Miley v Friends Life Ltd

The central issue in this case is whether or not the claimant is (and has been) entitled to receive payments from the defendant under an income protection policy of insurance on the basis that he is suffering from moderate to severe chronic fatigue syndrome (“CFS”). The defendant contends that the claimant is not so entitled because he is either faking or, at least, seriously exaggerating his illness. A further issue, however, also arises as to whether the defendant is entitled to avoid the policy on the additional ground that the claimant is in breach of the terms of the policy having understated his income to the defendant on two occasions after the claim had been made.

The exploration of this further issue has given rise to an application from the defendant inviting me to recuse myself from further involvement in the case on the grounds of apparent bias. It is my adjudication on this issue which is the subject matter of this judgment.

The defendant’s decision to cease payments under the policy was motivated by its conviction that the claimant was inventing or significantly overstating the level of his symptoms. However, during the process of disclosure, the claimant equipped the claimant with copies of his tax returns. Those representing the defendant noticed an apparent disparity between the sums appearing on these returns and the sums which the claimant would be expected to have been receiving simply from the income he was receiving from the defendant under the policy.

In short, the amount of benefit to which the claimant was entitled under the policy was limited to 75% of his pre-incapacity earnings. Consequently, he was required to complete financial review forms to ascertain his level of income from time to time to ensure that the ceiling was not exceeded. In January 2011 and January 2013 respectively the claimant was required to declare if he was either receiving or had received any other income during the course of the claim. On each occasion he responded in the negative. The pro forma contained a statement of truth in the usual terms.

It transpired, however, that the income received by way of benefits from the defendant amounted to £92,457 per annum but that his tax returns revealed that his total declared income was £170,713 and £103,511 in the years 2011 and 2012 respectively.

Having spotted this discrepancy, the defendant made the tactical decision not to raise the issue in advance of the trial and, indeed, the point was not raised in the defendant’s skeleton argument. The issue was ventilated for the first time during cross-examination of the claimant. Claimant’s counsel raised no objection.

Following the conclusion of the evidence, the defendant’s written closing submissions of 23 March 2017 characterised the claimant’s failure to disclose the additional income as one which admitted of no innocent explanation. It was, they contended an untrue statement which was intended to result in the defendant paying more benefit than he was entitled to.

By way of response in undated written submissions served on 24 March 2017, the claimant contended that if, which was not admitted, the payments ought to have been declared then his failure was not one “done consciously” and that accordingly “the effect for which the defendant now contends does not arise.” During the course of the oral submissions, which followed on the same day, the parties expressly referred, for the first time, to clause 5 of the policy which provided at 5(1)(b):

“if in connection with the happening or purported happening of any event insured by this Policy, the Member makes an untrue statement of a Material Fact or omits to disclose a Material Fact, the cover provided by the Policy in respect of that member will immediately become void and no Benefit whatsoever will be payable in respect of him.”

On one interpretation of this clause, the innocence or otherwise of the claimant’s alleged misrepresentations on the financial forms would become irrelevant. Hitherto, both sides had concentrated upon the assumption that the significance of the alleged misrepresentation had been dependant on the state of mind of the defendant. Now, the argument emerged that even if the claimant had been innocent of all fault he would, nonetheless, forfeit all of his benefits under the policy. Faced with this development, I enquired if there were any relevant statutory or regulatory provisions which might relate to the interpretation, application or effect of clause 5.1(b).

The parties were not, at the time, able confidently to assist the court on this issue but, on 28 March, the claimant served further written submissions in which he continued to maintain that the information in the form was true and sought to introduce further and previously undisclosed documentary material purporting to evidence the precise nature of the income comprising the difference between what he had been receiving under the policy and that which he had been declaring on his tax returns.

In further submissions, the claimant repeated his assertion that “any failure to include information was wholly innocent”. The legal consequences of any potential finding on my part that the information was untrue but the claimant was innocent of fault were not thereafter referred to or developed.

The defendant responded, in written submissions dated 5 April, by contending that “clause 5.1(b) will also “bite” on any untrue statements or material non-disclosures made (or omitted) in respect of the claimant’s health.” It also opposed the receiving into evidence of the documents produced by the claimant purporting to show what the extra payments comprised.

The defendant’s submissions were attached to an email to me from the defendant’s leading counsel, Caroline Harrison QC, which stated:

“I attach the Defendant's Supplementary Submissions relating to the issue raised in oral closings, namely the regulation of the contract of insurance in this case. We have also addressed the Claimant's additional arguments and documents, without prejudice to our contention that these should be disregarded.

I am very sorry that these took rather longer to produce than we had anticipated, but I hope that they will assist your Lordship.

Two practical matters arise.

First, is there a requirement for further oral submissions? For our part, we consider that a further hearing may not be necessary, and we do not positively seek such. However, we are in the Court's hands to the extent that if your Lordship would in any way feel assisted by further oral submissions, then of course we will come to wherever your Lordship is sitting, and will do what we can to deal with any points that arise.

Second, our researches have necessarily ranged widely, and so there is a good deal of further authority that your Lordship may wish to consider. It may not be practicable to scan and submit this electronically, although we could try if that would help. We can arrange for delivery of hard copy authorities wherever is convenient for your Lordship.

With our sincere apologies for the slight delay in submitting the attached document. We very much hope that it does not inconvenience your Lordship.”

This email was sent at 8.20pm on 5 April. I responded seven minutes later in the following terms:

“Thank you for this. I will have a look at what you have sent and get back to you all.”

On the following day I emailed the parties saying:

“I have now had the opportunity to review the most recent written submissions and would appreciate the opportunity to hear oral submissions on some of the matters arising. I will be sitting in Manchester from 25 April to 25 May and in London from 12 June to the end of term.

Please can you forward me convenient dates?”

Ms Harrison responded:

“Thank you very much for letting us know so promptly. I wonder if it may be more convenient for your Lordship if Mr Callow and I arrange for our respective clerks to liaise with your clerk as to availability? The sooner the better would be preferable for all concerned, I’m sure. I have copied this to my senior clerk, who can liaise with Mr Barker and Mr Callow’s clerk, and suggest some dates.

If at any point prior to the hearing your Lordship felt able to give some indication of the broad areas or issues where the Court would appreciate further argument, this may enable us all to prepare more efficiently and effectively, and if appropriate, to do some further research beforehand. Otherwise we will of course, simply prepare to deal with whatever we might anticipate arises out of the written submissions.”

It was, therefore, at the express invitation of Ms Harrison that I proceeded to identify the particular issues upon which I was hoping for some assistance. I did this by way of email dated 11 April in to both parties in which I said:

“The area upon which I consider that I may be particularly assisted by further submissions relates to the hypothetical consequences of a finding that the Claimant did receive income during the course of the claim falling within the parameters of the wording of the FRF but that his omission was not as a result of fraudulent intent or recklessness.

As Longmore LJ held in K/S Merc-Scandia XXXXII v Certain Lloyd's Underwriters & Ors [2001] EWCA CIV 1275 at para 22:

“If the insurer has a right to information by virtue of an express or an implied term, there may be a duty of good faith in the giving of such information.”

See also Colinvaux's Law of Insurance 11th Ed.

Chapter 6 - The Duty of Utmost Good Faith

Section 3. - The assured’s post-contractual duty of utmost good faith

And:

The Law of Insurance Contracts 3rd Edition Clarke – Chapter 27.

Colinvaux at 6-022:

“Fourthly, the state of mind required of the assured for a breach of duty is unresolved by the cases. Those cases demanding fraud or at least recklessness are concerned with fraudulent claims, which is governed by different principles. As already noted, the Australian courts have opted for fair dealing rather than actual fraud.”

The declaration section of the Financial Review Forms includes the phrase “…to the best of my knowledge and belief…”.

What is the proper interpretation of the obligation on the Claimant in this context?

Would a wholly innocent omission have the result of voiding the policy?

If not, would a careless omission have the result of voiding the policy?”

Shortly, thereafter, I emailed:

“I would like, please, also to be reminded of the paragraphs of the defendant’s defence and counterclaim which are relied upon as the pleaded basis for the advancement of the non-disclosure argument in the context of the FRF return.”

The availability of counsel turned out to be very limited and the first date upon which the further oral representations could be heard was yesterday, 26 June 2017.

By “Further Closing Submissions” dated 21 June 2017, but not sent to the court until the following day, the defendant, for the first time, invited the court to recuse itself on the ground of apparent bias.

The law relating to apparent bias is uncontroversial and is set out in the defendant’s submissions:

“The test for apparent bias is whether the fair-minded and informed observer, having considered the facts, would conclude there was a “real possibility” that the judge was biased (Porter v Magill [2002] 2 AC 357)…

In Helow v Secretary of State for the Home Department [2008] 1 WLR, Lord Hope described the attributes of the ‘fair-minded and informed observer’ at paragraphs 1 to 3 of the speeches. These paragraphs include the following extracts:

“The observer who is fair-minded is the sort of person who always reserves judgment on every point until she has seen and fully understood both sides of the argument. She is not unduly sensitive or suspicious … Her approach must not be confused with that of the person who has brought the complaint. The ‘real possibility’ test ensures that there is this measure of detachment. The assumptions that the complainer makes are not to be attributed to the observer unless they can be justified objectively. But she is not complacent either. She knows that fairness requires that a judge must be, and must be seen to be, unbiased. She knows that judges, like anybody else, have their weaknesses. She will not shrink from the conclusion, if it can be justified objectively, that things that they have said or done … may make it difficult for them to judge the case before them impartially”.”

At the risk of stating the obvious, any judge who is invited to recuse himself on the ground of apparent bias must be very careful not to allow any personal considerations whatsoever to contaminate his conclusions. Nevertheless, this should not preclude such a judge from acting with the same level of robustness and proportionate scepticism, where this is necessary, as he would approach any other application. To proceed otherwise would be unfairly to prejudice the other side out of an undue sensitivity to the perception that such robustness may be wrongly attributed to the personal feelings of the judge as opposed to the legitimate demands of firm management with the aim of applying the overriding objective.

With this in mind, I am bound to pass adverse comment on the timing of this application. The emails the contents of which have prompted this application were sent as long ago as 11 April 2017. It should not be necessary to remind the defendant’s’ legal team and their client that CPR Part 1.3 imposes a duty on the parties to help the court to further the overriding objective. I asked Ms Harrison for an explanation for the delay and I found her response to be as unhelpful as it was uninformative. It is to be noted also that Practice Direction 23A 2.7 provides that: “Every application should be made as soon as it becomes apparent that it is necessary or desirable to make it.”

As a result of the timing of the application, the claimant’s response was sent to me just after 4pm 25 June, which was the Sunday before the Monday upon which the matter had been listed for hearing. The combined content of the new written submissions extended to in excess of forty pages and a hundred paragraphs. An exercise which was intended to assist the court predictably ended up in a wholly avoidable attempt at procedural damage limitation.

I inquired why the application did not comply with the formalities of CPR 23. The answer was unsatisfactory and appeared to be based on the assertion that there have been other cases in which the application for recusal had not been made on a formal basis. However, CPR 23.3(1) imposes a general rule that the applicant must file an application notice. The court may dispense with an application notice under (2)(b) but this is an act of discretion and not one of generic entitlement.

In the event, I made an order dispensing with the requirement of such an application, not because it would have been inappropriate for such an application to have been made in the first place but because, by the time the matter came before me, the waste of time and money which would have been occasioned by further delay far outweighed the benefits of insisting on proper procedural discipline.

It would also have been open to the court to exclude the issue from consideration by reason of the inordinate and inexcusable delay in raising the point. Parties should not simply assume that in all cases an application for recusal will automatically be immune from procedural objection as a result of delay. As Jacobs L.J. observed in Baker v Quantum Clothing Group [2009] EWCA Civ 566:

“35 …Weightmans say they only discovered certain of the matters relied upon two weeks after the hearing. We have unchallenged evidence from Mr Fry of Wake Smith leading to the clear inference that Mr Byard of Weightmans had visited the BTA website during the hearing. Even accepting that the matters concerned were only found two weeks later, there is no explanation of why they were not found earlier. Further, it is astonishing that, having found the material, the applicants took no action for a further five weeks. We draw the inference from this delay that the matters now relied on were not, at the time of discovery, seen as serious.

36 Finally, we think that this objection simply comes too late. It is not open to a party which thinks it has grounds for asking for recusal to take a leisurely approach to raising the objection. Applications for recusal go to the heart of the administration of justice and must be raised as soon as is practicable.”

In the particular circumstances of this case, however, I am satisfied that the furtherance of the overriding objective is best achieved by proceeding to the assessment of the substantive merits of the application rather than to dismiss it on the grounds of procedural default.

The four contentions upon which the application are based are:

I propose to deal with each in turn.

This is an inaccurate description of the development of the arguments deployed by the parties. At first, as my summary of the procedural history reveals, the parties treated the financial information issue as one which was founded on the assertion that the claimant had acted fraudulently. It was only at the hearing of oral final submissions that attention was directed to the consequences of an innocent or careless misrepresentation in this context. The claimant never “disavowed” this issue. The concession he made was that there was no statutory or regulatory provision material to the operation of the relevant clause of the policy and not that the claimant’s state of mind was immaterial as a matter of law. On the contrary, the claimant’s written submissions at this stage continued to assert that the claimant’s alleged innocence was relevant, albeit without making it expressly clear why that was alleged to be the case.

In the absence, at least, of any express concession on the part of the party in whose interests a legal point has not been made or developed the judge is not required to turn a blind eye to the potential points of law which may not have been fully or adequately considered by the parties. As Lord Neuberger observed in his paper on “The Role of the Judge: Umpire in a contest, Seeker of the Truth or Something in Between?” delivered to the Singapore Panel on Judicial Ethics and Dilemmas on the Bench 19 August 2016 at paragraph 24:

“When it comes to points of law, it appears to me that, if a judge thinks that an argument, which has not been raised, could be raised, the right thing to do is normally to raise it, shortly and neutrally, as soon as possible with the parties. It should not be raised on the basis that it is the obvious answer to the whole case and the parties are idiots for not having seen it. That attitude smacks strongly of the judicial mind having been made up – and it carries the risk of judicial humiliation if the point turns out to be bad. Sometimes, however, it may be better to keep quiet – eg if it is pretty plain that, in order to enable the advocates to deal with the point, the hearing would have to be unacceptably adjourned. Again, a judge must be very careful of being prejudiced in favour of a point just because he raised it and the parties missed it.”

Mindful as I must be of the warnings of Lord Neuberger concerning the legitimate limits of judicial curiosity, I am entirely satisfied that no objective and disinterested observer could detect, even deploying the most anxious of scrutiny, any appearance of bias in the legal enquiries which I made.

There a number of problems with this contention.

Firstly, I did not make a determination of the issue. My requests for assistance were prefaced by the word “hypothetical”. I am not sure what further comfort would be required to dispel any concern that I was approaching the issue of fraud with a closed mind.

Secondly, the hypothesis I was ventilating was predicated on the assumption that, contrary to the claimant’s case, his representations were untrue. Pursuing the logic of the defendant, the claimant would have been entitled to claim apparent bias because my postulation pre-supposed that the claimant had lost on this issue.

Thirdly, it will often be necessary for judges to explore hypothetical outcomes with the parties. Where, for example, as is often the case, a trial proceeds with both liability and quantum in issue, it would be frankly absurd for a judge to feel constrained not to seek clarification and submissions relating to the issue of quantum for fear that the defendant will assert that this means that the judge has given the impression of having predetermined the issue of liability against him.

Fourthly, the defendant’s perceived strength of its case on the issue of fraud ignores the fact that this is a highly contentious issue in the case which will require careful analysis of strongly conflicting lay and expert evidence. As Lord Hope pointed out in Helow, the fair-minded observer is one who approaches the issue of bias objectively and not from the point of view of the complainant.

Finally, the email of which complaint was made was sent when all the evidence in the case relevant to the state of mind of the claimant had been heard and had been the subject of detailed written and oral submissions. I take the view that neither side could have complained of apparent bias even if I had informed the parties in the email that I had actually decided what the claimant’s state of mind was. Where a complaint is made that a judge has “pre-determined” an issue, the question must arise: “Pre what? What further evidence or submissions ought the judge to have waited to hear before proceeding to determination?” The answer in this case must be: “None”.

The defendant argues that the email of 11 April not only suggests that I have “pre-determined” the issue of fraud in respect of the information contained in the financial review forms but, by implication that I have also “pre-determined” the issue of the allegations of the claimant’s fraud with respect to his level of disability.

Upon analysis, this ground is vulnerable to precisely the same objections which I have identified in respect of its predecessor and, for the same reasons, I reject it.

This allegation relates to the email which I sent to Ms Harrison asking to be reminded of the paragraphs of the defendant’s defence and counterclaim which were relied upon as the pleaded basis for the advancement of the non-disclosure argument in the context of the financial review forms.

I do not begin to understand how the fair-minded observer could ever construe this enquiry as an attempt to “raise a potential pleading point”.

Firstly, I had expressly indicated to the parties during closing submissions that I did not intend to determine the case on a pleading point but on the merits. The email contained no suggestion that I had changed my mind on this issue. This is hardly surprising because I had not.

Secondly, I had a genuine interest in making sure when setting about the drafting of my reasoned judgment that I had correctly identified the way in which the issue had arisen on the pleadings. I observe without criticism that the Defence and Counterclaim were, for the most part, very broadly drafted and made no specific reference to the issue of any financial misrepresentations whatsoever. I was erring on the side of caution lest I should have missed any paragraph alleged to be material. As it happened, when, after ten weeks had elapsed, Ms Harrison finally purported in her written submissions to identify the relevant paragraph pursuant to my request, it turned out to be the wrong paragraph and she was obliged, when this was pointed out to her during the course of oral submissions, herself to scour her own pleadings to find the correct answer to my still outstanding question.

Thirdly, both sides had relied in their submissions upon the claimant’s reaction to the questions posed to him in cross-examination relating to the financial review forms. The defendant was, in effect, contending that his response was that of a guilty thing surprised. The claimant, in contrast, was asserting that his answers were those of someone doing his best to deal with a wholly unexpected line of questioning relating to matters which had occurred some years ago. Thus, it was relevant for me to bear in mind the extent to which the pleadings were explicit or otherwise on the issue when judging how prepared one could reasonably expect the claimant to have been when attempting to give an explanation for the apparent discrepancies.

Finally, there is no reason why, if the defendant were wrongly but genuinely concerned that my email concealed a darker purpose, to seek clarification from me as to the reason behind my request and, perhaps, a reassurance that I was not minded to limit the scope of the defendant’s case with reference to its pleadings. Had such a request been made I would gladly have put the defendant’s mind at rest.

For the reasons given above, this application fails. It ought to be unnecessary for me to make the point but, alert to the heightened sensitivities revealed by this application, I state, for the sake of completeness only, that the making of this application and its failure will, of course, make no difference whatsoever to my determination of the substantive issues which remain to be decided.