Area(s) of Law :
Insurance & Reinsurance Law
Court : Court of Appeal, Civil Division Sir Anthony Clarke
Source :  EWCA Civ 939
Case Summary By :
Insurance – Contract of insurance – Construction of terms – Claims co-operation conditions – Provision of information and documents – Conditions imposing no express time limit – Whether reasonable time requirement to be implied into terms – Whether prejudice caused to insurer relevant to question of fact as to reasonableness of time taken to comply with condition.
The claimant employed the first defendant insured to carry out demolition and excavation works at a residential property. The work was executed negligently so that the wall of the neighbouring house began to collapse into a hole excavated by the insured. The claimant compromised the resulting claim brought by the owners of the adjoining property and in turn brought proceedings in April 2004 against the insured for the increased costs of their development. Judgment in default with damages to be assessed was obtained and in March 2005 the second defendant insurers were joined to the proceedings. The insured had a Public Liability and Contractor’s All Risk Insurance Policy with the insurers and a term of the policy required it to tender to the insurers all necessary information and assistance to enable them to settle or resist any claim or to institute proceedings. This was a condition precedent to the insurers’ liability. In the event although some information was provided to the insurers they declined to indemnify the insured for failure to provide information and assistance in accordance with the policy. At first instance the judge held that the insured had been impliedly required to comply with the conditions as to provision of information within a reasonable time. He decided that there had been a failure to do so, but that there had not been a breach of the reasonable time obligation because the insurers had not been prejudiced in any material way by the delay. The insurers appealed arguing that prejudice was immaterial. The claimant argued that there was no rule of law that prejudice could not be taken into account as relevant to the question of fact as to reasonable time for compliance with a claims co-operation clause.
Held – There was no absolute principle which included or excluded, as relevant to the question of what was a reasonable time for compliance with a claims co-operation clause, the fact of whether as things turned out, insurers were prejudiced. Each case turned on its facts but there was no determinative principle that a duty on the insured to provide relevant information within a reasonable time would not be broken if, in the end, it turned out there was no prejudice to the insurers. Insurers were entitled to know where they stood and in the instant case the insurers were entitled to receive the information in good time, whether they were in the end prejudiced by failure to achieve this or not. Until they received the information, they could not tell what it would be nor what they
 2 All ER (Comm) 982 at 983
might wish to do. But they could say that its provision was overdue, and that the failure to provide it was a breach of a condition precedent to provide it within a reasonable time. The judge had therefore erred and had he applied the correct principle, he would have held that there was a breach of the condition (see –, below).
Decision of Judge Richard Havery QC  1 All ER (Comm) 224 reversed.
For the interpretation of non-marine policies of insurance, see 25 Halsbury’s Laws (4th edn) (2003 reissue) paras 83–89.
Cases referred to in judgments
Diab (Nasser) v Regent Insurance Company Ltd  UKPC 29,  2 All ER (Comm) 704.
Hunt (George) Cranes Ltd v Scottish Boiler & General Insurance Co Ltd  EWCA Civ 1964,  1 All ER (Comm) 366, CA.
Lickiss v Milestone Motor Policies at Lloyds  2 All ER 972, sub nom Barrett Bros (Taxis) Ltd v Davies  1 WLR 1334, CA.
Pioneer Concrete (UK) Ltd v National Employers Mutual General Insurance Association Ltd  2 All ER 395.
Welch v Royal Exchange Assurance  4 All ER 289,  1 KB 294, CA.
Axa Insurance UK plc (Axa) appealed, with the judge’s permission, from the decision of Judge Richard Havery QC, ( EWHC 2319 (TCC),  1 All ER (Comm) 224) given in an action brought by Shinedean Ltd against Alldown Demolition (London) Ltd (Alldown) to which Axa was subsequently joined. The judge held that whilst Alldown had failed within a reasonable time to provide information contained in a claims co-operation condition in an insurance policy taken out with Axa that as Axa had not been prejudiced by the delay, this failure did not amount to a breach of the condition. Axa appealed. The facts are set out in the judgment of May LJ.
Richard Lynagh QC and Suzanne Chalmers (Instructed by CIP Solicitors, Bristol) for Axa.
Nigel Jones QC and David Lewis (instructed by Lawson George Solicitors) for Shinedean.
MAY LJ (giving the first judgment at the invitation of Sir Anthony Clarke MR).
 In the Public Liability and Contractor’s All Risk Insurance Policy, which is the subject of this appeal, there were conditions precedent to the effect that the insured should give AXA, the insurers, all information and assistance which the company might require. There were two versions of this requirement in two different parts of the policy, but they were to essentially the same effect. Judge Havery QC, against whose judgment of 28 October 2005 sitting in the Technology and Construction Court this appeal is brought with his permission, decided that the insured was impliedly required to comply with these conditions within a reasonable time. The judge’s judgment has the neutral citation number  EWHC 2319 (TCC) (see  1 All ER (Comm)). Neither party quarrels in this court with this part of his decision. He decided that there was a body of
 2 All ER (Comm) 982 at 984
significant information which the insured did not provide to AXA until two-and-a-half years or more after the incident, which gave rise to the claim under the policy. But he decided that there was no breach of the reasonable time obligations to supply information and assistance because AXA had not been prejudiced in any material way by the delay. They were just as able to deal with the claim with the information reaching them when it did as if they had received it two years or more earlier.
 AXA appeal, contending that prejudice to them is immaterial. Shinedean, the claimants, say that what is a reasonable time is a question of fact depending on all the circumstances of each case. There is no rule of law, they say, saying that prejudice to the insurer cannot be taken into account as one of the facts and circumstances relevant to the question of fact as to reasonable time. That is the short compass of this appeal.
 Shinedean employed a contractor called Alldown Demolition (London) Ltd to do demolition and excavation works at 113 Kirkdale Road, Sydenham. Alldown negligently excavated a hole beside number 111, the property of Mr and Mrs Patel. On 24 April 2002, Mr and Mrs Patel’s flank wall began to collapse into Alldown’s hole in the ground. Shinedean had to settle Mr and Mrs Patel’s undefendable resulting claim for withdrawal of support, which they eventually did for £110,000 including interest and costs. This they did on 14 June 2004. Shinedean had their own claim against Alldown for the increased costs of their development. It is not entirely surprising that Alldown went into creditor’s voluntary liquidation on 2 September 2002.
 In proceedings started in April 2004, Shinedean obtained judgment in default for damages to be assessed against Alldown. AXA were joined as second defendants in these proceedings in about March 2005. The claim was amended to include a claim for indemnity under the Third Parties (Rights Against Insurers) Act 1930.
 Alldown had a Public Liability and Contractor’s All Risk Insurance Policy with AXA for one year from 5 September 2001. The clauses of the policy relevant to this appeal are set out at para  of the judge’s judgment. In the general conditions there was a requirement (cl 3) that in the event of any loss, destruction or damage or event likely to give rise to a claim, the insured should notify AXA immediately—Alldown did this on about 25 April 2002—and should deliver to AXA at the insured’s expense all such proofs and information relating to the claim as might reasonably be required. No claim was to be payable under the policy unless this, among other conditions, was complied with.
 Clause 12 required the insured to tender to AXA all necessary information and assistance to enable AXA to settle or resist any claim or to institute proceedings. Due and faithful compliance with these and other terms was a condition precedent to any liability of AXA under the policy. In the public liability section, there was an equivalent condition precedent, an equivalent clause requiring immediate notification, and an equivalent clause requiring the insured to give AXA all information and assistance they might require. The judge accepted submissions to the effect that generally, clauses such as these are to be construed, if they are ambiguous, against insurers.
 On 5 June 2003, AXA through their loss adjusters notified Alldown’s brokers that they declined indemnity to Alldown under the policy because Alldown had failed to provide AXA with information and assistance in accordance with the policy. There was before the judge an issue of fact about
 2 All ER (Comm) 982 at 985
when and to what extent Alldown had provided information to AXA. Mr Fox of Cunningham Lindsay was AXA’s loss adjuster. He made numerous requests of Mr Clarke, then director of Alldown, for documents. There were, I understand, at least six such requests before Alldown went into liquidation in early September 2002.
 Mr Fox’s evidence, which the judge accepted, was that he received from Mr Clarke two letters from the solicitors acting for Mr and Mrs Patel on 5 June 2002, and some drawings following a telephone call from Mr Clarke on 24 June 2003. Mr Clarke said these had been sent earlier, but the judge rejected this and other supporting evidence. Otherwise, Mr Fox did not receive the relevant documents. The bulk of the documents did not come to AXA until they were provided to them as an exhibit to a witness statement in the proceedings brought by Mr and Mrs Patel at the end of 2004 or the beginning of 2005. The witness statement itself was of a much earlier date, sometime in 2002.
 It was submitted to the judge on behalf of Shinedean that a condition precedent with an implied reasonable time limit is to assist the insurer to protect his position. It cannot, it was submitted, be intended to operate punitively. Prejudice to the insurer is one of the tests for judging reasonableness. The judge accepted this. It meant that if an insurer was unable to tell when a reasonable time had elapsed so that he could not close his books, there was a small degree of prejudice which could not be ignored.
 As to reasonableness, the judge bore in mind that Mr Fox had made numerous unanswered requests for information and that Alldown were undoubtedly to be blamed for the situation which arose.
 On the question of prejudice, it was not suggested that AXA suffered prejudice in relation to Shinedean’s own claim against Alldown. AXA also accepted before the judge, on the documents recently produced by Shinedean, that the settlement with Mr and Mrs Patel satisfied the test of bona fides in s 1(4) of the Civil Liability Contribution Act 1978. AXA did not allege that Shinedean themselves were responsible for the Patels’ damage. AXA accepted that Shinedean were entitled in principle to indemnity for the whole of the £110,000 liability to the Patels. Shinedean were also entitled to recover its reasonably incurred costs of the Patel action.
 So any prejudice suffered by AXA for the long delay in providing the information was limited to the prejudice in not being able to close their books which, in this part of his judgment, the judge described as miniscule. The judge concluded that the documents were supplied within a reasonable time and that Alldown had not been in breach of the condition precedent. AXA were not entitled to decline to indemnify for these reasons.
 The grounds of appeal in summary are that the judge was wrong in law to find that actual prejudice to the insurer was material in deciding whether the insured was in breach. He was wrong to take into account events after the time when AXA declined indemnity under the policy. The purpose of the clauses was to enable AXA to investigate accidents and claims at the earliest opportunity, to be able to control and negotiate their disposal. The question of a reasonable time cannot be divorced from this. It would turn fortuitously on the scope and content of documents and the hindsight question of prejudice. On the judge’s approach, neither party would be able to determine whether the insured was in breach, even if on the face of it there was little or no co-operation and the insured’s delay was enormous. An insurer could not safely determine whether the insured was
 2 All ER (Comm) 982 at 986
in breach because without full information he could not know whether he will turn out to have been prejudiced or not. Insurers, it is said, can rely on a breach of condition precedent even if there is no prejudice, so it is inappropriate to import prejudice into whether there has been a breach.
 It is submitted that if the matter of hindsight prejudice is left out of account, Alldown were plainly on the facts of this case in breach. I agree. The information was available in the form attached to Mr Clarke’s witness statement from September 2002. It was not provided to insurers until more than two years later. No amount of latitude could elevate this to a reasonable time. I would also incidentally question whether prejudice to insurers was indeed miniscule, although that was not argued nor is it necessary to my conclusion.
 Mr Jones QC repeats the submissions which succeeded before the judge. He gives a number of factual examples which he says would bring punitive results if the appellants are correct. A reasonable time for compliance should be judged in all the circumstances, including whether or not the insurer has in fact been able to achieve the purpose of the clauses. The parties cannot have intended the clauses to act as a penalty in favour of the insurer, where the insurer’s ability to fight the cause is materially unaffected. Insurers, he submits, could have fashioned their contract to make the matter of eventual prejudice immaterial but they did not choose to do so.
 There is, I think, little or no directly relevant authority. All but one of the authorities to which we were referred related to notification clauses and not to co-operation clauses. Welch v Royal Exchange Assurance  4 All ER 289,  1 KB 294 is quite close on the facts, but the issue there was whether compliance with the relevant clause was a condition precedent. There was also a question whether the insured could rely on facts arising after the making of their claim. The submission that the documents were in the event required was not regarded as determinative. Any comfort that the respondents might get from Lickiss v Milestone Motor Policies at Lloyds  2 All ER 972, sub nom Barrett Bros (Taxis) Ltd v Davies  1 WLR 1334 is dispersed, as suggested in MacGillivray on Insurance Law (10th edn, 2003) p 267, fn 45. Pioneer Concrete (UK) Ltd v National Employers Mutual General Insurance Association Ltd  2 All ER 395 was concerned with the effect of prejudice assuming a breach of condition; see Bingham J (at 400); see also generally Clarke The Law of Insurance Contracts para 26-2E4, which does not refer to prejudice.
 In George Hunt Cranes Ltd v Scottish Boiler & General Insurance Co Ltd  EWCA Civ 1964,  1 All ER (Comm) 366, the issue was whether compliance with the term in question as to notification was a condition precedent to insurers’ liability. Paragraph  of the judgment of Potter LJ is referred to as giving the purposes of these clauses as that—
‘the insurer should be properly placed in possession of a notification, with accompanying information, in sufficient time for him to make a reasoned decision, (a) in relation to the existence of cover under the terms of the policy; (b) as to the prima facie amount of the loss; (c), and most important, as to the investigations necessary or advisable to be made while the incident is fresh and evidence still available, whether in the form of an investigation at the accident scene or the availability and memory of potential witnesses. While reports of damage to the police in cases of damage by malicious persons or theft may well assist to that end, in many cases it will do little to
 2 All ER (Comm) 982 at 987
assist the insurer in respect of the matters which concern him under [the clause in question in that case].’
 The list there referred to does not, as is pointed out, refer to actual prejudice. We were also shown yesterday’s case in the Privy Council of Nasser Diab v Regent Insurance Company Ltd  UKPC 29,  2 All ER (Comm) 704. This was cited to show Lord Scott’s distinct scepticism whether absolute compliance with a 15-day time limit in a fire insurance policy would be regarded as always necessary in all circumstances. This, in my view, has little relevance to breach of a term requiring compliance within a reasonable time.
 In my judgment, there are two potentially conflicting principles in play here. On the one hand, it is commonplace that if you have to judge what is a reasonable time you take all relevant circumstances into account. Why then is not eventual prejudice to the insurer a relevant circumstance? On the other hand, there are other considerations than just whether eventually there is prejudice. Insurers are entitled to have co-operation and relevant information in good time to be able to assess their potential liability and to take appropriate action. Appropriate action could, importantly in some cases, include deciding to take control of the defence of the case.
 They are entitled, I suppose, to say that they have not had co-operation and relevant information in good time and to decline then to indemnify the insured. If they do so, as they did in this case, they must be entitled to know whether they are right. Where there is material information that could and should have been supplied much earlier, the insured cannot properly say:
‘We cannot tell whether we have failed to provide information to which you are entitled within a reasonable time because it may turn out, when I manage to provide it to you in 18 months’ time, that you will not have been prejudiced.’
 Other considerations may apply with information which has not yet come into existence, but in the present case much of the documents were in existence and it was Mr Clarke’s evidence, rejected by the judge, that he had indeed provided them. To have provided many of them two-and-a-half years or more after the event which gave rise to the claim under the policy, when they were available to be provided very much earlier, seems to me to be obviously unreasonably late. To have provided them only in the course of litigation to which insurers were about to become a party, again seems to me to have been unreasonably late and obviously so. If they had been provided much earlier, insurers’ participation in the litigation may have been avoided. This point is not I think met by a finding that, in the event, the insurers were not prejudiced.
 I would hold, therefore, that there is no absolute principle which includes or excludes as relevant to the question what is a reasonable time in these circumstances the fact of whether, as things turn out, insurers were prejudiced. I would only say that each case turns on its own facts but that there is no determinative principle that a duty on the insured to provide relevant information within a reasonable time will not be broken if, in the end, it turns out there is no prejudice to insurers. Insurers are entitled to know where they stand, and under this policy AXA were entitled to receive the information in good time, whether they were in the end prejudiced by failure to achieve this or not. Until they receive the information, they cannot tell what it will be nor what they may wish to do. But they can say that its provision is overdue, and that the failure to
 2 All ER (Comm) 982 at 988
provide it is a breach of a condition precedent to provide it within a reasonable time. On the facts of this case, in my judgment they were entitled so to say.
 For these reasons, I think that Judge Havery applied a wrong principle. Had he applied what I regard as the correct principle, he cannot but have held that there was a breach.
 I would allow the appeal and so find.
 I agree.
SIR ANTHONY CLARKE MR.
 I also agree. The key parts of cl 3 of the General Conditions provide:
‘3 Claims Conditions
(1) In the event of any loss destruction or damage or event likely to give rise to a claim under this policy the insured shall:
(a) notify the company immediately
. . .
(d) deliver to the company at the insured’s expense
. . .
(iii) All such proofs and information relating to the claim as may be reasonably required
. . .
(2) No claim under this policy shall be payable unless the terms of this condition have been complied with.’
 It is common ground in this court that where the insurer reasonable requires relevant proof and information, the insured must deliver them within a reasonable time. It is also common ground in this court that the performance of that obligation is a condition precedent to the insurer’s liability under the contract of insurance. The question in any case is thus whether or not the relevant information is provided within a reasonable time. What is a reasonable time is essentially a question of fact and depends on all the circumstances of the particular case.
 For the reasons given by May LJ, I agree that the reasonable time had elapsed long before the relevant documents were provided to the insurer or the proceedings against the insurer were instituted. I also agree that this conclusion is not met by a further conclusion that the insurer did not, in the event, suffer more than miniscule prejudice as a result of failure to comply with the condition precedent.
 For the reasons given by May LJ, I agree that this appeal must be allowed.
Rukhsana Ali Barrister.
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