Case No. CCRTF 1999/0117/B2
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MEDWAY COUNTY COURT
(HIS HONOUR JUDGE HARGROVE)

Royal Courts of Justice
Strand
London WC2

Date: Wednesday 19 January 2000

B e f o r e:

LORD JUSTICE ROBERT WALKER
LORD JUSTICE LAWS
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CARINA MARGARET JACOBS
Claimant/Respondent

- v -

1.  JAMES COSTER
(Trading as NEWINGTON COMMERCIALS SERVICE STATION)
Defendant/Appellant
2.  AVON INSURANCE
Third Party
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(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
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MR J RICH (Instructed by The Jarman Partnership, Sittingbourne, Kent, ME10 4D11) appeared on behalf of the Appellant.
MR J STUART-SMITH QC and MR A BURNS (Instructed by Messrs Berrylands Lace Mower, London, EC2M 5QN) appeared on behalf of the Respondent.
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J U D G M E N T (As approved by the Court)

1.	LORD JUSTICE ROBERT WALKER:  Lord Justice Laws will give the first judgment.
2.	LORD JUSTICE LAWS:  This is a defendant’s appeal against a decision of His Honour Judge Hargrove QC, given in third party proceedings in the Medway County Court on 29 July 1998, when he held that the third party insurer was entitled to avoid liability to his insured, the defendant, in respect of a sum which the defendant had paid to the plaintiff in the case pursuant to a compromise of the plaintiff’s claim against him. The appeal is brought with permission granted by Evans LJ and Wilson J. 
3.	The matter arose as follows. The defendant had entered into a combined all risks policy of insurance with the third party in March 1992. The policy applied to the defendant’s business premises, a petrol filling station and adjoining commercial vehicle sales lot. Clause 5a of the policy under the heading “General Conditions” provided: 
“If any event gives or is likely to give rise to a claim, the Insured (or his representative) must:
a) report the details immediately to the Company and send a written claim within thirty days but within seven days if the claim is for riot, civil commotion or malicious damage.”
4.	Clause 8 of the policy provided:
“The due observance and fulfilment of the terms exclusions conditions and endorsements of this Policy in so far as they relate to anything to be done or complied with by the Insured and the truth of the statements and answers in the proposal will be conditions precedent to the liability of the Company to make any payment under this Policy.”
5.	On 23 March 1994 the plaintiff, Mrs Jacobs, was on the forecourt of the defendant’s petrol filling station intending to fill her car with petrol. The judge below described what happened thus: 
“She fell over and injured her leg. She was taken to the payment kiosk and was seated on a chair, where she was seen by Mrs Coster [the defendant’s wife] who sent for an ambulance. Mrs Coster says that at no stage did the Plaintiff complain to her that her fall was in any way the fault of the Defendant, or that it was due to diesel or any other substance being upon the forecourt.”
6.	The defendant did not then notify the third party insurer of the plaintiff’s accident as being an event likely to give rise to a claim; he did not notify them until 26 October 1994. That was shortly after he must have received a letter from the plaintiff’s solicitors dated 13 October 1994 intimating a claim against him on the basis that the plaintiff had fallen because the forecourt office filling station was slippery. 
7.	The matter thereafter proceeded in the usual way. Ultimately, the plaintiff’s claim (she had broken her leg or ankle) was compromised with the third party’s agreement for some £12,000. Throughout, the third party reserved their position as to their liability under the policy. 
8.	The judge described what followed:  
“The insurers took statements from the Defendant and Mrs Coster. The Defendant cannot read or write; he can sign his name, and that is the limit of his liabilities in that respect. Mrs Coster dealt with all the paperwork of the business. In their statements, Mr and Mrs Coster said that there had been no complaint to them about the state of the forecourt and, indeed, when they looked at the forecourt on that occasion they could see nothing which could have caused the accident. However, Mrs Coster did say-
‘As she did not contact me at all after the incident until the solicitor’s letter of the 21st October 1994, I assumed her injury was minor and that she did not blame me at all. If I had known she had broken her leg I would have reported the incident.’
On the 25th April, the Third Party repudiated liability. The manner in which this was put was as follows:-
‘We are satisfied that you have not complied with general condition 5a....”
9.	whose terms are then set out. The insurers concluded their communication thus: 
“’We are therefore unable to deal with the claim being made against you by C Jacobs arising out of the incident which occurred on the 23rd March 1994.’”
10.	The judge continued:
“The Third Party does not rely in this matter upon the words: ‘If any event gives rise to a claim,’ but says that the expression: ‘Likely to give rise to a claim’ is apposite to the validity of their rejection of liability.
The vital question, therefore, is whether the event of the 23rd March 1994 was likely to give rise to a claim. That question has to be answered with reference to the position at the date of the occurrence, immediately after the incident.”
11.	I am prepared to make certain assumptions in this case without necessarily arriving at a definitive decision about them.
12.	(1)  If it is shown that the defendant was in breach of clause 5a then the third party would be entitled to avoid liability under clause 8.
13.	(2)  5a must be construed and applied objectively, but taking account of such knowledge as the insured had. That was Mr Stuart-Smith’s submission for the third party.
14.	(3)  If the accident which happened on the 23 March 1994 was likely to give rise to a claim, then there would be a breach of 5a even if, as happened, when the claim actually followed the defendant promptly notified the third party; that is to say the later prompt notification would not save the defendant from breach of clause 5a. To that extent I proceed on the footing that Mr Rich’s submission in paragraph 6 of his skeleton argument is incorrect.
15.	These assumptions follow the line taken by this court in Layher Limited v David Richard Lowe, The Times 8 January 1997, a transcript of which has helpfully been provided for this court. 
16.	The burden lies on the third party insurer to prove by evidence that as at 23 March 1994 the plaintiff’s accident was likely to give rise to a claim. In Layher v Lowe this court rejected the proposition that the bare fact that a claim was in fact brought (in that case two years after the relevant event) of itself demonstrated that the relevant event or incident was one that was likely to give rise to a claim. The court moreover approved the view that “likely” in the clause of the policy meant at least a 50 per cent chance that such a claim would eventuate. With respect, I would adopt precisely the same approach here. 
17.	The judge dealt with the issue in the case in this way:
“Both the Defendant and Mrs Coster maintained that they did not know what caused the accident, and that they were given no hint by the Plaintiff that there was some blame attaching to the premises or to the Defendant. On the other hand, the evidence of both the Defendant and Mrs Coster was that after the accident they both inspected the forecourt, in order to ascertain whether there was anything which had caused the Plaintiff to fall, not only from the point of view of ascertaining the Plaintiff’s position, but also for the safety of their own customers. It does not matter that the claim might be unsuccessful; that is not the issue. The issue is whether there is likely to be a claim. It is urged on the part of the Defendant that it places the duty of notification far too high, if every time there is an accident on the premises the occupier of the premises ought to assume that a claim is likely. It is said that that may be the case in some transatlantic jurisdictions, but that is not the point to which litigation has sunk in this jurisdiction.
However, here was a situation of some gravity. Not only had the Plaintiff fallen over, but she had to be carried by two men into the payment kiosk, she was unable to drive her car, and was removed to hospital by ambulance. Whatever the Plaintiff said or did not say at that time, the features I have set out above would alert the reasonable man to the likelihood of there being a claim, and that likelihood was greater than fifty per cent. In the circumstances, therefore, there was a failure by the Defendant to observe the matter set forth in paragraph 5a of the policy.”  
18.	In my judgment, in light of the evidence before the learned judge at trial, this reasoning cannot stand. It rests on a premise or assumption that the fact that a person has suffered serious, or at any rate a non trivial, injury requiring her removal to hospital by ambulance, itself demonstrates without more that there is then and there at least a 50 per cent chance that in due course she will make a legal claim in respect of the injury. I should be loth to think that our society had reached such a sorry state and I do not think it has. There was in my judgment no evidence that the defendant and Mrs Coster knew of anything wrong with the forecourt. They had not been blamed by the plaintiff for her accident at the time. 
19.	Mr Stuart-Smith has submitted that there was indeed evidence before the judge entitling him to arrive at the conclusion which he did. He pointed to that passage in the judgment which I have just read out, “Both the defendant and Mrs Coster maintained that they did not know what caused the accident....” and then proceeding, as the judge said, “On the other hand, the evidence of both the defendant and Mrs Coster was that after the accident they both inspected the forecourt.”  Mr Stuart-Smith’s submission is that the opposition in the judge’s use of language there between these two propositions shows that he was placing them in contrast one to the other, and the inference is that the judge in fact rejected the evidence that the defendant and his wife inspected the forecourt. I am not prepared to accept that submission. If this experienced judge, in truth, disbelieved evidence being given by the defendant and his wife about a potentially important aspect of the matter taking place on the very day of the incident, I have no doubt but that he would have said so. In my view, the position is that the judge is to be taken as having accepted the evidence that the forecourt had been inspected. Upon that footing he must also, no doubt, have accepted the evidence that there was nothing wrong with it to be seen. 
20.	Even if Mr Stuart-Smith’s submission were right and for some reason the defendant and Mrs Coster told an untruth in saying that the forecourt had been inspected, the fact that it had not been inspected would not of itself go to prove the likelihood of a claim as at 23 March 1994. Mr Stuart-Smith relied further in his submissions before us on a sentence in Mrs Coster’s witness statement which was set out by the learned judge in a passage I have already quoted. The sentence was:
21.	“If I had known she had broken her leg, I would have reported the incident.”  
22.	But that piece of evidence goes to Mrs Coster’s state of mind in the event that she had known of a broken leg; it does not go to objective, the probability of a claim arising. 
23.	With deference to Mr Stuart-Smith’s admirably eloquent and economical submissions, I fear I am not moved from the clear conclusion that the judge has simply inferred the likelihood of a claim from the happening of the accident. That he was not entitled to do.
24.	For those reasons, I would allow this appeal. 
25.	LORD JUSTICE ROBERT WALKER:  I agree.
	Appeal allowed with costs her and below. Third Party insurers indemnity the defendant in relation to the plaintiff’s claim.