EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Osborne Lord Reed Lord Pentland	[2010] CSIH 18 XA37/08 OPINION OF THE COURT delivered by LORD OSBORNE in Appeal by WILLIAM JOHN MITCHELL Pursuer and Respondent; against HISCOX UNDERWRITING LIMITED First Defenders and First Appellants; and SYNDICATE 33 AT LLOYD'S, MANAGED BY HISCOX SYNDICATES LIMITED Second Defenders and Second Appellants _______

Act: No Appearance; Barton & Hendry, Cumbernauld

Alt: Lindsay, Advocate; HBJ Gateley Wareing (Scotland) LLP (for First and

Second Defenders/Appellants)

9 February 2010

The Background Circumstances

[1] In this action, the respondent sought a decree against the appellants for payment of the sum of £23,000 said to be the sum insured under a contract of insurance between the respondent and the appellants in respect of a Falcon 22 SPC motor boat called the "Dot Dash". The respondent sued the appellants upon the basis that he was the proprietor of that vessel; initially that averment was disputed by the appellants. The respondent averred that the vessel was moderately valued at a sum of £23,000. In or around July 1999, the vessel was stolen from Largs Marina, where it was moored. It has not been recovered. The appellants have refused to make payment of the insured value of the vessel, which is the sum craved in the present action. The basis upon which the appellants declined to pay the claim was twofold. In the first place, they contended that the respondent was not the owner of the vessel and that, accordingly, he had no insurable interest in it. In the second place, they contended that they were entitled to avoid the contract of insurance on the grounds of misrepresentation and of non-disclosure of material facts and information on the part of the respondent.

[2] In due course, a proof before answer was held in Airdrie Sheriff Court over a period of four days in January 2007. At the conclusion of the proof, it was indicated on behalf of the appellants that they were no longer disputing that the respondent was the owner of the vessel at all material times. What remained in dispute was the information given to the appellants by the respondent when he applied to them for insurance and the implications arising from that information.

[3] On 19 June 2007, the sheriff issued her judgment, in which she sustained the respondent's first plea-in-law and repelled the appellants' pleas-in-law, granting decree for payment by the appellants to the respondent of the sum of £23,000, with appropriate interest. The sheriff made the following findings-in-fact:

"1. The pursuer is William John Mitchell, who resides at 1J Blake Road, Seafar, Cumbernauld G67 1AG.

2. The first defenders are Hiscox Underwriting Ltd, a company incorporated under the Companies Acts and having a place of business at 1 Great St Helens, London EC3A 6HX.

3. The second defenders are Syndicate 33 at Lloyd's who are managed by the first defenders and who have a place of business at 1 Great St Helens, London EC3A 6HX.

4. At all material times the pursuer was the owner of a Falcon 22 SPC motor boat named the Dot Dash.

5. The price paid by the pursuer for the said boat was less than £25,000.

6. Between 1996 and 1998 the boat was insured by Haven Knox-Johnston in terms of policy number UKHUN.0105549 which was in the name of the pursuer's then girlfriend, Dorothy McCarroll. In terms of the policy the pursuer was covered as a driver for the boat for third party liabilities. In or around 1998 the pursuer obtained insurance cover from the defenders in terms of policy number HIS945/98.

8. Prior to applying for the policy of insurance with the defenders the pursuer had not held marine insurance in his own name for said boat.

9. In applying for insurance to the defenders the pursuer completed a proposal form on which he stated that the purchase price of the boat was £25,000. That was a misrepresentation.

10. In applying for insurance to the defenders the pursuer was asked to complete question 12 on the proposal form which said: 'Please state your previous insurance company and policy number'. The pursuer answered that question with reference to the Haven Knox-Johnston policy which had been in his girlfriend's name. This was not a misrepresentation.

11. In applying for insurance to the defender the pursuer stated in a telephone conversation that he had a no claims bonus of 5%. He had no no claims bonus and this was a misrepresentation.

12. In or around July 1999 the said boat together with the trailer, was stolen.

13. The pursuer has intimated a claim to the defenders in respect of the theft of said boat which the defenders refuse to pay."

[4] The sheriff went on to make the following findings-in-fact-and-in-law:

"1. The misrepresentation of the purchase price was a material misrepresentation.

2. The misrepresentation of the price did not induce the defenders to enter into the contract of insurance.

3. The misrepresentation of the no claims bonus was material.

4. The misrepresentation of the no claims bonus did not induce the defenders to enter into the contract of insurance.

5. The defenders are not entitled to avoid the policy."

[5] In her Note appended to her interlocutor, of the issue of misrepresentation of the no claims bonus, the sheriff said this:

"During her telephone conversation with the pursuer Mrs Crumpen [a representative of the appellants] said that she asked him if he had a no claims bonus to transfer to this insurance policy. She did not ask him if he was the owner of the boat. She said it might have been a new boat to him. She however clearly asked him if he had any no claims bonus to transfer to this insurance. That, to my mind, is a very straightforward question. I do not accept that Mr Mitchell did not know that the no claims bonus on any insurance policy attaches to the insured. Indeed that was not his position. He gave no evidence at all as to why he had said he had a no claims bonus other than suggesting that the no claims bonus attached to the policy with Haven Knox-Johnston. Any reasonable person would not, in my opinion, have taken that view. I therefore consider that Mr Mitchell did misrepresent to the insurers that he personally had a no claims bonus to transfer to this insurance when he did not have that."

[6] At a later stage of her note, in explaining her reasons for making the decision that she did, in relation to the issue of the misrepresentation concerning the no claims discount, the sheriff said this:

"Mr Crumpen's [the underwriter who made the decision to accept the respondent's proposal for insurance] evidence is obviously of importance in this case since he was the underwriter who assessed the risk and thereafter entered into the contract of insurance on behalf of the defenders. The court must consider what actually influenced his judgement and whether that would have influenced the judgement of a prudent insurer in terms of the legislation referred to, bearing in mind the objective nature of that test. Thereafter the court must consider what was the actual inducement. Mr Crumpen explained the annotations he had made on the cover note; XS 150 meant that there would be an excess of £150; 60 was the market rate to evaluate a risk of £23,000; + T is the tax; + 5 is a £5 administration fee and 20% NCB is a no claims bonus of 20%. In making this assessment Mr Crumpen said he would have viewed the risk. Haven Knox-Johnston had granted insurance and were well respected. He was competing against them. He agreed to give the same no claims bonus as they did. He also explained that he would take into consideration the details of the client and the details of the boat. The total sum to be insured was £23,000 and that was the sort of value he would have expected against this boat. It was the case that Haven Knox-Johnston granted insurance for this vessel. It was not the case however that there was a no claims bonus. The misrepresentation of the no claims bonus led Mr Crumpen and would have led any prudent insurer to adjust the premium ... to be paid and therefore in terms of the Marine Insurance Act 1906 section 18(2) (sic) it is material. However that misrepresentation did not, in my view, go so far as to actually induce Mr Crumpen to enter the contract of insurance on behalf of the defenders."

[7] Following upon the sheriff's decision, the appellants appealed to the sheriff principal who, on 21 February 2008, refused the appeal and adhered to the interlocutor of the sheriff, dated 19 June 2007. Against that decision of the sheriff principal, the appellants have appealed to this court.

[8] In the judgment of the sheriff principal, in paragraphs 37 and 38, he explains the basis of his decision in this way:

"37. There remains the criticism of the sheriff's decision in that there appears to be a contradiction between the sheriff's statement that the misrepresentation of the no claims bonus led Mr Crumpen to adjust the premium to be paid and her statement that the misrepresentation did not as the sheriff puts it 'go so far as to actually induce Mr Crumpen to enter the contract of insurance on behalf of the defenders'. It seems to me that in order to resolve this contradiction one would have to examine the evidence. I recall the words of Bowen L.J. in Edgington v Fitzmaurice [(1889) 29 ChD 459] and cited by Evans L.J. in St Paul Fire and Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd [1996] 1 All ER 96 at my paragraph 15:

"The real question is, what was the state of the plaintiff's mind, and if his mind was disturbed by the misstatement of the defendants, and such disturbance was in part the cause of what he did, the mere fact of his also making a mistake himself could make no difference. It resolves itself into a mere question of fact."

In the instant case the sheriff has found in fact and in law that the misrepresentation regarding the no claims bonus did not induce the contract. Before I could make firm findings-in-fact as to how exactly the misrepresentation 'led Mr Crumpen ... to adjust the premium' I would require to be referred to evidence on which I could make additional findings. I refer again to Macphail on Sheriff Court Practice, this time at paragraph 18.85:

"If he [the sheriff principal] agrees with the sheriff's findings but considers that additional findings are necessary he may adhere and add further findings. If, however, the evidence has not been recorded, the sheriff's findings-in-fact are binding on the sheriff principal and he cannot make different, or further findings-in-fact."

38. In the Avon case [Avon Insurance Plc and Others v Swire Fraser Ltd and Another [2000] 1 All ER (Comm) 573] the learned judge had the advantage of having heard what appears to have been very detailed evidence and, as already noticed, he reports that:

'The various witnesses each had their own way of expressing their opinions as to the reasons which had led them and their companies to subscribe to the scheme ... In this context the analysing and grading of historical results, if mentioned at all, fell into a lesser category as something which supported or encouraged their decision, but in my judgment did not induce it'.

I have not had that advantage. The apparent contradiction between the sheriff's statement that the information about the no claims bonus led to the adjustment of the premium and her conclusion that this did not induce the contract highlights the necessity of ascertaining if in the words of Bowen L.J., quoted in my paragraph 15 supra, "his [in this case Mr Crumpen's] mind was disturbed by the misstatement of the defendants". In the absence of extended notes of evidence this cannot be investigated and in the absence of such investigation I am not prepared to dislodge the learned sheriff's formal factual finding that the misrepresentation in relation to the no claims bonus did not induce the contract."

Procedural Matters

[9] It is appropriate to mention briefly the history of the procedure in this court in this appeal. Following the appellants' appeal against the decision of the sheriff principal of 21 February 2008, on 4 April 2008, the court appointed grounds of appeal to be lodged and the cause was appointed to the summar roll on 7 May 2008. On 29 October 2008 the court allowed an appendix to be received. Following that, a summar roll hearing was fixed for 4 December 2009, but, on that date, it was discharged on the motion of the respondent, upon the ground that his counsel had withdrawn from acting at a very late stage leaving insufficient time for fresh counsel to prepare to represent him at the hearing. On the motion of the appellants, the cause was then found suitable for early disposal and a diet for the summar roll hearing was fixed for 9 February 2010. That diet was intimated to the parties on 6 January 2010.

[10] This appeal called before us on the occasion of the appointed diet, when there was no appearance for the respondent. Counsel for the appellants explained the background of procedure just mentioned. He explained that the agents instructing him had endeavoured to communicate with the agents for the respondent on a number of occasions without success. However, they had succeeded in speaking with the responsible solicitor on the day of the hearing. He had explained to them that he had attempted to obtain legal aid for the respondent and, to that end had made an application in electronic form. However, inquiries showed that the Scottish Legal Aid Board had no record of such an application. The agent in question had stated that he would have to try again to obtain legal aid. The position of the respondent himself was unknown. His agent could not attend this court for the hearing because he had been engaged to appear in a district court at the same time. It was evident from the fact that there was no appearance on behalf of the respondent that his agent had not accorded to this court the courtesy of instructing counsel to explain the position of the respondent to the court. Against this background, counsel for the appellants pointed out that there were apparently two options that the court could choose. In the first place, the court could simply proceed with the hearing and consider the appellants' submissions. In the second place, the court might consider that it was appropriate to adjourn the diet in order to discover the respondent's position. What was not an option was to operate the procedure set forth in Chapter 30 of the Rules of Court. That procedure, in terms of Rule of Court 30.1(1), could only operate "where an agent withdraws from acting on behalf of a party"; in that situation the agent came under a duty to "intimate his withdrawal by letter to Deputy Principal Clerk and to every other party." It was evident from such enquiries as had been made that the respondent's agent had not withdrawn from acting. Furthermore, he had not intimated any withdrawal.

[11] Against the foregoing unsatisfactory background, which includes a failure on the part of the respondent's agent to arrange for an appearance on the respondent's behalf at a peremptory diet, we decided to follow the course contemplated in Court of Session Practice (Tottel) in paragraph 552 where it is pointed out:

"Where the respondent does not appear to support the judgment in his favour, the court still requires the appellant to show cause as to why the judgment should be altered."

Thereafter we heard submissions by counsel on behalf of the appellants.

[12] Finally, on another matter, it should be recorded that there has been produced in this court, as an appendix for the appellants, a transcript of the evidence led from Mr Ian Crumpen, at the proof before the sheriff on 16 and 17 January 2007. In that respect, this court is in a different position from that of the sheriff principal.

The Grounds of Appeal

[13] The appellant's grounds of appeal contain the following contentions:

"The sheriff (i) erred in law as to the degree of inducement required for an insurer to avoid a policy on the grounds of material misrepresentation. The correct test is that a policy can be avoided on those grounds if the insurer was induced to enter into the policy on the terms which it did, in particular as to the premium. The sheriff said that 'the misrepresentation of the no-claims bonus led [the underwriter] and would have led any prudent insurer to adjust the premium to be paid, and therefore in terms of the Marine Insurance Act 1906, section 18(2), it is material. However, that misrepresentation did not in my view go so far as to actually induce [the underwriter] to enter into the contract on behalf the defenders' (appeal print, page 31A-B). On that basis she held that the test of inducement had not been satisfied, so that the defenders were not entitled to avoid the policy. In so holding, the sheriff wrongly applied a different and higher test of inducement. (ii) failed to make findings-in-fact and law that the defenders had been induced by material misrepresentation to adjust the insurance premium, and that they were accordingly entitled to avoid the policy. Such findings followed unavoidably from the sheriff's view of the evidence, as expressed in the passage quoted above. ... The sheriff principal erred in refusing the defenders' appeal against the sheriff's decision. In particular, the sheriff principal: (i) failed to hold that the sheriff had erred in the respects identified above; and (ii) erred in holding that he could not alter the sheriff's fourth and fifth findings-in-fact and law without reference to the underlying evidence. Those findings were vitiated by the sheriff's error in law. It was clear from the sheriff's Note what her findings would have been had she applied the correct legal test."

The Appellants' Submissions

[14] Counsel observed that the scope of the issues between the parties had been reduced; one narrow issue remained. A misrepresentation concerning the no-claims bonus had been established, which was a material misrepresentation, as appeared from the sheriff's finding-in-fact-and-in-law 3. What was to be challenged in the appeal was her finding-in-fact-and-in-law 4, to the effect that the misrepresentation of the no-claims bonus did not induce the defenders to enter into the contract of insurance. Counsel submitted that that finding constituted an error because the sheriff, and, in his turn, the sheriff principal, had neglected the matter of the terms on which the appellants had offered insurance to the respondent.

[15] A transcript of the evidence given by Mr Crumpen at the proof was now available. Counsel drew our attention to passages at pages 31-32, where Mr Crumpen indicated that the no-claims bonus accorded to the respondent had been granted on the basis of the information given by the respondent that he had a no-claims bonus with the previous insurers of the vessel, Haven Knox- Johnston. Had that representation not been made, no no-claims bonus would have been accorded to the respondent. However, Mr Crumpen explained at page 8 of the transcript that because of that representation a no-claims bonus of 20% had been agreed by him to be allowed. That evidence had not been challenged. Against that background, counsel indicated that he would ask this court to insert an additional finding-in-fact based upon Mr Crumpen's unchallenged evidence. The existence of the representation made concerning the no-claims bonus had been acknowledged by the sheriff in finding-in-fact 11, finding-in-fact-and-in-law 3, and on page 24 of the appeal print in her Note. The new finding-in-fact ultimately sought to be added to the sheriff's findings is in the following terms:

"12. The effect of the pursuer's misrepresentation that he had a no-claims discount of 5% was to cause the defenders to enter into the contract of insurance at a premium 20% less than it would have been had that misrepresentation not been made."

Counsel said that, were the court to accept his submissions, it would be necessary for the court to vary the fourth finding-in-fact-and-in-law to state that the misrepresentation of the no-claims bonus induced the defenders to enter into the contract of insurance on the terms that they did and also to vary the fifth finding-in-fact-and-in-law to state that the defenders were entitled to avoid the policy.

[16] Thereafter counsel for the appellants drew our attention to the law which he contended was relevant to the issue in the appeal. He began with reference to sections 17 and 20 of the Marine Insurance Act 1906, "the 1906 Act". Section 20(2) was important in the present context; it provided that:

"(2) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk."

It was important to note that, at page 31 of the appeal print, in the course of her Note, the sheriff had observed that:

"the misrepresentation of the no-claims bonus led Mr Crumpen and would have led an prudent insurer, to adjust the premium to be paid and therefore in terms of the Marine Insurance Act 1906, section 18(2) (sic) it is material."

[17] In support of his submissions, counsel relied upon MacGillivray on Insurance Law, 11^th edition, paragraph 16.046, dealing with the question of inducement. It was necessary for the insurer to show that the misrepresentation was a real and substantial cause of his entering into the contract on terms that he would not have accepted if he had been appraised of the truth. In the present case, it was quite clear from Mr Crumpen's evidence that the 20% no-claims discount would not have been given but for the misrepresentation. Counsel went on to rely upon several authorities. The first was Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 A.C. 501, particularly the observations of Lord Mustill, at pages 518, 521 and 529, Lord Goff of Chieveley at page 516 and Lord Lloyd of Berwick at pages 570-571. Reference was also made to the observations of Lord Templeman at page 514 and Lord Slynn of Hadley at page 551. This case was authority for the proposition that an insurer could avoid liability on a policy on the ground of non-disclosure of a material circumstance or misrepresentation if that misrepresentation induced him to enter into the policy on the terms on which he did. That interpretation of Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd had been affirmed by the Court of Appeal in England in Assicurazioni Generali SpA v Arab Insurance Group [2003] All ER (Comm) 140, particularly in paragraphs 59, 62, 187 and 205. The same position had been adopted in Brotherton and Others v Aseguradora Colseguros SA and Another [2003] 2 All ER (Comm) 298.

[18] Looking at what the sheriff had said at page 31 of the appeal print and at Mr Crumpen's evidence, counsel submitted that the test for inducement had been met in the circumstances of this case because the premium payable by the respondent had been discounted by 20% on account of the misrepresentation concerning his possession of a 5% no-claims discount. Plainly the materiality test had also been met. However, the sheriff had erred in the last sentence of the relevant passage at page 31 of the appeal print. She had apparently neglected to consider the terms on which the appellants had agreed to enter into the contract of insurance, in particular, the premium which they had agreed should be paid, which had been discounted.

[19] Turning to the position of the sheriff principal, it was evident from his judgment that, in the absence of the transcript of the evidence of Mr Crumpen, he was unprepared to make any additional findings-in-fact of the kind now suggested. In fact, he could have done so on the basis of what the sheriff had said in her Note, but he was unprepared to do so. In the whole circumstances the appeal should be allowed.

The Decision

[20] At the outset, it is appropriate to recognise the relevant provisions of the 1906 Act. Section 17 provides:

"A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party."

[21] Section 18 deals with matters which require to be disclosed by the assured before the contract is concluded, with which we are not directly concerned in this case; section 20 deals with representations pending negotiation of the contract of insurance. It provides, in sub-sections (1) and (2) as follows:

"(1) Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.

(2) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk."

[22] These provisions were considered by the House of Lords in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd, although that case was not directly concerned with marine insurance. At page 521, Lord Mustill, describing the issues in the case said that one of these issues was this:

"Is the establishment of a material misrepresentation or non-disclosure sufficient to enable the underwriter to avoid the policy; or is it also necessary that the misrepresentation or non-disclosure has induced the making of the policy, either at all or on the terms on which it was made? ...."

He went on to answer this question at page 529 in this way:

"For these reasons, I conclude that there is to be implied in the Act of 1906 a qualification that a material misrepresentation will not entitle the underwriter to avoid the policy unless the misrepresentation induced the making of the contract, using 'induced' in the sense in which it is used in the general law of contract ...".

Although his Lordship did not repeat the formulation used in the first passage quoted including the words "induced the making of the policy, either at all or on the terms on which it was made", we consider that it is plain that he intended to use the word "induced" in that sense. That is made clear by Lord Goff of Chieveley at page 516, where he expressed himself in these terms:

"The second question is whether, for an insurer to be entitled to avoid a policy for misrepresentation or non-disclosure, it is enough that the misrepresentation or non-disclosure was material, or whether in addition it must ... have induced the making of the policy on the relevant terms. This has been called the 'actual inducement test'.

I turn first to the second of these question. Like both of my noble and learned friends [Lord Mustill and Lord Lloyd of Berwick], I have come to the conclusion that, on this question, Mr Beloff's submission on behalf of Pan Atlantic should be accepted; in others words, I accept that the actual inducement test accurately represents the law. I do so for the reasons given by my noble and learned friend Lord Mustill".

[23] This interpretation of the Pan Atlantic decision has been affirmed by the Court of Appeal in England in Assicurazioni Generali SpA v Arab Insurance Group [2003] All ER (Comm) 140. In paragraph 62, Clarke L.J. made his position clear in the following passage:

"62. In all these 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. ...

(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 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."

Thus, the court in that case accepted that the insurer could avoid a policy of insurance if a material misrepresentation by the assured had induced it to enter into the policy on the terms on which it did. In other words, if the misrepresentation led to different terms being offered by the insurer, that was sufficient to avoid the policy. (see St Paul Fire and Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd [1996] 1 All ER 96 (CA) at page 108; Brotherton and Others v Aseguradora Colseguros SA and Another [2003] 2 All ER (Comm) 298).

[24] It is quite clear from the passage in the sheriff's Note at page 31, already quoted, that she accepted the evidence of Mr Crumpen that the misrepresentation of the no-claims bonus had led him and would have led any prudent insurer to adjust the premium to be paid by the respondent. However, in our opinion, in the last sentence of that passage, when she stated that the misrepresentation did not go so far as to actually induce him to enter the contract of insurance, she misdirected herself in law as is apparent from the several authorities to which we have referred. What Mr Crumpen had said was that he would not have entered the contract on the terms on which he did, but for the misrepresentation. In the light of our conclusion, for that reason we consider that the sheriff's decision is flawed.

[25] As regards the decision of the sheriff principal, it is evident from the passages from it that we have quoted that he found the sheriff's finding-in-fact-and-in-law 4 constituted an obstacle to acceding to the appellants' appeal before him. It is true that the sheriff did not make a finding-in-fact relating to the effect of the misrepresentation on the premium, but, on the other hand, in the passage in the sheriff's Note that we have quoted, the sheriff expressed her factual conclusion that the misrepresentation had led Mr Crumpen to adjust the premium to be paid. While it might have been open to the sheriff principal to take the view that he could in fact have made an additional finding-in-fact in accordance with the sheriff's factual conclusion expressed in her Note, in the absence of a transcript of the evidence of Mr Crumpen, he felt unable to do so. We are not at a disadvantage in that respect, in that we now have that transcript. Having regard to what was said by Mr Crumpen in the passages to which reference has been made, which evidence the sheriff appears to have accepted, in the sense that she reflected that evidence in her Note, and having regard to the fact that that evidence was uncontradicted, we feel able now to make an additional finding-in-fact dealing with that matter. We are prepared therefore to accede to the motion of counsel for the appellants that a finding number 12 in the terms already indicated should be made. If such a finding-in-fact is made, it appears to us to be beyond argument that, having regard to the law which we have set forth, it follows that the contract of insurance was induced in the relevant sense by the misrepresentation relating to the no-claims discount. It follows from the conclusions which we have reached that the terms of the sheriff's findings-in-fact-and-in-law 4 and 5 must also be varied. They should now state:

"4. The misrepresentation of the no claims bonus induced the defenders to enter into the contract of insurance on the terms that they did.

5. The defenders are entitled to avoid the policy."

[26] In all these circumstances we shall allow the appeal from the interlocutor of the sheriff principal of 21 February 2008; we find that the sheriff's findings-in-fact and the new finding-in-fact, the terms of which we have narrated, were established by the proof; vary the sheriff's fourth and fifth findings-in-fact-and-in-law in the manner indicated; vary the sheriff's interlocutor of 19 June 2007 so as to repel the pursuer's first plea-in-law and sustain the defenders' fourth plea-in-law to the extent that it refers to misrepresentation of material facts; assoilzie the defenders and appellants from the crave of the initial writ; and continue the appeal on all questions of expenses to a hearing to be fixed for that purpose.