Avondale Exhibitions Ltd v Arthur J. Gallagher Insurance Brokers Ltd [2018] EWHC 1311 (QB)

Case No D40CF005[2018] EWHC 1311 (QB)IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS IN WALESCIRCUIT COMMERCIAL COURT (QBD)Venue Cardiff Civil Justice Centre, 2 Park Street, Cardiff, CF10 1ETDate 31 May 2018
Before
HIS HONOUR JUDGE KEYSER Q.C.sitting as a Judge of the High Court
Between
AVONDALE EXHIBITIONS LIMITEDClaimantARTHUR J. GALLAGHER INSURANCE BROKERS LIMITEDDefendant
David Phillips Q.C. and Angharad Davies (instructed by Harrison Clark Rickerbys) for ClaimantClare Dixon (instructed by Simmons & Simmons LLP) for DefendantHearing Hearing dates: 15, 16, 17 May 2018
JudgmentH.H. Judge Keyser Q.C. :Introduction
[1]The claimant company (“Avondale”) carries on the business of the manufacture and erection of exhibition stands. It is run by Mr Patrick Watkins and owned by him and his wife Mrs Tracey Watkins. Before Avondale began to trade, Mr Watkins carried on a similar business as a sole trader in the name Intex Exhibitions.[2]The defendant carries on the business of insurance brokers. For most of the period relevant to these proceedings it was called Giles Insurance Brokers Limited; therefore I shall refer to it simply as “Giles”, regardless of what its correct name might have been at any particular time.[3]Giles acted as insurance brokers for Intex Exhibitions from 2007 and for Avondale from the time it started trading in June 2010. The insurance cover that Giles arranged for Avondale included a policy of Commercial Combined insurance, underwritten by QBE Insurance (“QBE”), for the years 2010/2011, 2011/2012 and 2012/2013. A claim under the policy for 2010/2011 in respect of damage caused by a burst water pipe at Avondale’s business premises was accepted by QBE, which paid out £54,138.41 on the claim, together with loss adjusters’ fees.[4]On 26 August 2012 there was a fire at Avondale’s business premises. The premises were seriously damaged and the trading stock was destroyed. Avondale made a claim under the Commercial Combined policy for 2012/2013.[5]However, after carrying out its investigations, QBE declined cover and avoided the policies for 2010/2011, 2011/2012 and 2012/2013, refusing to pay out in respect of the fire damage and intimating a claim to recover its outlay in respect of the earlier claim. The ground of avoidance was that Avondale had failed to disclose two criminal convictions of Mr Watkins (together, “the Convictions”): 1) The first (“the 2005 Conviction”) was a conviction on 21 February 2005 for three offences: racially aggravated harassment, alarm or distress; failing to provide a specimen of breath; and obstructing a constable. For these offences Mr Watkins was on 15 March 2005 sentenced to four and a half months’ imprisonment. 2) The second (“the 2009 Conviction”) was a conviction on 19 October 2009 for assault occasioning actual bodily harm. For this offence Mr Watkins was on 26 April 2010 sentenced to sixteen months’ imprisonment. (In what follows, reference to the Convictions or either of them may on occasion more properly be to the prison sentences that ensued upon the Convictions. Nothing of significance turns on the distinction. The context will show sufficiently what is meant.)[6]It is common ground between Avondale and Giles that QBE was entitled to avoid the policies on the ground of material non-disclosure, because it had not been told of the Convictions. The real question is: whose fault was it that QBE had not been told?[7]In these proceedings, Avondale seeks damages from Giles for professional negligence in respect of the non-disclosure of the Convictions to QBE. Its primary case is that it informed Giles of the Convictions and that Giles was in breach of its duty of care in failing to pass the information on to QBE. In response, Giles denies that it was informed of the Convictions, though it accepts that, if it had been properly informed of them, it would have been a breach of duty to fail to pass the information on to QBE. Avondale’s secondary case is that, regardless of whether or not it did inform Giles of the Convictions, Giles was in breach of its duty of care in failing to take proper steps to bring to its attention the importance of making the necessary disclosure and to elicit the relevant information. In response, Giles maintains that it discharged its duty and made sufficiently clear what was required by Avondale by way of disclosure. It also contends that, regardless of any further advice that might have been given to it, Avondale would not have made the necessary disclosure to it or to QBE. In the event of a finding that it was in breach of duty and that, if it had discharged its duty, Avondale would have made the necessary disclosure, Giles contends that there should be a finding of substantial contributory negligence.[8]By order dated 23 November 2017, His Honour Judge Jarman Q.C. directed that there be a trial of the following preliminary issues: i. Breach of duty; ii. Whether (properly advised) Avondale would have disclosed the Convictions to Giles and/or QBE and/or another insurer; and iii. Contributory negligence. This is my judgment upon the trial of those issues.[9]The remainder of this judgment will be structured as follows. First, I shall summarise the main points of the law applicable to the case. Next, I shall provide a narrative of the central facts, highlighting important areas of dispute. In doing so, I shall pass in silence over many of the matters dealt with in the witness and documentary evidence, as being tangential to the issues, though I have regard to all the evidence in forming my conclusions. Next, I shall address in turn the questions that fall to be answered, setting out any findings of fact necessary for their resolution. Those questions are, at least in broad terms, as follows: 1) Did Avondale inform Giles of the Convictions? 2) (Whether or not Avondale did inform Giles of the Convictions) was Giles in breach of duty by failing to take reasonable steps to bring to Avondale’s attention the importance of making the necessary disclosure and to elicit the relevant information. 3) (If the answer to question 2 is yes) would Avondale have disclosed the Convictions if Giles had performed its duty? 4) (If the answer to both question 2 and question 3 is yes) was Avondale contributorily negligent in respect of the non-disclosure of the Convictions to QBE?[10]I am grateful to Mr David Phillips Q.C. and Miss Angharad Davies, who appeared for Avondale, and to Miss Clare Dixon, who appeared for Giles, for the manner in which they conducted the trial and for their helpful written and oral submissions.

The legal framework

[11]Before me, counsel were agreed that the law relating to the duties of insurance brokers, insofar as it is relevant in the present case, could be taken from two cases: Jones v Environcom Limited [2010] EWHC 759 (Comm), [2010] P.N.L.R. 27, (David Steel J) (“Environcom”); and Synergy Health (UK) Limited v CGU Insurance Plc [2010] EWHC 2583 (Comm), [2011] Lloyd’s Rep IR 500, (Flaux J) (“Synergy”). It is unnecessary to refer here to the detailed facts of those cases.[12]In Environcom there had been material non-disclosure to the insurers. David Steel J held that the brokers had been in breach of their duty in failing to give adequate advice to the client as to its disclosure obligations and failing to take adequate steps to elicit the information that needed to be disclosed. However, the claim for damages against the brokers failed on a causation point.

The judge dealt with the scope of the brokers’ duties at paras 54 – 56:

“54. In short, a broker: (a) must advise his client of the duty to disclose all material circumstances; (b) must explain the consequences of failing to do so; (c) must indicate the sort of matters which ought to be disclosed as being material (or at least arguably material); (d) must take reasonable care to elicit matters which ought to be disclosed but which the client might not think it necessary to mention. All this flows from the requirement that the broker should take reasonable steps to ensure that the proposed policy is suitable for the client’s needs. By definition, a policy which is voidable for non-disclosure is not suitable. 55. Moreover it was, or became, common ground that where a change in personnel led to a new person being responsible for insurance matters in the client’s organisation, the broker must ensure that an appropriate understanding of questions of materiality is held by that person. … 56. The rationale for the imposition of these duties on a broker is that it is an unusual obligation for a contracting party, and an area of the law which can have harsh consequences, not least because any non-disclosure relied upon by the underwriter to avoid the policy may have no causative significance as regards the claim that will as a result not be paid. This makes it all the more important that the lay client is told of the paramount duty to disclose and what it involves. Further, in case the client does not appreciate what may be material, (as will often be the situation) he needs to be advised to err on the side of caution so as to disclose anything that might impinge on the judgment of a competent underwriter in assessing the risk and be helped to unearth such matters.”
[13]In Environcom, the brokers relied on documents they had sent to the client as being adequate to inform the client of its obligation of disclosure. David Steel J regarded the documents in question as being “seriously inadequate for that purpose”; see in particular paras 57 and 62. He continued at para 63:
“In any event, I am not persuaded that it is sufficient simply to rely upon written standard form explanations and warnings annexed to proposals or policy documents. I understood the experts to be agreed on this. The broker must satisfy himself that the position is in fact understood by his client and this will usually require a specific oral or written exchange on the topic, both at the time of the original placement and at renewal (particularly if a new person has become that client’s representative). There is no evidence of any such exchange let alone one accompanied by any inquiries by [the brokers] to help unearth material facts.”
[14]In Synergy, the insurer sought to avoid the contract of insurance on the grounds of material non-disclosure and misrepresentation. The insured commenced proceedings against the insurer for an indemnity under the policy and, in case the insurer were held entitled to avoid the policy, against the brokers for damages for breach of duty. Flaux J held that the insurer was not entitled to avoid the policy. The alternative claim against the brokers did not therefore fall for decision, but the judge dealt with it nevertheless as it had been fully argued. In respect of the scope of the brokers’ duties, he said at para 204:
“The scope of the brokers’ duties to Synergy was not seriously in dispute between the parties and can be summarised as follows: (1) a duty to take reasonable care that Synergy was aware of and understood its duty of disclosure; (2) a duty to take reasonable care to elicit relevant information from Synergy for the purposes of enabling Synergy to comply with its duty of disclosure; (3) a duty to take reasonable care to disclose any material facts of which the brokers themselves were aware and not to make material representations to insurers which it knew to be untrue; (4) a duty to take reasonable care to obtain insurance that clearly met Synergy’s requirements and did not involve unnecessary risks of litigation about its legal scope and effect.”
[15]Flaux J then set out the passage at paras 54 – 56 of David Steel J’s judgment in Environcom and continued:
“Nonetheless, I agree with Mr Southern [leading counsel for the brokers] that there must be a limit to the scope of the brokers’ duty to make enquiries. The context in which brokers have been held to be under a duty to make enquiries and to elicit information is where the questions which should have been asked are ones which a competent broker might have been expected to ask in the circumstances: McNealy v Pennine Insurance [1978] 2 Lloyd's Rep 18 and The Moonacre [1992] 2 Lloyd’s Rep 501 are obvious examples. However, as the editors of Jackson & Powell on Professional Liability (6th edition) point out at para 16-059 a broker will not be negligent if he fails to ask questions about the risk which he had no reason to ask or if he does ask appropriate questions and the insured does not disclose important information to the broker.”
[16]A little later in his judgment, Flaux J turned to the question of the significance of a failure to give oral advice to the client concerning the duty of disclosure:
“212. Mr Eklund [leading counsel for the insured] also sought to make much of the fact that the brokers had failed to give oral advice either to Mr Jacques or Mr Johnson [the insured’s representatives] concerning the effect of any non-disclosure or misrepresentation. He relied upon the evidence of Synergy’s expert broker, Mr Wood, as to the importance of giving such advice and the endorsement of that view by David Steel J in the Jones v Environcom case. It seems to me that there are two answers in the present case to any attempt to rely upon a failure to give such advice as a causative breach. First, I do not read that judgment as laying down that it is an immutable requirement, in order to comply with their duty, that brokers should have given such oral advice and, to the extent that Mr Wood was suggesting that such oral advice must be given, I reject that evidence as too inflexible. 213. Whilst it may be advisable to give such oral advice in a particular case, whether it is necessary to do so and whether the failure to do so is a breach of duty, will depend upon the circumstances. In the present case, there had been a long history of dealings with this client and the Risk Register sent to the client spelt out the duty of disclosure in clear terms. Furthermore, although in Mr Johnson the brokers were dealing with a new person responsible for insurance, it is quite clear from his evidence that Mr Johnson was well aware of the need to comply with the duty to make disclosure of all material facts and of the serious consequences of failing to do so. Equally, there is no doubt that Mr Jacques, who was the person with ultimate responsibility for insurance, was also well aware of the need to comply with the duty of disclosure and the consequences of not doing so. 214. Second, even if it had been a breach of duty to fail to give such oral advice, I am simply not satisfied that such breach was in any sense causative of any loss which Synergy might have suffered. …”
[17]Before me, Mr Phillips accepted that the question whether specific oral advice as to material disclosure must be given, or a specific enquiry regarding a material piece of information must be made, is not susceptible of a general answer applicable to all circumstances but is to be decided upon the facts of the particular case. He accepted (rightly, in my judgment) that, as stated in Simpson, Professional Negligence and Liability, at para 10.166, “there can be no general rule and that this question is highly fact-sensitive, depending upon the terms and nature of the communication and the sophistication of the client. The adequacy of the communication ought to be assessed on a case-by-case basis.”[18]However, where the broker has actual knowledge of material facts, he is under a duty to communicate those to the insurer. “If a broker fails to disclose material facts, with the result that the insurers subsequently avoid the policy or exercise some other remedy, then (subject to any defence of causation) the broker will be liable for the loss sustained”: Jackson & Powell on Professional Liability (8th edition), para 16-086; see also proposition (3) in para 204 in Synergy, above.[19]I shall consider the application of these principles to the present case when considering the particular issues.

Narrative

[20]Mr Watkins is now fifty-one years old. He has been involved in the exhibition industry for most of his working life, but he commenced business as a sole trader, in the name Intex Exhibitions, only in 2005. He is a down-to-earth character, who has succeeded in business largely by virtue of hard work and a personable disposition. His first contact with Giles occurred in June 2007, when he made an enquiry by telephone and spoke to Giles’s office manager. Mr Watkins was disillusioned with his existing insurance brokers, whom he considered responsible for the fact that, after a break-in at his business premises, his property insurer had refused cover on account of a failure to comply with security requirements; therefore he was thinking of moving his business. In the course of the telephone conversation the office manager made several pages of notes concerning the business, its requirements and its claims history and arranged for a broker, Mr Ian O’Brien, to visit Mr Watkins. Mr O’Brien duly visited and met Mr Watkins at the business premises of Intex Exhibitions. This account of how the meeting came about is that given by Mr O’Brien and supported by the documents. I am satisfied that Mr Watkins’ account, which is to the effect that he had been happy with his previous brokers but was visited without prior arrangement by Mr O’Brien, who was in the vicinity and called in to make a bid for business, is wrong.[21]This initial meeting between Mr Watkins and Mr O’Brien in June 2007 is the first of three occasions when Avondale claims that information concerning one or both of the Convictions was communicated to Giles.[22]Mr Watkins’ evidence was to the following effect. Mr O’Brien’s visit “must have lasted the better part of half an hour or so”. Mr O’Brien enquired as to the nature of his business, his insurance needs and his claims history and offered to review the business’s existing policy with a view to seeing if he could provide better cover. When Mr O’Brien asked him how he had come to set up Intex Exhibitions, he told him that the idea had come to him when he was thinking things over while he was in prison in 2005. Mr Watkins said that he could not remember whether Mr O’Brien had asked him why he had been sent to prison; if he had asked, Mr Watkins would have told him. At no point during the conversation did Mr O’Brien explain what “material disclosure” was and, indeed, he received no explanation in that regard until after the fire in August 2012. Mr O’Brien did not say anything about disclosing the 2005 Conviction to the insurers or the likely consequence of doing so. At the conclusion of the meeting, Mr O’Brien said that he would review Intex Exhibitions’ existing policies and the information that Mr Watkins had given him and see whether he could provide better cover.[23]Mr O’Brien’s evidence was that, at this remove of time, he could not recall the details of the conversation on the occasion of this first meeting, although in cross-examination he was able to remember the gist of parts of that conversation. “I now do not know if I would have brought up the question of convictions at that time or not. However, I do feel sure that Mr Watkins did not tell me, at this meeting (or any other time), that he had any convictions (drink driving or otherwise). Something like that would have stuck in my mind, and I am confident that I would have made a written note of it at the time” (statement, paragraph 16). Mr O’Brien’s notes, written by way of manuscript addition to the note of Mr Watkins’ original telephone call, contain no mention of criminal convictions. In the course of his evidence Mr Watkins suggested the possibility that Mr O’Brien may not have adverted to what he was told concerning the prison sentence, because he was so engrossed in looking at some aluminium chalets at the premises and may have been distracted. When he gave evidence, Mr O’Brien could not remember the chalets.[24]On 26 June 2007 Mr O’Brien sent an email to Arista Insurance, asking for a quotation for a Commercial Combined policy. The email mentioned the claim that had been refused on Intex Exhibitions’ existing policy and set out the current requirements. On 29 June he received a quotation. Arista Insurance did not require a proposal form, but the quotation contained a Statement of Fact, which set out the material facts that formed the basis of the quotation. The first page showed the premium and was dominated by a box within which was the following text:
“This is an important document and you must read it in full. This Statement of Fact is a record of the information that you provided to [Giles], your Insurance Agent, and any assumptions made about you and your business upon which this quotation is based. Please read it carefully and keep it in a safe place, as it will form part of your contract of insurance with Arista Insurance should you decide to accept this quotation. All material facts must be disclosed, as Arista Insurance has relied upon the information in this document to calculate premium and apply terms and conditions upon which insurance cover is offered. Warning – You must check all the information in this document and tell your Insurance Agent immediately if any details are incorrect, incomplete or have been omitted.

(s) ”

On the second page were the following questions:
“Has any proposer, director or partner of the business or practise (sic) had any convictions, criminal offences or prosecutions pending other than motor offences? Has any proposer, director or partner of the business or practise (sic) ever been declared bankrupt/insolvent, or the subject of bankruptcy proceedings including CCJs? Has any proposer, director or partner of the business or practise (sic) ever had a proposal refused or declined or ever had an insurance cancelled, renewal refused or had (sic) special terms imposed?”
Next to each of the questions was the answer, “No”.[25]Mr O’Brien’s evidence was that the Statement of Fact was provided to Mr Watkins, although there is no documentary record of it being sent. It was clearly intended to be sent. It was provided to Giles under cover of a letter from Arista Insurance that said, “The quotation has been prepared as a statement of fact, which you must share with your client. Arista Insurance does not require a completed proposal form.” Mr Watkins accepted in cross-examination that he may well have received the Statement of Facts. I find that it was sent by Mr O’Brien and received by Mr Watkins. Mr Watkins acknowledged that he ought to have corrected the answer to the question concerning his convictions. He said that he had not read the document, as he did not read any insurance documents.[26]The Statement of Fact made no mention of Mr Watkins’ claims history regarding the claim that had previously been refused, although that formed part of the information that Mr O’Brien had brought to the attention of Arista Insurance when seeking the quotation. In cross-examination Mr O’Brien accepted that he ought to have spotted the omission from the Statement of Fact and corrected it.[27]In late 2007 Mr O’Brien arranged a personal motoring policy for Mrs Watkins. He filled in the information on the proposal form and sent it to her, having written in manuscript near the top left corner of the first page, “Please check, sign, date and return.” Mr and Mrs Watkins were shown as the two persons to be the named drivers on the policy. In Section 6 of the form, headed “Insurance History”, were a number of questions, including, “Has any driver ever been convicted of any criminal offence (unspent under the rehabilitation of offenders act 1974) or is any possible prosecution pending?” Beside that question was the answer “No”. Underneath was a box in which were to be placed details of any motoring convictions or fixed penalties on the part of either of the named drivers within the preceding five years. The box was blank. Mrs Watkins signed the proposal form, dated it 14 November 2007, and returned it. She had not altered any of the information on the proposal form. She had not included mention of Mr Watkins’ 2005 Conviction. She had also not mentioned two relevant fixed penalties endorsed on her driving licence. When asked about this in cross-examination, Mrs Watkins said, “All I can think is that [Mr Watkins] provided the information on my behalf.” She could not explain how she had signed the form in those circumstances.[28]The Commercial Combined policy with Arista Insurance was renewed in June 2008. At or around the same time a Commercial Vehicle policy was either taken out for the first time or renewed; the available documents do not make clear which.[29]In December 2008 Mr O’Brien acted for Intex Exhibitions in relation to a non-fleet motor policy for a specific commercial vehicle. Cover was incepted on 18 December 2008 subject to the submission of a satisfactory proposal within a specified timescale. I accept Mr O’Brien’s evidence that he sent to Mr Watkins a number of documents, including the Market Presentation, which formed the factual basis of the request for a quotation from the insurer. The second page of the Market Presentation contained the question, in relation to permitted drivers (which included Mr Watkins), “Any convictions in past 5 years?” The answer was shown as “None”. I am satisfied that the documents were sent under a letter in standard use by Giles, which listed the documents and contained the following text:
“Market Presentation outlining information regarding your risk—please ensure that this information continues to be correct. Should any changes be required please contact us immediately, as this could affect your level of cover.”
It is probable that, among the documents that Mr O’Brien sent together with Market Presentation, was another document that Giles regularly used, headed “Important Considerations”. The first entry on that document was as follows:
“Material Facts It is important to ensure that the insurers are kept fully informed of any material facts, namely circumstances or changes to the risk, which would normally affect the prudent underwriter in his acceptance of the risk or influence terms applied. As the Insured, you have a duty to disclose all material facts. This duty is ongoing and does not apply solely at inception or renewal. Failure to do so could seriously affect the policy cover in the event of a claim and could invalidate the policy.”
Mr Watkins did not correct the mistaken entry in the Market Presentation regarding his lack of convictions.[30]It is unclear precisely what happened about the continuation of cover under the non-fleet commercial motor policy; the documentation is incomplete and the matter was not fully explored in the witness statements or in the oral evidence at trial. Consistently with the insurer’s requirement for a signed proposal form, a letter dated 6 January 2009 from Mr O’Brien to Mr Watkins reads as follows:
“Please find enclosed proposal form and cover note confirming cover has been in force since 18th December 2008. Could you please complete and return the enclosed proposal form within the next 14 days along with a copy of your drivers licence. Should you have any queries, please contact me.”
The trial bundle contains two copies of a proposal form for this policy for the period 18 December 2008 to 17 December 2009. One has a manuscript note, “Please sign, date and return”; but it is unsigned and undated. The other lacks the manuscript note but is signed by Mr Watkins, though not dated. The number at the foot of this second copy shows that it has been placed on Giles’s electronic file as being the attachment to an email dated 26 August 2009 from Mr O’Brien to those acting for the relevant insurer. The text of the email reads:
“As discussed proposal form attached.”
It therefore appears that the requirement to return a signed proposal form was overlooked for seven or eight months. The proposal form signed by Mr Watkins has a blank space where his convictions ought to have been entered and is therefore materially inaccurate. It is certain, therefore, that he did not place onto the proposal form either the 2005 Conviction or either of the two fixed penalties that appeared on his driving licence, one from December 2008 and the other from May 2009. It is also probable that he did not provide to Mr O’Brien a copy of his driving licence, as requested in the letter of 6 January 2009, and that Mr O’Brien did not follow up on that request. Should you have any queries, please contact me.”[31]In June 2009 Intex Exhibitions’ Commercial Vehicle Insurance policy and Commercial Combined policy both fell due for renewal.[32]In respect of the Commercial Vehicle Insurance policy, the position, as it appears from the available documentation and the evidence of Mr O’Brien, was probably as follows. Giles sent Mr Watkins a one-page letter dated 12 June 2009, which informed him that the renewal premium would be £3,338.05. The letter was accompanied by a number of documents, including a policy summary (but not the full policy: that was available on request), a sheet giving a breakdown of the premium, and a one-page document headed “Your Demands & Needs”. The central paragraph of the letter read as follows:
“If any of the information is incorrect or your requirements have altered in any way please contact us immediately. May we remind you that you have a duty to disclose all material facts. A material fact is defined as any information that may influence an underwriter’s acceptance of a risk. If you are in any doubt whether a fact is material, it MUST be disclosed, as failure to do so may invalidate your cover and could mean that part or all of a claim may not be paid. Your duty of disclosure does not apply solely at inception or renewal.”
The same text was set out on the premium-breakdown sheet, where it was contained in a box headed, “IMPORTANT[:] DUTY OF DISCLOSURE”. The sheet headed “Your Demands & Needs” contained the following paragraph:
“It is essential that we are advised of any alteration to the risk and that you disclose any material facts relevant to this insurance, as they may effect (sic) the premium or level of cover offered. Please also disclose any changes with regards to drivers, cover, the required use and any alteration to your vehicle specification of which your insurers are unaware. We must also be advised of any accidents or claims, convictions or pending convictions and of any physical or mental defect or infirmity by anyone who may drive under this policy. If you are unsure whether or not to advise us of a material fact then you should advise us.”
Underneath were two material pieces of information. One line read:
“Accidents/Convictions: No/No”
. The final entry read:
“Conviction History – None declared.”
[33]Although Mr Watkins’ evidence was that he never read insurance documents but simply filed them, he paid sufficient attention to enable him to inform Mr O’Brien that there had been a change to the number of vehicles for which insurance was required. This resulted in the preparation of new documents, which showed a reduced premium for renewal. However, he did not inform Mr O’Brien that the conviction history was incorrect, either as regards the 2005 Conviction (of which, he says, Mr O’Brien knew and which therefore ought to have been included; it included, of course, a conviction for failing to provide a specimen of breath) or as regards the matters appearing on his driving licence, which included two endorsements with penalty points within the previous twelve months.[34]In respect of the Commercial Combined policy, cover was moved from Arista Insurance to Evergreen Underwriting, which provided a quotation on 29 June 2009. That quotation was given on the basis of a Market Presentation prepared by Mr O’Brien on 17 June 2009. The Market Presentation stated “None” next to the detail “Material facts regarding directors and/or partners”. It also had a blank entry under “Claims history”. Mr O’Brien accepted in evidence that his failure to record the refused claim under an earlier policy (cf. paras 20 and 26 above) was an error on his part. Upon receipt of the quotation by email on 29 June, Mr O’Brien effected immediate inception of cover and wrote to Mr Watkins confirming that, “as instructed”, cover had been placed. (The words, “as instructed”, seem to have been used as a matter of course. It cannot be inferred that they necessarily refer to a specific instruction, although it is more likely than not that they do.) A number of documents were sent under cover of the letter. These did not include the policy documentation, which “will follow shortly”. They did include a Market Presentation and the Important Considerations document (cf. para 29 above). It is probable that the documents sent with the letter also included the Statement of Fact, which is referred to in it. The Statement of Fact does not appear to be on Giles’s file, but I accept Mr O’Brien’s evidence that, though it may not have been copied to the file, it was sent. Be that as it may, the information on the Statement of Fact would replicate the information in the Market Presentation that was prepared for the underwriters. The Market Presentation stated “None” in respect of “Material facts regarding directors and/or partners”. The letter asked Mr Watkins to ensure that the information in the Market Presentation and Statement of Fact was correct. After Giles had received the policy documentation on 6 August 2009, it sent it to Mr Watkins under cover of a letter dated 6 August 2009. The letter purported to be accompanied by two further documents: a Summary of Insurances, and a Statement of Facts. (This second reference to the Statement of Fact(s) makes it the more probable that it was in fact sent, as Mr O’Brien says it would have been.) Of the Statement of Facts, the letter said:
“Please check this document carefully to ensure the details are correct, sign in the appropriate place and return immediately. If there are any discrepancies, please contact me immediately.”
Mr Watkins did not contact Mr O’Brien regarding the omission of his convictions.[35]The scale of Intex Exhibitions’ operations had increased fairly rapidly. In the late spring of 2009 the business moved to premises at Unit 2A, Avondale Business Park, Cwmbran (“the Premises”), where Mr Watkins employed a significant workforce. His accountant advised him that it would be advantageous for him to carry on business by means of a limited company rather than in his own name, so he caused Avondale to be incorporated on 27 August 2009. The issued shares were and are held as to 80% by Mr Watkins and as to 20% by Mrs Watkins. Mrs Watkins was a director from the date of incorporation until 24 July 2014. Mr Watkins was not formally appointed as a director until 23 February 2012, but he was at all times a de facto director and the person in charge of the company. However, although Avondale had been incorporated, it did not promptly commence trading, but Mr Watkins continued carry on his business on his own account as Intex Exhibitions.[36]In late 2009 Mr O’Brien left Giles’s employment. Responsibility for Mr Watkins’ account was taken over by a director, Mr Mark Goodfield. He was assisted initially by two account managers, Ms Julie Taylor and Mr Leighton Davies, who performed a back-office role, though within a short time Mr Davies became the sole account manager dealing with the account, answerable to Mr Goodfield. Mr Goodfield described his own role as “client-facing”; the detail of placing or renewing policies was dealt with by the account manager. It is relevant to note that, during the time he managed the Intex Exhibitions and Avondale accounts from the start of 2010 until mid-2012, Mr Davies never met either Mr or Mrs Watkins, though he spoke to both of them by telephone.[37]In late November and early December 2009, Mr Goodfield met Mr Watkins for the first time. No minutes or records of those meetings have been produced and there is limited evidence as to the content of the discussions. On 10 December Mr Goodfield sent an email to another director of Giles, seeking assistance in reconciling payments made by Intex Exhibitions:
“I’ve taken on this account from Ian [O’Brien] and it’s a bit of a mess. I’ve been to see the client twice in the past couple of weeks and we are getting there with his documentation but he unhappy about the monthly payments he is making under [h]is credit agreement which he now says is over £1,900 per month. Excepting (sic) he now has some fairly tasty premiums I’m trying to sift through the debris left behind by Ian and there is one payment for £1,640.94 in August of this year which I am having trouble reconciling. As you are the wizard with the accounts, particularly the old SSP system[,] could you have a look when you have a moment to see if you can see what this relates to.”
Mr Goodfield’s evidence was that the difficulty arose because Mr Watkins had direct debits going out “all over the place”; therefore he felt it would be preferable to rationalise the policies by having a single fleet policy, which would be easier to manage although it might be no cheaper. He did not ask Mr Watkins about his convictions, not only because he was seeing him about a specific problem, rather than a renewal, but because Mr Watkins was an established customer. If a decision were taken to take out a new fleet policy, the documentation would cover such matters as convictions.[38]Meanwhile, on 3 December 2009 Ms Taylor wrote to Mr Watkins in respect of the non-fleet commercial motor policy, which was due for renewal on 18 December. With the letter she sent a Market Presentation she had prepared:
“please ensure that this information continues to be correct. Should any changes be required please contact us immediately, as this could affect your levels of cover.”
The Market Presentation repeated the information, “None”, in respect of permitted drivers’ convictions in the preceding five years. In cross-examination Mr Watkins accepted that he had received these documents. He said that he did not read them; if he had done so, he would have known that he needed to disclose his convictions. In answer to further questions he acknowledged that he knew that motoring convictions were material and required to be disclosed for the purposes of motor insurance policies, that he did not inform Giles of his motoring convictions, and that Giles could not know of his motoring convictions if he did not inform them of them. On 18 December 2009 Mr Davies confirmed to the insurer that the policy could be renewed for the coming year.[39]On 1 January 2010 QBE took over Evergreen and became the insurer under the Commercial Combined policy. In February 2010 QBE provided a schedule of the risk improvements it required under the Commercial Combined policy. Giles forwarded the schedule to Mr Watkins:
“Please confirm when these have been done.”
About a month later, Mr Watkins contacted Giles to request a correction to the address shown for the Premises on the policy (the address was shown as Unit 2, instead of Unit 2a) and to complain about the level of service he was receiving. On 10 March Ms Taylor sent an email to Mr Watkins, confirming that she had corrected the details of the address and continuing:
“I will speak with Mark [Goodfield] on his return from holidays on Monday to make sure he gives you a call to arrange to visit you to iron out any remaining issues.”
She also sent an email that day to Mr Goodfield regarding Mr Watkins:
“We need to discuss this when you come back. He’s not a happy bunny at all, in fact he went into a right rant about how shoddily he’s been treated since Ian has gone ……….. yeah right, I was tempted to say well at least we haven’t used your money to pay someone else’s premium!!!! He even said that last week he was going to transfer the business to another Broker, but it was only because he was too busy last week that he didn’t. He raised some issues, all of which I have dealt with now. I’ve managed to turn him around, but I think he really needs some kid gloves right now. … he said you were going to look into setting up a fleet for him??”
These documents indicate that the management of Mr Watkins’ insurance business under Mr O’Brien had been less than ideal. They also indicate the probability of a higher level of engagement by Mr Watkins with his insurance affairs than he was willing to admit to in evidence at trial, although the correction of the detail in his address may show no more than that, as he says, delivery of relevant documents was delayed by the use of an incorrect address. … he said you were going to look into setting up a fleet for him??”[40]In March 2010, after his return from holiday, Mr Goodfield duly met with Mr Watkins at the Premises, when they discussed both the risk improvements and a possible fleet motor policy. After that meeting, and on instruction from Mr Goodfield, on 24 March 2010 Mr Davies sent a Market Presentation to NIG, seeking a quotation for a commercial fleet motor policy for Intex Exhibitions. The Market Presentation again included the statement “None” in respect of drivers’ convictions. NIG provided a quotation on 26 March, and Mr Davies asked them to go on immediate cover. On 29 March he wrote to Mr Watkins, enclosing a number of documents, there listed, and asking that he read them carefully. The documents included a summary of the insurance but not the policy terms themselves. None of the documents were very long, and their nature was clearly identified in the letter. The reference to the Market Presentation included the standard request to ensure accuracy. Also listed was the document “Important Considerations (incorporating your duty to disclose Material Facts)”. (For these, see para 29 above.) Another enclosed document was Giles’s Terms of Business (headed “Please Read Carefully”), which contained a paragraph on the duty to disclose all material facts in terms substantially similar to those of the central paragraph of the letter of 12 June 2009 (para 32 above).[41]Mr Watkins’ oral evidence was that he did not read the letter of 29 March 2010 or any of the documents enclosed with it.[42]On 26 April 2010 Mr Watkins was sent to prison as a result of the 2009 Conviction. That conviction arose out of an incident on the August Bank Holiday in 2008, when Mr Watkins got into a fight. He was charged with causing grievous bodily harm with intent, contrary to section 18 of the Offences Against the Person Act 1861. On 19 October 2009 he entered a guilty plea to the lesser offence of assault occasioning actual bodily harm, contrary to section 47 of that Act. It appears that, upon receiving a strong indication from the judge at the Crown Court, the prosecution did not accept that plea, and the matter went off for trial on the more serious charge. However, when the trial came on in April 2010 the prosecution was not in a position to proceed. Therefore Mr Watkins was sentenced for the lesser offence. (The sequence of events was not dealt with in detail in the evidence, but I was told it by Mr Phillips without demur from Miss Dixon and it makes sense of an otherwise perplexing chronology.) Mr Watkins had not told Giles of the pending prosecution or of his guilty plea or of the ongoing proceedings before he was sentenced.[43]The custodial sentence came as a shock to Mr Watkins. It was only at lunchtime immediately before sentence that he realised that he was at real risk of going to prison, and he immediately took steps to transfer money from the Intex Exhibitions bank account (on which he was sole signatory) into Mrs Watkins’ personal bank account, so that she could meet the immediate financial commitments of the business.[44]Avondale’s case is that the second occasion when Giles was informed of one or both of the Convictions was in a telephone conversation between Mrs Watkins and Leighton Davies. There is no documentation relating to the alleged conversation and, unlike the initial meeting with Mr O’Brien, its date is not a matter of obvious inference. The pleaded case is ambiguous. The Particulars of Claim puts the matter as follows:
“In the summer of 2010, during the period that Mr Watkins was in prison following the 2009 conviction, his wife, Tracey Watkins, dealt with the defendant in relation to the taking out of the 2010/2011 policy in the name of Patrick Watkins t/a Intex Exhibitions. In the course of those dealings Mrs Watkins explained to Mr Leighton Davies of the defendant that Mr Watkins had been convicted of a criminal offence and was in prison.”
There is no documentary evidence that the Commercial Combined policy, or any other policy, for 2010/2011 was dealt with before June 2010, which is when it would naturally have fallen for consideration. The Particulars of Claim seem therefore to indicate that the conversation did not take place before June 2010. More information was given in Further Information in response to a request on behalf of Giles:
“Due to the passage of time Mrs Watkins is unable to identify the exact date of the telephone conversation. The conversation took place some weeks after Mr Watkins went to prison, which was on 25 April 2010. The conversation was prompted by receipt of a letter from the defendant requiring Mr Watkins to sign something. As Mr Watkins was unable to sign the document, Mrs Watkins telephoned Mr Leighton Davies and explained that Mr Watkins was in prison and that in order that they could continue to trade they would be using the claimant company, which had been set up some years before, of which she was a director, rather than Intex Exhibitions. The conversation between them was quite light-hearted and Mr Davies did not ask any details about Mr Watkins’ imprisonment. Mr Davies did not indicate that the imprisonment was a problem and stated that he would send out the insurance details in the new company name.”
This account, when considered in the light of the available documentation, also appears to place the conversation in June 2010, though it could indicate some date in May 2010. Before turning to the evidence relating to the alleged conversation, I shall summarise the documentary evidence.[45]On 5 May 2010 Mr Davies wrote to Mr Watkins, enclosing three documents: a covernote under the NIG commercial fleet policy, which was apparently required in order that one of the vehicles could be taxed; a proposal form required by NIG before it finalised the policy; and a Premium credit application form for the purpose of paying the premium by instalments. The letter asked that the proposal form and the credit application form be completed and returned. The credit application form was to be returned “urgently”, because the initial payment was due. Both the proposal form and the credit application showed the insured as Mr Watkins trading as Intex Exhibitions. However, the credit application showed the bank details of Mrs Watkins, not of Intex Exhibitions, and it was signed by her, and not by Mr Watkins, on 6 May 2010. The proposal form had been completed in manuscript by Mr Davies and required only to be signed and dated. It was signed by Mr Watkins, not Mrs Watkins; see further below.[46]The obvious inference to be drawn is that between 26 April and 5 May 2010 Mrs Watkins contacted Giles and both asked for a covernote and—perhaps, but by no means certainly, in response to information that a request for payment of the premium was on its way—informed Giles that her personal bank account was to be used. (Giles already had her bank account details, because it had used them in connection with a personal motor insurance policy the previous year.) That information could have been accompanied by no explanation, or by an explanation that the business was in transition to a limited company, or by an explanation that Mr Watkins was in prison and could no longer operate his own bank account.[47]On 2 June 2010 Mr Davies sent two emails to underwriters. The first confirmed a change of bank details and provided the details of an account in the name of Avondale. The second asked the underwriters to note that the trading name had not altered:
“we are waiting for confirmation that we are to amend.”
Taken literally, the Further Information would appear to indicate that the alleged conversation took place after, not before, this email.[48]On 4 June 2010 Mr Davies sent the completed proposal form for the commercial fleet policy to NIG.

(b) was in these terms:

“Have you [i.e. Mr Watkins] or has any person who drives (i) had any motoring convictions in the last 5 years or are there any prosecutions pending or police enquiries outstanding … (ii) had any criminal convictions (or been charged with a criminal offence but not yet tried)?”
Mr Davies had completed the answers to both parts of the question, “No”. The form was returned without correction, although the answers were false. Mr Watkins accepted in evidence that the signature on the completed form was his. The tenor of his evidence and that of Mrs Watkins was that they had no idea how his signature could have got onto the form. The implication of their evidence was that his genuine signature could not have been placed on the form, because it was practically impossible that he should have been able to sign it. I am entirely satisfied that Mr Watkins did sign it. That is why, as he acknowledged, the signature is his. I reject the suggestion that his imprisonment meant that he could not sign the form: quite obviously, it meant no such thing, though it might result in a delay in obtaining his signature, such as might be indicated by the lapse of four weeks between Giles sending it out for signature and returning it to NIG. It follows that Mr Watkins signed the form without correcting the false statement concerning his lack of motoring convictions, although he accepts that he knew that motoring convictions were required to be disclosed to a motor insurer.[49]The proposal form had incorporated a schedule of the vehicles within the scope of the fleet policy. One of those vehicles had a registration number V482 TNV. On Tuesday 8 June 2010, the second working day after Mr Davies returned the signed proposal form to NIG, he wrote to Mr Watkins at the Premises “with reference to the [fleet] policy and recent change of car”:
“Attached is the revised schedule confirming the change from V482TNV to BX06GHF. Please check and advise if any other changes are required.”
As Mr Watkins accepted in cross-examination, it is clear that someone at the Intex Exhibitions end had read the documentation closely enough to inform Mr Davies that there had been a change of vehicle. The evidence does not indicate any person who had dealings with Giles for Intex Exhibitions other than Mr and Mrs Watkins, both of whom must have known that the answer on the proposal form concerning motoring convictions was false.[50]On 10 June 2010 Mr Davies informed NIG and QBE that Intex Exhibitions had changed its name (as it was put) to Avondale Exhibitions Limited. On the same day he sent to Mrs Watkins (not Mr Watkins) a letter regarding the NIG commercial fleet policy and an email regarding the QBE Commercial Combined policy. The letter asked Mrs Watkins to check an enclosed covernote and advise if any further changes were required. The email read:
“Hi Tracey I’ve told the insurers of the change of name and await their documents. To enable me to get the renewal terms, the insurers have asked if the risk improvements, required after the survey, have been carried out. I’ve attached a copy of the risk improvements and would appreciate it if you could confirm. You may have already done this but it’s not noted.”
It seems likely that, upon receipt of that email, Mrs Watkins communicated in some way with Giles, because early on the morning of the following day, 11 June 2010, Mr Goodfield sent her an email:
“Hi Tracey I did run through the risk improvements with Patrick on my last visit. He did confirm that all the requirements had been completed with the exception of 2010/03[,] the fire break wall. He did also explain that there was a dispute with the present landlord and as a result getting this information was probably going to be difficult. Perhaps you could just send a quick email to confirm that all the other requirements have been complied with and update us regarding the fire break wall. In the meantime we shall look at alternative quotes for you.”
In the meantime we shall look at alternative quotes for you.”[51]Avondale relies on these communications with Mrs Watkins, particularly insofar as they concern the risk improvements, a matter previously discussed specifically with Mr Watkins, as tending to confirm that Giles did indeed know that Mr Watkins was in prison and therefore unable to deal with business matters. I turn to the evidence regarding the alleged conversation in which that information is said to have been communicated.[52]Mrs Watkins’ evidence was to the following effect. The conversation with Mr Davies occurred in the course of a telephone call that she made to Giles. In her witness statement she said that this was in “the first few days” following Mr Watkins’ sentence, which would place it in late April or early May 2010. (This conflicts with the chronology in the Further Information.) In cross-examination, she said that she could not remember when the call had been made, but it was made in response to the receipt of some communication from Giles that required attention. (This is consistent with the Further Information.) She did not know Mr Davies by name and had not knowingly spoken to him before, so she asked the receptionist if she could speak to somebody concerning Intex Exhibitions and was put through to Mr Davies. She explained to Mr Davies that Mr Watkins had been sent to prison and that she would be the point of contact until he were released. She told him that the renewal payment that was due imminently from Intex Exhibitions in respect of the fleet motor policy should be taken from her personal bank account, as she was not a signatory on the Intex Exhibitions bank account. In her witness statement, Mrs Watkins said that Mr Davies “appeared uncomfortable” on hearing that Mr Watkins had been sent to prison. (This contrasts markedly with the account in the Further Information, which describes the conversation simply as “light-hearted”, albeit that there is not a formal contradiction.) Mr Davies asked what her intentions were, and she told him that she would contact him with details after she had set up a new business bank account from which to make future payments. She duly opened a bank account in the name of Avondale on or around 10 May 2010 and made a further telephone call to Mr Davies to give him the necessary details. During neither conversation did Mr Davies make any enquiries about the circumstances of Mr Watkins’ conviction or give any advice about the requirement of full disclosure; he simply told her that she could leave everything to him to deal with, as she clearly had a lot on her plate.[53]Mr Davies is adamant that Mrs Watkins said nothing to him about the 2009 Conviction or about Mr Watkins being in prison. He did not purport to have a specific recollection of any particular conversation but said that, if he had been told of Mr Watkins’ imprisonment, he would have enquired into the circumstances, logged the conversation on Giles’s electronic file (there is no record of any conversation at this time), passed the information on to the insurers and remembered what he had been told. Mr Davies also gave evidence that he was surprised to learn of the Convictions in 2012 after the fire at the Premises.[54]In order that Mr Watkins’ business could be kept going while he was in prison, from June 2010 it was continued by Avondale, which took over responsibility for all contracts from Intex Exhibitions and was managed by Mrs Watkins with the assistance of Mr Watkins’ brother. Although this change involved a distinct corporate entity, the existing insurance policies, including the Commercial Combined Policy, were continued with a change of name; no new policies were issued in substitution for the existing ones, at least initially.[55]On 23 June 2010 Mr Davies sent an email to Mrs Watkins:
“Hi Tracey Attached is the renewal letter regarding the business insurance. Can you have a look and let me know? … Mark [Goodfield] would like to call up and run through things with you so if you can let me know a time and date, I’ll pass on to him.”
Mr Davies said in cross-examination that he did not think that the reference to Mark Goodfield running through things with “you” meant Mrs Watkins in particular; it just meant someone who could meet Mr Goodfield. The letter itself was addressed to Mr Watkins at the Premises. It was put to Mr Davies that the identification of the addressee as Mr Watkins was due to the use of the automatic template used by Giles and that the fact that the addressee had not been altered to Mrs Watkins indicated that he knew that Mr Watkins’ unavailability was only temporary (i.e. on account of prison). Mr Davies denied this: he said that he was “covering both bases” by sending the letter to Mr Watkins but the email to Mrs Watkins, with whom he had been discussing the change of name. In my judgment, the inference that Mr Phillips sought to draw would be weak at the best of times, but it loses any possible force when one considers that the template, identifying as it does Mr Watkins at Avondale, can only have been created in June 2010.[56]The letter of 23 June was in Giles’s standard form. Among the documents it referred to as enclosed with it were the Market Presentation and the “Important Considerations (incorporating your duty to disclose Material Facts)” (for both of which, see para 29 above) and the Terms of Business (see para 40 above). The Market Presentation identified only Mr Watkins as a named person in Avondale and repeated the answer “None” in respect of his convictions.[57]On 25 June 2010 Mr Davies sent Mrs Watkins a chasing email, asking if the Commercial Combined policy were to be renewed. She replied, “yes go ahead and renew policy”.[58]On 28 June 2010 Mr Davies wrote to Mr Watkins at the Premises, confirming that the policy had been renewed and enclosing a Premium credit application form for him to sign and return as soon as possible. On 30 June 2010 Mr Davies wrote again to Mr Watkins at the Premises, enclosing the new policy documents issued on behalf of QBE.[59]On 5 July 2010 Mr Davies sent a letter to Mr Watkins at the Premises, enclosing the new commercial fleet policy. The letter said:
“Please check these documents carefully, noting any terms, conditions and warranties that apply and ensure that they meet with your requirements.”
It appears likely that Mrs Watkins made a telephone call and spoke to Mr Goodfield, possibly because the change to Avondale had not been sufficiently noted on the documents, because on 7 July Mr Davies wrote to her, referring to a “telephone conversation with Mark” and continuing:
“In order for the Insurance Company [i.e. NIG] to finalise the amendment, I would appreciate it if you could sign and return the enclose[d] proposal form.”
It also appears likely that Mrs Watkins complained about commissions and fees charged by Giles, because on 8 July Mr Goodfield sent an email to a colleague at Giles, with the subject “Patrick & Tracy (sic) Watkins”, saying that “[Mr Watkins] is now questioning the fact that we have retained comm/fees” after the consolidation of the various motoring policies into a single fleet policy and asking that the moneys be returned.[60]On 18 August 2010 Mr Davies wrote to Mrs Watkins (unusually, the letter was addressed for her attention, rather than that of Mr Watkins), enclosing the new policy documents issued by QBE after the change in the identity of the insured.[61]On 7 December 2010 Mr Davies wrote to Mr Watkins in respect of the imminent renewal of the non-fleet commercial motor policy. The letter, in Giles’s standard terms, already mentioned, referred to the documents enclosed with it, which included the Market Presentation, the Important Considerations and the Terms of Business. The Market Presentation repeated the answer “None” in respect of drivers’ convictions. Mr Watkins did not correct this incorrect answer.[62]Mr Watkins was released from prison on 26 August 2010 and thereafter wore an electronic tag, which was removed on 25 December 2010.[63]While Avondale was closed for business between Christmas 2010 and the New Year, a burst pipe caused significant damage at the Premises. Through Giles, a claim was made on the Commercial Combined insurance policy for 2010/2011. In due course, QBE paid out on the claim; see para 3 above. For the purposes of this trial, the only relevance of the claim concerns the investigations carried out by loss adjusters appointed by QBE to investigate it. On 27 January 2011 a representative of the loss adjuster, Mr Matthew Cook, attended at the Premises on 27 January 2011 and spoke to Mr Watkins. Mr Cook completed an eleven-page document comprising notes of his visit and an action plan. On the first page he listed Mr and Mrs Watkins as the two directors of Avondale, and in a box concerning bankruptcy, convictions or county court judgments (“CCJs”) he wrote against each of them: “No”. On behalf of Giles it is said that Mr and Mrs Watkins gave false information to Mr Cook on this occasion. For his part, Mr Watkins denied that he had given the information recorded to Mr Cook. In support of that denial, he pointed to what seems possibly to be a letter “P” underneath the “No” appearing next to his name—he suggested that Mr Cook had begun to write “Prison”—and to errors on the face of the document, which he said made it unlikely that he was the source of the information recorded there. The first of those points is weak: the answer “No” is clear enough. As to the second, the document makes a mistake as to Mrs Watkins’ date of birth. It may possibly be mistaken in recording that the hours of Avondale’s trade were “24 hr – shiftwork”; however, despite Mr Watkins’ insistence that this was mistaken, it is far from clear to me that he may not have said that the business was active around the clock, because there is some evidence that he would work through the night if there was a deadline to be made. One or two of the other entries are subject of interpretation. In general, however, the information on the form appears sufficiently accurate for it to be credible that its source was Mr Watkins. It is inherently unlikely that a loss adjuster investigating a significant incident for the purposes of a potentially large claim would either make up an entry saying that the directors had no convictions or write such an entry if he had been told that they did have convictions. However, I bear in mind that Mr Cook did not give evidence before me and that the circumstances in which he received and recorded his information could not be explored properly. Accordingly I do not place weight on Mr Cook’s notes.[64]On 23 February 2011 Mr Davies sent an email to Mrs Watkins, asking her to call him to discuss the renewal of the commercial fleet policy. The following day Mr Watkins replied, saying that he was getting some other quotations. That was not actually true—it was a ruse, successful as it turned out—to encourage Giles to obtain a more competitive quotation. What is significant is that, even though Mr Watkins had been back at work for six months, Mr Davies directed his initial enquiry to Mrs Watkins. Although this is by no means determinative, it does not suggest that he had believed her involvement to be nothing more than a temporary necessity on account of Mr Watkins’ incarceration. In my judgment the balance of the evidence indicates that both before and especially after Avondale began trading Mrs Watkins had quite a close involvement in the administrative and paperwork side of the business, although Mr Watkins continued to be the person controlling operations generally and would engage with administration when time permitted.[65]On 14 March 2011 Mr Davies sent a renewal letter in respect of the commercial fleet policy, with accompanying documents, to Mr Watkins by email. In material respects the renewal letter was in standard terms, and it referred, with the standard wording, to documents including the Market Presentation, the Important Considerations, and the Terms of Business. Another document referred to the in the letter was:
“Summary of Insurances outlining the main features, warranties, terms and conditions of your policy. Please check the sums insured and limits provided by the policy to ensure they are adequate and let me know straight away should you require any changes.”
A page in the Summary of Insurances, marked Additional Information, had the heading “Drivers”, under which were three lines of text. Under “Convictions in past 5 years” was written “None”. (The same information was recorded on another page in the documentation, though I am unsure which document the page was contained within.)[66]On 15 March Mr Watkins sent an email to Mr Davies:
“I have read through the proposals and I am happy to proceed with it.”
He did not correct the information concerning the convictions. When he was cross-examined about this, Mr Watkins said that it was not true that he had “read through” the documentation but that, if he had done so, he would have appreciated that he needed to disclose his convictions. I reject his evidence that he had not read the documentation. It is unlikely that he would have said that he had done so if he had not done so. Further, the narrative provides plenty of indications that, contrary to his claim never to have read insurance documentation, Mr Watkins did so.[67]On 20 June 2011 Mr Davies sent to Mr Watkins a letter recommending renewal of the Commercial Combined policy with QBE and asking for instructions. The letter referred, in Giles’s standard wording, to enclosed documents, including the Market Presentation, Giles’s Terms of Business (now altered in format, but including “Duty of Disclosure” in section 5), and the Important Considerations. Again, the Market Presentation stated “None” in respect of material facts regarding Avondale’s directors. On the following day Mr Goodfield met with Mr Watkins and, in an email to Mr Davies, asked him to make certain adjustments for renewal purposes. The adjustments related to matters of detail regarding Avondale’s performance and insurance needs. In my judgment, they showed that Mr Watkins had engaged with the insurance documentation. He said nothing about the Convictions.[68]On 4 July 2011 Mr Davies wrote to Mr Watkins, enclosing the new Commercial Combined policy documents and asking him to read them carefully. I accept Mr Davies’ evidence that those documents included a Statement of Fact, which formed the basis of the policy. In a box on the first page of the Statement of Fact, the line for entering non-motor convictions and criminal offences was left blank. Mr Watkins did not correct the omission.[69]On 24 October 2011 Mr Goodfield sent an email to Mr Watkins regarding a claim under the Commercial Fleet policy arising out of a vehicle collision. The email said that the insurers had asked a number of questions – “pretty straightforward, but could you let me know[?]” The first of the questions was:
“Have you any convictions on your licence?”
It appears that Mr Watkins did not reply to that email. The evidence of Mr Goodfield, which was not challenged, was that the matter was allowed to drift, until in March 2012 he met Mr Watkins to discuss the allegation by the other party to the vehicle collision that the accident was Mr Watkins’ fault. Mr Goodfield had no further recollection of the matter. However, it has not been alleged that Mr Watkins then told him of the convictions on his driving licence or of any other convictions.[70]On 8 March 2012, Mr Davies sent to Mr Watkins by email a letter regarding the forthcoming renewal of the commercial fleet policy and sought instructions regarding renewal. The email said:
“Can you check carefully and let me know any changes you need[?] The driving on the policy is any authorised driver but some vehicles are over 25, details are in the cover summary. If you can restrict all to over 25, I should be able to get a reduction in the premium or even a cheaper alternative quote with someone else.”
The letter, in the usual terms, referred to enclosed documents, including a Summary of Insurances, a Market Presentation, Giles’s Terms of Business, and the Important Considerations document. Again, the Summary of Insurances and Market Presentation did not disclose Mr Watkins’ motoring convictions or other convictions.[71]The third occasion relied on by Avondale as an occasion on which it informed Giles of Mr Watkins’ convictions was a lunch at a hospitality table at the Welsh Golf Open at the Celtic Manor Resort on 31 May 2012. The table was hosted by Mr Jamie Hallam in his capacity as a senior business developer at Allianz Insurance. Mr Goodfield was a guest and, as there had been some late cancellations, was told that he could bring along someone of his choosing and invited Mr Watkins. Mr Goodfield told him that he wanted to introduce him to Mr Hallam, with a view to exploring the possibility of moving Avondale’s insurance from QBE to Allianz Insurance. Lunch was held in a marquee, with a free bar from 10.30 a.m., and the atmosphere appears to have been convivial. There were ten persons at the Allianz Insurance table (a round table); Mr Goodfield was immediately to the right of Mr Watkins, and Mr Hallam was immediately to the right of Mr Hallam. A good deal of alcohol was consumed, but it does not appear that the bounds of decorum were breached, at least by most standards.[72]Mr Watkins’ evidence was to this effect. The other nine at the table appeared to know each other well, both professionally and socially. As the conversation began to include humorous tales of drunken misdemeanours, and in a desire to match the stories being told by others, Mr Watkins told those present about the circumstances in which, after playing golf on the August Bank Holiday in 2008, he had ended up in a fight that had led to a criminal conviction (the 2009 Conviction) and a prison sentence. On hearing this, Mr Goodfield and Mr Hallam were “all ears” and asked him some questions, which he answered. The stories and the alcohol continued to flow during the afternoon, until Mr Watkins left at around 6 o’clock. Mr Watkins’ evidence was that he could not specifically remember mentioning the 2005 Conviction; however, it was quite likely that he had mentioned it, because it related to an incident of drink-driving after another golfing event.[73]Mr Goodfield’s evidence was as follows. The golf event was “a business jolly”; although it was a social event, he had a business reason for attending and was representing Giles at a function with an insurance client, so he would not take a day’s holiday to attend. He and others at the table were drinking, but the event was “fairly refined” and in the V.I.P. tent. He would not have spent the entirety of the event with Mr Watkins. He had no specific recollection of the conversations at lunch, although he was seated next to him during lunch itself. It was likely that he had taken the opportunity to discuss Avondale’s insurance business with Mr Watkins and Mr Hallam, because the event presented an opportunity for just such discussions. He had no recollection of Mr Watkins saying anything about convictions or about being sent to prison; if he had heard any comment to that effect, he would have acted upon it and remembered it.[74]Mr Hallam also gave evidence about the golf event, to this effect. The lunch was a combination of a business lunch, and a good day out socially; it was not an “all-day party”. The atmosphere over lunch was relaxed, and it was not particularly loud or noisy. As his wife was expected to give birth imminently, he was on stand-by and was not drinking. The occasion was not specifically for the purpose of drumming up business, but when the opportunity to explore a business opportunity arose he naturally took it. He would not have heard everything that was said at the table. He was sure that he was not told that Mr Watkins had a conviction or had been sent to prison.[75]On 1 June, the day after the golf event, Mr Goodfield sent a couple of relevant emails. First, he sent an email to Mr Davies, marked “Avondale”, as follows:
“Meeting with client, one of the very few who’s (sic) business is on the increase, amended figures below. Stock - £1 million; T/O - £1 million; Wages - No Change He also needs to look at his BI figure because probably not sufficient but will check with his accountant.”
It is to be noted that Mr Goodfield was alert to Avondale’s business and requirements but made no mention of the 2009 Conviction. Second, he sent Mr Hallam an email, saying that he was “not feeling the best” (presumably because of over-indulgence the previous day) and thanking him for the previous day, “including looking after my client”. Mr Hallam replied:
“No probs—do you want to get Leighton to drop me over the presentation for his renewal?”
Mr Goodfield promptly sent an email to Mr Davies, asking him to let Mr Hallam “have the Avondale Com Combined to look at”. In the event, Allianz Insurance was unable to match QBE’s terms for the policy. It is material to note that neither Giles nor Allianz Insurance had any regard to the Convictions in respect of the obtaining and provision of the new quotation, although Mr Goodfield, Mr Davies and Mr Hallam are all said to have known of at least the 2009 Conviction.

Stock - £1 million; T/O - £1 million; Wages - No Change

[76]Later in June 2012, Giles received from QBE the renewal documentation for the Commercial Combined policy, comprising a Statement of Fact, a Schedule, and an Employers’ Liability Certificate. The Statement of Fact had a box where declarations of various matters, including “convictions or criminal offences which are not spent under the Rehabilitation of Offenders Act”, were to be made; this was blank. The evidence of Ms Sarah Tucker, an account manager with Giles, was that these documents were not sent to Avondale before renewal because the time-frame was too tight; instead the instructions to renew were given by Mr Watkins to Mr Goodfield in a telephone conversation on 28 June, as mentioned in Ms Tucker’s letter to Mr Watkins on that date. However, her evidence was that the insurance documents, including the Statement of Fact, were sent out under cover of a letter dated 25 July 2012. I accept that evidence. The letter said:
“Please check these [policy documents] thoroughly to ensure that all of your details and the sums insured are correct.”
It is common ground that Avondale did not inform Giles of the need to correct the Statement of Fact.[77]The Premises suffered severe fire damage on Sunday 26 August 2012 and Avondale’s stock was destroyed.[78]By Tuesday 28 August 2012 Mr Watkins had found new premises and Avondale had taken possession of them and was recommencing its operations.[79]That afternoon, a meeting took place between Mr Watkins, Mr Collin Ashworth of GAB Robins, the loss adjusters appointed by QBE, and Ms Ann Hewlett, a loss controller with Giles. (Ms Hewlett had not previously had dealings regarding Avondale. She was brought in to facilitate the progress of the claim and deal with the loss adjusters.) At that meeting Mr Ashworth asked Mr Watkins, among other things, whether he had any criminal convictions or CCJs. Mr Watkins told him, without any prevarication, of the Convictions and of a CCJ. The following morning Ms Hewlett had a telephone conversation with Mr Goodfield, to tell him what had transpired at the meeting with Mr Ashworth, which he had been unable to attend. When she told him of the Convictions, Mr Goodfield expressed surprise, saying that he had not known of them.[80]On 17 September 2012 Mr and Mrs Watkins met with Ms Hewlett, Mr Goodfield, Mr Ashworth and two other representatives of GAB Robins at Celtic Manor Resort. The meeting lasted for perhaps three hours. Among the matters discussed were Mr Watkins’ movements on the day of the fire (the loss adjusters were clearly considering the possibility that Mr Watkins had deliberately started the fire, though I should make it clear that no suggestion to that effect was pursued by the insurers or made in these proceedings) and the details of the Convictions. The loss adjusters asked questions of Mr and Mrs Watkins in turn and recorded their answers in numbered paragraphs comprising witness statements, which they then signed. Mr Watkins’ statement contained details of the Convictions.[81]After the meeting, Mr and Mrs Watkins, Mr Goodfield and Ms Hewlett went for a drink at the hotel bar. In her witness statement, Ms Hewlett stated:
“At no point during that conversation do I recall either Mr or Mrs Watkins saying that they had previously told anyone at Giles that Mr Watkins had a conviction. I generally recall that Mr and Mrs Watkins asked what issues or problems might arise with their claim. While I cannot remember my specific response, I believed that, as part of my answer, I would have explained to them that the non-disclosure of Mr Watkins’ convictions might be a problem.”
When she was cross-examined, Ms Hewlett said that Mr Watkins had asked her why assault convictions, being unrelated to dishonesty or arson, should be relevant to an insurance policy.[82]After Ms Hewlett left the hotel bar, Mr Goodfield stayed there with Mr and Mrs Watkins. It was Mrs Watkins’ evidence that she had been cross that Mr Goodfield had not intervened to tell the loss adjusters that he knew about the Convictions, and that later at the hotel bar she asked him to confirm that he knew that Mr Watkins had been sent to prison and he “nodded his head and did not dispute what I had just said.” Mr Goodfield’s evidence was that he had not known of the prison sentence until after the fire in August 2012, when he learned of it first from Ms Hewlett (see para 79 above).[83]On 18 September 2012 Mr Watkins sent an email to Ms Hewlett concerning the claim. The email expressed concern that the loss adjusters were trying to delay the claim. It did not say anything regarding the concerns that Mrs Watkins claims to have had the previous day or alleging that Giles had known all about the Convictions. In reply, Ms Hewlett sent a lengthy email to Mr Watkins, assuring him of her best endeavours to secure a pay-out on the claim and mentioning the potential problems, in particular non-disclosure of material facts. Mr Watkins’ evidence was that this was the first time that the obligation to make full disclosure had been explained to him. Ms Hewlett forwarded her response to Mr Watkins to Mr Goodfield and wrote:
“As you will note from my email I have decided to explain briefly to Patrick by email about material facts. Can you please check to see if at any time a proposal form was ever completed. Otherwise we are relying on the documentation accompanying the documents in explaining material facts. Do you have any renewal notes? I am unsure how much information is asked regarding convictions and material facts at renewal. It’s an awkward question and I used to hate asking it as an Adjuster.”
The following day Ms Hewlett sent an internal email, seeking the experiences of colleagues. Part of the email read:
“The policy is with QBE via Ink and there have been no proposal forms. Our Account Exec [i.e. Mr Goodfield] had no knowledge of the convictions he advised at renewal he has not specifically asked about convictions but asked if the client had anything else he needed to tell us. We therefore rely on the documentation sent with the renewal where it draws attention to the duty to disclose and ‘material facts’. The client disclosed the convictions quite freely at the first meeting and in a subsequent statement to the Adjuster. He does not believe the convictions to be material and therefore did not realise he needed to disclose them.”
[84]Ms Hewlett’s evidence, supported by an entry she made on Giles’s electronic log, was that on 21 September she made a telephone call to Mrs Watkins, in which she explained the potential difficulty regarding non-disclosure, and that Mrs Watkins told her that both Mr O’Brien and Mr Davies knew that Mr Watkins had been to prison. Ms Hewlett’s evidence made no mention of being told that Mr Goodfield had known that Mr Watkins had been to prison. Further, her evidence was that Mr Watkins never told her that he had told anyone about the Convictions or the prison sentence. I accept Ms Hewlett’s evidence on these matters.[85]It is unnecessary to set out the detailed contents of further email communications at this time. Three relevant points arise.[86]First, in a number of emails and other communications Ms Hewlett expressed views favourable to Mr Watkins. On some occasions the views were expressed in an effort to progress the claim, and to that extent had an agenda, while on others they were expressed internally. There is no reason to doubt that they reflected Ms Hewlett’s honest opinions, which included the following: Mr Watkins had no responsibility for the fire; he did not disclose the convictions because he did not imagine that they could be relevant; as he was very open about them with the loss adjusters, it is unlikely that he would have seen them as an issue or sought to conceal them; he “would not know what a material fact is as he sees everything as being very black and white”; there was “no intention to disclose[;] it was a misunderstanding.”[87]Second, as appears from the foregoing matters and from his own emails, Mr Goodfield’s clear position was that he had not known of the Convictions.[88]Third, Mr Goodfield was expressing agreement with Ms Hewlett’s assessment. On 21 September he wrote to her by email:
“I agree with your comments about Patrick, he is a hard working (sic) guy who genuinely doesn’t believe the convictions have any relevance to the cover.”
Mr Goodfield proceeded to attempt, successfully, to persuade NIG to remain on cover despite the late disclosure of the Convictions. In an email to NIG on 4 October 2012 he wrote:
“I do believe that Patrick genuinely believed that these incidents would not have any relevance to insurance and not sure he would be fully aware of material facts. As we discussed the Company became a Limited Company in 2009 but Patrick only became a director earlier this year and the reason given was he just did not have the time to get in to the accountants and arrange, allowing Tracey his wife to be the sole director. I think this also typifies the way the pair work, Patrick pays little if any responsibility to the administration of the Company leaving all this to Tracey. She has been the contact for any vehicles changes looking back at our file.”
[89]On 21 November 2012 QBE’s solicitors wrote to Avondale’s solicitors, stating that QBE believed it had the right to avoid the insurance policies for the years 2010/2011, 2011/2012 and 2012/2013 on the basis of the non-disclosure of the Convictions and was reserving its position. (Ms Hewlett received a copy of the letter from QBE’s solicitors and sent a copy of the letter to Mr Watkins.) One of the points made in the letter was that, when Mr Watkins met Mr Cook of GAB Robins in connection with the water damage claim in December 2010, he was asked whether he had any convictions and replied “No”. When eventually Avondale’s solicitors replied substantively to that letter, they did not challenge what was said concerning the answer given to Mr Cook. Giles relies on this as tending to confirm that Mr Watkins did indeed deny having any convictions, but it seems to me more likely that the reason that the letter did not challenge the point was that it was primarily directed along a different line of argument.[90]On 28 November 2012, Ms Hewlett sent an email to Mr Goodfield. In part it read:
“At the first year of cover with Evergreen [i.e. QBE] a proposal form should have been obtained as requested by Evergreen however there was facility to put this on their website as they provided log in details. I have no idea if this was done but details can’t been seen on the Ink system.”
Mention may also be made in this connection of something that Ms Hewlett said to Mrs Watkins in the course of their telephone conversation on 21 September 2012:
“I explained that when the policy was changed to a limited company it should have been set up as a separate policy and at that time the details of directors obtained[;] they would then have been asked if any of the directors had convictions or CCJs which would have alerted Tracey and Patrick to the importance.”
Avondale relies on both of these expressions of opinion in support of the case it advances on breach of duty.[91]QBE maintained its position and, by a letter dated 5 June 2013, avoided the policies. Eventually, on 13 February 2018, Avondale and QBE entered into a settlement agreement, whereby QBE agreed to return the premiums under the policies and Avondale agreed to repay an equivalent amount in respect of the moneys received under the claim for the burst water pipe (see paras 3 and 63 above) and not to pursue further claims under the policies, including any claim in respect of the fire in August 2012.[92]These proceedings were commenced on 11 April 2017. Avondale claims to recover something in excess of £1.5 million.[93]Perhaps surprisingly, Giles is still Avondale’s broker. Mr Phillips points to this fact as indicating that those at Giles who deal with Avondale do not regard Mr and Mrs Watkins as dishonest people. (Indeed, Mr Goodfield said in terms that he did not regard them as dishonest.) The same point might as well, it seems to me, be made the other way: Mr and Mrs Watkins might not be expected to instruct brokers they thought to be dishonest.[94]In the light of this narrative, I turn to consider the questions that arise for determination (see para 9 above).

Actual Knowledge

[95]The first question is whether Giles had actual knowledge of the Convictions by reason of what it was told by Avondale. It is common ground that, if it did have actual knowledge but failed to communicate that knowledge to QBE, it was in breach of duty. The information is said to have been communicated on three separate occasions; I shall take each in turn. However, some preliminary general points have a bearing on all three occasions.[96]There are reasons for thinking the evidence of Mr Watkins and Mrs Watkins regarding the three occasions to be credible. Neither of them has a record of dishonesty. Both of them gave evidence in an apparently plausible manner; although observations might be made about this or that aspect of their evidence, it cannot be said that their demeanour seriously undermined their evidence. Their recollection of specific conversations with the brokers might perhaps be thought likely to be clearer than those of the brokers, who would deal with large numbers of clients on a daily basis. Mr Watkins appears to be someone who is quite up-front about his prison record, so it cannot be assumed that he would keep quiet about it unless forced to divulge it. And no very obvious motive for keeping quiet about the Convictions has been suggested. Certainly, it would make little tactical sense to mention them only when an insurable event had occurred.[97]However, there are also powerful reasons for concluding that Giles was not told of the Convictions until after the fire in August 2012, chief of which is that none of those involved—not Mr O’Brien, not Mr Davies, not Mr Goodfield—took any action upon his supposed knowledge, even though any broker must immediately have appreciated the importance of Mr Watkins’ convictions. This reason operates in respect of each of the three occasions severally, but it also has cumulative force when considering the case advanced by Avondale. As Mr Phillips acknowledged in the course of his closing submissions, the court must balance the competing considerations and form a view as to where the truth lies. (1). Mr O’Brien: June 2007[98]The evidence as to this initial meeting, at which Mr Watkins says he told Mr O’Brien about the 2005 Conviction, is summarised in paras 20 – 23 above.[99]I reject Avondale’s case in respect of this meeting and accept Mr O’Brien’s evidence that he was not told about the 2005 Conviction.[100]First, Mr Watkins’ evidence, though inherently plausible, was not compelling. He purported to have a moderately good recollection of the meeting, but he did not accurately remember how the meeting had come about. It is hardly surprising that he should not have a good memory of a meeting that took place almost eleven years before he gave evidence about it. Although it is true that he will have had relatively few meetings with insurance brokers—certainly far fewer than Mr O’Brien will have had with clients—the point cannot bear a great deal of weight, because he will nevertheless have had plenty of meetings of one sort or another, many of them of more apparent significance to his life and business. Be that as it may, I am not persuaded that he does in fact have a detailed memory of the meeting.[101]Second, Mr O’Brien, who is candid as to the limits of his recollection, does not remember anything being said about a prison sentence. This is significant in two respects. First, in cross-examination he said that he was “pretty confident” that nothing of that sort was said, because “I’d have remembered it if it had been said.” In itself this bears only limited weight; he might have forgotten, despite thinking that he would not. Nevertheless, he said in re-examination that he had had very few clients with criminal convictions and that he remembered them. It is plausible to suppose that the detail would have stuck in his mind. Second, and more importantly, Mr O’Brien was adamant that, if he had been told that Mr Watkins had been in prison, he would have made a note of it and informed the insurer. He did in fact make some manuscript notes of his conversation, in addition to those provided to him by the office manager, and recorded nothing about a conviction or prison sentence. I simply do not believe that, if informed of these matters, he would not have appreciated their importance and taken some action. Disclosure of the 2005 Conviction was obviously critical to ensuring that any insurance policy obtained for Mr Watkins was not voidable for non-disclosure. It was also relevant because the point of the meeting was to see whether Mr O’Brian could obtain cover on better terms than those of the existing policy; attention to relevant matters was therefore fundamentally important.[102]Mr Phillips addressed this point by pointing to a mistake that Mr O’Brien made, namely his failure to observe that the Statement of Fact did not mention a previously refused insurance claim (see paras 24 – 26 above). I attach no significance to that. Mr O’Brien had noted that claims history and had communicated the information when seeking a quotation. That he failed to ensure the inclusion of the point from the subsequent documentation does not make it materially more likely that he would from the outset ignore important information about the 2005 Conviction. (2). Mr Davies: May 2010[103]The evidence as to this telephone conversation, in which Mrs Watkins says she told Mr Davies that Mr Watkins had been sent to prison after the 2009 Conviction, is summarised in paras 52 and 53 above.[104]I reject Mrs Watkins’ evidence that she told Mr Davies of the 2009 Conviction. That evidence was given quite forcefully, and at times Mrs Watkins appeared rather argumentative in maintaining her position. I think it would be unfair to take this, without more, as indicating that she was attempting to advance a case rather than give honest evidence. It may perhaps be that she has come to believe that she did tell Mr Davies that Mr Watkins was in prison but, if so, I am satisfied that she is mistaken. There seem to me to be grounds for adopting a less charitable view of her evidence.[105]Apart from Mrs Watkins’ own evidence on the point, the other significant matter that might indicate that Giles had been told of the prison sentence is the sequence of communications in May and June 2010, which show that Giles was dealing with Mrs Watkins instead of Mr Watkins, even in respect of matters (notably the risk improvements) that had previously been the subject of discussion between Mr Goodfield and Mr Watkins. However, I do not find this to be compelling.[106]I accept that Mrs Watkins made a telephone call to Giles and spoke to Mr Davies during the period 26 April to 5 May 2010 (see para 46 above). The reason for the call was probably to ask for a cover note. There was also discussion about how a forthcoming payment was to be made; whether this was a reason for making the call or simply a matter that arose in the course of the conversation is not known. I am entirely satisfied that, if Mr Davies had been told of the 2009 Conviction and the prison sentence, he would have acted upon it by ascertaining the details, recording them, telling Mr Goodfield and informing the insurers. It is overwhelmingly improbable that he would have regarded the information merely as a personal misfortune to be passed over with embarrassment. That he was not told tends to be confirmed also by the absence of any record of the conversation in the electronic log and by the fact that the subsequent correspondence in May and June not only makes no mention of the prison sentence but is addressed to Mr Watkins at the Premises. It is notable that, when this correspondence was received, Mrs Watkins did not tell Giles that they should not be writing to her husband there as they knew he was in prison. Again, Giles took steps to inform the insurers, both NIG and QBE, of the “change of name” to Avondale and the change of bank details, as of course it was required to do, but said nothing about the Convictions. It also dealt with the change of vehicle under the commercial fleet policy, yet did not mention the Convictions.[107]Mrs Watkins’ own evidence is problematic, in that it is more likely that she would remember the tone or “feel” of a telephone conversation than its detailed contents, yet there is a significant difference between the description of the conversation as “light-hearted” in the Further Information (information that can only have come from Mrs Watkins) and her evidence that Mr Davies appeared “uncomfortable” at being told of Mr Watkins’ imprisonment.[108]I am not persuaded that much weight attaches to the fact that Mrs Watkins informed other persons about the prison sentence. She would very naturally have felt the need to explain the situation to those with whom Mr Watkins traded closely on a regular and personal basis. It does not at all follow that she would feel a similar need in the case of insurance brokers.[109]I have regard to the fact that, after April 2010, Giles began dealing regularly with Mrs Watkins and did so in the months May, June, July and August 2010. (I have not referred to all of the occasions when Giles wrote to Mrs Watkins, but I have had regard to them, particularly those in August 2010 regarding risk improvements.) This does not require one to suppose that Giles knew that Mr Watkins was in prison. First, although Mr Watkins was clearly in charge of the business, I do not accept that Mrs Watkins’ role had been either nominal or minimal beforehand; she had undoubtedly had contact with suppliers and the customer of the business and even with Giles. Second, it was not particularly unusual that Mr Watkins’ work should effectively take him out of normal circulation for significant periods. By way of example, when Avondale was incorporated Mr Watkins was not formally appointed as a director; see para 35 above. In cross-examination, Mrs Watkins said that this was because at the relevant time Mr Watkins was “always away, very rarely at home”, and it was difficult to “pin him down” to attend to anything. (See also, for Giles’s understanding, para 88 above.) I do not think that any particular explanation was required to be given to Giles in May 2010 for the need to deal with Mrs Watkins. (3). Mr Goodfield: May 2012[110]The evidence as to the conversation at the golf event on 31 May 2012 is summarised at paras 71 to 74 above.[111]I am satisfied and find that Mr Watkins did not tell Mr Goodfield of the Convictions or his recent prison sentence as he claims. As cross-examination of Mr Goodfield and Mr Hallam progressed, the suggestion to them appeared to be that they might have failed to hear what Mr Watkins said, either because of the general hubbub at the table or at the bar or because they were not in Mr Watkins’ company at all times. This suggestion appeared to be intended only to preserve Mr Watkins’ credibility. It would hardly assist Avondale’s case as to actual knowledge on the part of Giles, because Mr Goodfield could hardly be held responsible for failing to act on matters that were not brought to his attention.[112]However, Mr Watkins’ evidence was not that he mentioned the 2009 Conviction and prison sentence only to others but that he told Mr Goodfield and Mr Hallam of it and that they were “all ears” and questioned him about the circumstances. I reject that evidence. Mr Hallam was adamant that he had not been told of these matters and he was not challenged on that evidence. He was sober at the event and, as he was interested in the possibility of picking up Avondale’s business, he would have been interested in what he was supposedly told and would both have remembered it and have taken it into account when making a bid for the business. Mr Goodfield drank alcohol at the event, but it is not plausible that he heard but failed to advert to the significance of the 2009 Conviction and prison sentence: first, he was forging a business introduction, to which the information was relevant; second, he was perfectly capable of acting on the basis of the conversations over lunch, as was shown by his subsequent communications with Allianz; third, the information would have been obviously relevant to his existing business relationship with Avondale; fourth, he would have been interested in this rather startling information concerning his guest at the event.

Conclusion

[113]Accordingly I reject Avondale’s case that Giles had actual knowledge of the Convictions.[114]It suffices to say that I find that Mr and Mrs Watkins’ evidence concerning the three occasions set out above is incorrect. As to why they gave incorrect evidence, there are two possibilities. One is that, in their dismay over the losses suffered in the fire and their desperation to find a way to avoid the consequences of the refusal of insurance cover, they have sought too hard to find a convenient solution and have persuaded themselves of the truth of what they say. On the whole, I incline to this view of Mr Watkins’ evidence regarding Mr O’Brien. The other possibility is that they have taken a decision to attempt to extricate themselves from difficulty by telling fibs at the expense of Giles’s insurers. On balance, that is the view I take of Mrs Watkins’ evidence concerning her conversation with Mr Davies and of Mr Watkins’ evidence concerning his conversation with Mr Goodfield and Mr Hallam. Those pieces of evidence do not seem to me to be easily explained as false but honest memory. In reaching this conclusion I also have regard to the other evidence in the case and to my opinion that Mr Watkins has not been truthful regarding the attention he was wont to pay to insurance documentation and that Mrs Watkins has deliberately and falsely minimised her own involvement in Avondale’s affairs.

Breach of duty

[115]I turn to the question whether Giles was in breach of duty by failing to take reasonable steps to bring to Avondale’s attention the importance of making the necessary disclosure and to elicit the relevant information. The legal framework has been set out above; the critical point is summarised in para 17.[116]The case for Avondale may be summarised, very briefly, as follows. The role of the broker is to act as intermediary between the client and the insurer and, in particular, to ensure that correct information and all material information is given to the insurer. This role explains the rationale for the broker’s duties, as set out by David Steel J at para 56 of his judgment in Environcom (para 12 above). In the present case the necessary information was not given to the insurer. Though not determinative, that is a prima facie indication that the broker did not adequately fulfil its role. The two ways of doing so would have been to ask a direct question about convictions and to give a clear and proper explanation of the requirements of disclosure. It is accepted that there is no general duty, applicable in all cases, to ask oral questions or give oral explanations. However, in the particular circumstances of this case, Giles cannot reasonably rely on the questions or explanations in the documents that it provided to Avondale but was obliged to enquire and explain orally. First, that documentation was both complex and bulky. Mr Davies said in cross-examination that he did not realistically expect that his clients would read the full extent of the documentation; there was a real risk that a client would just pay the bill and file the documents. Second, Mr Watkins was a hard-working man but obviously not a man of great education or commercial prowess. He could not be regarded—indeed, was not regarded by Giles—as a sophisticated businessman. Third, the relevant question was easily asked in a moment; all possibility of misunderstanding could have been eliminated by the simplest of enquiries (which Mr Phillips helpfully demonstrated in court). Fourth, there were obvious moments when the necessary question ought to have been asked:(a) the first meeting with Mr O’Brien in 2007. Mr O’Brien’s evidence was that his practice since 2009 or 2010 has indeed been to ask such a question, though he did not previously do so;(b) when Mr Goodfield took over the file in 2009, especially as the file was in a poor condition and gave indication of the need to check that the information held was accurate;(c) when the business passed from Intex Exhibitions to Avondale and there was a new client;(d) upon each policy renewal, when it was important to ensure that there had been no material changes and that the client understood its responsibility to make full disclosure.[117]Accordingly, it is fundamental to the case as so advanced that, in the circumstances of this case, Giles was under an obligation to do either or both of two things: first, orally ask Mr Watkins whether he had any convictions; second, orally explain the requirements of disclosure.[118]Whether in contract or in tort (and it is unnecessary to distinguish between them for the purposes of this judgment), Giles’s obligation was to exercise reasonable skill and care. The standard of skill and care required of a professional person is to be determined by the court by reference to the profession concerned, in this case that of insurance brokers. Among the ways in which the matter is sometimes put is that the required standard is that achieved by reasonably competent or ordinarily competent members of the profession. It is clear, in my judgment, that, however the matter is put, the profession cannot be the ultimate arbiter of the applicable standard, because it is ultimately for the court to decide what amounts to reasonable competence and the court may conclude that the standards ordinarily observed by a particular profession fall short of what is reasonably required. Accordingly: “The extent of the legal duty in any given situation must, I think, be a question of law for the court”: Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch. 384, per Oliver J at 402.[119]It is usual for a court to require expert evidence as to the standards ordinarily observed within a profession before it will find that a professional’s conduct amounts to negligence. Thus in Sansom v Metcalfe Hambleton and Co [1998] P.N.L.R. 542, Butler-Sloss LJ said at 549:
“[A] court should be slow to find a professionally qualified man guilty of a breach of his duty of skill and care towards a client (or third party) without evidence from those within the same profession as to the standard expected on the facts of the case and the failure of the professionally qualified man to measure up to that standard.”
To similar effect, in Pantelli Associates Ltd v Corporate City Developments Number Two Ltd [2010] EWHC 3189 (TCC), Coulson J said at para 17:
“Save in cases of solicitors’ negligence, where the Court of Appeal has said that it is unnecessary (see Brown v Gould & Swayne [1996] 1 PNLR 130), and the sort of exceptional case summarised at paragraph 6-009 – 6-011 of Jackson & Powell, Sixth Edition, which does not arise here, it is standard practice that, where an allegation of professional negligence is to be pleaded, that allegation must be supported (in writing) by a relevant professional with the necessary expertise. That is a matter of common sense: how can it be asserted that act x was something that an ordinary professional would and should not have done, if no professional in the same field had expressed such a view? CPR Part 35 would be unworkable if an allegation of professional negligence did not have, at its root, a statement of expert opinion to that effect.”
[120]I do not regard these and similar dicta as establishing a rule of law that expert evidence is required in every case before a finding of professional negligence can be made. They rather indicate a matter of common sense, as Coulson J put it, in most cases. As the passage in Jackson & Powell referred to by Coulson J shows (see now the same paragraphs in the eighth edition), expert evidence is not required if the practice or conduct complained of has no rational basis or is so obviously unsupportable as to require no such evidence for it to be found to be negligent. One is entitled to bear in mind in this regard that the nature of the role being performed by the professional may be more or less technical and more or less dependent on professional qualifications: the practice in surgical oncology or (as in Pantelli) quantity surveying will raise considerations different from those raised by insurance brokering. (This point ought not to be over-stated. It is worth noting that in both Environcom and Synergy there was expert evidence, as was to be expected of a broker.) As mentioned above, the standard reasonably to be required of a professional is a matter for the court.[121]Despite this, it is striking and significant that Avondale asks the court to find that Giles fell below the standard of reasonably careful and competent insurance brokers without adducing any expert evidence as to the standards in that profession. Some reliance was placed on the guidance in 5.1.4G of the Insurance Conduct of Business sourcebook (ICOBS) of the Financial Services Authority. But that guidance comes nowhere near indicating a professional standard such as Avondale alleges, and perhaps for that reason ICOBS was not referred to by Mr Phillips in his closing submissions. The lack of expert evidence significantly limits, though it does not altogether exclude, the possibility of a finding that Giles’s conduct was such as to constitute a breach of the common-law duty of care or the contractual obligation to exercise reasonable skill and care. Mr Phillips sought to rely on answers given by Ms Hewlett in cross-examination as indicating what Giles ought reasonably to have done. But Ms Hewlett is not and never has been a broker. Answers given and concessions made by Giles’s other witnesses may carry some weight and will fall to be considered when determining the issue of breach of duty, but they must be taken in context and weighed carefully.[122]The starting point must be that, as was common ground between the parties, there is no general obligation, applicable in every case, to give an oral explanation of material disclosure and make an oral enquiry about convictions. Therefore the contention is that a reasonably skilful and careful broker would have done these things in the particular circumstances of this case. This contention is advanced without any evidence as to a relevant professional standard at any material time. The simplicity of the material question (“Have you got any criminal convictions?”) and the potential consequence of non-disclosure (avoidance of the policy) are not particular to this case. If they were determinative of the issue, the obligation to give oral explanations and make oral enquiries would be general or nearly so, which is not argued.[123]One particular matter relied upon by Avondale is Mr Watkins’ lack of sophistication. It is true that he does not give the impression of peculiar intelligence or education or of unusual business acumen. But there is nothing to suggest that he was not as savvy as an ordinary businessman. One witness described Mr Watkins as “sharp”, meaning I think astute or “on the ball”. That seems right. As the narrative shows, Mr Watkins continually had an eye to the requirements of his business and to proper opportunity to advance or protect his legitimate interests. He also gives every impression of having paid more attention to the detail of his insurances than he was willing to admit in evidence.[124]Another matter relied on by Avondale is the sheer bulk of the documentation by which Giles says it made the necessary enquiries and gave the necessary explanations. Thus Mr Davies said that he did not realistically expect clients to read all the documentation. This point can be, and I think has been, exaggerated. Insofar as there was an impenetrable mass of verbiage, it lay in the detailed terms and conditions of the policies, as it always does. Presumably, very few people would read all of that. However, as the foregoing narrative has sought to indicate, and as a perusal of the documentation on which the narrative is based confirms, the material paperwork for present purposes was both limited in amount and clearly highlighted. I shall not repeat what is set out above. Time and again, the letters from Giles to Mr Watkins or Avondale identified specific documentation and made clear the need to check the accuracy of the information provided to the insurers. The documentation so identified was not by any means unduly long or dense. The factual bases set out in the Market Presentations and the Statements of Fact were clear, concise and easy to read and verify or correct. The explanations of the duty of full disclosure of material facts were clear and full and attention was properly drawn to them; they were not tucked away where they might not be seen. It is of course correct that the explanations of the duty did not specify that convictions were material facts. However, this does not assist Avondale: first, there is no evidence that there was a professional standard requiring that it should do so; second, unless all possible material facts are set out in the explanation of the duty, specific mention of one or more such facts is liable to be misleading as creating a false impression that the duty is restricted to particular matters; third, it is clearly impossible to set out all material facts. Convictions only appear to be specially significant because of the issues that arise in this case; fourth, the documentation provided to Avondale repeatedly mentioned convictions, which made it entirely obvious that convictions were properly to be disclosed.[125]I do not consider that Mr Phillips’ attempt to identify particular occasions when specific oral enquiries or advice were required improves Avondale’s case. Every engagement of a broker has an initial occasion of contact, so the fact that Mr O’Brien had an initial meeting with Mr Watkins does not explain why a relevant duty should arise in this case. There is no evidence as to the standards within the profession as at 2007, or indeed as at any other date. It is of interest to note that Mr Watkins had been in the exhibitions business for some twenty years at that time (much of it through a limited company) and had already been instructing other brokers; he did not come to Giles as a novice. The change of personnel from Mr O’Brien to Mr Goodfield obviously required that Mr Goodfield should acquaint himself with the client, but it did not of itself indicate any reason why the oral advice and enquiries should have been requisite in this case as distinct from any other. Mr Watkins had been the client for two years and continued to be so. Mr Phillips referred to the evidence that Mr O’Brien had left the file in something of a mess (see in particular paras 37 and 39 above). However, there is neither evidence nor reason to suppose that that had anything to do with the disclosure made by Mr Watkins, and Mr Goodfield spent considerable time addressing such problems as did exist (see paras 37 to 40 above). There was indeed a change of client in 2010, when Avondale was substituted for Mr Watkins. However, this needs to be seen in the particular circumstances of the case. Avondale was in effect just the incorporation of the same business and, in practical terms, Mr Watkins’ role was unchanged, though he was now a de facto director rather than a sole trader. If there is no general obligation to hold direct oral communications of the relevant sort at the outset of a relationship between broker and client, there is in my judgment no good reason to hold that Giles was under such an obligation in 2010 by reason of the substitution of a new client. Mr Phillips submitted that, as Ms Hewlett had remarked, the matter ought to have been dealt with by means of a formal proposal and a new policy, rather than an amendment to an existing policy. However, this does not assist Avondale: first, Ms Hewlett is not a broker and her evidence on this point is not expert evidence; second, QBE did not actually impose such a requirement; third, however the matter might have been dealt with technically, the important thing was the nature of the information being passed to the insurer, and the formal change of client did not indicate that the relevant information had or might have changed. In fact, the relevant information was set out in the usual manner for Avondale to check and it was not corrected (see paras 55 to 60 above).[126]Accordingly, and on the facts of this case, I hold that Giles was not in breach of duty to Avondale.

Causation and Contributory Negligence

[127]In view of my decision on breach of duty, the issues of causation and of contributory negligence (questions 3 and 4 in para 9 above) do not fall for consideration. Indeed, it seems to me artificial in the circumstances to say anything at all about contributory negligence.[128]However, it is fair that, having heard all of the evidence, I state briefly my view on the matter of causation.[129]I do not consider that an oral explanation of the obligation of full disclosure would have made any difference in itself. The obligation was set out very clearly in the documentation and I am quite satisfied that Mr Watkins understood it sufficiently.[130]However, despite that conclusion, I consider that, if he had been asked face-to-face whether he had any convictions, Mr Watkins would have acknowledged that he did.[131]These two conclusions may appear to be in tension, or even contradictory, if viewed in the light of the way that Avondale puts its case: that Mr Watkins failed to disclose his convictions because he did not think them to be relevant, and that he falsely confirmed that he had no convictions because he did not read the documentation. However, I do not accept that way of putting the case. I am satisfied that he did read the documentation and that he must have seen and therefore did see the false information regarding convictions. I am also satisfied that he knew his convictions to be relevant: this follows both because the express mention of convictions in the documentation makes the point obvious and because I do not accept his later protestations, made in adverse circumstances, that he believed the convictions to be irrelevant. In my judgment, Mr Watkins failed to give correct information and confirmed incorrect information because he was cavalier about the matter and signed forms recklessly, without caring whether or not what he confirmed was true unless it happened to have what he perceived as a direct bearing on his interest (such as the vehicles to be included in a policy). However, my impression of Mr Watkins is that, if asked eye-to-eye (so to speak) whether he had convictions, he would not have lied.

Conclusion

[132]For the reasons given above, the claim will be dismissed.[133]This judgment is handed down in the absence of the parties. No agreement has been notified to me as to the further terms of the order to be made in consequence of the judgment. Accordingly, I shall adjourn this hand-down hearing part-heard so that counsel may be heard on a date to be fixed, whether at court or by telephone.

Cited in 1 later judgment