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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Bertram Breach v Lloyds TSB Insurance [2002] EWCA Civ 1818 (07 October 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1818.html Cite as: [2002] EWCA Civ 1818

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BURNLEY COUNTY COURT
(MR RECORDER LAPRELL)

		Royal Courts of Justice Strand London, WC2 Monday 07 October 2002

Monday, 7 October 2002

1. LADY JUSTICE ARDEN: This is an application for permission to appeal from an order dated 23 August 2002 of Mr Recorder Laprell sitting in the Burnley County Court. By this action the appellant sought payment of the outstanding balance of sums totalling £41,200.00 claimed to be due to him under the terms of his property and contents insurance policy in respect of a claim arising out of damage to the house caused by a fire on 2 June 1999. The insurers counterclaimed for repayments of sums totalling £47,000 which they had made under the policy. In March 2000 the insurers avoided the policy on the ground of fraud. By the judge's order the appellants claim was dismissed, and judgment was given for the insurers on their counterclaim in the total sum of £55,748.63. It will be appreciated that what is at stake for Mr Bertram is very considerable indeed, and I noted that the learned Recorder expressed his sympathy with Mr and Mrs Breach, and added this:

"They will lose the benefit of recovering anything at all as a result of the fire from their Insurers despite the fact that, on any view, they suffered a substantial loss and the greater part of it was genuine."

2. It is obviously a case which is complex and calls for sympathy, and in the course of this hearing I have therefore endeavoured to elicit as much as I can from Mr Breach that might help his case.
3. The critical question at the trial was whether the appellant had made a fraudulent claim in respect of computer equipment. The appellant had submitted a quotation from RAM Computers giving a phone number, and headed "Special Build Quotation", which began:

"Dear Mr Breach.

Further to your recent inquiry and specification we have pleasure in quoting the following, which we trust meets with your approval."

There are then a large number of items listed. They are not separately itemised. It then says:

"Total Price £7,800

Plus VAT at 17.51%

£9,165

The above includes building, testing, delivery to your premises, and installing. Complete with 3 year warranty on parts, and 1 year labour."

4. The Recorder found that this document was in fact prepared by the appellant's wife, Mrs Breach, whom Mr Breach has described to me as a computer buff. He says that she prepared it by using figures in the inventory for retail sale available from RAM Computers, and she then added in 20 per cent for the costs of installing these various items of computer equipment and making the system for which Mr Breach claimed. On the face of it, however, there is no reference to it having been constructed in that way. At the end of his judgment the Recorder's conclusion was, at the very least, that the appellant and Mrs Breach had taken the opportunity to up-grade the quality of their equipment significantly in a way that in his judgment constituted substantial fraud, albeit that only a small proportion of the total value of the claims which I had mentioned. He found that the appellants' evidence was untrue in significant respects.
5. The law in question was common ground before the Recorder and has not been challenged on this appeal. Among the relevant propositions which the Recorder sets out is the following proposition:

"(c) A fraud is material and therefore justified the Insurer avoiding the policy if it is not so small as to make the maxim de minimis applicable. The proportion of the total claim which is fraudulent is not a determining factor and the appropriate test is whether the fraudulent portion of the claim taken in isolation would be sufficiently serious to justify it being treated as a breach of the Insured's duty of good faith.

(d) If a claim is fraudulent the consequence is that the insurer is entitled to repudiate the whole claim, not just the fraudulent part of it. Accordingly it is common ground between the parties that, if this claim contained a fraudulent element which was substantial, then the claim fails and the Counterclaim whereby the Defendants seek the return of the payments it made as interim payments, succeeds."

6. I now turn to the grounds of appeal. The first ground for appeal is that counsel for the defendant knowingly and recklessly misled the court and the judge in the examination of the evidence and testimonies. I should make it clear that Mr Breach was represented by solicitors and counsel at the trial, although it appears that his solicitors may not have been present throughout the trial. According to Mr Breach's skeleton argument the point in the first ground of appeal is that the insurers' counsel cross-examined Mrs Breach about a large computer which was not in fact the computer in issue, but another computer, one that she kept in her own study which was not affected by the fire. The appellant's solicitor was not in court and for some reason the appellant was unable to make clear to his counsel that this was the case. Mr Breach has explained to me that he wrote a long statement which he brought to court at the opening of the case. Unfortunately his solicitor was not present, his counsel arrived, he says, a little late and only had five minutes to look at the statement before the case started; therefore, he says, vital evidence was not put before the court which would have been beneficial to his case.
7. So far as the information which Mr Breach gave to his own counsel (and it appears his own counsel did not use) is concerned, I do not think there is any real prospect of success on appeal. Even if Mr Breach's solicitor was absent from court it would have been possible for him to pass a note to counsel pointing out that defendant's counsel was cross-examining Mrs Breach about another computer altogether; but in any event (as will appear later in this judgment) the evidence given by Mrs Breach on this point was not critical to the judge's reasoning.
8. The second ground of appeal is that the insurers breached insurers' duty of good faith. This relates to the fact that certain documents were not produced by them for the claimant and for the court. As I see it those documents had no immediate bearing on the claim, save for one element which is some photographs which might have helped Mr Breach's case. But the position here is that Mr Breach's solicitors knew about these documents and asked for them before the trial and no doubt were in a position to take steps to get interim orders if they existed but were not being made available when they ought to have been. Accordingly, as I see it, this ground would not afford a good ground of appeal.
9. The third ground is that the judgment contains a large number of factual inaccuracies. Mr Breach has prepared a lengthy document headed "Objections to Judgment". I have considered this document with care. I noted, for instance, that in the course of his judgment the Recorder said that a mark-up of 20 per cent on the RAM quotation was unsubstantiated; but it is clear from the document entitled "Objections to Judgment" that even the expert called on behalf of the insurers accepted that 20 per cent was a mark-up which could properly have been used: see page 264. However, this particular point is not a point which the Recorder notes as critical to his judgment. Having seen the quotation for RAM Computers it is possible, I say no more, that what the Recorder was referring to was the fact that there was not a specific item for that mark-up in the quotation, but it was unparticularised. But there was clearly evidence before the court as to how that mark-up had been achieved and therefore it was a matter which was covered in the evidence as such.
10. I have instead focussed most particularly on paragraph 6.12 of the Recorder's judgment. What the Recorder did was, having set out a number of elements of the evidence which he rejected, he said this:

"I have not purported ...to summarise the whole of the evidence... Overall I have to look at the totality of the evidence, remind myself again as to the burden and standard of proof and consider the evidence against that burden and standard to determine whether or not the Defendants has discharged the burden of proving that this claim was presented fraudulently in a way which was substantial in the sense of being more than minimal. I have come to the clear conclusion having heard all of the Claimant's evidence, his wife's evidence and Mr Lustgarten's evidence, that there has been exaggeration at the very least of the items which the Claimant and his wife owned prior to the fire. It is not possible to say precisely which items on the 'RAM quotation' they did own prior to the fire but I am satisfied that it was substantially different to the items there listed. At the very least I have concluded that the Claimant and his wife took the opportunity to up-grade the quality of their equipment significantly in a way that does represent a substantial fraud, albeit only a modest proportion of the total value of the claim. That is almost inevitably the case when someone is tempted to try and take advantage of an Insurer as to the amount or quality of possessions which were there prior to a fire. I have regard to all the matters of evidence which I have set out above. None of them individually would have persuaded me that Mr Breach was exaggerating his claim. However looked at collectively and cumulatively as one has to look at the totality of the evidence, I cannot accept the Claimant's explanations for all of them or indeed, when one looks at them collectively, for a significant proportion of them. In particular I reject the following contentions put forward on behalf of the Claimant as being untrue:-"

11. The Recorder then lists three matters. The first relates to computer equipment purchased eight weeks prior to the fire in the sum of £5,000, which the appellant tells me was valued at £5,000 in the RAM Computer's quotation. The next item refers to a difference between two processors which again on the figures accounts for an amount of about £300 to £400. The third point relates to some peripheral equipment, a Belina monitor, a scanner and digital camera. Those would clearly be matters of some value as well, say £1,000. If the value of these sums is £6,000 then, as it seems to me, the Recorder was entitled to take the view that that was a substantial amount and sufficiently serious to justify the conclusion that Mr Breach had broken his duties to the defendant insurer so as to avoid the policy.
12. Accordingly, it seems to me that the prospect of success on appeal can best be tested by looking at these three matters which the Recorder has specifically relied on. If the Recorder's conclusion on these points cannot be challenged on appeal then, as it seems to me, there is no prospect of success on appeal even if Mr Breach is right on all the other objections to the evidence which he has taken, and it is therefore on these three items that I have focussed most closely in the course of the hearing.
13. I take the first item which is that the Recorder did not accept that Mr Breach had spent £5,000 on computer equipment in the eight weeks prior to the fire. He mentioned three things. (1) that the claimant's wife wrote a detailed history of the acquisition for computer equipment not mentioning this equipment; (2) she continued to have no specific recollection of it; and (3) there was no documentary evidence forthcoming as to payment for even these items which ultimately the claimant said were paid for by cheque. These items were a digital camera, mother board, RAM chips and sound cards in the main. Mr Breach tells me that what happened was that he took a sum of cash to the bank (the Royal Bank of Scotland) and the bank gave him a cheque in exchange and that did not show on his bank statements. He did, however, ask his bank for bank a statement, but was told that they would not be available in time for the trial. So he did ask for a bank statement from his bank, but he must have asked at a very late stage. He tells me that this explanation in his statement, which was handed to counsel as I have mentioned, was not available at the trial; in other words all the judge knew was that the sums had been paid for by cheque but that the appellant had not produced his bank statements.
14. Now, given that there was no explanation to the judge for the absence of the bank statements and that the judge was not told about the system with RBS and therefore made no findings with it, in my judgment it would not be possible to challenge this finding on appeal. I have asked myself whether it was possible to adduce evidence on appeal, but there are restrictions about this. One of the principal guidelines which the courts adopts is that the evidence was not available to be led at trial; whereas Mr Breach's case is that it was available to be led at trial. Accordingly, it seems to me there is not a real prospect of success in upsetting the judge's finding on this point.
15. On the second point the judge rejects the claimant's explanation for an upgrade from a 500 megahertz chip to a 550 megahertz either on the basis that he misunderstood the loss adjustor, Mr Lustgarten, who told him that the "new for old" statement in the policy meant that he could upgrade to whatever was the current state of the item. The fact is that Pentium 500 processors were available and the RAM Computer's quotation is for a Pentium 550 megahertz processor and there were two items involved. The difference between the two, taking the price list at June 1999 shown to me in court this morning by Mr Breach, must be of the order of £300 to £400, assuming the cost of 550 processors to be about £200 more than the cost of a 500 processor.
16. The judge, having heard Mr Breach, said:

"It is inconceivable that an intelligent man such as the Claimant would think that new for old entitled him to upgrade to a new level of performance when the 500 megahertz chips were still available."

17. That was a finding of fact by the judge and I do not consider there is any prospect of success in upsetting that on appeal.
18. The third element in this paragraph is that "the RSS documentation signed by the claimant does not log the separate peripheral, but substantial items linked to the Pantec computer." These are a monitor, a digital camera and a scanner. RSS were a salvage company and at the end of the day when they came to collect the property damaged by the fire they drew up a list and asked Mr Breach to sign it. Mr Breach did indeed sign it, and the judge went on to say:

"Having heard Mr Breach give evidence, I am certain that, had RSS missed from the list items of significant value newly acquired only 2 months previously, Mr Breach would have noted it and dealt with it at the time."

19. That was the judge's finding of fact. Reading the judgment as a whole it seems to me to show that the Recorder did not accept that the claimant had these items at the time of the fire. What Mr Breach says in his objections to evidence is that he signed it at the end of their work, he had not had an opportunity to consider it properly, but when he did look at it and noted the discrepancies he brought the matter to the attention of the adjustor, Mr Lustgarten, who advised him to wait until the appellant had received a typed copy from the insurers loss adjuster, Mr Dickie. But the explanation which is given in the objections to evidence, although it was contained in the statement prepared by Mr Breach, was not given to the judge; and there is no reason why it was not given, as I have explained. Before the court allows new evidence to be adduced on appeal the court takes into account whether or not the information was available to be led at the trial; and here it clearly was.
20. The other point which I have considered is whether it could be said that the three items were not substantial. The position was that it was common ground that if the claim was fraudulent it was to a substantial extent, the claim would fail and the counterclaim of the defendants would succeed. That was common ground. Having considered these points it seems to me that it could not be said that the items together were not substantial. They represented significant sums in themselves and were undoubtedly significant in relation to the total claim for computer equipment. They were also significant, though to a much lesser extent, in relation to the fatal fire claim of £88,000 and cannot be described as of no materiality or as of no substance. Accordingly, in my judgment, the third ground of appeal does not disclose a real prospect of success.
21. The fourth ground is that counsel misrepresented the position without consultation or agreement with him. As I have explained to Mr Breach in the course of the hearing and he appears to accept, this ground cannot afford a ground of appeal but rather only of a complaint against his own legal advisers.
22. The fifth ground of appeal was that the judgment might have been prejudiced by the fact that the claimant and his solicitor communicated with the Lord Chancellor's Department about the delay in delivery of the judgment which was handed down some eight weeks after the trial. However, there is nothing to substantiate this claim and thus I do not think it can afford any prospect of success.
23. The sixth ground is that the proceedings did not include evidence that the claimant considered beneficial to his claim. This evidence was in the statement of counsel, to which I have referred and with which I have already dealt; and for those reasons that claim cannot give a real prospect of success either.
24. In the circumstances, though I should like to express the same regret as the Recorder, in my judgment the application must be dismissed.
(Application dismissed; no order for costs).