Neutral Citation Number: [2013] EWHC 1687 (Comm)
Case No: 2011 Folio 1537
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 17/06/2013

Before :

HIS HONOUR JUDGE MACKIE QC
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Between :

	ALAN BATE	Claimant	
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	AVIVA INSURANCE UK LIMITED	Defendant	

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Neil Moody QC, Sonia Nolten and Timothy Killen (instructed by Neumanns) for the Claimant
Graham Eklund QC and Nicholas Broomfield (instructed by Greenwoods) for the Defendant

Hearing dates: 12 to 22 March and 10 May 2013
Judgment

Judge Mackie QC : 

1.	This is the trial of a claim by the Claimant Mr Bate against the Defendant insurers for an indemnity and for damages arising from a fire on 5 June 2006 at buildings known as Long House at Dobcross near Oldham in Lancashire. It is accepted that Long House was largely destroyed by an accidental fire but liability is denied on several grounds. Aviva alleges that material facts were not disclosed or were misrepresented which entitle it to avoid the policy. Alternatively, it alleges that there was a breach of a condition precedent which entitles it to repudiate liability. Mr Bate denies all these allegations and claims not only an indemnity but consequential losses including the costs of borrowing following the fire and damages for distress. He claims the costs of rebuilding by his company Parthenon at some £1.2 million (somewhat higher than the sum insured). There is a loss of rent claim of £133,186 and a contents claim for £115,000. There are also claims for interest charges which appear to be over £1.4 million and for damages for distress and inconvenience. The Claimant also contends that the Defendant waived its right to avoid.
2.	The trial has been of the question of liability and some issues of principle on damages. Apart from the controversial claim for consequential losses the legal issues are not much in dispute. There has however been great dispute about the facts which are complex and have involved days of evidence from fact witnesses and from one ‘materiality’ expert on each side. Deciding questions of fact in 2013 about a fire in 2006 has added to the difficulties in this case. Some people have left, others can no longer remember very much, Aviva lost an important file and witnesses on both sides, being human, have made mistakes.
3.	At the trial 28 bundles of documents were before the Court. I heard evidence of fact from five witnesses for the Claimant who were Mr Bate, his daughter Emma, Mr Richard Cockerton, his broker at the time of the policies who was then a director of Hamptons in Bristol, Mr Alan Kirkham, an estate agent retained to market the development at the Long House, and Mr Philip Dust, the architect retained for that development and for the rebuilding after the fire. There were seven fact witnesses for the Defendant. Four were formerly with Aviva’s cover holder Home & Legacy, Mr Ian Davies, an account manager, Ms Rebecca McGruther, a deputy team leader dealing with policy renewals, Ms Lesley Hubbard, operations manager and Ms Lorraine Prest, formerly a trading underwriter. Mr Brian Cohen is and Mr Andrew Crowe was with Woodgate & Clark, loss adjusters. Dr John Camplin works with Hawkins & Associates, the loss investigators retained by Aviva at the time of the fire. The experts were Mr Gardner Brown for the Claimant and Mr Simon Mobey for the Defendant.
4.	The preparation for this trial has been formidably conscientious. I refer below for brevity only to Leading Counsel by name but I am well aware of the contributions of the other members of the teams. As there was an unfortunately long break between evidence and closing submissions and unexpected developments during the trial I have received in writing skeleton arguments, provisional closing submissions, final closing submissions and further detailed ripostes and additional notes. I cannot in a judgment of manageable length address all the points made. I have however considered each point but I do not mention those which though skilfully made seem to me to be fanciful.
The Policies in outline
5.	The policies were underwritten by Norwich Union (now Aviva) through its cover holder Home & Legacy. For brevity I shall refer to both companies as ‘Aviva.’ It covered rich (“High Net Worth”) individuals for their domestic property (i.e. their home) and was for domestic buildings and contents. Policy No DB04AA03288800 incepted on 24 November 2004 and insured the Claimant in respect of properties at 51 Radnor Drive, Egremont, New Brighton and The Stables, Long House. The combined buildings sum insured was £530,000 (“the 2004 Policy”). Policy No DB05AA0353700 incepted on 31 March 2005 and insured the Claimant in respect of the Long House. The buildings sum insured was £789,260 (“the 2005 Policy”). Aviva contends that the 2005 Policy also covered the Coach House. The two policies were merged in March 2006 and the Long House was placed onto the 2004 Policy. The policies were renewed but Aviva omitted to carry out the process in March 2006. The error came to light in May and cover for the  three properties was endorsed retrospectively so there was valid insurance at the time of the fire.
The Long House and the surrounding buildings
6.	The facts and the insurance arrangements cannot be set out coherently without first describing the buildings which comprise and closely surround the Long House, described at times by Mr Bate and shown in photographs as the Longhouse Hamlet, and referred to in a lease as the ‘Estate’. When referring to this collection of buildings on a comparatively small plot as a whole I will use the term Estate for brevity although the set up is very different from what that word usually connotes.
7.	The Long House is a substantial house built beautifully and in style with fine internal work, in the middle of the 19th Century for an affluent mill owner. The Long House originally had stables and a tack-house. The tack house was converted to a self-contained house, known as "The Stables" which Mr Bate registered under a separate title. It was only some 8.25 metres from the main house. The actual stables which were close to the main house were converted to 5 garages, one belonging to The Stables. At the time of the fire three of the garages were within the registered title of the Long House (the other two belonging to The Stables and the Coach House, a property I refer to below.)            
8.	Mr Bate acquired the Long House Estate in 1984. It was used at first as his family home. In 1986 planning consent was obtained to use the house as a hotel and it functioned as such after about 1994. In January 2001, planning permission and building regulation approval was obtained for the change of use from an hotel to five dwellings (four to be carved out of the Long House, the fifth to be The Stables) plus garage accommodation. Work began on the outbuildings – the old stables which came to be garages and the old tack house which was to become "The Stables".
9.	In 2001 Parthenon Building and Design Services Ltd ("Parthenon") was incorporated with Mr Bate and his daughter as the only shareholders and directors. Emma’s role was nominal as Parthenon was Mr Bate’s business. Parthenon continues to trade. On 3rd April 2003, Mr Bate entered into an agreement with Parthenon whereby he sold the Long House to Parthenon to enable it to convert and sell the developed units, including The Stables and, as the units comprising the main house were to be called, South View, East View, The Gables and the Coach House. This agreement was rescinded on 14 September 2004. 
10.	The Coach House was an annex attached to the rear elevation of the Long House. On 2 April 2004, there was an agreement between Mr Bate, Emma Bate and Parthenon. By this Mr Bate sold to Emma Bate the area which was to become the Coach House, for conversion to be undertaken by Parthenon at a sale price of £195,000. On 11 June 2004, Mr Bate (not for some reason Parthenon) granted a lease of the Coach House to Emma, which enabled her to raise money to buy and develop it. The construction of the Coach House was carried out by Parthenon in the second half of 2004. It was declared “wind and watertight” by Mr Dust, the architect, on 17th November 2004. Thereafter internal works progressed slowly until the Coach House was handed over to Emma Bate on 26 February 2006. From about June 2004 Parthenon occupied the garage for the Coach House. There remains a connecting door between the Coach House and Mr Bate’s property. Before the fire the Coach House had no separate meter for gas and Mr Bate paid all the bills, (as he advised Aviva’s loss adjustor, Mr Crowe.).
11.	In the meantime the freehold title for The Stables had been carved out from that of the Long House on 1st May 2003 and its conversion from tack room into a house was completed in autumn 2004.
12.	In July 2003 Mr Bate instructed Alan Kirkham and Co, estate agents, to commence marketing the proposed new properties. Mr Kirkham gave evidence. Mr Kirkham used the gym at the Long House (now part of the Coach House) as an office for selling the properties for about nine months until the beginning of May 2004. 
13.	By September 2004 it was apparently clear to Mr Bate that there was little market interest in his proposed redevelopment of the Long House. As Mr Kirkham put it:
“To all intents and purposes Alan stated that the Stables was a test property; the remainder of the development would only be undertaken by Parthenon if that had sold…
At some point in the Autumn of 2004, I recall having a discussion with Alan about Parthenon’s asking prices. In my view due to the downturn in the housing market they were now too high so I suggested that to sell the properties the price would need to be reduced. His reaction was to say that at a reduced price there would be no profit in the development for Parthenon…In around September 2004, Parthenon instructed us to cease marketing the properties as development was no longer proceeding…Alan then purchased the completed Stables dwelling in his own name and told us to market it through our To Let register.” 
14.	According to Mr Bate and Emma, Mr Bate’s brother Terence who had undergone a leg amputation came to live in The Stables from Christmas 2004, so that he could be cared for by Emma and her father.  Terence moved out in mid-2005 but some months later a second amputation was on the cards. The family decided to use the plans for one of the intended apartments to be carved out of the Long House to construct suitable accommodation for Terence. A Mr Basford expressed interest in letting The Stables in May 2006 but after the fire Mr Bate had to move into The Stables as he had nowhere else to go.
15.	At the time of the fire, an advertisement board placed immediately outside the property stated that Long House was being converted into five separate three/four bedroom private dwellings, and gave details of the building contractors, architects and sales agents. Mr Kirkham claimed that the board was left there to attract possible tenants for The Stables but his active involvement ended 18 months or so before the fire.
16.	At the time of the fire the various buildings were being used as follows: Parthenon had completed The Stables and Mr Bate’s disabled brother was living there temporarily while one of the units in the Long House was being converted for him to live in. There seems to have been other work as well since in  March 2006 a contract for £28,310 plus VAT and a roofing contract for about £8250 were entered into. Mr Bate was living in a part of the Long House which was also being converted. The Coach House was still being worked on but Emma was living there. Two of the garages were being occupied for business purposes. The garage for the Coach House was being occupied by Parthenon for what Mr Bate says was solely the clerical and administrative side of its business. The adjacent garage was being occupied by Mr Bate to operate his loss assessing and surveying business. Next to the garages is an enclosed open space which Mr Bate says was used to store machinery and materials for maintaining the estate and the buildings but which Aviva suggests was used for the storage of a wider range of items deployed in Mr Bate’s businesses. 
17.	On 21 August 2006 Aviva wrote to avoid the policy. There is no reason to doubt the summary of Mr Bate’s position set out in his opening skeleton argument. “The fire has been a personal catastrophe for Mr Bate. After the fire Mr Bate was perforce compelled to reinstate his house from his own resources. In order to fund this, the property was divided into units which (it was thought) would sell more easily. This meant that he could borrow from a commercial lender specialising in bridging loans for property developments to fund the reinstatement. Mr Bate had been unable to obtain rebuilding funding from a domestic mortgage lender. In fact he was unable to sell the reinstated units, and his lenders repossessed the Long House and The Stables. The result is that he has been left without a home and severely indebted.”
Mr Bate and his background
18.	Mr Bate was born in 1944 and left school at 16, at a time when university education was much less common than it is now, to go into the building trade where he did well and gained knowledge through what he fairly called the University of Life. Mr Bate is intelligent, articulate and wise in the ways of the world.  In about 1977, Mr Bate set up business as a property surveyor trading under the name of Alan Bate & Company. In about 1984 he began working as a loss assessor from the Long House. He traded as Bate & Co, Loss Assessors & Surveyors. He was also a Property Consultant undertaking work for solicitors, surveyors, accountants and engineers. He was, as I have said, a director of Parthenon which carried out work for clients and on sites owned either solely by him or jointly with others.
19.	He has considerable knowledge and experience of insurance matters through his work as an assessor (although, as his Counsel Mr Moody QC pointed out, on the claims rather than the placing side). He also arranged for various policies of insurance for his numerous companies over the years. His evidence showed that he was familiar with the “indemnity principle”, “subrogation”, “new for old” and “first party” and “third party” liability. He understood the requirement to disclose material facts to insurers. His broker Mr Cockerton saw Mr Bate as being an individual with significant experience in the insurance industry. 
20.	Mr Bate’s insurance assessing business, Bate & Co, was carried on from the garage converted into an office and, at times, it conducted this claim on his behalf. Mr Bate says that it, like Parthenon, was more or less a one man band. Aviva says that both businesses, Parthenon in particular, were more extensive than that.
The law
21.	There is no dispute about the principles. The dispute lies in their application. So I briefly summarise the principles taking some points of emphasis from the skeleton arguments of the parties.
22.	A fact is material if it would have an effect on the mind of the prudent underwriter in assessing the risk. Pan Atlantic Insurance v Pine Top Insurance [1995] AC 501. It is not necessary, however, that the hypothetically prudent underwriter would have been decisively influenced in his assessment of the risk by the non-disclosure. Underwriters are entitled to a fair picture of the risk and to assume that the summary presented to them is fair. CTI Inc v Oceanus Mutual Underwriting Association (Bermuda) Limited [1984] 1 Lloyd’s Rep 476 and 511.  Materiality is a question where expert evidence is likely to be more reliable than that of the insurer. See Colinvaux and Merkin’s Insurance Contract Law at A-0801, page 10-775, “proof of materiality is possible only by expert evidence.” See also: MacGillivray:
“The materiality of an uncommunicated fact may be so obvious that it is unnecessary to call any expert evidence to establish this point…where, however, the court is unsure of the materiality of a given fact, it is usual to call expert evidence from persons engaged in the insurance business in order to assist the court in making its decision.”  
( paragraphs 17-042 – 3)
Although the starting point is that the proposer has an independent obligation to disclose all material facts, the form and extent of questions put on the proposal form may limit the extent of the duty of disclosure. The test in each case is whether on a true construction of the proposal form a reasonable person would think that the insurer had restricted his right to receive all material information and consented to the omission of the particular information in issue. Synergy Health (UK) Limited v CGU and others [2010] EWHC 2583 (Comm), at para 16).If an insurer fails to put questions on all material matters, or puts them in an unclear way, he runs the risk of the contention that failure to ask the questions prevents him from relying on non-disclosure afterwards: Zurich General Accident and Liability Company v Morrison and others [1942] 2 KB 53 at p. 64. 
23.	The misrepresentation or non-disclosure must have been an effective cause of the underwriter making the contract on the terms agreed. If the underwriter would have made the contract on the same terms then the non-disclosure cannot have made a difference (in effect the “but for” test of causation): Assicurazioni Generali Insurance SA v Arab Insurance Group [2003] 1 All ER (Comm) 140, at paragraph 59. 
24.	The question of what would have happened had there been full disclosure, is a hypothetical one. The test of inducement is not a heavy one but the Court should approach with care and caution the evidence of the underwriters as to whether they were induced. See Flaux J in Synergy at paragraphs 185 and 186. The question is whether the insurer would have underwritten the risk on precisely the same terms had disclosure been made of all material circumstances. 
25.	When the Court hears evidence from the relevant underwriter, it should “approach with care and caution the evidence of the underwriters as to whether they were induced”. Synergy at 186. It is important to bear in mind when considering materiality that there is a risk that the evidence advanced by insurers “may be a defensive post-mortem response to the risk in the particular case” (Clarke on the Law of Insurance, 5th edition 2006, at page 686). 
26.	An insurer may waive the right to complain of non-disclosure of a particular matter if he has failed to make further enquiries. The assured must perform his duty of disclosure properly by making a fair presentation of the risk. If the insurer thereby receives information from the assured which, taken on its own or in conjunction with other facts known or presumed to be known by them, would naturally prompt a reasonably careful insurer to make further enquiries, and they omit to do so, they will be held to have waived disclosure of the material fact which that enquiry would necessarily have revealed. (Synergy, 172).
The Insurance Conduct of Business Sourcebook (“ICOB”)
27.	Aviva is regulated by the Financial Services Authority. Aviva, in underwriting contracts of insurance, conducts a “regulated activity” within the meaning of s.22(1) and Schedule 2 of The Financial Services and Markets Act 2000 (“FSMA”). In order to carry out a regulated activity, an insurer must also have obtained a Part IV permission under FSMA and is, therefore, an “authorised person” within the meaning of s. 31 FSMA. Under ss. 138 and 153 FSMA, and pursuant to para 13 of Schedule 17 FSMA, the FSA is permitted to make binding rules to be followed by authorised persons. At the relevant time the regulatory framework governing insurance companies was The Insurance Conduct of Business Sourcebook (“ICOB”). Aviva was therefore bound to comply with the relevant ICOB rules. Non-compliance with ICOB gives rise to a claim by private persons for breach of statutory duty under s150 of FSMA which provides that “A contravention by an authorised person of a rule is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.” 
28.	Mr Bate claims that he falls within the definition of a “private person” as set out in The Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 reg 3(1) and is therefore entitled to bring an action for breach of statutory duty under s150. Mr Bate relies upon the following ICOB rules: 
ICOB 7.3.1. “An insurer must carry out claims handling promptly and fairly.”
ICOB 7.3.6. “An insurer must not…unreasonably reject a claim made by a customer,…except where there is evidence of fraud, refuse to meet a claim by a retail customer on the grounds…of non-disclosure of a fact material to the risk that the retail customer who took out the policy could not reasonably be expected to have disclosed;…of misrepresentation of a fact material to the risk, unless the misrepresentation is negligent and …in the case of a general insurance contract, of a breach of warranty or condition, unless the circumstances of the claim are connected with the breach; …”
29.	 ICOB rules are not confined to retail customers but apply to all classes of insurance. However, some rules, including 7.3.6(2), apply only to retail customers. The definition of a “retail customer” is given in the FSA Handbook as:“in accordance with the meaning of ‘consumer’ in article 2(d) of the Distance Marketing Directive an individual who is acting for purposes which are outside his trade, business or profession.”  
30.	Mr Moody QC argues that there is no doubt that Mr Bate, in proposing for insurance on his home, fell within this definition of a retail customer. Furthermore, even if it could be argued that there was doubt as to whether Mr Bate was a retail customer, he is entitled to be treated as such: see ICOB 1.2.6. In circumstances where a policy covers a customer in both a private and business capacity he is to be treated as a retail customer: see ICOB 1.2.6A. Mr Eklund QC argues that the Claimant was not acting outside his trade business or profession; he was acting as a property developer developing the Long House and buildings within the curtilage of the Long House hamlet for commercial profit and business use by his own construction company, Parthenon. Aviva refers in this regard to the Guidance at paragraph 1.7.3 of ICOB which expressly excludes proprietors of buy-to-let from being “retail customers”. Aviva argues that, by analogy, a proprietor of development property or property being developed for commercial and financial gain should fall within the same exception.
31.	I prefer the submission of Mr Moody. Whatever the complications and uncertainties of what was going on at the Estate, the Long House had been Mr Bate’s home since 1984 and his prime concern was to insure it under a home owner’s policy. ICOB therefore applies. In approaching its requirements however the Court must bear in mind the background and experience of Mr Bate and the activities occurring on the Estate.
32.	Mr Moody argues that ICOB is relevant to the analysis in three ways. First, material non disclosure and/or misrepresentation have to be construed in the light of the insured’s obligations under ICOB. Secondly, the ICOB rules fall to be implied as terms in the policy of insurance. Thirdly and alternatively, if Aviva is otherwise entitled to avoid (on the basis that material non-disclosure and/ or misrepresentation  must be construed without regard to ICOB) then Mr Bate is entitled to claim damages for breach of statutory duty amounting to an indemnity. There is an issue about the second factor.
33.	Mr Bate’s team argues at length that the Defendant’s obligations under ICOB were also implied terms of the 2004 and 2005 policies. This is surprising given the decision of Mr Justice Teare in Parker v The National Farmers Union Mutual Insurance Society Limited [2012] EWHC 2156, 	Teare J held at (para 197) that whether or not ICOB are implied terms of the policy, an insurer cannot claim to be entitled to exercise a right to reject a claim under a policy of insurance otherwise than in accordance with ICOB standards.  I agree with Teare J on this point.
34.	The Defendant’s position is as follows. The Claimant must rely on a claim under FSMA 2000 s150. If the Claimant is found to be a retail customer, he falls within the exception to paragraph 7.3.6(2).  The Court has to consider the purpose of ICOB generally and chapter 7 in particular. It is clear from the wording of Chapter 7 that its purpose is to ensure that private persons are protected from unfair claims handling processes by insurers. These unfair processes are primarily concerned with delay and the provision of information. Accordingly, in accordance with a proper construction of ICOB, Aviva will not be in breach of the rules if the Court deems that it acted reasonably when rejecting the Claimant’s claim, even if the Court ultimately finds in favour of the Claimant. Aviva contends that, in the specific circumstances of this case it acted reasonably when avoiding the Policy both for the reasons set out in its avoidance letter of 21 August 2006 and in this action. Mr Bate was a person who could be expected to know that he had to disclose the material facts which Aviva assert were not disclosed and/or he was negligent in failing to disclose those material facts or in misrepresenting them. 
35.	It follows that on each claim of  misrepresentation and non - disclosure I have to decide what the facts were, whether the Defendant has established  materiality and  inducement and what the effect of ICOB is.
Insurance policies for the Long House - matters agreed or not much in dispute.
36.	The Long House until 30 March 2005, before Aviva was involved. Mr Bate insured the Long House with Zurich from 14 May 2003. On 7 October 2003 Charcol, then Mr Bate’s brokers wrote to him: “Following our telephone conversation regarding the proposed work to your outbuildings your Insurers, Zurich have requested a brief schedule of the planned works along with confirmation of how close the demolished outbuildings are to the main structure.” They also stated: “It was also mentioned that we felt that the insurance of the works should remain the responsibility of the builder and enquiries would be made as to whether the builders had a suitable contract works policy. As far as I understand the matter of which paragraph was going to be included was still open for debate at the time of our conversation and I was hoping you could now confirm this by means of providing a copy of the contract that will be used.” Additionally they stated: “Please also find a very handy Question and Answer sheet that many clients have found useful regarding building works”. The question and answer sheet provided: “Q. Should I inform my insurers that building works are to be carried out.” A. “It is a condition of all insurance policies that material facts must be declared. The potential works should therefore be notified to insurers.” 
37.	On 8 December 2003, Charcol told Mr Bate that Zurich would not cover the outbuildings or the works, including any materials. Zurich was on cover on 1 May 2004 when there was damage to an electricity cable, caused by a Parthenon digger digging a trench for electricity cables to be laid in the grounds of the Long House. The digger struck an existing underground electric cable whilst excavating for new water, gas and electric services in the drive between The Stables and the main Long House property. This caused a fire in the gym of the Long House. The cost of repairs was estimated to be about £50,000. 
38.	Zurich refused to indemnify Mr Bate on the grounds that it excluded cover for the outbuildings and the building fixtures and fittings, and for any damage caused directly or indirectly to the main dwelling house by contractors.  Aviva says that Mr Bate must have been aware from that letter of the materiality of the development work that was being undertaken on the Long House site. Mr Bate successfully appealed to the Insurance Ombudsman who made a decision on 15 February 2007. The Zurich policy came to an end on 30 March 2005 and was not renewed by Mr Bate. 
39.	Insurance of the Coach House by Zurich from 10 June 2004.  Mr Bate arranged for the policy to be in his and Emma Bate’s joint names and her interest to be noted on the Zurich policy from 10 June 2004. It is clear from the evidence that the Coach House was covered under the Zurich policy.
40.	Insurance of The Stables (and another property owned by Mr Bate at Radnor Drive, New Brighton) by Aviva from 24 November 2004. The Stables had its own separate insurance policy from 24 November 2004. The cover did not include outbuildings.
41.	In November 2004 Mr Bate was purchasing 51 Radnor Drive with his partner June. At the same time he took out a mortgage on The Stables to fund the works that had been carried out. He required insurance for these two properties and (unhappy with Zurich and Charcol) he approached Mr Cockerton of Hamptons International. Mr Cockerton was a director of Hamptons based in Bristol. He was well - known to Home & Legacy and well - regarded. He took details over the phone and filled in two “fact find” documents. Mr Cockerton had access to Home & Legacy software and he was able to establish indicative terms by inputting the relevant information. This produced a quotation facsimile. 
42.	On 23rd November Mr Davies of Home & Legacy sent Mr Cockerton a quotation sheet and proposal form. The form required the proposer to confirm twelve specific and conventional matters or if he or she could not, to provide full details. Paragraph (iii) stated that the property is not used in connection with any business or profession. Paragraph (xii) stated that neither the proposer nor any member of his family living with him had made a claim within the last 5 years or had a claim pending against them. Mr Bate answered:
“(iii) Long House, The Stables, Long Lane, Dobcross…is a let property. The property is newly constructed (brick & tile/slate roof);
(xii) 04/04 Building contractor caused fire damage at previous address after cutting through an electricity cable - £50,000 (building contractor found not to have adequate commercial cover so insd attempting to persue [sic] through previous insurer –claim outstanding.”
43.	The sums insured were adjusted the following day. Mr Bate signed a credit agreement for the premium. He signed the proposal form on 28th November and this was sent to H&L who sent out policy documents on 9th December 2004. The policy covered High Net Worth individuals in relation to their domestic property, outbuildings and contents. The cover for Radnor Drive incepted on 24 November 2004 and was  renewed in November 2005. 
Insurance of the Long House and outbuildings by Aviva from 31 March 2005.
44.	The Zurich policy on the Long House was due to expire on 31st March 2005. Mr Cockerton produced a quotation facsimile for H&L dated 24th March 2005. This disclosed the previous claim against Zurich and noted “attempting to pursue through previous insurer – claim still remains outstanding.” Mr Davies produced a quote dated 4th April, and Mr Cockerton passed this on to Mr Bate who completed the proposal form on 13th April 2005. The form was as before. Two matters were not confirmed and the relevant “full details” provided were:
“(xi) April 2004 building contractor caused fire damage at previous address after cutting through an electricity cable causing £50,000 damage”
45.	Cover incepted from 29th March 2005. The cover required included outbuildings and was stated to be subject to a survey which was never carried out.  Mr Bate paid the premium.
46.	 This policy issued from 31 March 2005 took the place of the Zurich policy. The policy should have been renewed in March 2006 but, as I said earlier, this was achieved retrospectively.
Summary of the Defences
47.	As the facts and allegations are complicated I first set out the grounds relied on by Aviva in the Particulars of its Amended Defence. All are denied by Mr Bate. Paragraph 11 deals with the proposal of 28 November 2004 and Paragraph 17 with that of 13 April 2005.
48.	Paragraph 11(1): It was false to state that the property was not being used in connection with any business or profession in that The Stables and/or other outbuildings were occupied by Parthenon, the company owned and directed by the Claimant and undertaking building construction work. In addition to Parthenon occupying The Stables and/or other outbuildings as an office, it used land at the rear of the outbuildings to store building materials and equipment.
49.	Paragraph 11(2): It was misleading to state simply that The Stables was a let property. The Claimant failed to disclose that the Property was let to a building construction company (Parthenon) owned and operated by the Claimant.
50.	Paragraph 11(3): It was false to state, when disclosing the 2004 insurance claim that the building contractor…was found not to have adequate commercial cover so the insured was attempting to pursue the matter through a previous insurer and the claim was outstanding. The contractor referred to was engaged by Parthenon, through the Claimant.
51.	The Claimant knew that the “previous insurer” referred to, namely Zurich, had advised the Claimant’s previous broker Charcol…that it would not cover the outbuildings and the works…and that on 14th July 2004 Zurich formally repudiated liability to indemnify…Zurich reaffirmed the repudiation on 30th November 2004.
52.	Paragraph 11.4: It was false to state that the Stables was not used in connection with any business or profession. The Stables was used and occupied by Parthenon.
53.	Paragraph 11.5: The Claimant failed to disclose that he was developing the property known as the Long House and the buildings thereon or adjacent thereto for commercial purposes and profit. 
54.	Paragraph 11.6: The Claimant failed to disclose before the conclusion of the contract of Insurance (i.e when the proposal was accepted by Aviva) that on 30th November 2004, Zurich had re-affirmed the repudiation of liability to indemnify the Claimant. 
55.	Paragraph 11.7: The Claimant failed to disclose that the development works were going on at the property. At the time of the proposal (29th November 2004) development works were proceeding at the Coach House. The contract was a very substantial one, having a value in the order of £115,000.
56.	Paragraph 17.1(a): The Claimant failed to disclose the matters pleaded in paragraph 11 above, which ought to have been disclosed in relation to the 2004 policy and which again should have been disclosed for the 2005 policy. The development works were still proceeding at The Coach House. 
57.	Paragraph 17.1(b): the Long House comprised a house on a plot which contained four other buildings which were being converted or had been converted from buildings within the curtilage of Long House which had been partially demolished. 
58.	Paragraph 17.1(c): the Long House was undergoing development, and conversion works were being undertaken.
59.	Paragraph 17.1(d): During the course of the conversion works or development works, a contractor had caused fire damage by cutting through an electricity cable. This had not happened as represented at “previous premises”, but had happened at the Claimant’s premises and had been caused by a JCB driver who was engaged by the Claimant through Parthenon to assist in the development of the Long House. 
60.	Paragraph 17.1(e): ( not pursued at trial). 
61.	Paragraph 17.1(f): Parthenon, the Claimant’s construction firm was operating from the Stables and/or other outbuildings within the curtilage of the Long House or adjacent to the Long House and was storing equipment and building materials there. 
62.	Paragraph 17.1(g): The Stables was used for business and commercial purposes as pleaded above
63.	Paragraph 17.1(h): The Long House was used for business and commercial purposes. The Claimant traded as a Loss Assessors and Surveyor, from Long House. The trading name was Bate & Co or Alan Bate & Co and the business was a multi-disciplinary practice. The Claimant employed a personal assistant, Jan Williamson, who attended 5 days a week.
64.	Paragraph 17.1(i): the Claimant had misrepresented material facts and/or failed to disclose material facts to Aviva when proposing for the contract of insurance for The Stables ie the 2004 Policy.
65.	Paragraph 17.2 and 17.3 address the Zurich insurance claim and 17.4 was not pursued. Paragraphs 18 and 19 allege misrepresentation at renewal of the Long House policy in March and/or May 2006.
66.	Breach of general condition 4 is alleged in that Mr Bate failed to inform Aviva in advance of building works expected to cost more than £10,000. This is denied on the facts. In the alternative Mr Bate says that the breach of condition was plainly not connected with the loss (since the loss was caused by an electrical fault, not building works) and accordingly, pursuant to ICOB 7.3.6(2) (c) Aviva was not entitled to refuse to meet the claim.
67.	The defences necessarily overlap and I will deal with them by issue rather by considering each paragraph of the Particulars. It will shorten matters if I first decide an issue about the Coach House.
Did the Aviva policies cover the Coach House?
68.	This question is significant because if the Coach House was covered then the building works in this area should, under the terms of the policy, have been notified but were not. Similarly the business activity of Parthenon at the Coach House garage should have been disclosed. In a reversal of their conventional roles the insured says that the Coach House was not covered but the insurer says it was.
69.	 Aviva relies on the following sequence of events.  In March 2003 the Long House was insured by Zurich. At this time, the Long House was a single property and included a gym. The sum insured was £720,000. On 3 April 2003 the Long House was sold to Parthenon. The sale was never registered with HM Land Registry but was noted as a Parthenon asset in the company’s accounts. The Long House policy was renewed in March 2004 with the sum insured as £751,680 increased by the usual index. Emma Bate needed a mortgage to purchase a lease of The Coach House from the Claimant. A proposal form acknowledges that Emma Bate had been added to the Zurich Policy on 10 June 2004 the day before she was granted her lease. By the contract dated 2 April 2004 the Claimant, Emma Bate and Parthenon agreed that Parthenon would build the Coach House. The Claimant retained a reversionary (and therefore insurable) interest in the Coach House and was required to insure the whole estate if the Long House Management Company failed (as it did) to do so.  In March 2005 the Zurich Policy was due for renewal. The proposal form recorded that the Long House had a sum insured of £789,268, which was index - linked to the figure on the 2004 proposal form.
70.	Mr Eklund submits that all the surrounding indications are that Mr Bate intended the insurance to include the Coach House. Mr Bate has not provided consistent or plausible alternatives to the Aviva analysis above. Neither Mr Bate nor Emma have produced any documentary or other evidence of separate insurance having been taken out for the Coach House. Third party disclosure obtained by Aviva (despite Mr Bate’s strong resistance to its application for an order) from Emma’s mortgagees has yielded nothing.
71.	 I conclude from this and other indications that no separate insurance was taken out for the Coach House, a fact which Mr Bate has sought to conceal. Further, the fact that after the fire (but before the avoidance) Mr Bate sought insurance for the Coach House, as I see it adds nothing.
72.	Mr Moody argues that all this is all beside the point. The question as to what was insured under the Long House policy can only be determined by an objective construction of the policy documents, not by a consideration of what Mr Bate subjectively intended to insure. In this respect the cover in the Schedule applies to “the buildings as stated at the above insured address”. The address is “Long House.” The definition of “buildings” states that it is “the private residence specified in the schedule…”  Since the Schedule in this case specified the Long House, not the Coach House, and since the Coach House had a separate title which had not been noted on the Schedule, it cannot have been within the scope of cover.
73.	I agree with Mr Moody. None of this background was known to Aviva and it does not form part of the factual matrix against which the policy must be construed. The policy wording does not cover the Coach House which is Emma’s home and a separate registered title, not as Aviva would now have it an ‘outbuilding’. The Coach House was not within the policy but that does not necessarily mean that the works done at it or Parthenon’s business activity within its garage are irrelevant.
Aviva’s claims of misrepresentation and non disclosure...
The 2004 proposal for The Stables and Radnor Drive 
74.	Use in connection with business or profession. Aviva says that there was a representation that the property was not used in connection with any business or profession. Aviva says this was not true because, according to Mr Bate’s post-fire statement dated 7 July 2003, The Stables was used by Parthenon. 
75.	Mr Eklund argues that the other business activity being carried on by Mr Bate and his firms on the Estate, to which I refer below, should have been disclosed. This fact of business use was material to a prudent underwriter. The properties were all on the same plot and were “inter-associated”. It was therefore something that a prudent underwriter would expect to be disclosed.  Ms Hubbard of Aviva said that information about the loss assessing and construction businesses being run from the Long House and the Coach House garage was a material fact that fell within the Claimant’s general duty of disclosure. There is a risk to neighbouring buildings inherent in plant and machinery being delivered to the Coach House garage, with building materials being stored at and behind the premises and of third parties coming onto the insured land.  
76.	Mr Moody argues as follows. The use and occupation of nearby property (not the risk address) was not material at all as Mr Brown and Mr Mobey accepted (I do not accept that the expert evidence was as clear as his written submissions suggest). Material matters should be the subject of a question in a proposal form: see e.g. the ABI Statement of General Insurance practice. Mr Mobey agreed. No proposal form for a residential risk ever asks about the use and occupation of nearby property as Mr Mobey accepted. There is nothing in the Aviva Underwriting Guide about neighbouring property. If there is evidence that insurers in general do not enquire about a particular matter, that indicates that the matter is not material: Mann Macneal & Steeves Limited v Capital and Counties Ins Co Ltd [1921] 2 KB 300, at 307-8. The fact that Mr Bate controlled the nearby garages and they were all part of one “estate” is irrelevant. There are many situations where a proposer will own or control nearby property which is not part of the risk address (for example in a block of flats). The mere fact of control of nearby property cannot make it material to disclose. Further Aviva has waived the right to information regarding nearby property by failing to ask any questions about it.
77.	This aspect of the Defence originates from the observations in the statement, which Mr Bate insisted was prepared by him after the fire rather than by the insurers, that The Stables buildings were used for a business. There is no other evidence that The Stables was used for business and it was a newly built dwelling house. I find that there was no use of The Stables for a business. The policy was taken out mainly for Radnor Drive and The Stables came in under ‘other items’.
78.	Against that background, and with no relevant question being asked by the insurer, Aviva does not, as I see it, succeed in establishing that the non -disclosure of business activity elsewhere on the Estate at this point, when taken on its own, was material. When matters are taken as a whole and considered in relation to the 2005 Policy the position is different.
79.	The 2004 proposal - works at the Coach House. Works were being continued at the the Coach House by Parthenon but Mr Bate contends that these were not material since they related to a neighbouring property not insured under the relevant policy and to Emma Bate who was not an insured. As Mr Mobey put it the works were “outside the direct control of the insured” (albeit the contractor, in effect her father was the insured) works. The Claimant says that if the Defendant’s case were right, then many thousands of policyholders across the UK - none of whom have been prompted by questions on proposal forms to disclose building works at adjacent properties – are in breach of their obligations of disclosure. The market operates on the basis that only building works at the insured property are material. There is nothing in any of the other high net worth proposal forms obtained by Mr Brown or in Aviva’s Underwriting Guide which suggests that nearby building works are material. 
80.	Mr Eklund argues as follows. The Coach House was constructed out of the existing structure of the Long House; it was not a rebuild from the ground up. Accordingly, the works were not separate and distinct from the Long House but were works to the same building. The distinction that the Claimant seeks to draw between the freehold of the Long House and the leasehold of the Coach House is an artificial one.  Mr Brown accepted that, if the Coach House was formed out of the Long House and works were still ongoing at the time of the inception of the 2005 Policy this could have been a fact material to a prudent underwriter. Mr Brown’s report stated that, “Were it the case as alleged by the Defendant that conversion [works] were being carried on at the Long House at the time of the proposal then this could be material to a prudent underwriter.”  Mr Cockerton accepted that, had he been told about the works to the Coach House, he would have disclosed them to Aviva because he deemed them material for insurers assessing the risk as a result of construction plant coming on to site. The works to the Coach House were material due to the additional “traffic” over the Long House freehold caused by those works. Any workmen and/or delivery men attending the Coach House had to cross the Long House freehold.
81.	It is clear from the evidence that a house owner seeking insurance will not generally be expected to disclose the existence of building work at a neighbour’s house unless asked to do so. This insurance was for The Stables and for a house far away from the Estate. Taken in isolation I do not consider that Aviva has established a non - disclosure entitling it to avoid. Nonetheless this aspect should have been disclosed as part of Mr Bate’s obligation to give insurers a fair picture overall of this unusual estate and the activity at it.
82.	The 2004 proposal – The Stables was a let property. Aviva says that the representation that The Stables was a let property was not true. Mr Bate says that his brother was living in the property but paying no rent and there is no evidence of any tenancy or letting. While it is odd that Mr Bate should have provided that information through his broker and signed the declaration the issue of rent is not material and I place no importance upon it.
83.	The 2004 proposal - description of past claims. The representation about the claims that Mr Bate had made within the last 5 years was untrue. Confirmation (xii) records a claim in April 2004 where a building contractor caused fire damage at a “previous” address after cutting through an electricity cable. Aviva says that this was not true because the fire damage did not occur at a previous address and it occurred in May 2004. It occurred at the Long House which was Mr Bate’s home and the address he had been at from 1984.
84.	The Claimant’s case on this point has shifted over time (as indeed has Aviva’s on certain aspects of this case). Mr Bate does not (and could not) deny that the words used are incorrect but he points to the fact that the address was different from those covered under the policy and was at least “another address”. He suggests that Mr Bate gave correct information to Mr Cockerton who in turn passed this to Mr Davies at Home & Legacy. But Mr Cockerton‘s evidence was that he would have checked the proposal form carefully against the information received from the client. He also said that if he had known that the fire had been at the Long House he would have told insurers of this because he, like Mr Davies, would have regarded that fact as “highly material”. The answers relied on by the Claimant to show that his view was different do not do so when set in context. Further Mr Mobey describes the previous fire as a ‘major material fact’. Mr Moody also suggests that as the form was ‘pre -populated’, ie generated by the Defendant, his client’s responsibility is diminished.
85.	The archaeology of how the proposal came to take the form it did is not of great assistance. I believe that Mr Cockerton was truthful about this aspect of his evidence and that the idea that the information somehow got to Mr Davies is fanciful. The answers to the form were generated by Aviva on the information supplied to it. But the fact remains that Mr Bate signed the proposal form and knew of its importance and exactly what he was doing. His answer on the form suggested that there had been a fire caused by a contractor at an address he had left. But the fire occurred on the Estate, his home for twenty years and was caused by his own wholly owned company. The contractor was Parthenon, in substance Mr Bate himself. Reference to ‘found’ suggests a distance between Mr Bate and the contractor which did not exist. The location of the fire was highly material, as the Claimant’s expert Mr Brown also accepted, and would have led to questions being asked which would have revealed that the position was more complex. The answer simply gave a false picture which Mr Bate must have known to be false. This was a material misrepresentation which would have affected the terms on which the insurance would have been granted.
86.	Aviva also says that the representation that the building contractor did not have adequate cover was misleading and false – the building contractor had no cover at all. (Mr Bate produced a certificate of insurance for Parthenon which showed that it might have had insurance). Aviva says that the representation that Mr Bate was attempting to pursue the matter through a previous insurer was misleading and false, because Mr Bate was attempting to pursue the matter through Zurich, which was his then current insurer of the Long House.  Aviva also says that the representation that Mr Bate was attempting to pursue the previous insurer did not reveal the true picture of the state of the claim and was misleading because Zurich repudiated liability to indemnify Mr Bate on 14 July 2004 and confirmed that repudiation in November 2004. (That is literally true and Mr Bate would have known it at the time but the fact is that Mr Bate took the case successfully to the Insurance Ombudsman. In any lay sense he was still attempting to pursue the matter and I do not think that particular criticism appropriate). The points in this paragraph do not affect  the view I take of this defence.
The 2005 proposal for cover of the Long House.
87.	Use in connection with business. Aviva says that the representation that the property was not used in connection with any business or profession was not true because the two garages were used respectively by Parthenon and by Bate & Co, Mr Bate’s loss assessing and surveying business. 
88.	The loss assessing business was based in the office in the Long House garage. There is no evidence that it was disclosed. Mr Moody relies on Mr Bate’s evidence that he told Mr Cockerton that he worked from home and it is set out in the copy fax of 6th April 2005. He argues that it is likely that Mr Cockerton passed this information on to Mr Davies. The likely explanation for it not being recorded on the proposal form is that clerical work from home was not material and there is coverage for business equipment up to a value of £15,000. He cites the views of Mr Mobey.
89.	Aviva submits that if Mr Bate had given this information to Mr Cockerton he would have noted it on his file and passed it on. For reasons I will come to I do not accept that the copy fax of 6th April was ever sent or that the copy reached Mr Cockerton until much later. 
90.	Mr Moody argues with more conviction that there was no inducement. Mr Davies said this:
“Q. If you had been told that he had an office in his garage where he worked part-time from home as a loss assessor, you would have written the policy on the same terms?
A. If that is the only thing that was disclosed with nothing else, yes, I believe so.”
Ms Hubbard said:
“Q.  If the facts were…that two or three doors away, Mr Bate was simply carrying out clerical work, that wouldn’t be a matter of concern to you would it?
A: No”
91.	He points out that the Aviva Underwriting Guide shows that work at home is an acceptable risk save that (where visitors come onto the risk premises) an endorsement may be imposed in respect of theft. That does not apply here since there were no visitors. 
92.	I accept Mr Moody’s submissions about inducement on this issue. Aviva does not succeed on this aspect, seen in isolation. I next consider the Coach House garage.
93.	Aviva says that the Claimant failed to disclose that Parthenon was operating from the Coach House garage and the yard. The Coach House garage is a permanent office for Parthenon and includes the company’s name etched into the glass frontage. Other people attended the Coach House garage to work for Parthenon (both before and after the 2006 fire), including Terence Bate, the Claimant’s bookkeeper/PA Jan Williamson and Mr Heathcote who is referred to in correspondence as Parthenon’s “senior estimator”. Parthenon had a van which it brought into the Long House Hamlet before and after the fire in 2006. Parthenon was involved in contracts off-site which purported to include the provision of labour, materials and resources. There was also some evidence that Parthenon was hiring plant for use off-site, a Travis Perkins invoice dated 28 July 2005.
94.	 After the fire Woodgate & Clarke went to the property on a number of occasions. Three representatives of that firm (Mr Crowe, Mr Cohen and Mr Howlett) made handwritten, contemporaneous, attendance notes. Each of them recorded that Parthenon was operating in a substantial way from the Coach House garage which included the storage of materials in the yard behind the outbuildings. In Mr Howlett’s memo to Mr Crowe dated 12 June 2006, compiled following a site visit, Mr Howlett noted that,“[The outbuildings have] been converted to form three garages used for storage of materials, together with offices used by [the Claimant’s] brother who has a building contracting company. Behind the offices is a yard area used for storage of materials in connection with the brother’s business.” (The Claimant points out that Mr Howlett was not called as a witness.) The Woodgate & Clarke Report, compiled by Mr Crowe, recorded that the outbuildings had been converted for the use of storage of materials and the running of the Claimant’s brother’s construction business.
95.	The report records that the yard behind the outbuildings was being used to store building materials in conjunction with the Claimant’s brother’s construction business. This impression was not dispelled when Mr Bate was cross - examined about the yard by reference to some of the photographs. Mr Crowe’s handwritten notes of an interview record the Claimant telling him that, “In addition to offices Parthenon also has a small builder’s storage yard at these premises.” 
96.	In cross-examination it was suggested that Mr Crowe had simply adopted the notes of Mr Howlett when compiling the Woodgate & Clarke Report. Mr Crowe maintained that both the memorandum provided by Mr Howlett and the Woodgate & Clarke Report accurately recorded his impression of the Long House Hamlet following his visits and his discussions with the Claimant. For reasons I shall give I prefer the recollection of these witnesses to that of Mr Bate.
97.	Parthenon was more than a one man band. Apart from Ms Williamson, Mr Bate hired in family members and others to work on Parthenon contracts. I do not accept his evidence that this practice started only after the fire and because he was having to battle with Aviva.
98.	Mr Davies accepted that if the yard was for Mr Bate’s own use for maintenance and renovation that would not be material. But its function was more substantial than that. The yard was within the area covered by the policy and the activity within it should have been declared.
99.	The argument about disclosure of business activity on neighbouring property is in principle the same as discussed above for the 2004 proposal. So I do not repeat the arguments but the context is different and one must also look at matters as a whole, an observation that I have been tempted to repeat too often in this judgment. 
100.	This was a policy for the home of a rich individual but it was no ordinary house and grounds as should have been obvious to Mr Bate. It was a collection of buildings close together. There had been a substantial previous insurance claim on the Estate the relevance of which the insured had concealed. The Coach House had been created from the back of the main house and minor work by Parthenon was continuing. Although previously insured as part of the Estate the Coach House was in 2005 not insured at all. A scheme to develop the main house and its buildings had come to nothing but signs of it still remained. Some works were being done to the main house and a flat was being created for a family member in breach of the condition to notify insurers. One business of a clerical kind was being carried on in the garage in breach of a representation. A separate construction business was being carried on from the neighbouring garage belonging to the Coach House and from the yard that formed part of the insured property. By breaking down these different aspects and treating them in isolation the Claimant can make a plausible claim that in some particular respects matters are not material and, in isolation or as a concept, would not be regarded as such in internal manuals or in the view of an expert. Thus it is right that business carried on or building work done in a neighbouring property is not a matter for the owner of a terrace house to disclose or to realise that he or she might have to disclose. But the Coach House was a neighbouring property in only a literal sense and the business it was doing also involved the insured yard. These highly untypical arrangements should have been disclosed. They would have been disclosed if Mr Bate had given Mr Cockerton the full picture. Someone with the background of Mr Bate should and may have known that.
101.	 It is unsurprising that the conventional questions asked when a home insurance policy is taken out are insufficient to provoke disclosure of all material facts when the applicant is seeking insurance for an unusual property which has various uses and been subject to a degree of development. The answer to the repeated assertion on Mr Bate’s behalf that particular matters could not reasonably have been expected to be disclosed is that when these matters are all put together it becomes obvious that disclosure of  most of them is required to give a fair presentation of the risk.
102.	 The 2005 proposal - representation of previous claim. Although the 2005 wording is different the misrepresentation remains. The representation that in April 2004 a building contractor had caused damage at a “previous” address after cutting through an electricity cable was clearly false because the cable had been cut through at the Long House, the very property Mr Bate was seeking to insure. As to this aspect the positions of the parties and my conclusion are substantially the same as for the November 2004 proposal.
103.	The 2005 proposal - notification of works to Long House. Mr Bate says that he had agreed to provide suitable accommodation for his brother Terence at the Long House and it was these works together with maintenance works to the roof which were continuing at the time of the fire. Aviva relies on a schedule of outstanding maintenance, repairs and upgrading prepared by Mr Dust, a witness, who was the architect for work done on Mr Bate’s home. The total cost of these, £28,310 plus VAT became the price for a contract dated 20 March 2006 between Mr Bate and Parthenon. There was also a contract for roof repairs for £8,250. Notification of these works was required by General Condition 4.
104.	Aviva says that the Claimant failed to disclose that the Long House was being developed for commercial purposes at the time of the inception of the 2005 Policy and that this was a material non-disclosure and/or misrepresentation relying on the following. In April 2006 James Crosbie Associates drew up plans for the development of the Long House which included divisions for each of “East View”, “South View” and “The Gables”. The plans drawn up by James Crosbie Associates included, amongst other things, structural calculations for the roof works. (However it seem from a letter produced by Mr Moody in closing that these were historical plans produced for the purpose of the roofing works.) Signs remained in place outside the Long House hamlet referring “site” traffic to a particular gate. An advertising board, advertising each of the separate developed residential units remained in place outside the gates upon the advice of Alan Kirkham, the Claimant’s estate agent. The contracts let in March 2006 for about £36,500 plus VAT were for very significant works, not confined merely to the provision of disabled living accommodation. The contract works in 2006 included hot works. During the investigations carried out by Woodgate & Clarke following the 2006 fire the Claimant made reference to the ongoing development works at the Coach House (as recorded in Woodgate & Clarke’s contemporaneous handwritten notes and the Woodgate & Clarke Report). The reinstatement work carried out by James Crosbie following the fire, was not of the Long House undeveloped but included the development of the Long House in accordance with the original plan. (However there is evidence that that was because there was no other way for Mr Bate to finance the work.) 
105.	Mr Bate’s case is that there was no ongoing commercial development and that that is consistent with the timing and fact of the rescission agreement. That case is supported by the unchallenged evidence of Mr Kirkham and Mr Dust. Aviva cannot show that there was development on the scale alleged. As I see it the facts relied upon are more consistent with a scheme that had fizzled out and not been dismantled properly and with the more limited work that was being done. It is clear however that work was in train to the extent shown by the documents relating to the £36,500 plus VAT and this of course should have been disclosed.
106.	Mr Bate claims however that the works were notified to Aviva. Mr Moody  said in his opening  skeleton argument :
“It is a matter of some importance in this case that these works to the Long House were expressly notified to Rebecca McGruther of H&L. It is also important to note that Ms McGruther appears either to have kept no record of that notification, or alternatively H&L lost the relevant file note. It is clear that notification was given because Mr Cockerton recorded this in his letter to Mr Bate of 9th February 2006:
“I have also told them of your need to carry out maintenance work to areas of the roof resulting from damage due to the resent [sic] high winds. Whilst the scaffolding is in place you intend to install some new flashings and updated Velux roof lights and alter some rooms to create disabled living accommodation for your invalid brother. The cost of the scaffolding and the work will exceed the permitted policy limit of £10,000 as this roofing work necessitates your complying with Heath and Safety requirements.
I have confirmed that there will be no Building Regulation Controlled structural alterations or “hot work” involved, however I have requested that they revert to me if they need any further information.”       
Ms McGruther did not take up the offer of reverting for further information. Mr Cockerton also made a hand-written record on his copy of the letter:
Called Rebecca McGruther @ H&Leofelis
…
> Advised of maintenance works over £10k & reason which she confirmed acceptable and noted her file.”

It is extraordinary to note that Aviva persists in arguing (Opening para 59) that notice of building works was not given.”
107.	These were entirely appropriate submissions given the information available to Mr Bate’s lawyers. But on the fourth day of the trial the file of Hamptons was produced for the first time. As a result of disclosure of that material I am clear that no such notice was given in February 2006 and that the note relied upon was very probably not prepared at the time but was created later to give a false impression that what might have seemed to be a gap in the case did not exist. The absence of a file note at Aviva is not significant given the amount of other material the company has mislaid. The absence of the conventional response of a form being sent out by Aviva is surprising. It is also surprising that, given the very limited information set out in Mr Cockerton’s note, Ms McGruther did not ask for more. Ms McGruther was clearly aware of basic insurance practice and her limitations (she is now a school teacher), which are fewer than Mr Moody suggested. It is implausible that Mr Cockeron’s contemporaneous note of a conversation which then led to his letter to Mr Bate should have been written on his copy of the letter, already written. The letter is longer and more conveniently worded than one would expect in the context of the recorded dealings between Mr Cockerton and Mr Bate. Finally the behaviour of these witnesses in the not dissimilar context of the April 2005 letters creates further doubts about this exchange. In short I do not accept that Aviva was given any notice of these works. There was a clear breach of  condition.
108.	In order to explain my reference to April 2005 I must deal with the credibility of these witnesses on that issue. This involves a wider evaluation of the live evidence.
The evidence of the witnesses other than Mr Bate and Mr Cockerton
109.	The main events in dispute in this case took place between 2004 and 2006 and the trial was in April 2013. All the Defendant’s witnesses who were once employees now work elsewhere, had no axe to grind and very little live memory of these events. The underwriting file was lost at some point. There was no criticism by Mr Moody of the honesty of these witnesses. He was justifiably critical of Aviva’s management of the risk and cited in particular the failure by Ms McGruther to maintain adequately records, notably by omitting to record a change to Mr Bate’s occupancy arrangements which led to Aviva making a misconceived allegation of misrepresentation. Those criticisms lead me to conclude that the fact that an alleged communication was not on Aviva’s files does not, as it might have done if the matter had been run efficiently, necessarily mean that it was not made. 
110.	 Two former employees, Mr Davies and Ms Hubbard, were asked questions about materiality and inducement. Both were straightforward and ready to say things adverse to some points advanced by Aviva. Both have left the company and have no axe to grind. Ms Hubbard seemed to me a particularly able and intelligent insurance executive. They were both reliable witnesses.
111.	The note taking and investigative process of those retained by Aviva to investigate the fire was challenged. The witnesses had little live recollection of events but they had no reason not to make accurate records. They are by the nature of their work accustomed to doing so and had no motive not to.  
112.	Ms Emma Bate gave evidence which I accept about her occupation of and the works to the Coach House and the effect on her father of the difficulties he has faced. Her evidence about what happened generally on the Estate, in particular what business was carried on at it, was understandably hesitant given the elapse of time and the fact that she was away in working hours doing her own job. Ms Bate was understandably and properly loyal to her father.
113.	My Kirkham and Mr Dust were straightforward witnesses. Mr Kirkham first worked with Mr Bate in 2003 and his evidence was short and to the point. I accept his evidence but I am not convinced that Mr Kirkham’s view that the commercial development of the site was over by late 2004 was shared by Mr Bate. Mr Dust has been associated with Mr Bate since 1976 and lives nearby. His professional involvement with Mr Bate was close and he was involved with the redevelopment after the fire. He confirmed that Parthenon had no employees. There was a book keeper Jan Williamson who may have been self - employed. All other Parthenon workers were self - employed. He never saw clients or other professionals at the office but he was not there all that often.
Mr Bate and Mr Cockerton - Letters of 4 April 2005
114.	On 4 April 2005 Mr Cockerton wrote to Mr Bate (in a letter I will call 721 after its bundle number) thanking him for choosing Hamptons and explaining the reasons for choosing Norwich Union (as Aviva then was), enclosing the pertinent documents and describing payment arrangements. Another version of that letter 685 was relied on in the letter before action and exhibited in the proceedings. That version adds the words “of Long House” after “your insurance arrangements”. It adds confirmation that the Aviva policy includes all the cover provided by Zurich. It adds that Home & Legacy have stated that the policy must be with Norwich Union because they already underwrite Radnor Drive and The Stables and are aware of the fire claim at the Long House in 2004 . In evidence Mr Bate was asked why there were two letters and he explained that he had asked for 685 as he wanted to have the additional assurances it contained before becoming committed to Aviva (on 13 April 2005). That claim was false and Mr Bate must have known it to be so. The letter cannot have come into existence until, at the earliest, 23 May 2005. 
115.	From analysis of other letters from Hamptons at around the time of 721, the letters could not have been written on the same day. Mr Cockerton effectively admitted this. He indicated that the reason for writing the letter 685 later than 4 April 2005 could well have followed some form of conversation he had with Mr Bate. Aviva claims that he would have asked for it sometime after 7 July 2006, which was the date he submitted 721 to Woodgate & Clarke.
116.	Mr Bate’s version of events was that he received 721 following a telephone conversation with Mr Cockerton. He sent a fax to Mr Cockerton dated 6 April 2005. There was a further telephone conversation after Mr Cockerton had received the fax which led to Mr Cockerton amending the letter of 4 April 2005 and sending it to the Claimant. This account and the final disclosure of the Hamptons file led Mr Cockerton to serve a second witness statement agreeing with Mr Bate’s account.  
117.	The explanation provided by the Claimant and Mr Cockerton is utterly implausible. 685 uses different type face from 721. The “arrow” bullet points are interceded with numbered additions. This is not consistent with other Hamptons documents disclosed. 685 is on different Hamptons letter paper to 721. The letter paper for 685 did not come into existence until some months after 4 April 2005. The directors listed at the bottom of the Hamptons letter paper were not appointed until well after the 4 April 2005. 
118.	The “fax” on Hamptons’ file is marked “Copy”. It is, perhaps by accident dated two days after the letter which mentions it. There is no reason for Mr Cockerton to have the “Copy” version on his file. It should have been kept by the sender (i.e. the Claimant) but he has not disclosed it or a copy despite being asked to do so. Mr Cockerton was unable to explain why this copy and not the fax was on his file. The “fax” does not have a “fax notation” across the top or bottom of the page to indicate that it has, in fact, been sent by the Claimant to Mr Cockerton.  The fax includes unexpected remarks helpful to Mr Bate such as the assertion that he works from home. If a real fax had been sent one would expect it to be on Hamptons’ file. The Claimant has also failed to provide from his own disclosure his original versions of the letters of 4 April 2005, despite requests. The first time 685 was disclosed was with the Claimant’s solicitors’ letter before action, dated May 2011. It was not referred to in numerous communications between Aviva’s avoidance letter dated 21 August 2006 and the solicitors’ letter of May 2011, including those from the Claimant and Mr Cockerton who would have had his own file copy of 685, had it been in existence then. Furthermore there was no claim by the Claimant in that period that a fire at the Long House itself had been previously disclosed.
119.	Mr Moody suggests that this view is mistaken and should have been put more directly to the witnesses. He points to a screen note of Mr Davies of a conversation with Mr Cockerton on 29 March 2005 consistent with one of the additions included in 685 which in turn is consistent with a file note by Mr Cockerton of a conversation with Mr Bate on 6 April ‘in response to his fax’. He suggests that if there was going to be a dishonest scheme of this kind it would have been executed better, have involved more significant issues and would have been more relied on. He also makes a point about the date of the appointment of directors which fell away. He points to the unblemished character of Mr Bate and to the fact that three of Aviva’s witnesses accepted that when they met the Claimant after the fire he was completely straightforward.
120.	When at the start of his evidence Mr Bate gave his account of why there were two letters it sounded plausible. Mr Bate is articulate and persuasive. But this account was demonstrated to be untrue when Mr Cockerton gave evidence.
121.	Mr Cockerton had a senior position in a well - known firm and is good at his job. He is liked and respected by those at Aviva with whom he dealt. In cross -examination he was at first confident, clear and convincing. I have no reason to doubt his evidence about more general matters. When the questions turned to the letters and the fax Mr Cockerton seemed a different man. He was hesitant and unconvincing and he became visibly nervous (as the Claimant’s Counsel accept in their closing submissions). Judges know from the law, from their training and from experience that the demeanour of a witness is an unreliable guide to whether the truth is being told. This did however seem to me one of those extremely rare occasions where demeanour was of some weight. I had the impression of an honest man unused to telling untruths driven for some reason to do so and being very uncomfortable about it.
122.	I reject the criticisms that Mr Eklund failed to put these matters or to plead them. The material only emerged on the fourth day of trial. Mr Bate was not asked about these matters, in effect, because he had failed to disclose the Hamptons file much sooner. There was no application to recall him later. Mr Cockerton was well aware of what was being said of him. Further at the end of his evidence he and I had this exchange.
“Q: I think I should give the opportunity for you to deal with it. It think one of the things that Mr Eklund’s side may say is – they haven’t said it, but since you are here, I think you should have an opportunity to deal with it.
A: Yes
Q: One of the things that they may say is that your dealings in relation to this letter and to the February note have in some ways been less than straightforward.
A: Right.
Q: Would you like to say anything about that?
A: No, there is nothing else I wish to add.”
123.	The weight of the documentary and circumstantial evidence is so great that it is not necessary to rely on demeanour however. Further the absence of disclosure in the litigation by Mr Bate of documents which would be crucial if his account were true is striking. 685 was probably created by Mr Bate and Mr Cockerton after the fire (at a time when Mr Cockerton had been enlisted by Mr Bate to campaign on his behalf) but was certainly created after 25 May 2005. Either way this was a deceitful device about which Mr Bate knowingly lied in evidence. Mr Cockerton, for some reason that did not emerge, cooperated in this scheme and gave untruthful evidence about it.
Other allegations of dishonesty made against Mr Bate.
124.	Aviva make other allegations of dishonesty. I deal with claims relating to the individual defences elsewhere. A number of claims concern Mr Cockerton’s evidence of what Mr Bate told him at various times. It is not credible that Mr Cockerton or any experienced broker, if given the full picture by Mr Bate, would not have passed more information on to Aviva. But this is not a reason for making some independent finding of dishonesty based on  the recollections of Mr Bate about conversations eight or nine years ago. Other allegations concern Mr Bate’s willingness to tell untruths to advance his claim - Aviva points to an untruthful claim in November 2006 that the leaseholder of the Coach House (in fact his daughter ) was threatening action for damages.
125.	Aviva also claims that Mr Bate’s evidence revealed other dishonesty in his past and in what he told the court and produce a 13 page schedule. Some of this seems to me conventional commercial hyperbole about the scale of Mr Bate’s business operation no worse than what one sees in a different form from some large companies. Other matters are peripheral. It seems that he made an exaggerated claim for loss of earnings to Zurich over the May 2004 fire.
126.	Many  of the matters relied on involve Mr Bate in effect arguing his case by making unsustainable claims about the effects of documents such as those providing for the management of the estate, his accounts and the records of building works and contracts. This too is something I consider only as part of addressing the issues.
127.	 Mr Bate is in a desperate financial plight and has been pursuing a claim for over five years against a very large company arising out of what was on any view a genuinely accidental fire. Many aspects of his business life have been conducted informally. He has great experience of making insurance claims for others. He may have felt driven to tell untruths to Aviva and to the Court in seeking to right his grievance. He has been less than candid over a number of matters. I find that he has been dishonest over the April 2005 letters in a manner that was planned and executed deliberately. This was not just a silly lie told under pressure. He has been under great pressure and suffers from a painful condition and this too may be a reason why his recollection has not been accurate. Many of these events took place a long time ago. Overall I hesitate before accepting the truth of anything he says to his potential advantage about his claim which is not supported by contemporaneous documents, by other witnesses or by clear probability.
The expert witnesses
128.	Both expert witnesses were honest and doing their best to provide a detached and independent testimony. Mr Mobey’s relevant experience was greater than that of Mr Brown but in the end there was no substantial difference between them on points that mattered.
129.	I have recognised that the expert evidence is important to materiality and that there are dangers in relying on the views of the insurer. The views of Mr Mobey and Mr Brown are therefore important. Mr Mobey, in terms that I found convincing, considered in his report that on the basis of the facts alleged by Aviva virtually all the alleged misrepresentations were material. As Mr Moody pointed out the report does not consider the facts as alleged by Mr Bate but where I find the facts to be those alleged by Aviva that point diminishes in importance.
130.	My conclusion that the Coach House does not form part of the property insured means that the works at it and the Parthenon business in its garage can only be relied on to the extent that this activity on a neighbouring property was material. In Mr Mobey’s view it was, given the particular considerations affecting the Estate the nature of the cover for a home and outbuildings and the proximity of the buildings and the activities within them to each other. I accept that evidence.
131.	Mr Brown’s evidence did not differ greatly from that of Mr Mobey on the most significant matters. He accepted as material the operation of a business from the risk address, carrying out clerical work in a loss assessing business in the garage, carrying on construction works at the Coach House (including interior works) because of increased fire risk and the risk posed by additional people coming to the property, the correctness of the  address for the previous fire and the fact that that fire had occurred during the development of a nearby  property in the same ownership of the proposer.
132.	Understandably some of the questions put to the experts involved assumptions favourable to one of the parties and elicited predictable responses which each side has relied on its submissions. It is necessary of course to look at the evidence overall. 
133.	In short where I have found there to be misrepresentation or non - disclosure the expert evidence, along with the other relevant factors leads me to conclude that this was  material except where I have stated otherwise. It has followed from that, and from the evidence, that in those respects the Defendant has established inducement.
ICOB
134.	Mr Bate was an insurance professional to the extent that I have indicated. He had a broker and if he had provided full and honest information to Mr Cockerton this would have been passed on and no risk of misrepresentation or non disclosure would have arisen. He made what he must have known to be two misleading statements about the previous claim. He knew that building work was being done at the Long House and that he should disclose it but did not do so. He was conducting business at the Long House Garage as an assessor. He knew he should have disclosed this but did not do so. He was also actively dishonest in the presentation of aspects of his claim. Against that background it would be neither apt nor fair to characterise Aviva’s rejection of the claim as unreasonable or to find that, given the knowledge of Mr Bate of the matters in questions, it should not have refused to meet that claim. It follows that there was no breach of ICOB 7.3.6.
 Estoppel and Waiver
135.	Mr Bate claims that Aviva waived its right to avoid either of the policies, because of the payment of his claim for damage to a camera and equipment. There was no evidence of there being an unequivocal and unambiguous election by relevant Aviva personnel with the relevant knowledge that Aviva would not rely on its right to avoid either of the policies from inception or a relevant renewal. On the Claimant’s evidence, he was aware from 8th June 2006 (just two days after the fire) that Aviva’s rights were reserved in relation to its liability to indemnify and that that remained the position. On a number of occasions after the fire he referred to the fact that Aviva had reserved its rights. This defence was scarcely referred to at the trial and rightly so as there is nothing in it.
Conclusion.
136.	The claim fails because the Defendant has established some of the misrepresentations, non - disclosures and breaches of condition on which it relied and, on the facts, the Claimant has no valid claims under ICOB or a basis for relying on waiver or estoppel. It is not therefore necessary to consider the claim for damages, or appropriate as it raised controversial issues of law.
137.	There may be relevant issues I have omitted to decide. If so the hand down of this judgment should be fixed to allow time for this.
138.	I repeat my admiration of the conscientious work of the lawyers on both sides in the preparation and presentation of this case.
139.	I shall be grateful if the parties will, not less than 72 hours before hand down of this judgment, let me have a note of corrections of the usual kind and a draft order, both preferably agreed, and a note of matters which they wish to raise at the hearing.