurance. They subsequently discontinued against CNA and Mr Thornhill and on 18 January 2006 they compromised their claim against Mr Fisk on the basis that he paid them £62,000 and their costs of the main action.

Mr Fisk however had brought a Part 20 Claim against Mr Thornhill for breach of contract and, further or alternatively, negligence and for a contribution pursuant to the Civil Liability (Contribution) Act 1978 (“the 1978 Act”). That claim was tried by the Judge.

It was not in dispute before the Judge that CNA was entitled to decline indemnity under the policy. Mr Fisk’s case against Mr Thornhill was that CNA avoided cover on the basis of warranties and information provided to it by Mr Thornhill without the knowledge or authority of Mr Fisk and in circumstances where Mr Thornhill should have known that the warranties and information were inaccurate. Mr Thornhill denied liability, contending that the information he had about the Property was supplied by Mr Fisk in relation to the Intercounty policy and he denied that any breach by him was causative of loss.

The Judge in his judgment severely criticised Mr Fisk who, the Judge said, failed fully to understand that a person applying for insurance is under a positive duty to disclose all material matters regardless of the questions he is asked. The Judge found that the completed Intercounty proposal form was “thoroughly misleading” and that, in allowing it to be forwarded to Mr Thornhill, Mr Fisk was in very clear breach of the duties owed to Mr and Mrs Scicluna; Mr Fisk should have disclosed that the Property was largely of 16^th Century construction and certainly not of standard build. The Judge rejected the argument of Mr Fisk that Mr Thornhill should have been alerted to the fact that the Property was not of BSST construction from the answers given in the Intercounty proposal. The Judge relied on the statement by the joint expert, Mr Dowlen, in paragraph 8.2.6 of his written report:

The Judge noted that when the Renewal Notice was sent back to Mr Thornhill Mr Fisk failed to make it clear that the Property was a 16^th Century listed building. He said that Mr Thornhill assumed that the Property was within the insurance scheme provided by Mill House/CNA because he was not told otherwise by Mr Fisk and was told the contrary in the Intercounty proposal form. However, the Judge in paragraph 29 of the judgment agreed with the view expressed by Mr Dowlen that Mr Thornhill was in breach of his duty to Mr and Mrs Scicluna in not making it clear that a new policy with a different insurer was being suggested for 2001 and that it would have different terms and conditions.

The Judge then turned to causation. He referred to the view expressed by Mr Dowlen in his report that Mr Thornhill’s breaches of duty were not causative of the loss to Mr and Mrs Scicluna. The Judge said that it may be that Mr Dowlen acted outwith his remit in so concluding, but he said that he agreed with Mr Dowlen’s view. The reason the Judge gave was that if Mr Thornhill, when sending Mr Fisk the Renewal Notice, had sent the Mill House proposal form, and if Mr and Mrs Scicluna had completed it on 19 October 2001, Mr Thornhill would not have been able to arrange insurance for the Property prior to the flood. The Judge continued in paragraph 33 of his judgment:

Finally, the Judge referred to Mr Fisk’s claim for a contribution under the 1978 Act. He said that, on the facts he had found, Mr Fisk and Mr Thornhill were not liable to Mr and Mrs Scicluna in respect of the same damage, as it had to be under the 1978 Act, and that because of the causation point Mr and Mrs Scicluna would have failed in tort against Mr Thornhill and in contract would only have received nominal damages. The Judge added that the claim by Mr Fisk was for a contribution to the costs paid by him to Mr and Mrs Scicluna. The Judge said that legal costs paid by a defendant to the claimant were not “the same damage” within the meaning of the 1978 Act. In any event, the Judge said, the entire responsibility for what occurred rested with Mr Fisk and it would not be just and equitable to order Mr Thornhill to contribute towards the damages Mr Fisk agreed to pay Mr and Mrs Scicluna. Accordingly, the Judge dismissed the Part 20 Claim.

On this appeal, Mr Graham Chapman for Mr Fisk has divided the grounds of appeal into 3 categories.

The first category is what he describes as the Judge’s failure to analyse the various breaches of duty committed by Mr Thornhill. He submits that in addition to the breach, which the Judge did find, of failing to inform Mr Fisk that he intended to place cover in October 2001 with new insurers on new terms, the Judge failed to record in his judgment the numerous other respects in which Mr Thornhill acted in breach of duty both towards Mr and Mrs Scicluna and Mr Fisk. He says that the evidence showed that, had Mr Thornhill acted competently and regardless of any breach of duty on the part of Mr Fisk, the cover for the 2001 policy ought not to have been placed with CNA on CNA’s terms, that Mr Thornhill should have obtained a proposal form before placing cover, that he should have taken instructions from Mr Fisk as to the new terms of the cover with CNA and that Mr Thornhill acted in breach of duty in providing warranties to Mill House as regards the construction of the Property without instructions or authority to do so either from Mr Fisk or Mr and Mrs Scicluna.

The second category is what Mr Chapman calls the errors in the Judge’s approach to the issue of causation. He argues that even on the Judge’s findings, CNA was able to avoid cover at least in part by reason of Mr Thornhill’s breaches of duty and that the Judge allowed Mr Thornhill to escape liability on an unpleaded case that Mr Fisk would have been unable to find alternative cover prior to the flood. He points out that it had not been suggested prior to trial that in any event Mr and Mrs Scicluna would have been uninsured had Mr Thornhill acted competently and that no complaint had been made about how Mr Fisk approached the renewal in terms of timing. Mr Chapman submits that the Judge was wrong to reject Mr Fisk’s evidence to the effect that he could have placed cover at very short notice. He further criticises the Judge for saying in paragraph 38 of the judgment that the Part 20 Claim was for a contribution to the costs paid by Mr Fisk to Mr and Mrs Scicluna. He points out that this claim formed only part of the Part 20 Claim and he argues that, to the extent that the Part 20 Claim was for a contribution to the costs paid by Mr Fisk, such payment was recoverable either by way of a contribution under the 1978 Act or as damages in respect of loss suffered by Mr Fisk as a result of Mr Thornhill’s breaches of duty owed to Mr Fisk, a claim to which the Judge made no reference.

The third category is what Mr Chapman describes as the Judge’s procedural irregularities. Here Mr Chapman points again to Mr Thornhill’s success on an unpleaded causation defence which he says was not supported by the evidence adduced at trial. A second point which Mr Chapman took in his skeleton argument was that the Judge formed a clear view, without seeing all the relevant correspondence, that Mr Fisk was to blame for Mr and Mrs Scicluna’s dispute with Mr Fisk and Mr Thornhill not settling sooner; that, he argues, was an irrelevant consideration in the determination of the Part 20 Claim.

Mr Andrew Nicol for Mr Thornhill robustly defended the correctness of the entirety of the Judge’s decision. He denied that Mr Thornhill had breached any duty other than that which the Judge found had been breached. He submitted that the Judge was right to find that Mr Fisk was entirely responsible for the incorrect information which Mr Thornhill had passed on to Mill House. He pointed to the reason given in the letter from CNA for avoiding the policy and to Mr Fisk’s acceptance in cross-examination that the reason why CNA avoided the policy was because of the non-standard construction of the Property. He argued that the Judge was entitled to find on the evidence that, had Mr Thornhill acted any differently in October 2001, the position would not have been altered and cover could not have been obtained by Mr Fisk in time before the flood.

On this appeal it has not been in dispute that Mr Fisk was negligent, causing loss to Mr and Mrs Scicluna. On the apportionment of responsibility for the loss, Mr Chapman says no more than that Mr Thornhill should be held to be at least 50% responsible for that loss. Mr Nicol does not challenge the Judge’s finding in paragraph 31 of the judgment that Mr Thornhill was in breach of duty in not making clear that he was suggesting a new policy with new insurers and that it would have different terms and conditions from those in the Intercounty policy. Nor is it in dispute that Mr Thornhill owed Mr Fisk as well as Mr and Mrs Scicluna a duty of care. The substantial issues on this appeal are (1) whether the breach found by the Judge to have been committed by Mr Thornhill was causative of any loss; (2) whether there were other breaches of duty by Mr Thornhill which caused loss; and (3) the appropriate proportion (if any) of the total loss the responsibility for which should be attributed to Mr Thornhill.

It is convenient to start with the question what breaches of duty Mr Thornhill did commit. In this context it is to be borne in mind that in placing cover for Mr and Mrs Scicluna Mr Thornhill alone communicated with Mill House with whose requirements he was very familiar, that he did not pass on to Mill House any documents, such as the completed proposal form for the Intercounty policy, which came from Mr Fisk or Mr and Mrs Scicluna, nor did he provide to Mr Fisk or Mr and Mrs Scicluna copies of any documents which he sent to Mill House.

Mr Thornhill in his oral evidence said that he placed cover with CNA based on information provided to him for the Intercounty policy in 2000. He said that in 2001 he did not look at the 2000 proposal form but (with one immaterial exception) he would have worked exclusively from the file record he kept. He accepted that although the 2000 quotation assumed that the construction of the Property was BSST, the fact that the Property had a flat roof (amounting to less than 25% of the total roof area) and the failure to answer question 11 in the Intercounty proposal as to the construction of the roof meant that he did not know whether the ST (slates or tiles) of BSST applied to the roof of the Property. He challenged the correctness of the evidence of Mill House’s underwriter, Mr Goodhew, for CNA that had he been told about the flat roof he would have required further information about the construction of the Property before accepting cover, notwithstanding that the statement of Mr Goodhew had been accepted as correct by those representing Mr Thornhill. Nevertheless he maintained that he was entitled to warrant on Mr and Mrs Scicluna’s behalf to Mill House that the Property was BSST because of the assumption in the 2000 quotation that the Property was BSST. Mr Nicol also relied on the absence of disclosure of further material affecting or likely to affect the proposed insurance.

I cannot accept that Mr Thornhill was entitled to give the BSST warranty to Mill House by reason of the information passed to him in 2000 by Mr Fisk. Although Mr Dowlen in his report had said that it would be reasonable for Mr Thornhill to infer from what Mr Fisk had provided to him in 2000 that the Property was of standard construction, in cross-examination Mr Dowlen, when questioned on the answers given in the 2000 proposal, accepted that on that document it was not being said that the Property was BSST. As Mr Dowlen put it, it was “Nearly, but not quite”. I do not doubt that there was further information which Mr Fisk should have disclosed to Mr Thornhill in 2000, but I cannot see how that in any way absolved Mr Thornhill, owing as he did a duty of care, from further inquiry in the light of the answers given in the 2000 proposal, including the failure to answer question 11. Or putting it another way, the assumption in the 2000 quotation of BSST construction did not entitle Mr Thornhill to ignore how the subsequent Intercounty proposal form was completed.

Further, no warranty was given in 2000 as to the standard construction of the Property. The Judge correctly stated that the warranties were given by Mr Thornhill without specific authority but he does not acknowledge that Mr Thornhill thereby acted in breach of duty. The giving of a warranty puts the insurer in a stronger position because the insurer has full protection in the warranty and can avoid liability if there is any breach. Where there is a warranty, facts relevant only for the matter so warranted need not be disclosed by the insured (See McGillivray on Insurance Law 10^th Ed (2003) paragraph 17-82). In its pleading CNA made clear that it relied on the breaches of the warranty that the Property was BSST and the further warranty that the Property was constructed of incombustible materials. Further, for Mr Thornhill to have given the warranties without taking instructions deprived Mr Fisk and Mr and Mrs Scicluna of the opportunity to refuse to authorise the giving of the warranties because, as they knew, there could be no compliance with the warranties.

The Judge rightly recognises that Mr Thornhill was in breach of his duty to Mr and Mrs Scicluna in not making clear that a new policy with different insurers on different terms and conditions was being suggested by him. However, the Judge does not acknowledge that the duty was also owed to Mr Fisk nor does he acknowledge the significance of the different terms and conditions. Mr Thornhill accepted in cross-examination that the Construction Clause was a more onerous provision than any in the Intercounty policy.

Further, the term to which I have drawn attention in paragraph 14 above, entitling Mill House/CNA to refuse liability in respect of a matter not disclosed in a quotation request but disclosed in a subsequent proposal form without written agreement, is, in my opinion, of particular significance in relation to the question whether Mr Thornhill was in breach of duty in not obtaining a proposal form before placing cover. Mr Dowlen recognised that there had been a “failing” by Mr Thornhill to provide a new proposal form prior to placing the 2001 insurance and accepted in cross-examination that Mr Thornhill ought to have obtained the form before placing cover, saying that it would be “best practice” and “prudent practice”. In the circumstances of the present case where Mr Thornhill had not informed Mr Fisk or Mr and Mrs Scicluna of any of Mill House’s terms and conditions other than that a new proposal form would be required nor had they been in any way alerted to the potential disastrous consequences if a statement in the quotation request, which had not been supplied to them by Mr Thornhill, was corrected subsequently in the proposal, it seems to me plain that there was a breach of duty on the part of Mr Thornhill in not obtaining a proposal form before placing cover.

I turn to causation. The Judge, as I have noted in paragraph 25 above, stated his agreement with Mr Dowlen’s view that Mr Thornhill’s breaches of duty were not causative of the loss to Mr and Mrs Scicluna, though the Judge rightly doubted if Mr Dowlen should have expressed that view of a matter to be determined by the Judge. However, the Judge did not acknowledge that Mr Dowlen’s reason for his view (viz that there were non-disclosures and misrepresentations in the quotations obtained or submitted by Mr Fisk and in the proposal forms submitted by Mr and Mrs Scicluna which entitled an insurer to avoid the policy) was entirely different from the Judge’s own reason. That was one of timing: Mr Thornhill on 19 October 2001 would not have been able to arrange cover for the Property prior to the flood and Mr Fisk’s evidence that he would have been able to arrange cover at short notice was rejected as “fanciful”.

It is unfortunate that the Judge decided the case on a point which had not been pleaded on behalf of Mr Thornhill and which only emerged at trial. Mr Nicol may well be right that, had he applied to amend the pleading, the Judge would have allowed the amendment, but the issue should have been raised before trial by being properly pleaded. In cross-examination Mr Fisk gave evidence that on being made aware that CNA would not give cover he would have gone back to the office and found cover elsewhere. Mr Fisk said that just after the events of 11 September 2001 an insurance company notified him that it was cancelling cover that afternoon on a number of policies. He said that he was able to find cover elsewhere in the space of a few hours. Mr Fisk’s evidence of his experience on this was not tested further. The Judge, in the same sentence as his rejection of Mr Fisk’s evidence as fanciful, had referred to Mr Thornhill’s evidence of not having available to him insurers who would cover the particular risks presented by the Property, and it may well be that the Judge regarded Mr Thornhill’s evidence as telling against the credibility of Mr Fisk’s evidence. If that were the reasoning of the Judge, it would be faulty. Mr Thornhill’s wholesale broker business appears to have been to place cover for properties of standard construction as he had done with his Intercounty scheme in 2000 and as he did with Mill House/CNA in 2001. That Mr Thornhill could not place cover for the Property is entirely understandable. But that does not show that Mr Fisk’s evidence was fanciful. Mr Fisk was a retail broker. He gave evidence that he had a lot of buildings exactly the same as the Property on his books and that a lot of companies which were actually insuring pubs were insuring a lot of old buildings. It was not put to Mr Fisk that he was not telling the truth nor was there any general finding made by the Judge that Mr Fisk’s evidence was not to be believed. The Judge has not provided any valid reason for rejecting Mr Fisk’s evidence on this point and in the absence of any other evidence there was no basis for rejecting it.

I would add that the position is even clearer if, as I have found, Mr Thornhill should have submitted a proposal form before placing cover. On the reasonable assumption that the proposal would have been completed in the same way as that completed on 26 October 2001, Mr Thornhill would have known on or about 9 October 2001 that he could not place cover with Mill House/CNA and would have so informed Mr Fisk, who would have had a much longer time in which to place cover with another insurer prior to the flood.

In my judgment, therefore, not only the breach of duty found by the Judge but also the other breaches of duty which I have found, viz the giving of warranties without authority and the failure to obtain a proposal form prior to placing cover, were causative of loss.

It is unnecessary to say anything further on the alleged procedural irregularities.

I turn finally to the question of contribution. Mr Nicol submits that the Judge was right to hold that the entire responsibility for what occurred rested with Mr Fisk and that Mr Thornhill should not be ordered to make any contribution. Mr Nicol rightly does not argue that the Part 20 Claim is limited to the costs agreed to be paid by Mr Fisk. Mr Fisk submits that Mr Thornhill should contribute to what Mr Fisk paid Mr and Mrs Scicluna, including the costs which Mr Fisk agreed to pay them, and that such contribution is recoverable either under the 1978 Act or as damages for breaches of duty owed to Mr Fisk. Mr Nicol has not argued that such a contribution is not recoverable by one or other of these routes if the entire responsibility is not to be laid at Mr Fisk’s door.

I take full account of the adverse findings made by the Judge against Mr Fisk and I agree with the Judge to the extent that I would accept that the major share of the responsibility for what occurred must rest with Mr Fisk. Nevertheless, for the reasons given it seems clear to me that Mr Thornhill was guilty of breaches of duty which in part caused the loss to Mr and Mrs Scicluna and led to the award of damages against Mr Fisk. I would hold that Mr Thornhill was responsible to the extent of 25%.

For the foregoing reasons, which owe much to Mr Chapman’s admirable arguments, I would allow the appeal and order Mr Thornhill to make a contribution of 25% of the sum agreed by Mr Fisk to be paid to Mr and Mrs Scicluna including their costs of the main action.

I agree.

I also agree.