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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Royal & Sun Alliance Life & Pensions Ltd, R (on the application of) v Personal Investment Authority Ombudsman Bureau Ltd & Anor [2000] EWHC Admin 379 (27 July 2000) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2000/379.html Cite as: [2000] EWHC Admin 379

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QUEEN and PERSONAL INVESTMENT AUTHORITY OMBUDSMAN BUREAU LIMITED; KEITH J. GOSS Ex Parte ROYAL & SUN ALLIANCE LIFE and PENSIONS LIMITED Respondens [2000] EWHC Admin 379 (27th July, 2000)

CO/46/2000

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

CROWN OFFICE LIST

Royal Courts of Justice

Strand, London, WC2A 2LL

Thursday 27th July 2000

This Application raises a short question as to the proper construction of the terms of a Personal Retirement Policy issued by the Applicant (then Royal Life Insurance Limited and to which I will refer as "Royal") to Mr Goss in March 1983. In imprecise but common terms the question is whether the Policy was a single premium policy or an annual premium policy. If it was the former its value to Mr Goss in the circumstances which have arisen would be significantly greater than if it is the latter.

The Application takes the form it does because when the issue arose between Royal and Mr Goss, Mr Goss referred it to the Respondent Ombudsman. The Ombudsman ruled in favour of Mr Goss in a decision letter dated November 5, 1999. In summary the Ombudsman reached the view that the meaning of the policy was ambiguous, that he was faced with two opposed constructions, and so it was to be resolved by construing the wording against Royal as the party responsible for and producing the wording.

Royal is required to comply with awards made by the Ombudsman unless it applies to the Court for relief as it did in the present Application dated January 7, 2000. The primary submission on behalf of Royal is that the Ombudsman erred in law in concluding that the Policy was a single premium policy and not an annual premium policy. A secondary submission, that the Ombudsman's approach to the issue of construction was "Wednesbury unreasonable", it was agreed in the course of submissions, adds nothing to the primary submission because if that submission be right it does not matter and if it be wrong it cannot avail Royal. Neither counsel submit that there are any circumstances in which remission to the Ombudsman for reconsideration by him would be appropriate as both agree that the outcome of this application should depend on the view of this court as to the proper construction of the Policy. If that view is that the Ombudsman was wrong, Royal is entitled to the relief it seeks. If that view is that he was right, whether for the same or other reasons, then Royal is not entitled to any relief.

Although the complete original Policy is not available, the Schedule to it is as is a sample of the wording to which, it is agreed, the Schedule would have been attached.

The wording, so far as material, provided that:

In return for the premiums Royal ... will pay to the purchaser ... the retirement benefits as defined herein ....

1. ...30 days of grace for payment of premiums due ....

5. The purchaser ... may elect not to take the retirement benefits commencing at the Final Vesting Date but to take different retirement benefits at an early Vesting Date such date being any date between the 60th and the 75th birthday ....

7. If a premium is not paid before the end of the days of grace it may be paid within one year of the due date ....

8. If a premium remains unpaid one year after the due date, or at the previous request of the purchaser the policy shall be converted into a paid up policy for reduced benefits free from payment of further premiums provided that at least one year's premium has been paid ....

The Schedule to the Policy contained a table of "Retirement Benefits". That set out "retirement funds" at Mr Goss' 75th birthday (£252,333) decreasing down to £110,133 at his 60th birthday. It stated that the funds were to be used to secure the Retirement Benefits which were an annuity and a lump sum payment.

In the middle of the schedule there was a "box", the entries in which contain the key provisions which have to be construed, as follows:

As the submissions developed, there was no real difference between Mr Riddle and Mr Strachan on the proper approach to the issue. The words have to be construed as a whole. Mr Strachan did not rely on any extrinsic facts to support the Ombudsman's conclusion. Mr Riddle did rely on some extrinsic facts but only to seek to establish that Royal had acted throughout in a manner consistent with its construction. None of those facts, even if admissible on construction (which I do not think they are), do more than establish that negative proposition and I need say no more about them.

Counsel were (rightly) agreed that the maxim, still commonly known as "contra proferentem", is only of use as a last resort in a case of real ambiguity, for example where two reasonable meanings are equally open. The first task is to seek to construe the relevant words using the normal canons of construction and only where that fails may the maxim assist. Moreover ambiguity is not the same as lack of clarity. Nor can the maxim be used to create the ambiguity it is then employed to resolve.

Mr Goss contended, the Ombudsman decided, and Mr Strachan submitted that the Policy was to be construed as one requiring payment only of a single premium of £6000 with "an option" to make subsequent annual payments and thus was a single premium policy. Royal contended and Mr Riddle submitted that it was to be construed so as to provide for an initial premium of £6000 split as to an annual payment of £3500 and a one-off or single payment of £2500 with a commitment to annual payments of £3500 thereafter, and so was an annual premium policy. That is the basis on which Royal had quoted a transfer value to Mr Goss. I should add that it is a more generous basis than would apply if the Policy had been treated as one in respect of which an initial payment of £6000 was to be made with annual payments of £3500 thereafter, but less generous than if it were a single premium policy.

At the end of the hearing I stated that I had reached the conclusion that Royal was entitled to the relief it claimed (the quashing of the Ombudsman's decision) and that I would put my reasons for that conclusion in writing.

(1) If Mr Strachan was right in his submission, I think much of the Schedule to and indeed a number of the Conditions of the Policy would be otiose or at least no more than expressions of hope. The whole of the line in the box containing the premium of £3500 would be no more than an option. It would have no greater purpose than an offer. The conditions as to payment of premium (Conditions 7 and 8) would have nothing to bite on unless the "option" were exercised.

(2) The language used is the language of obligation not option: "first payment due"; "last payment due". The last payment is due in the year 2021 unless condition 5 applies.

(3) The reference to "first" payment is itself otiose if there was not to be a second payment.

(4) The word "single", which understandably was at the heart of Mr Strachan's submissions, refers I think to a single payment of £6000 not to a single premium. The submissions of both counsel accept that only one such payment was to be made. The word "single" expressly refers to the "frequency" of the payment. True it is, as Mr Riddle acknowledged, that the wording could have been clearer if it was intended to state that the £6000 was split between a regular payment of £3500 and a single payment of £2500 but that is not fatal if it can still properly be so construed or the wording is, as I think it is, plainly inconsistent with a single premium policy.

(5) It may be that the more natural meaning is that the Policy was an annual policy with a premium of £6000 due in the first year and premiums of £3500 due in each subsequent year. But that also is the antithesis of a single premium policy and would, as I have indicated, penalise rather than assist Mr Goss if it were the correct construction.

(6) The stated figures for "retirement benefits" are, it is obviously rightly agreed, only appropriate for a Policy which was an annual policy. The benefits shown could not realistically be offered for a £6000 single premium policy. Yet there are no benefits shown for such a single premium policy, which, on Mr Strachan's submission, is the only Policy which was involved. Mistakes can of course be made and figures stated to encourage "options" to be taken up, but the figures do provide at least a small further indicator as to the nature of the Policy.

For these reasons I reject the construction determined upon by the Ombudsman. In my judgment this was not a single premium policy but an annual premium policy and there is no room for the contra proferentem maxim in that context.

I will hear the parties, if necessary, on any orders they may seek consequential upon this judgment.