Neutral Citation Number: [2006] EWHC 2811 (QB)

Case No: 2006/0939
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 09/11/2006

Before :

THE HON MR JUSTICE TUGENDHAT
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Between :

	Norwich Union Insurance Limited	Appellant	
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	M.Meisels &anr	Respondent	

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Mr Michael Soole QC (instructed by Edwin Coe) for the Appellant
Graham Ecklund QC (instructed by Keoghs) for the Respondent

Hearing dates: 25th &26th October 2006
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Judgment

Mr Justice Tugendhat: 
1.	This is an appeal from the judgment of HHJ Higgins in the Central London County Court on the hearing of an issue of liability.  The judge gave judgment for the claimants and the defendant insurers appeal to this court, as it happens by permission which I myself gave on paper. I shall refer to the Appellants as the defendant and to the respondents as the claimants.
2.	The claim is on a contract of insurance on a portfolio of some 48 properties listed in a schedule. One of these, is at Gilda Crescent, London N16, and is the home of the claimants. The others were let. The first claimant makes his living as a property dealer, which involves the buying, renting and selling of both residential and commercial property. The proposal form was dated 6th December 2001, and the contract was entered into on 14th January 2002.  The perils insured against included fire, flood and other perils commonly covered by buildings insurance. An escape of water occurred at the claimants’ home on 6 August 2002. 
3.	The benefits payable under the contract in the event of water damage included the cost of repair and alternative accommodation in the event that the property was rendered uninhabitable.  That was what the claimants claimed under the contract. The benefits payable also included loss of rent, although that was not relevant in this instance, because the damage was at the claimants’ home.
4.	The claimants claimed that the property was rendered uninhabitable by reason of an insured event namely the escape of water.  The claimants have a large family and one of their properties is an hotel in Bournemouth. This also happens to be one of the properties listed in the schedule to the policy.  The total value attributed to the properties in the schedule is in excess of £10 million.  The defendants resisted the claim on the ground that it has validly avoided the contract. First, it was alleged that part of the claim was false and fraudulent and, secondly, it was alleged that the claimants had been guilty of non-disclosure, misrepresentation and breach of warranty.  In the letter of avoidance dated 30th July 2003, the defendants’ solicitors referred only to the allegedly false or exaggerated claim.  The other allegations arose only after the claimants had issued proceedings.  Some were raised in the Defence served in November 2003, while others were added by amendment and re-amendment in May and November 2005.
5.	The allegation of fraud made by the defendants included that the claimants did not in fact stay at the hotel at all.  The judge rejected this defence decisively in his judgement.   There is no appeal against it.  The appeal relates solely to issues of non-disclosure.  A number of points raised were abandoned at various stages of the proceedings.  Half the judgement, which runs to twenty three pages, relates to the issue of fraud.  The judge found that the claimants and their witnesses were honest and he was very critical indeed of the witnesses for the defendant called in relation to the alleged fraud.  He did not accept their evidence.  The findings that the judge made in relation to the alleged fraud had some bearing on his assessment of the witnesses in relation to the other defences relied on by the defendant in particular in relation to the issue of inducement.  The judge’s findings on the non-disclosure points are less detailed than those on the fraud issue, but the appeal is not on the basis that the reasoning is insufficient.
6.	There were in fact two proposal forms signed by the first claimant on 6th December 2001. Both proposals were made in the name of “Simon Tov Properties and others”, which is a reference to Simon Tov Properties Ltd (“STPL”) and to other owners whose names were given for the first time in a second schedule, dated 15th January (the day after the contract was concluded).  The first proposal form, to which I have already referred, has been called the “Let Plan Policy Proposal”.  The second is referred to as the “Property Owners Insurance Application Form”.  That second proposal form was required in respect of some seven properties that were let to commercial tenants.  Its relevance to this claim is that the proposal form contains answers which it is admitted were incorrect when the first claimant signed the form.  
7.	The question, to which the first claimant answered No, is as follows:
“Have you or any principal in the business or any company in which you or such principal have or have had an interest … (e) ever been declared bankrupt, the subject of bankruptcy proceedings or of any voluntary or mandatory insolvency or winding up procedures? If yes give details.”
8.	In fact as is common ground, there were some 20 companies of which the first claimant had been director which had been removed from the register or dissolved.  Most of these had been struck off pursuant to Companies Act 1985 Section 652.  But there were four which went to creditors’ voluntary liquidation, as follows:
“1. On 3rd March 1992 Regencydeals Limited, incorporated 1st July 1985, went into creditor’s liquidation and the final meeting took place on 11th September 1995.
 2. On 16th June 1993 Fivestar Builders Limited, incorporated 12th March 1975, was the subject of a winding up order and was struck off on 30th August 1994.
3. On 25th June 1998 Investtrust Limited, incorporated on 21st August 1991, went into creditor’s liquidation. It was struck off on 10th October 2000.
4. On 25th June 1998 Pearl Star Limited, incorporated 21st December 1994, was put into liquidation.  It was dissolved on 10th October 2000.

9.	The Let Plan Policy Proposal did not contain a question in the terms set out above, nor any question relating to either bankruptcy or insolvency proceedings in respect of any company with which the proposer was associated.  It did contain a number of questions the answers to which raise no issues in these proceedings. After the questions it did contain, there appear the following words:
“Disclosure: any other facts which are known to you which are likely to affect acceptance or assessment of the insurance cover you are requesting must be disclosed.  Should you have any doubt about what you should disclose, do not hesitate to tell us. Making sure we are informed is for your own protection, as failure to disclose may mean that your policy will not give you the protection you require, or perhaps you may invalidate the policy altogether…. 
Declaration: I/We declare that the foregoing statements and particulars are, to the best of my knowledge true and complete and that I/We have read the note above, headed Disclosure”….”
10.	The live issues remaining in this appeal arise under two headings: whether there was non-disclosure of material facts and, if there was, whether the defendants were thereby induced to enter into the Let Plan Policy.  The facts alleged to be material and not disclosed are under four headings:
i)	Facts relating to an Inland Revenue assessment and to accounts and returns which had not been filed or made by STPL.
ii)	Facts relating to other companies which had been dissolved for failing to file accounts.
iii)	Facts relating to the four companies referred to above which had been the subject of creditors liquidation, and in particular to two of them where the Inland Revenue is identified as a creditor.
iv)	The fact that in relation to the property on the schedule to the policy the first claimant was the registered owner, and referred to in the schedule dated 15 January 2002, under an alias “M Hager”.  
The Law
11.	The judge directed himself as follows in relation to the law on non-disclosure:
“6. With regard to the alleged non-disclosure or misrepresentation of material facts, the insurers must prove, this time to the simple civil standard, that the fact was material and that its omission, or the misrepresentation in relation to it, induced the contract.  This involves both an objective and subjective test, although it is commonly accepted that if materiality is proved then there may be a rebuttable presumption (if I may use that expression) in insurers’ favour in respect of inducement.  In this regard, I refer to the judgment of the House of Lords in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd.
7. The basic test of materiality is to be found in Section 18 of the Marine Insurance Act (1906), which says that: “Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk.”  In effect, any fact which the prudent insurer would use in the formation of his opinion.  In the Pan Atlantic case, Lord Mustill put it this way: “To my mind, this expression clearly denotes an effect on the thought processes of the insurer in weighing up the risk, quite different from words which might have been used but were not such as influencing the insurer to take the risk….
10. Finally, because one of the matters upon which the defendants rely by way of non-disclosure is an allegation against the claimants rather than an unchallenged underlying fact, it is necessary to consider how, as a matter of law, such a situation should be approached.  It is recognised that this is a difficult topic because (for example) as a matter of strict logic (albeit perhaps unrealistically) an undetected criminal should perhaps disclose his crime; whereas an accused but innocent man has no crime to disclose, yet the accusation still exists.  That injustice might ensue is obvious and, as it seems to me, there is a need for some sort of balance to be struck.  In this regard, I derive considerable assistance from the observations of Lord Justice Mance (as he was) in Brotherton v Aseguradora in which allegations against an insured were extant at the time of the placing.  In material part, Lord Justice Mance said this:
‘However, the authorities grapple understandably with some hard cases.  Firstly, what if, at the time of placing, the insured himself is under investigation for, or has been charged with, an offence which he knows that he did not commit, and of which he is subsequent to the placing indeed acquitted?  Forbes J in Reynolds and Fisher J in Gate v Sun Alliance Insurance Ltd [1995] LRLR 385 (High Court of New Zealand) thought that this could not be material.  May J in March Cabaret and Phillips J, as he was, in The Dora held, after hearing underwriting evidence, that it could be, on the basis, as Phillips J put it, that: 
‘When accepting a risk underwriters are properly influenced not merely by facts which, with hindsight, can be shown to have actually affected the risk but with facts that raise doubts about the risk.’

I add however that, in this situation, the issues of both materiality and inducement would in all likelihood fall to be judged on the basis that, if there had been disclosure, it would have embraced all aspects of the insured’s knowledge, including his own statement of his innocence and such independent evidence as he had to support that by the time of placing. This might itself throw a different light on the answer to one or both of the issues of materiality and inducement. That would of course be a matter of fact and evidence.”
11. The parties are not agreed as to the proper meaning and interpretation of this passage.  For the defendant, Mr Ecklund submits that the mere allegation (if, in itself, material) is enough regardless of the insured’s response and the evidence of innocence on which he may be able to rely.  Mr Soole, for the claimants, submits that this is not correct and that the position must be judged by reference to all of the evidence available at the time of placing.  In my judgment, Mr Soole’s submission must be preferred; for, otherwise, the words of Lord Justice Mance would add little or nothing to that which was already understood.  This can have been neither the intention nor the effect.  If that is correct then in the present case such an approach may well have an impact on all of the examples of non-disclosure as alleged; but I shall deal with this in more detail when considering each allegation in turn.”

12.	Before me Mr Ecklund QC advanced his submissions that the judge was wrong in law.  He did so by reference to North Star Shipping Limited v  Sphere Drake Insurance PLC [2006] EWCA Civ378: [2006] 1 Lloyds Rep  IR 519.  That judgment of the Court of Appeal was delivered on 7th April 2006, a week after the judgment appealed in the present case.  In North Star the Court of Appeal were concerned with a marine insurance policy under which a claim was made for damage caused to a vessel by an explosion.  Underwriters alleged that they were entitled to avoid the policies, amongst other reasons, for non-disclosure of a number of matters, including the existence of criminal proceedings in the Greek courts against the brothers who owned and managed the company which owned the vessel in question.  To meet that point, the insured argued that there was no basis to those charges. Reliance was sought to be placed on a letter written by the Serious Fraud Office, stating that it regarded the allegations as fraudulent. 
13.	Waller LJ gave the leading judgment with which the other members of the court agreed.   His judgment included the following, under the heading “Arguments on the appeal”:
“17. The law in this area is, as others have recognised, capable of producing serious injustice. If every false allegation of dishonesty must be disclosed in all types of insurance that may place some insureds in the position of finding it difficult to obtain cover at all, and will certainly expose them to having the rates of premium increased unfairly. I do not myself see it as a practical answer to say that exculpatory material can be produced, because unless the material is such as to prove beyond peradventure that the allegation is false, in which event the allegation seems to me no longer material, an underwriter is not likely to be prepared to take time sorting out the strength or otherwise of the allegation. In many instances he would be likely to take the view there is no smoke without fire and turn the placement down or at the very least rate the policy to take account of the allegation. Furthermore the decision in Drake may provide an answer in some but very few cases, and in any event does not seem to provide a remedy for the increased premium that an insured may have had to pay on the basis of a false allegation.
18. All that said, it does not seem to me that what must be disclosed can be defined as a matter of law in the way that Mr Goldstone would have us do and in a way which I might have been tempted to follow. It is a matter of evidence what is a material circumstance and, as the headnote in Pan Atlantic v Pinetop accurately records, a "material circumstance" is one that would have an effect on the mind of a prudent insurer in estimating the risk and it is not necessary that it should have a decisive effect on his acceptance of the risk or the amount of premium to be paid.

19. Expert evidence is called to guide the court as to what would influence the judgment of an underwriter. The only way that, under the present state of the law, the obligation of disclosure in this area of moral hazard can be confined is either by underwriters giving evidence that they would not be influenced and would not take into account an allegation of dishonesty, or by a robust judge rejecting an underwriter's evidence that he would take it into account. Spent convictions no longer have to be disclosed, and old allegations of dishonesty or allegations of not very serious dishonesty, one would hope, expert underwriters would not suggest would influence the judgment of prudent underwriters. But it is unreal to contemplate as a general proposition that underwriters as expert witnesses would ever give evidence that a prudent underwriter would not take into account in assessing the risk or the terms of the insurance a recent allegation of serious dishonesty the truth or falsity of which has yet to be determined, even if it is quite unconnected with insurance or the risk being insured. Furthermore it is difficult to see a judge not accepting that evidence.
14.	Later in the judgement, under the heading “Mr Goldstone’s argument”, Waller LJ said the following:
“35. Does the SFO letter undermine that conclusion? The judge thought that there were difficulties in taking exculpatory material into account in considering materiality as opposed to considering inducement (see para 206 to 210).  His view was that serious allegations of fraud would always be material, and it would be for the underwriter then to assess the exculpatory material. I suspect as a practical matter there is force in the judge's view but it would seem to me that it must be possible to have a situation in which it is so clear that there is nothing in the allegation, such as an admission from the person who has made the allegation that he has made a terrible mistake as to identity, that the allegation no longer needs disclosing because it is no longer material.
36. The position in this case however is that the SFO letter does not get near to providing such a clear answer to the allegations. In my view one thing that shows clearly that the SFO letter was not the end of the matter is that, after receipt of that letter by the authorities in Greece, the Greek proceedings continued and the allegations and charges were considered to be of sufficient substance for the judge in Greece in the Sotiriadis proceedings to order in January 1994 the Petrakakos brothers to provide security or bail for their attendance at trial…. 
15.	Mr Ecklund QC also relied on the following further passages in support of his submission that information that is not disclosed and which is not material taken in isolation, may become material, and so disclosable, taken together with other undisclosed information, provided that the two pieces of information relate to the financial position of the insured.
42. … first it seems to me that both Mr Hall and the judge had in mind allegations of fraudulent behaviour, which included not just a fraudulent assignment (or more accurately a dishonest concealment of an endorsement) but also alleged fraudulent transfer of the North Rock.  Furthermore it seems to me that if one envisages disclosure of the allegations being made in the Greek criminal proceedings together with exculpatory material, plus a denial of dishonesty, in that context the judge is right in taking the view that a different allegation of dishonesty by another third party would become material, even if, arguably, it had not been material on its own…. 
50. As regards non-payment of premium, it is not absolutely clear that the judge would have found this fact alone to be material. He seems to conclude it is material when taken with other factors. In so far as those other factors relate to the financial position of the owners, that is a matter which it has been agreed should not be dealt with by us at this stage. In so far as the judge following Mr Hall seeks to suggest the non-payment of premium could become material as a result of the other matters such as the Greek criminal proceedings, I doubt whether that is a legitimate approach. The non payment of premium is either material on its own or not, and since it seems to go to the owner's credit risk, and not to the risk insured, I would have thought it was not material”.
16.	Mr Ecklund QC submitted that North Star is authority for the proposition that, where there is information such as an allegation of dishonesty or (he added) of other criminal conduct, which would on its face be material and so disclosable, then the obligation to disclose will subsist, except in a case where there is exculpatory material from which it can be seen by the proposer that it is so clear that there is nothing in the allegation that the allegation no longer needs disclosing because it is no longer material. In the words Waller LJ used in para 17, the material must be “such as to prove beyond peradventure that the allegation is false”. The example given in para 35 of Waller LJ’s judgment is a case of an admission from the person who has made the allegation that he has made a terrible mistake as to identity.
17.	Mr Soole QC submits that North Star does not support so broad a proposition. He refers to the words of Mance LJ in Brotherton, cited by the Judge:
“…the issues of both materiality and inducement would in all likelihood fall to be judged on the basis that, if there had been disclosure, it would have embraced all aspects of the insured’s knowledge, including his own statement of his innocence and such independent evidence as he had to support that by the time of placing. This might itself throw a different light on the answer to one or both of the issues of materiality and inducement.”
18.	Mr Soole QC submits that these words demonstrate that exculpatory material may go both to materiality and to inducement, and that such exculpatory material includes a statement by the insured of his own innocence. Mance LJ does not say that it has to be clear beyond peradventure.
19.	Mr Soole QC submits that Waller LJ, in para 19, suggests another qualification to the requirement of disclosure, separate from exculpatory material, namely “old allegations of dishonesty or allegations of not very serious dishonesty”.  In the same paragraph Waller LJ also contemplates “a robust judge” rejecting evidence of an underwriter that certain information would be material. 
20.	He goes on to submit that this makes clear that Mr Ecklund QC is wrong to treat allegations of criminal conduct which do not involve dishonesty as similar to allegations of dishonesty. So far as the facts of the present case are concerned, while the defendants were making very serious allegations of dishonesty against the claimants in relation to the claim for alternative accommodation, there was no suggestion of dishonesty on their part in relation to any of the matters relied on as material non-disclosure.
21.	He submits that this passage further makes clear that there may be old allegations or allegations which are not very serious, in respect of which there is no exculpatory material, but which Waller LJ considered might not have to be disclosed, even though they involved dishonesty. The position must be all the stronger in relation to allegations which are old or not very serious, and which do not involve dishonesty, and in respect of which there is nothing exculpatory.
22.	So he submits that North Star does not take the law any further than Brotherton.
23.	It is necessary to view these submissions in context. In the present case the information which is said to be material but not disclosed is said to go to moral hazard. The proposal form in question here is for a common form insurance of buildings. The moral hazard to which underwriters are mainly looking is the tendency of some people who are insured and in financial difficulties to commit arson in order to make a fraudulent claim on insurers. Mr Soole QC submits that it would be surprising if a householder had to disclose in a proposal form the fact that HM Customs and Revenue had submitted to him a large tax demand which he knew to be mistaken, or which he knew to be an assessment which would be withdrawn, or not pursued, once the tax collector understood the true position that there were not taxable profits.
24.	The passage from Mance LJ’s judgement in Brotherton quoted by the judge at para 10 of his judgment is also quoted by Waller LJ in North Star at para 8. Waller LJ says nothing which suggests that he was intending to state the law any differently. What he is saying at para 35 is that it must be possible to have a situation where it is so clear that there is nothing in an allegation that the allegation does not need disclosing.  That is consistent with what Mance LJ said. It is not the same as saying that every allegation known to the insured must be disclosed unless it is so clear that there is nothing in it that it does not need disclosing. Waller LJ is explicitly accepting that there may be other justifications for considering information to be immaterial, for example that the allegation is old or is of dishonesty which is not sufficiently serious.
25.	I do not understand there to be any material difference between the statements of Mance LJ and Waller LJ. They both seem to me to be consistent with the following. The test of materiality is by reference to what would influence the judgment of a prudent insurer. This is an objective test, and the characteristics to be imputed to a prudent insurer are in substance a matter for the courts to decide. There is room for a test of proportionality, having regard to the nature of the risk and the moral hazard under consideration. There may be things which are too old, or insufficiently serious to require disclosure, whether or not there is exculpatory material. And in cases where the information would be material and disclosable if there were no exculpatory material, the degree of conviction that the exculpatory material must carry, must depend on all the circumstances known to the insured. 
26.	So far as the law is concerned I accept the submissions of Mr Soole QC and I conclude that the Judge did not misdirect himself. As the judge noted at the end of para 11 of his judgment, the view that is taken of the law has a considerable impact on all of the examples of non-disclosure alleged in this case.
Appeals on Findings of Fact
27.	The main grounds of appeal in this case now are that the judge made a number of findings of fact which were wrong.  The approach which an appellant court should take in such a case has been set out by the Court of Appeal in Assicurazioni Generali Spa v. Arab Insurance Group [2002] EWCA Civ 1642; [2003] 1 WLR 577.  I refer in particular to the judgment of Clarke LJ (as he then was) at paras 12 to 23 and Ward LJ at paras 195 to 197.  It is not necessary to prolong this judgment by setting them out.
28.	Before turning to the particular findings of fact which Mr Ecklund QC seeks to challenge, it is right to record the undisputed facts which he submits form the background against which all the individual points are to be considered. These are:
i)	The first claimant had been a director of some 20 companies which had been removed from the register after failing to file accounts;
ii)	The first claimant had been a director of 4 companies which had been put into creditors liquidation;
iii)	STPL was at the time the contract was formed in dispute with the Inland Revenue, and had received assessments in relation to 1997 and 1998, and proceedings had been issued claiming in excess of  £250,000;
iv)	The first claimant had given an incorrect answer to a question in the second proposal form relating to companies which had been liquidated.
The Inland Revenue assessment of Simon Tov Properties Limited.
29.	The judges findings on this issue are set out in his judgment at paras 66 to 71 as follows:
“66. Mr Holland gave evidence for the claimants and Mr Smith for the defendants.  I can ignore those points on which the defendants no longer rely, although during evidence Mr Smith was still exercised by at least one of those points.  Looking then at the matters allegedly material and not disclosed, both were agreed that the dispute, in isolation with the Inland Revenue was (or may be) a material matter; but, as far as Mr Holland was concerned, the explanation given by Mr Meisels and Mr Vernett (his accountant) was acceptable and thereby rendered the dispute immaterial.  Mr Smith did not agree.
67. As to the evidence of Mr Vernett, who is an accountant, he confirmed that, at the relevant times, his firm acted for Mr Meisels.  He said that, typically, Mr Meisels, like many of Mr Vernett’s clients, would simply send, without consideration, correspondence from the Inland Revenue or Companies House for him to deal with.  At the beginning of 2001 he received a notice of estimated assessment of corporation tax for Simon Tov Properties Limited in the sum of £52,500, together with a penalty of £10,700 and interest of £5,542 for allegedly late payment.  As it was an estimate only, he suspected that was in order to prompt the company to finalise its accounts which had not been possible because of delays by third parties.  The assessment did not represent the true position and, on the evidence before the court, in this he was correct because, notwithstanding a default judgment obtained by the Inland Revenue in May 2002, at a meeting in October 2002, Mr Newman of the Revenue was satisfied that nothing was due and the Inland Revenue has done nothing to execute its judgment and Simon Tov Properties was resolved [sic, it should probably read ‘dissolved’] some years ago.  
68. For material purposes, I accept all of Mr Vernett’s evidence; but it is fair to add that the claimants cannot rely on this favourable resolution of the position just as the defendant cannot rely on the default judgment because both occurred after the relevant contracts of insurance had been concluded.  What both parties can rely on, however, is the evidence as it stood at the time of the placing.  As to this (and, as I have said, there is a fundamental difference of opinion between Mr Holland and Mr Smith), both are agreed that the test is that which would influence the prudent underwriter.  Mr Holland says that this must be judged by reference to all of the evidence available at the relevant time; whereas Mr Smith appears to be of the view that only matters potentially unfavourable to the insured – namely, the allegation itself and, in particular, the imposition of a penalty – should be taken into account and that the materiality which this represents can never been neutralised, as it were, by evidence favourable to the insured.
69. To my mind, this is a surprising proposition because we are here concerned, in relevant respects, with an objective test – that of the prudent underwriter.  I ask, rhetorically: why would a prudent underwriter only want to see part of the picture if, having seen all of the picture (if it is available), he realises that it is a picture which he does not wish to see at all and, therefore, not seeing it does not matter?  If only part of the picture is available then the position can only be judged by reference to that part; but if it is all available then it is the complete picture by which the situation must be judged.  Moreover, as the test is objective, the position must be judged objectively; so whether particular underwriters are more or less receptive is irrelevant.  By definition, a prudent underwriter will respond to coherent and cogent evidence.
70. In the light of the evidence of both Mr Meisels and Mr Vernett, I am entirely persuaded that whatever the Revenue well [sic, it should probably read ‘were’] doing there was, in December 2001 and thereafter, coherent and cogent evidence in the possession of the claimants such as to neutralise the assessment, and, as it seems to me, a wrong assessment cannot, in itself, be material to a prudent underwriter.
71. All of the alleged non-disclosures on which the defendants rely really go to what is commonly called the moral hazard.  I asked Messrs Hart and Schofield what they understood by that.  Mr Hart referred to transparency obligations in law and the fulfilling of the contract by the insured in an honourable and decent manner. Mr Schofield, in the context in which he was asked, spoke in terms of the possibility of something potentially sinister, although the concept of moral hazard is clearly broader than this.  It can obviously extend to poor or reprehensible conduct, or mismanagement short of conduct or circumstances suggesting the possibility of fraud in the realisation or presentation of any claim.  Nevertheless, and however broad the approach to moral hazard, it is difficult to see why a demonstrably incorrect tax assessment should come within its compass, and, therefore, it is immaterial.  This is the view of Mr Holland and I accept his evidence.  I may add that I would have come to this conclusion even without his evidence.  Any other approach would look to form and not substance, and I cannot think this to be right.  In other words, one looks to the result, not the procedure.  So merely because in isolation some fact might be thought to be material, it is not necessary to go through the procedure of disclosing all facts to demonstrate that the isolated fact is actually immaterial.  If, at the end of the process, it is immaterial then it was immaterial from the outset.  Whether or not any given insured, out of an abundance of caution, discloses a whole range of facts which he believes to be immaterial merely to ensure that there can be no subsequent argument of the type with which the court has been engaged in this case, does not alter the position. The undisclosed fact, in the context in which it exists at the time of placing, is or is not material.  Clearly the larger the disclosure, on whatever basis, the smaller the room for subsequent argument, but this will not alter the inherent characteristics of the undisclosed fact.  What was not disclosed in this case, for present purposes and on the evidence before me, was an unjustified claim for tax to which had been added a penalty and interest when none was due.  In my judgment, that cannot be a matter which is material to the notional prudent underwriter whether or not one adds the adjective “reasonable”
30.	Mr Ecklund QC submits that the judge was plainly wrong.  He submits that it is plain that the Inland Revenue assessment, and proceedings brought to enforce it, were material, and there was nothing that the judge could properly describe as ‘coherent and cogent evidence’ in the possession of the claimants such as to neutralise the assessment, nor was there “a demonstrably incorrect tax assessment”.
31.	So far as materiality is concerned Mr Ecklund QC referred me to a document signed by the two expert witnesses on 13th and 14th March 2006 headed “Report Following Meeting of Expert Underwriters”.  In relation to the Inland Revenue  it includes the following:
“Mr Smith [called by the defendants], for the reason contained in his report, considers that the unpaid taxes and penalties would be material to a reasonable and prudent underwriter.  In view of the statement of Mr Vennitt [the accountant who dealt with the matter on behalf of the company] Mr Holland [the expert witness called by the claimants] considers the risk to be acceptable”.
32.	These short statements must of course be considered in the light of the evidence given by the witnesses to which the judge refers at paras 68 and 69 of the judgment.  Mr Ecklund QC took me to the cross examination of Mr Holland. However, he was not cross examined on this point because Mr Ecklund QC submits that the agreed summary is clear to the effect that Mr Holland regards the Inland Revenue assessment as material, and in stating that he considers the risk “to be acceptable” he is addressing the issue of inducement.  Mr Ecklund QC submits that nothing in the statement of Mr Venitt could be described as so clearly exculpatory that it removed the need to make disclosure at all.
33.	Mr Ecklund QC took me to the documents relating to this matter.  They start with a letter from the Inland Revenue dated 28th February 2000 addressed to the first claimant asking to be told the current registered office of STPL, because communications sent to the address they had were being returned undelivered.  On 29th March 2000 Companies House wrote to the First Claimant stating that the accounts for STPL for the period ending 31st August 1998 were overdue, reminding him of his responsibilities personally as a director and of the criminal proceedings that might be instituted, and of the right of the registrar to apply for removal from the register under Companies Act s.652A.  A reminder was sent by Companies House on 13th April 2000 addressed to the directors of STPL.  
34.	On 9th May 2000 Companies House noted that there had been no reply to the letter of 29th March 2000 and warned that the case would be passed to the Prosecuting Solicitor.  On 26th September 2000 the Inland Revenue wrote to the  First Claimant stating that  corporation tax was due in respect of STPL, for the period ended 6th August 1998 in the sum of  £2,100 and that in addition there was due a penalty of £410 and interest of £180.62p, making a total of £2690.62p.  Payment was demanded.  On 15th February 2001 there is a copy of a letter from Mr Venitt to the First Claimant referring to estimated assessments received in respect of STPL and asking if the First Claimant would now update Mr Venitt and confirm whether he would now be striking this company off the register.  The assessment is dated 10th January 2001 and is in respect of the period 7th August 1997 to 6th August 1998.  The profits are assessed at £250,000 and the tax chargeable £52,500.  This represents an assessment of £50,400 in addition to the £2,100 referred to in the letter of 26th September 2000.  On the same date, 10th January 2001, there is a notice of further penalty in the sum of £10,500, making a total of £10,290.  The due date is 9th February 2001.  
35.	On 29th May 2001 the Inland Revenue wrote that they would attend the first claimant’s home on 1st June to collect the money due.  On 1st June 2001 they wrote stating that they had made the visit but found the first claimant not to be in.   They asked for an urgent meeting.  So far as Mr Venitt is concerned, the position does not appear to have advanced.  He wrote on the letter in his own handwriting “Please find out what exactly the above relates to.  Then we need to obtain copy assessments if appropriate in order to appeal”.  On 31st December 2001 (so between the dates of the proposal and the contract) Mr Wyn Thomas, a collector of taxes, issued proceedings in the Barnet County Court against STPL.  The claim was for a total of £275,980.17p. This included the tax and penalties in respect of the period ended 6th August 1998, as already described.  In relation to the period 6th August 1999 there is claimed tax of £153,246.58p and penalties of £30,849.30p.  In addition there are claims for interest.  
36.	There are no documents relating to the period ended 6th August 1999 preceding the claim form.  The acknowledgment of service, dated 30 January 2002, contained under the heading of “Defence” the following words,written by Mr Venitt:
“The assessments are estimated.  The Companies accounts are being finalised and these should show no liabilities”.  
It is common ground that judgment was entered in May 2002 in favour of the Inland Revenue.  A meeting was discussed between the Inland Revenue and Mr Venitt, and on 7th October 2002 the Inland Revenue confirmed a meeting to be held on 29th October 2002.  The letter carries the hand written note “Appointment made for Wednesday 27th November at 1.30pm.”  There are no other contemporaneous documents. Mr Ecklund QC submits that the judge should have placed weight on that handwritten note, but erred in failing to mention it in his judgment.
37.	Mr Ecklund QC took me to the cross-examination of the Mr Venitt on 20th March 2006.  Mr Venitt said that as at December 2001 the accounts were in draft in spreadsheet form.  Mr Venitt was asked the reason for the delay and referred to the need for more information from the mortgagees and solicitors but he could not identify them.  He could not identify what the outstanding information was and said that it was an assumption on his part that there was outstanding information.  He said his firm did not attend when judgment was entered on 20th or 29th May 2002.  He agreed that the accounts were never finalised and never filed at Companies House.  At the date of trial Mr Venitt said that he had no details of the rents received by STPL nor its expenditure nor any books of account.  He had no record of the meeting fixed for 29th October 2002.  He agreed that he could not have shown the Inland Revenue finalised accounts at such a meeting.  He had no record or letter from the Inland Revenue agreeing to anything.  He said this:
“We had a discussion, a lengthy discussion.  I can only assume that if the Inland Revenue thought that there was such a substantial liability outstanding, they would have taken the matter further and possibly put the company into receivership itself or liquidation itself and have to have a thorough investigation and it has not been the case here.  I presume that Mr Newman was satisfied”.
38.	Mr Venitt stated that the company had not sought to appeal against the judgment or set it aside but he said that, on the other hand, the Inland Revenue did not follow the matter up either.
39.	The Companies Act 1985 s.221(5) (as amended by the Companies Act 1989) provides:
“If a company fails to comply with any provision of this section, every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.”
40.	I understand it to be submitted that the first claimant may be guilty of an offence under this section, notwithstanding his honesty, because the default was not excusable. The criminality would thus not involve dishonesty.  But it is no more than an allegation of criminality as at the date of the proposal and contract, and an allegation made by the defendants at the trial.  It was not made contemporaneously by the Inland Revenue or anyone else.  There were just warnings that it might be made.
41.	On this basis, Mr Ecklund QC submits that it cannot possibly be said that on this material there was coherent and cogent evidence to neutralise the assessment or that the assessment was demonstrably correct.
42.	In response to this Mr Soole QC referred me to the witness statement of Mr Venitt which stood as his evidence in chief. Mr Venitt said that he had looked for papers relevant to STPL, but had found only a few and that he gave evidence of what he could recall some years later. He said that the first claimant co-operated at all times in relation to the company’s accounts and the claim by the Revenue. Other parts of his evidence are as set out by the judge in para 67 of his judgment.
43.	Mr Soole QC also referred me to the oral evidence of Mr Holland, who maintained his view that it need not be disclosed. There is no allegation, still less finding by the judge, that the first claimant acted dishonestly in relation to the accounts or the tax position of STPL. 
44.	In my judgment, on the evidence before him, the judge was entitled to make the findings of fact that he did make. He was entitled to find that, on all the information relating to STPL’s tax known to the claimants up to 14 January 2002, there was nothing material that the claimants ought to have disclosed. The judge cannot be criticised for declining (as he did in para 72 of his judgment) to make a finding of criminality. And if criminality is not established, let alone dishonesty, the allegation is well below the threshold considered by Mance LJ and Waller LJ. That is not to say that conduct which is not criminal cannot be material. I say no more than that the judge was entitled to find as he did. The judge took into account all the information that, as he found, was known to the first claimant up to 14th January 2002. That is all that the judge was required to do.
The Dissolved Companies
45.	The judge’s findings of fact in relation to the companies of which the first claimant had been an officer and which had been dissolved are as follows:
“15. … The insurance of the properties was placed through Clydesdale Bank, from which I draw the inference that they provided much of the financing for the various transactions and would themselves have looked into the claimants’ and their activities…
19. Mr Meisels went on to say that his business strategy was to set up companies for particular transactions and then allow them to be dissolved, generally for want of the filing of returns, once they had served their purpose.  No doubt, this saves on expenses.  Whilst this strategy may be unattractive and is certainly open to criticism in various contexts, there is no evidence before this court that the manner in which he conducted his business either involved dishonesty or mismanagement such as to expose insurers to risks that they did not anticipate or were not inherent in the contracts of insurance into which they entered.  On the contrary, the claims record (which was not challenged) is modest and straightforward, and, apart from the one discrete matter, to which I shall come in due course, there is no evidence of exposure to financial pressure which might tend to lead claimants into relevant wrongdoing….
72. Having dealt with the dispute over the Inland Revenue at some length, I can deal with the other allegations of non-disclosure relatively briefly because the legal principles and approach are the same.  As to the business strategy of Mr Meisels whereby he set up companies for particular transactions and then allowed them to be dissolved (some 20 in all, I am told), as I have said, the manner in which he does this may be open to criticism in other contexts, and, to the extent that it is, I make clear that it cannot be condoned.  It would be unfair to go further, however, because I have not received more than limited evidence; nor have I heard full argument on those matters; and it would be wrong to appear to prejudge something which may or may not engage further legal process.  It is only this case with which I am concerned, and, in the context of this case, it is Mr Holland’s view that such matters would be immaterial to the prudent underwriter because the explanation offered by the claimants does not disclose that which he describes as “Phoenix companies” through the medium of which debts are not honoured and assets transferred to debt free companies; nor does it cast doubt on the efficacy or integrity of the claimant’s management in the context of property insurance.  Once again, Mr Smith ignores the explanation and says, in effect, such a record is material regardless of any other factors.
73. Once more I prefer the evidence of Mr Holland, which, throughout, had about it, to my mind, a far greater degree of commercial realism without in any way departing from the basic legal test; namely, that which would influence the prudent underwriter.”
46.	The criminal liability on the directors of companies under s221 of the Companies Act 1985 is set out above. S.652 of the Act gives the registrar power to strike a company off the register where he has reasonable cause to believe that a company is not carrying on business. What I say in paras 40 and 44 above is applicable under this heading also.
47.	The agreed statement of the experts dated 13th and 14th March 2006 reads as follows on this topic:
“Mr Smith considers that the dissolution of the previous companies following failure to submit accounts would be material to a reasonable and prudent underwriter.  
The explanation provided by the claimants is considered acceptable to Mr Holland.
Both experts would wish to see an accountants view as to the practice of regularly dissolving redundant companies as practiced by the claimants”.
48.	Mr Ecklund QC cross-examined the first claimant on 15th March 2006 on the topic of his duties under the Companies Act relating to accounts and records.  The first claimant confirmed that he understood the statutory requirements but said he would have left it with the accountants. It was not suggested that he acted dishonestly.
49.	Mr Ecklund QC cross-examined Mr Holland on 22nd March in relation to companies which make a proposal for insurance, but fail to comply with the statutory obligations in relation to accounts.  In particular Mr Ecklund QC asked Mr Holland whether an insurer providing lost rental income insurance would want to make sure that the owning companies’ records were properly kept so that it would be possible in the event of a claim to check what income had been lost.  Mr Holland accepted that an insurer would want to know this.  He said that it would be part of the assessment of moral risk which goes beyond being able to account and document. 
50.	Mr Ecklund QC submits that the evidence of Mr Holland is predicated on Mr Venitt’s evidence about events after the placing. He pointed to at least one case, that of UK 2000 Ltd, the owner of properties listed with a value of some £2m, where the company was struck off, which is not consistent with the explanation that the first claimant gave in evidence (referred to in paras 19 and 72 of the judgment), and to which Mr Holland had referred. Accordingly he submitted that, on the evidence, the judge was not entitled to make the findings that he did make.
51.	Further Mr Ecklund QC submits that the fact that the first claimant had given a false answer to the question relating to insolvencies in the other proposal form was a material fact to be disclosed in the Let Plan Policy Proposal.
52.	Mr Soole QC referred me to the schedule of properties attached to the proposal form. In the version existing on 14 January 2002, no owners’ names are attributed to any of the properties listed. He submitted that in those circumstances the identity of the owners could not be said to be something which the underwriters needed or wanted to know. It followed, he submitted, that underwriters must equally have been unconcerned about the financial status of the owning companies, at least to the extent (as was the  case) that there was no dishonesty and that the fact that companies were struck of the register did not demonstrate financial pressures which would be relevant to the risk proposed to be underwritten.
53.	These points are all questions of fact for the judge. The prudent underwriter whose judgment is to be considered is one fixing the premium or determining whether he will take the risk which was proposed in the proposal form in question. The judge was entitled to reach the finding that he did reach, applying the law as set out above. He was entitled to find that the non-disclosure of the winding up or striking off of the 20 companies was not material.  Absent a suggestion of dishonesty, there cannot have been a duty on the first claimant to disclose the incorrect answer he gave to the other proposal form. 
The four companies in creditor’s voluntary winding-up
54.	The passages of the judgment relevant to this include paragraphs 15, quoted above, and the following:
“16. Mr Meisels said that having completed his studies at Rabbinical College in 1995, he was gradually introduced into the family business, which, at that point, was run by his father.  Like many family businesses, however, different members of the family may be asked to lend their name to whatever business or corporate structure may be thought suitable at any given time, and this Mr Meisels did for his father even before he became involved in the business.  Mrs Meisels now does the same for her husband.  Accordingly, as long ago as 1993, Mr Meisels, together with his two sisters, was a director of a company called Five Star Builders Limited.  His mother was the company secretary.  He knew nothing of the company or its business, however, as he was merely a nominee; that is, in effect, he merely lent his name to his father.  The same (he says) is true of Regency Deals Limited and Pearl Star Limited, the former being wound up in 1992.  He has no knowledge of these companies or their affairs, but Regency Deals appears to have been indebted to the Revenue in the sum of £25,000 at the time of winding up.  This information is derived from the documentation provided by Companies House.  In principle, Mr Meisels says the same of Invest Trust Limited, although documentation from Companies House again reveals that it went into creditors’ voluntary liquidation in June 1998.  The principal creditor was Mr Meisels himself in respect of a director’s loan account of approximately £20,000.  There has been no evidence as to how this loan was funded but, equally, there has been no suggestion of impropriety of any kind.  The only other creditor was the Inland Revenue for the relatively small sum of £3,642.
17. In passing, it is a convenient moment to note that since Mr Meisels says he took over the business (which, by inference, is after 1998) and notwithstanding the numerous transactions, incorporations, liquidations and dissolutions over the years, there is no evidence before the court, save for one case with which I shall deal in due course, of any unpaid creditors, unresolved claims or financial mismanagement or instability of any kind.
18. It has been necessary for me to refer expressly to these companies because before their concession the defendants relied on the history of these companies in support of their submission that the claimants were guilty of misrepresentation and breach of warranty when, in the proposal form for the property owners’ policy, the claimants answered “no” to the question “Have you ever been declared bankrupt, the subject of bankruptcy proceedings or of any voluntary or mandatory insolvency or winding up procedures?”  Mr Meisels said that this answer, whilst incorrect, was an innocent one because he simply knew nothing about the companies to which I have just referred as, at the time, he had little or nothing to do with the business and simply lent his name to his father.  In this context, it must, however, be noted that, in respect of the companies Invest Trust and Regency Deals, Mr Meisels actually signed the winding up documentation in the name of Moses Meisels, either as a director or chairman.  So much is apparent from the Companies House documentation now appended to the pleadings.  This documentation was not put to Mr Meisels when he was giving evidence, but, through his counsel, he accepts that he is the person to whom the documents refer and that they do bear his signature.  Further than this I do not have his direct evidence on the documents.  As, however, I do not regard Mr Meisels as an untruthful witness, leading to my acceptance of his evidence, I accept that the incorrect answer in the proposal form did not involve deceit or even forgetfulness on his part.  He simply never knew of the relevant matters.  This view is not altered by his signature on the documents as this is not necessarily inconsistent with his basic evidence that at the relevant time he simply did his father’s bidding which would certainly have involved his signature from time to time albeit in ignorance of what he was signing.  Moreover, in what is, in essence, a family business, such conduct, particularly between father and son, would not necessarily involve the sort of concern which might be aroused by similar conduct in a large or more formal organisation.  As a matter of commonsense, informality and mutual trust and dependence is inherent in such a business.  Notwithstanding the defendants’ concessions, these findings of fact remain relevant to the defendants’ allegation of non-disclosure in respect of the let plan contract.”
55.	Paragraphs 74 to 77 which read as follows:
“74. The absence of disadvantaged creditors in respect of the 20 or so companies to which I have just referred, does not extend to the further four companies of which Mr Meisels was a director or chairman and about which he knew nothing because, at the time, the business was that of his father and he was only a nominee.
75. I have already foreshadowed my view of this aspect of the case and so I shall deal with it very briefly.  I have, of course, accepted Mr Meisels’ evidence in this regard; and thus, in so far as it is relevant, I find that these matters were never in his mind not merely that he was genuinely forgetful of that which he once knew.  By way of recapitulation, the companies were Regency Deals Limited (dissolved in 1992), Five Star Builders (dissolved in 1993), Pearl Star (dissolved in 1998) and Invest Trust (also dissolved in 1998).  According to the evidence, Regency Deals, on dissolution, owed £25,000 to the Revenue and Invest Trust owed £3,462 to the same creditor.  I take it to be trite law ever since Carter v Boehm that an innocent non-disclosure of material fact remains a non-disclosure with all that flows there from, the innocence of the insured affording no protection.  It is still necessary, however, for the insured to have known that which he did not disclose.  He cannot disclose what he does not know.  In this case, he did not know because, in summary, it is Mr Meisels’ evidence that he did not know any of the things on which the defendants rely.  In view of the documentation and the evidence overall, this also requires him to say (as, in effect, he does) that at all material times – that is, in 1992, 1993 and 1998 – he was still in thrall to his father.  Given Mr Meisels’ background and the nature of the business with which he is now concerned, I have no difficulty in accepting that this would have been the case.  In a family business of this kind, the early and total dominance of the father, who is then gradually replaced by the son, is, if not invariable, at least commonplace, and this one knows simply as a result of one’s own experience of the human condition.  If there were evidence to the contrary then this might be a different matter; but here there is none.  
76. This does not finally dispose of this point because, whilst Mr Holland rightly observes that one cannot disclose that which one does not know (a view, I imagine, shared by Mr Smith, although it was not put to him in terms), Mr Smith goes on to say that if Mr Meisels were, in effect, in thrall to his father then this would be a failure by Mr Meisels to discharge his duties as a director and he should have been aware of the insolvencies.  In other words, he is suggesting that Mr Meisels was conducting himself negligently and such negligence would be material to a prudent insurer.  I do not recall this part of Mr Smith’s opinion being put to Mr Holland, but, as with the other questions of materiality I have dealt with thus far, the experts are here to assist the court but in a case of this kind I am able to reach a conclusion without merely having to choose between two competing expert views.
77. As this matter, like most with which we have been concerned, goes to moral hazard, and as Mr Smith, very fairly, accepted that the moral hazard must be relevant to the risk in the shape of financial integrity, management of the business (including maintenance of the property) and any potential for fraud (whether or not caused by financial stress), I do not accept that the breaches of duty to which he refers in this case, even if accepted, would be material to a prudent underwriter.  As I have said, such an approach must be common to many close companies, and to say to immediate members of someone’s family that, for the purposes of a case of this kind, they were guilty of relevant wrongdoing some years ago in assisting in the family business in this way, would give rise, in my judgment, to well-founded astonishment.  Plainly former breaches of duty as a director might become a material fact, depending on the circumstances of the case, but it does not do so in this case because I do not see how, in the mind of the prudent underwriter, that which (as I find) would involve little more than family loyalty and cohesion, would amount to a fact material to the moral hazard in respect of a placing not less than three years and up to nine years after the events on which the defendants rely.  Accordingly, I reject Mr Smith’s evidence in this regard.”
56.	Mr Ecklund QC submits that the judge could not properly reach the findings of fact that he made in paragraphs 17 and 18 and 75, to the effect that “these matters were never in his [the first claimant’s] mind not merely that he was genuinely forgetful a fact which he once knew”.
57.	Mr Ecklund QC points to the judge’s finding that on dissolution there was owed to the Inland Revenue £25,000 by Regencydeals Ltd and £3,462 by Investtrust Limited.
58.	Mr Ecklund QC took me to the documents from Companies House referred to in paragraph 18 of the judgment.  There is an affidavit in relation to the winding up of Regencydeals Limited affirmed by the first claimant on 3rd March 2002.  It is on a printed version of Form 4.19 and includes the words:
“The several pages exhibited hereto …. are to the best of my knowledge and belief a full and complete statement as to the affairs of the above named company as at 3 March 1992 being the date of the resolution for winding up…”
59.	The page of the statement of affairs as at 3 March 1992, which records the Inland Revenue as making a non preferential claim for £25,000, bears the signature of the first claimant.  The extraordinary resolution appointing the liquidator is signed by the first claimant is described as “the chairman”.  Mr Ecklund QC submitted it was possible that that description referred to the First Claimant as chairman of the company, but more likely that it referred to him as Chairman of the Meeting at which the Extraordinary Resolution was passed.
60.	In relation to Investtrust Limited there is an affidavit in Form 4.19 also affirmed by the First Claimant on 25th June 1998.  The page listing the Summary of Liabilities and recording the non-preferential claims of the Inland Revenue for £3462 and the Directors Loan account at £20,209 also bears the signature of the First Claimant.
61.	Given these documents Mr Ecklund QC submits that a finding that the First Claimant did not know these things is unsustainable.  He further submits that in any event there was a duty to disclose these matters pursuant to the principles set out in s.18(1) of the Marine Insurance Act. S.18 of the Act includes the following:
“(1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract.
(2) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk….
(4) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact”
62.	Mr Ecklund QC explained that the reason why this documentation was not put to the First Claimant when he was giving evidence is that the documents (or some of them) had not been found at that stage.  When they were found it was admitted through counsel for the First Claimant that the signatures were his, as recorded in para 18 of the judgment.  He submits that these documents go directly to the issue  whether the answer to the question in the second Proposal Form which was admittedly incorrect was also the result of either deceit or forgetfulness.
63.	I was taken to the witness statement of the first claimant. At para 22(ii) he refers to documentation available at Companies House including the resolution that Investtrust Ltd be put into creditors’ voluntary liquidation on 25th June 1998, and to the sum of £3,462 shown as due to the Inland Revenue. He states he was a nominee director, and goes on to say “I have no knowledge of the circumstances giving rise to its being placed into liquidation”.
64.	Both parties also took me to passages in the witness statement of the first claimant and in the transcript of his cross-examination relating to when he took over responsibility from his father. Both parties also took me to the evidence of the two experts.
65.	The point Mr Ecklund QC makes on the documents from Companies House bearing the first claimant’s signature appears formidable.  But the fact is that the first claimant was not cross-examined on these documents at all, and therefore not cross-examined to the effect that he was dishonest, or that he did in fact know what he claimed he did not know. As the judge had found the First Claimant to be in other respects a truthful witness it seems to me that the judge was bound to make the finding of fact that he did make in paragraph 18.  Since the judge found that the Claimant never knew that the facts stated in the documents which bear his own signature, it seems to me that in accordance with the principles applying to an appellate hearing, I cannot make a different finding myself.  
66.	Moreover, the fact that the claimant was signing documents without reading their contents was not found by the judge to be a  “circumstance which, in the ordinary course of business, ought to be known by him” and so disclosable by him, within s.18(1). While it is open to an appellate court to make inferences of fact, this is not one which I feel able or inclined to make. So long as the first claimant’s conduct was honest, and related only to the past, before he took over fully from his father, I would not myself infer it was material to be disclosed.
The use of an alias
67.	 The property in the schedule to the proposal form is attributed in the later schedule (15th January 2001) to an owner identified as ‘M Hager’. The properties are registered in the name ‘Moshe Hager’ in HM Land Registry. The first claimant explained that one of these properties included premises which he himself occupied and the other included a synagogue which he attended. He chose to use an alias so that he would not find himself approached by people in his capacity as landlord, when he was present on the premises for his own purposes.
68.	The judge said this in his judgment:
“78. As to Mr Meisels’ use of an alias in respect of two properties which he frequented and thus did not wish to be known as the landlord lest he be pestered by the tenants, I readily accept Mr Holland’s evidence in this regard to the effect that the use of this alias in isolation might be material but when conjoined with the explanation it ceases to be so.  Mr Smith, once again, turns his back on a significant part of the picture.  I shall only add that, contrary to his evidence, Mr Meisels, in fact, only used an alias in respect of one of the properties and that property appeared on the face of the schedule with the use of the alias as part of the portfolio as split between the two contracts of insurance.  

79. In the result, I am not persuaded that, in the circumstances of this case, the facts to which the defendants refer are material or, as appropriate, were known such that they could be disclosed.”
69.	The use of two names is very common among professional and business people, especially among women. But registering land in a second name may be less common. And there is obvious force in the point that underwriters will be concerned that second names can be used for money-laundering and other criminal activities.
70.	Again I was taken to the oral evidence of the experts. Applying the law as he  correctly stated it to be, the judge was clearly entitled to reach the view that he did reach on this point, 
71.	It follows that I have declined to interfere with any of the judge’s findings of fact. Whether I would myself have reached the same conclusions as he did, is immaterial, and in any event I cannot say whether I would or not, not having had the benefit of seeing the witnesses.
72.	Since I have declined to interfere with the judge’s findings as to materiality, it follows that the issue of inducement does not arise. I will nevertheless deal with the point briefly.
Inducement
73.	The point has to be approached on the footing that the facts were as found by the judge, save that they are to be characterised as material, either individually, or cumulatively, contrary to what the judge had decided. This is how I understand para 85 of the judgment to state the position.
74.	The judge sets out his reasons for concluding there was no inducement in paras 80 to 87 of the judgment.
75.	The law is set out by Clarke LJ in Assicurazioni Generali at para 62 as follows:
“In all the circumstances I would summarise the relevant principles of inducement in this context in this way:
(i) In order to be entitled to avoid a contract of insurance or reinsurance, an insurer or reinsurer must prove on the balance of probabilities that he was induced to enter into the contract by a material non-disclosure or by a material misrepresentation.
(ii) There is no presumption of law that an insurer or reinsurer is induced to enter in the contract by a material non-disclosure or misrepresentation.
(iii) The facts may, however, be such that it is to be inferred that the particular insurer or reinsurer was so induced even in the absence from evidence from him.
(iv) In order to prove inducement the insurer or reinsurer must show that the non-disclosure or misrepresentation was an effective cause of his entering into the contract on the terms on which he did.  He must therefore show at least that, but for the relevant non-disclosure or misrepresentation, he would not have entered into the contract on those terms.  On the other hand, he does not have to show that it was the sole effective cause of his doing so.”
76.	The judge referred to a number of factors, including:
i)	The insurers’ deliberate decision not to enquire into the question of insolvencies for the Let Plan placing;
ii)	That this business had been acquired for the first time in January 2002, and the evidence of how it came to placed with the defendants involved Clydesdale Bank, whom the insurers were anxious to accommodate;
iii)	That, without doubting the sincerity of the evidence of the witnesses to the underwriting, Mr Hart and Mr Schofield, the judge did not accept it, considering that it lacked cogency, that the points had been raised only late, and in the Defence, and in the context of a defence of fraud on an unrelated point.
77.	A judge who makes findings of this nature may be described as acting robustly, but he saw the witnesses giving evidence over some time during a trial that itself lasted 8 days. Mr Ecklund QC is critical of the judge’s observations about the evidence of the defendants’ witnesses, particularly as to the suggestion that they may have been unwittingly influenced by the fact that there was also a defence of fraud. But these are matters which a trial judge is peculiarly well placed to assess, and on which an appellate court will be very hesitant to reach a different view. I was taken to the transcripts of their evidence. I can only say that I would not have been persuaded that I ought to interfere with the judge’s assessment of the witnesses and his findings of fact.
78.	For these reasons this appeal is dismissed.