YOUNG , WAYNE STEPHEN GARDNER YOUNG AGAINST ROYAL AND SUN ALLIANCE PLC [2019] ScotCS CSOH

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> YOUNG , WAYNE STEPHEN GARDNER YOUNG AGAINST ROYAL AND SUN ALLIANCE PLC [2019] ScotCS CSOH_32 (03 April 2019) URL: http://www.bailii.org/scot/cases/ScotCS/2019/2019_CSOH_32.html Cite as: 2020 SCLR 121, 2019 GWD 13-207, [2019] ScotCS CSOH_32, [2019] Lloyd's Rep IR 482, 2019 SLT 622, [2019] CSOH 32

[1] The pursuer and defender are, respectively, the insured and insurer under a policy of

insurance entered into in March 2017 (“the policy”) in respect of inter alia certain commercial

premises at 92 to 96 Sauchiehall Street, Glasgow (“the first premises”) and 98 to

104 Sauchiehall Street, Glasgow (“the second premises”). The first and second premises are

hereinafter collectively referred to as “the premises”. (This summary simplifies matters, as

the defender avers that the policy was subject to a mid-term change in October 2017 and that

the pursuer was co-insured with a company after-mentioned, but no point is taken in

relation to those circumstances.) On 22 March 2018 a fire took hold and extensively

damaged the premises. It is averred that these require to be demolished. The sum sued for

[2] The defender has declined to meet the pursuer’s claim and, indeed, seeks in terms of

its third plea-in-law to avoid the policy by reason of nondisclosure on the part of the

pursuer. (Other issues are raised in its defences, including the want of insurable interest of

the pursuer in the second premises and the presentation by its brokers of a second market

presentation (at the same time as the Market Presentation (as after-defined)) in relation to a

hotel (“the Hotel Market Presentation”), but to which the defenders did not respond.)

[3] In short, the nondisclosure is said to be the fact that the pursuer had been a director

of four companies which had been dissolved after an insolvent liquidation or had been

placed into insolvent liquidation within the 5-year period immediately preceding

[4] At debate on the pursuer’s first plea-in-law, the pursuer moved for decree in terms of

his first conclusion, namely for declarator that the defender was obliged to indemnify the

pursuer in terms of the policy for damage to the premises and for loss of rent. Underlying

this motion was the pursuer’s contention that the defender had waived disclosure of the

undisclosed information and that that issue could be determined at debate. The pursuer

otherwise sought a proof on the remaining issues (of insurable interest and quantum). The

defender opposed grant of declarator and, for its own part, sought deletion of the pursuer’s

averments of waiver as irrelevant. It otherwise sought a preliminary proof on the issues of

[5] So far as parties’ researches have disclosed, this is the first case to consider the duty

under section 3(1) of the Insurance Act 2015 (“the 2015 Act”) to make a “fair presentation” of

The documentation and communications between the parties prior to inception of the

[6] Parties were agreed that the issues debated could be resolved without proof. Both

counsel referred to a number of productions, although these were not formally agreed by a

joint minute. I set out the material terms of that documentation in this section of the

[7] The pursuer used insurance brokers, Boyd & Co Ltd (“Boyds”), to place the

insurance. Boyds prepared a market presentation (“the Market Presentation”) which it

submitted to the defender under cover of an email. The Market Presentation is a 20 page

document. Page 1 is the cover sheet. Page 2 contained “Client Details and General

Information”, which I will set out shortly. The remainder of the Market Presentation

comprised eight presentations of between 2 and 3 pages each (described as “Core Premises

Cover Sections”) for eight different properties (of which the premises were the fourth and

fifth). These sections included details of the property (eg type, construction, number of

storeys, heating etc) and any additional security details or risk management features. It

suffices for present purposes to record that the declaration of “none” was made in relation to

“Risk management features”. Returning to page 2 of the Market Presentation, headed up

“Client Details and General Information”, this identified the client as the pursuer and a

company known as “Kaim Park Investments Ltd” (hereinafter “Kaim”). Under the heading

“Activities”, the status of the entity, the business description and the trade of the client was

described, respectively, as “Limited”, “Property Development” and “Property Owner”. (No

distinction appears to have been drawn between the pursuer or Kaim in the foregoing.)

Entries in the Market Presentation said to constitute the undisclosed information

[8] Under the heading “Details” at page 2, the Market Presentation provided the date

the business was established (stated to be 20 February 2013) and the identity of the previous

insurer. There is then a passage in the left-hand column that reads:

“Select any of the following that apply to any proposer, director or partner of the

Trade or Business or its Subsidiary Companies if they have ever, either personally or

(For reasons that will become apparent shortly, I shall refer to this as “the Moral Hazard

Declaration”). The answer opposite this, in the right-hand column, is simply “None”. After

an entry stating that the number of subsidiaries is “0”, the same answer of “None” is

provided in relation to the left-hand words “Material facts” (“the Material Facts

Declaration”). These responses are the basis of the defender’s contention that there was a

[9] The Moral Hazard Declaration is, on first sight, a little cryptic. In its adjusted

“… the Market Presentation, in the section for ‘Client Details and General

Information’, there is an entry in the following terms: ‘select any of the following

that apply to any proposer, director or partner of the Trade or Business or its

Subsidiary Companies if they have ever, either personally or in any business

capacity. The software used by Boyds provided seven options that could be ticked in

response. One option was in the following terms: ‘been declared bankrupt or

insolvent or been the subject of bankruptcy proceedings or insolvency proceedings’.

Had the Market Presentation been completed accurately, this response should have

been selected. Boyds selected the ‘None’ option. The Hotel Market Presentation, in

the ‘Details’ section, included an entry in the following terms: ‘Material facts

regarding directors and/or partners’. The software used by Boyds provided five

options that could be ticked in response. One option was in the following terms:

‘Involved in another company within 6 months before receivership/insolvency’. Had

the Hotel Market Presentation been completed accurately, this response should have

[10] In his pleadings, the pursuer’s position in relation to the Hotel Market Presentation is

that the Moral Hazard Declaration was correct, as “[n]o proposer, director or partner of the

insured under the contract in question has ever been made bankrupt, insolvent, or subjected

[11] A trading underwriter in the defender’s “Property, Packages & Liability Trading

Site” department responded by email, dated 24 March 2017 and addressed to a

“I refer to our recent discussions and have pleasure in attaching our Property

Cover is of course subject to the terms conditions and limitations of our properties

Terms have been based on your presentation of 13/2/17, our recent discussions and

Electrics Certified, Housekeeping being satisfactory, No outside storage within 10m

of buildings and where Intruder Alarm Systems are in place that they are set in their

Been convicted of or charged with but not yet convicted of a criminal offence

The author proceeded to set out the annual premium, which stated that” [g]iven the nature

of the portfolio and recent claims we would need to pitch our terms at £19k minimum +

IPT”. There was reference to pulling out the first and second premises, in which event the

premium dropped to £11,570 (plus IPT). The three further headings of the email were “Risk

Consultation” (though risk improvements would not be required “during this period of

insurance”), the “Premium Breakdown” (with the premium broken down by reference to

seven premises (premises 4 and 5 are the premises with which this claim is concerned)), and

“Claims Enhancement” (which undertook a speedy processing of claims). The waiver

argument turns of the words I have highlighted in italics, though parties focused on the first

four lines (particularly the use of “Insured”). For ease of reference, I shall refer to this as

[12] The Boyds’ reply has not been produced but it is referred to in the defender’s letter,

dated 6 April 2018 (ie post-dating the fire), raising the issue of nondisclosure. That letter

referred to the “subjectivity” wording and quoted Boyds’ response as “Had a quick look and

[13] In his pleadings, the pursuer avers that Boyds’ reply (“Had a quick look in all seems

“the ‘Insured’ were to be the pursuer and a company controlled by him, [Kaim] (the

latter because one of the properties to be insured was owned thereby). Neither the

pursuer nor that company has ever been declared bankrupt or insolvent, or had a

[14] The pursuer also takes the point, in response to the defender’s averments about

Boyds’ software (quoted at paragraph [9], above), that these averments are irrelevant and

the software was unknown to the defender at the time of policy inception or prior to these

proceedings. The pursuer avers that the Market Presentation contained no

misrepresentation and that none was founded upon by the defender. Even on the

hypothesis that the software drop-down menu was relevant, and could be construed as

answering that query, it is averred that it was accurately answered in the negative. This was

because no proposer, director or partner of the insured under the policy had ever been

[15] In relation to the issue of waiver, the pursuer’s position is that the email was

concerned only with information regarding the bankruptcy, insolvency and liquidation of

the insured and that that query was answered correctly (see the end of Article 5 of

condescendence). The pursuer’s averments on waiver are set out in Article 10(2):

“There was no duty on the Pursuer to disclose his holding of directorships within

companies which had had liquidators appointed. Esto that fact would have been

material within the meaning of s.7(3) of the 2015 Act (which is denied for the reasons

narrated hereinafter), the Defender in any event waived any entitlement to

disclosure thereof by asking, in its email of 24 March 2017 as referred to above,

whether or not the ‘Insured’ – i.e. the Pursuer or Kaim Park Investments Ltd – had

ever been made bankrupt or insolvent, or had a liquidator appointed. By restricting

that question to the ‘Insured’, and by not, as would have been simple, extending

same to companies in which the Insured had been involved as Directors (or

otherwise), the Defender waived any entitlement to disclosure of prior insolvencies

or bankruptcies experienced by anyone other than the Insured themselves. In point

of fact, neither the Pursuer nor Kaim Park Investments Ltd has ever been declared

bankrupt or insolvent, nor had a liquidator appointed. The defender’s averments in

answer are denied. Explained and averred that the email dated 24 March 2017 pre-

dated the commencement of the insurance policy and was plainly taken into account

[16] I have already set out, above, what the defender avers is the undisclosed information

(see paragraph [3] ) and its averments about the Boyds’ software (see paragraph [9]).

[17] The defender has declined the pursuer’s claim inter alia on the basis of the pursuer’s

failure to disclose the undisclosed information. The undisclosed information was material

and the failure to disclose this was, it was said, a breach of the duty to make a fair

presentation of the risk. The relative averments in Answer five are as follows:

“A circumstance is a material circumstance if it would influence the judgement of a

prudent insurer in determining whether to take the risk and, if so, on what terms. The

undisclosed information was a material circumstance for the purposes of the 2015 Act.

The existence of the insolvent liquidations in the Pursuer’s prior and existing business

relationships would have been influential to the judgement of a prudent insurer in

determining whether to take the risk and, if so, on what terms.”

At the end of Answer five the defender expands on the issue of materiality:

“The fact that a proposer has been involved as a director in companies that have entered

into insolvent liquidation is relevant to an insurer’s assessment of risk. It can be an

indicator of a wide range of failings on the proposer’s part. For instance, it can be

indicative of a lack of relevant knowledge or expertise, poor judgement, a propensity

towards risk taking, an inability to organise finances or an inability to run a company

properly with due regard to, amongst other things, regulations (including those directed

to protecting life and property) and staff training. As a result of the Pursuer’s failure to

disclose the undisclosed information, the Defender was not provided with a fair

presentation of the risk. Had the undisclosed information been provided to the

Defender prior to policy inception, the Defender would not have entered into a contract

of insurance at all on any terms.” (I have removed the different fonts identifying the

[18] The defender responded to the pursuer’s argument on waiver, as follows:

“Not known and not admitted that neither the Pursuer nor Kaim Park Investments

Limited has ever been declared bankrupt or insolvent, nor had a liquidator

appointed. Quoad ultra denied. Explained and averred that the email dated 24 March

2017 did not set out questions for the Pursuer to respond to. It set out the basis on

which cover was being offered to the Pursuer. The offer was made on the basis of

inter alia Boyd’s market presentation. The market presentation pre-dated the email

of 24 March 2017. The market presentation contained an entry that, as hereinbefore

condescended upon, should have prompted Boyds to disclose the Pursuer’s

involvement as director in companies that had entered insolvent liquidation. As

such, the Pursuer’s failure to disclose the undisclosed information was unconnected

to, and did not rely on, the terms of email of 24 March 2017. The email of 24 March

2017 did not amount to a waiver of, or otherwise limit, the Pursuer’s duty of fair

[19] Mr Dunlop QC, who appeared for the pursuer, outlined the pursuer’s position as

follows. It is not disputed that the policy between the pursuer and defender covers loss

caused by fire. The only complete defence advanced by the defender (there is a partial

defence regarding insurable interest) is that it was entitled to avoid any liability under the

policy as a result of an alleged failure by the pursuer to disclose the undisclosed

information, namely that he had been a director of four companies that had been dissolved

after an insolvent event, or had been placed into insolvent liquidation, in the 5-year period

prior to the commencement of the policy. Mr Dunlop QC submitted that the undisputed

background discloses that the defender waived any entitlement to disclosure of prior

insolvencies or bankruptcies by anyone other than the insured themselves. In these

circumstances, the defence of waiver advanced was bound to fail and was irrelevant.

[20] The pursuer’s insurance was placed with the defender by Boyds, insurance brokers

acting on his behalf. Boyds presented the defender with the Market Presentation. The

defender responded with the defender’s email, providing its quotation for insurance cover.

In terms of the defender’s email, the defender indicated that cover was subject, amongst

[21] On the same date, Boyds confirmed this to be accurate. Mr Dunlop QC submitted

that was correct: the “insured” were to be the pursuer and a company controlled by him,

Kaim. Neither the pursuer nor Kaim has ever been declared bankrupt or insolvent. It is not

said by the defender that in answering this question the pursuer (or his brokers) responded

untruthfully, and accordingly there is no defence of misrepresentation; rather, the defence is

[22] Mr Dunlop QC turned to the legal principles. He submitted that it was

well-established that an insured’s obligation to disclose information on a subject matter can

be restricted by the questions posed by an insurer. If questions are asked on a particular

subject it may be inferred that the insurer has waived his right to information, either on the

same matters but outside the scope of the questions, or on matters kindred to the

subject-matter of the questions: R&R Developments Ltd v AXA Insurance UK Plc

[2010] 2 All ER (Comm) 527 at paragraphs 39–42 (followed in Scotland in Higherdelta Ltd v Covea

Insurance Plc [2017] Lloyd’s Rep IR 650); Doheny v New India Assurance Co [2005] 1 All ER

(Comm) 382 at paragraphs 14-21, 29, 37-38; MacGillivray on Insurance Law, 14th Edition at

paragraphs 17-020. Doheny involved a misrepresentation, so the court’s discussion of waiver

was obiter. The cases discussed in MacGillivray disclosed that questions could widen or

narrow the scope of disclosure. Furthermore, section 3(5) of the 2015 Act recognised that the

[23] Mr Dunlop QC stated that the defender’s Moral Hazard stipulation (quoted in

paragraph [11] above) was, no doubt deliberately, restricted to insolvency events

experienced by the insured. It can reasonably be inferred, he suggested, that an insurer,

looking out for its own interests, will seek information tailored according to what it wishes

to know. Where an insurer asks for information regarding the bankruptcy (for individuals)

or insolvency (for corporate entities) of the insured, the reasonable assumption is that the

insurer does not wish to know of bankruptcy or insolvencies affecting persons or entities

other than the insured. The result, he argued, was that the defender had waived its

entitlement to disclosure of insolvency events experienced by anyone other than the insured

themselves, that being the same subject matter but beyond the scope of the question posed.

[24] Albeit there was no proposal form here, there was, he argued, a specific question

regarding prior insolvency events. That specific question was, presumably deliberately,

targeted solely at the personal or individual situation of the two insured, and not any prior

corporate vehicle in which they had been involved. He referred to the following passage

“It makes perfect sense to ask the insured about the directors’ personal position,

whether arising from their personal affairs or from any businesses in which they have

been involved, without going further and asking about the position of the companies

as well. The literal construction [of the question asked] makes good commercial

sense. It is true that it might also make good commercial sense for the insurers to ask

questions about the claims and insurance history of companies with which the

directors had been involved, but they have not done so and that is not particularly

surprising, since insolvency is not a risk which is insured against even as regards the

insured and the directors, let alone remoter parties" (Counsel’s emphasis added).

[25] If the situation of such prior corporate vehicles was indeed so important to the

defender (as it has protested since the fire), it would have been very easy indeed for the

defender to have asked a question about it. He referred to Doheny and to R&R Developments

[26] Further, the defender, a substantial insurer, is taken to be aware of the case law

Mr Dunlop QC referred to MacGillivray on Insurance (14th ed) 11-002 – 11-004 to support this

proposition. He submitted that this further point underlines the fact that the defender

indicated what it considered material, so far as prior insolvency was concerned. It thus

waived any entitlement to anything further in that regard. It cannot, in the face of a fire on

premises which it was happy to insure on the basis of the specific question asked, now seek to

“move the goalposts” and insist that, actually, it considered material a far wider disclosure of

information regarding previous insolvency. Rather, the proper inference is that the insurer had

no interest in the insolvency of any party other than the subject matter of the question: namely,

[27] This, he submitted, leads to an entirely sensible result. As Simon Brown LJ (as he then

was) said in Economides v Commercial Union Assurance Co Plc [1997] 3 All ER 635, if

“material facts duly are dealt with by specific questions in the proposal form and no

sustainable case of misrepresentation arises, it would be remarkable indeed if the

[28] For these reasons, the defence is therefore irrelevant. Decree should be pronounced

[29] Mr Barne QC, who appeared on behalf of the defender, began by noting that the

debate, fixed on the pursuer’s motion, was to address the issue of waiver. In particular, the

Court was being asked, as a matter of relevancy, to determine from the documents and

pleadings whether or not the defender waived the right to receive disclosure of the

undisclosed information. The defender avers in Answer five that, “The undisclosed

information was a material circumstance for the purposes of the [Insurance Act 2015]” (see

paragraph [17] above). For the purposes of the debate, this averment must be taken

pro veritate. It is clear from the defender’s Note of Argument that it was not clear whether

the pursuer was relying on the waiver which is said to arise when the proposer discloses

information such as to give rise to a duty on the part of the insurer to investigate further.

This was not, in fact, advanced by Mr Dunlop QC. Accordingly, I do not record Mr Barne’s

[30] Mr Barne QC submitted that the pursuer’s averments in relation to waiver are

irrelevant, failing which the matter cannot be determined at debate. In short, it is the

1. The pursuer was in breach of its duty of fair presentation by not disclosing the

2. The defender’s email post-dated the pursuer’s breach of the fair presentation

duty and did not amount to a waiver of the pursuer’s duty to disclose the

3. In particular, the defender’s email did not give rise to a waiver because:

(i) The pursuer makes no averments to the effect that the pursuer relied on the

reply email. This reflects the fact that, had the Market Presentations

(including the Hotel Market Presentation) been correctly completed, the

undisclosed information would have been disclosed. The non-disclosure is

(ii) Further, and in any event, the defender did not know about the prior breach of

the duty of fair presentation and, as such, could not have waived its

consequences since there must be knowledge of the right before it can be

[31] Mr Barne QC referred to the documentation, whose terms I have summarised above,

at paragraphs [7] to [11]. Mr Barne QC noted that, following a recovery of documents, it has

become clear that one of the options that could have been selected was in the following

terms: “Involved in another company within 6 months before receivership/insolvency”.

The undisclosed information should have been disclosed as part of the Market Presentation

in compliance with the pursuer’s duty of fair presentation. Furthermore, the undisclosed

information should have been disclosed in response to the specific entries. Mr Barne QC

also explained that on 10 April 2017 the pursuer sought to change the values of a number of

properties for which cover had been sought and enquired as to whether a discount on

premium levels could be offered. It was, and cover was incepted on 10 April 2017. (This

[32] Mr Barne QC turned to the section 3 of the 2015 Act. Section 3(1) introduced the

requirement on the insured (at this stage, the person or party who would be the insured if

the contract were entered into) to make to the insurer a “fair presentation of the risk” before

the contract was entered into. The duty of fair presentation attaches before the insurance

contract is entered into. The duty of fair presentation replaced the existing duties in relation

to disclosure and representations contained in sections 18, 19 and 20 of the Marine Insurance

Act 1906 Act (“MIA1906”). However, he submitted, it retained essential elements of those

provisions. Section 3 is designed to ensure that an insured provides insurers with the

information they require to decide whether to insure a risk, and on what terms.

[33] Section 3(3) sets out the three elements of a “fair presentation of the risk”. The first

element of a fair presentation is a duty of disclosure, introduced in section 3(3)(a) and

further defined in section 3(4). This provides two ways to satisfy the duty of disclosure. The

first way to satisfy the duty is set out in section 3(4)(a) and effectively replicates the

disclosure duty in section 18(1) of the 1906 Act. Its key features are that the insured must

disclose “every material circumstance” which the insured “knows or ought to know”.

[34] As in section 18(3) of MIA 1906, section 3(5) of the 2015 Act provides exceptions to

the insured’s duty of disclosure. The exceptions do not apply to the requirement to make

the disclosure in a clear and accessible manner, nor to the duty not to make

misrepresentations. In the absence of inquiry, anything which is the subject of an exception

[35] Mr Barne QC turned to the pursuer’s pleadings. He noted that in Article 5 of

“Explained and averred that the market presentation put the defender on notice of

matters for further inquiry. The defender did in fact make further inquiry, as

hereinbefore condescended upon, prior to the inception of the policy.”

In this averment, the pursuer appears to place reliance on the terms of section 3(4)(b) of the

[36] He noted that, in these averments, the pursuer appears to place reliance on the terms

of section 3(5)(e) of the 2015 Act. However, the pursuer’s pleadings do not identify what it

was in the Market Presentation that “put the defender on notice of matters for further

inquiry”. There is, he submitted, therefore no averred basis for the pursuer to argue that the

Market Presentation disclosed sufficient information with the result that the pursuer’s duty

of fair presentation in relation to the undisclosed information was discharged in terms of

[37] Accordingly, although the pursuer’s pleadings appear to rely on two separate

subsections of section 3, it would appear that the pursuer is in fact advancing a single

argument: that the terms of the defender’s email of 24 March 2017 was such that the

defender is barred from relying on the pursuer’s failure to disclose the undisclosed

information. (As noted above, this is consistent with the way in which Mr Dunlop QC

[38] Mr Barne QC noted that in terms of the pursuer’s Note of Argument, lodged in

advance of the procedural hearing, the pursuer’s argument on waiver is advanced not only

on the basis of the 2015 Act but also at common law. The 2015 Act superseded the 1906 Act

and codifies the common law. Mr Barne QC noted that the pre-existing law in the UK is

based on principles developed in the eighteenth and nineteenth centuries and codified in the

1906 Act. Although the 1906 Act appears to apply only to marine insurance, most of its

principles have been applied to non-marine insurance on the basis that MIA 1906 embodies

the common law (which itself is mostly based on principles developed in marine cases). He

referred to paragraphs 1.16 and 4.3 of the joint report of the Law Commissions, “Insurance

Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims;

and Late Payment” (Law Com No 353/Scot Law Com No 238) (“the 2014 Joint Report of the

Law Commissions”). The pre-existing law on the duty to disclose material circumstances

was also summarised by the authors of Chitty on Contracts (33rd ed) at paragraph 42-34,

“Where the insurer asks the assured to answer specific questions, the parties are

taken to have agreed that the facts involved in answering the questions are material,

but this does not affect the duty to disclose material circumstances not covered by

the questions, unless the way they are drafted has this effect, and except insofar as

the failure to ask a particular question may make it difficult for the insurers

afterwards to assert that the circumstances which would have been elicited were

The same authors also discuss the exceptions to the duty (at paragraph 42-36):

“There are four traditional exceptions to the duty of disclosure (at least insofar as it

rests on the assured’s shoulders). Thirdly, the assured is not obliged to disclose

circumstances where the insurer has waived disclosure of such circumstances. For

example, if the insurer forbears to ask questions after disclosure of circumstances

have put him on inquiry, he may be taken to have waived the right to disclosure of

the circumstances which such inquiry would have disclosed; but the doctrine is not

applicable to circumstances which are so unusual or special that their non-disclosure

would distort the presentation of the risk, since the duty to disclose would otherwise

be undermined. Similarly, the question which the insurer may ask the assured

(usually in a proposal form) may be so framed as to indicate that the insurer does not

require further information on the matters in question, thus relieving the assured

[39] As noted in the last sentence of the extract from Chitty just quoted, under the

pre-existing law the duty of disclosure could be circumscribed by the manner in which the

insurer asks the insured certain questions. In those circumstances, the insured, in answering

the specific questions in the proposal form, did not breach the duty of disclosure by not

providing additional information. This is because the insurer was taken to have accepted

that the additional information was not material. Mr Barne QC referred to Doheny as an

example of this. Longmore LJ endorsed (at paragraph 19) the test set out in

“Whether or not such waiver is present depends on a true construction of the

proposal form, the test being, would a reasonable man reading the proposal form be

justified in thinking that the insurer had restricted his right to receive all material

information, and consented to the omission of the particular information in issue?”

The Court in Doheny found obiter that the question in the proposal form, had it meant what

the insured argued it meant, would have resulted in a waiver of additional information.

However, he submitted, it is important to note that the Court did not consider the basis of

the waiver to be section 18(3)(c) of the 1906 Act (being the predecessor of section 3(5)(e) of

the 2105 Act). This was because section 18(3)(c) - like section 3(5)(e) - only applied “in the

absence of inquiry”. The Court in Doheny considered the proposal form to be “a focused and

detailed inquiry running to six pages”. The waiver in the Doheny case was therefore not

[40] The position under the 2015 Act is he suggested, less clear in relation to this type of

“waiver”. However, he submitted that the important point to note is that the approach

adopted in the Doheny case does not apply in the present case. The defender did not ask the

pursuer questions in the email of 24 March 2017. Accepting pro veritate that the undisclosed

information was a material circumstance, by the date of the defender’s email of the pursuer

was already in prior breach of the duty of fair presentation by failing to disclose the

undisclosed information in the Market Presentation. There can be no question of the

defender knowing about, and then waiving, the pursuer’s prior breach.

[41] Turning to the doctrine of waiver, Mr Barne QC submitted that waiver can be

express or implied. Waiver involves the abandonment of a right. Whether or not there is

waiver is a question of fact. The party relying on waiver need not have suffered prejudice

by reliance on the waiver. There must, however, have been a conduct of affairs on the basis

of the waiver; in other words, there must be reliance. AWG Group Limited v HCP II Properties

101 GP Limited [2017] CSOH 69 at paragraphs 14 to 18. The party relying on waiver bears the

[42] The law of waiver has recently been considered by Lord Doherty in the case of AWG

Group Limited v HCP II Properties 101 GP Limited [2017] CSOH 69 particularly at

paragraphs 14 to 18. See also Fieldoak Limited (in receivership) v Citywide Glasgow Ltd 2017

CSOH 138 at paragraphs 110ff. Lord Doherty undertakes an extensive review of the

authorities and confirms that, for any argument on waiver to succeed, the party relying on it

must be able to aver and prove reliance. In doing so, he followed the approach of

Lord Fraser in Armia Ltd v Daejan Developments Ltd 1979 SC (HL) 56 at page 69:

“In the present case the reason why the plea of waiver fails is not that the

respondents suffered no prejudice (although in my opinion that is true) but that the

appellants never abandoned their right to refuse the title offered, and the

respondents never conducted their affairs on the basis that they had.”

[43] Waiver has typically only been found to have occurred in the reported cases relating

to pre-contractual disclosure obligations where the category of information which the

insurers are said to have dispensed with can be “clearly and narrowly defined”. Noblebright

Ltd v Sirius International Corporation [2007] Lloyds Rep 584 at 65.

[44] Turning to apply the foregoing principles to the pursuer’s case, Mr Barne QC

submitted that it was important to note that the case law on waiver in relation to

pre-contractual disclosure obligations predominantly addresses the situation where the

insured has completed the insurer’s proposal form and responded to specific questions

designed to allow the insurer to assess the risk. In other words, the waiver has occurred

because the insurer is deemed to have defined the nature and extent of the information it

wishes to receive. That is not the situation in the present case.

[45] The starting point is that waiver of information as to facts material to the risk is not

to be inferred too readily, or else it might subvert the insured’s duty to disclose them in

good faith. MacGillivray on Insurance Law (14th ed), paragraph 17-089. It has also been noted

“The cases on these matters [i.e. implied waiver] are not, however, fully consistent,

for the simple reason that the notion of waiver in such circumstances cannot easily be

reconciled with the principle that spontaneous disclosure is required of the assured.

The burden of proving waiver is borne by the assured.”; Colinvaux’s Law of Insurance

[46] Mr Barne QC submitted that the key point for the defender is that, in the defender’s

email, the defender was not making any “further inquiry” of the pursuer. The defender’s

email itself included a quotation for the applicable premium. The risk had been priced. As

is noted in the accompanying letter, the period of insurance was, at that stage, to be from

20 March 2017 to 19 March 2018. The insurer was not awaiting any further information in

[47] The case of Container Transport International Inc v Oceanus Mutual Underwriting

Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476 (“CTI”) is unusual since it, too, related to a

case where insurance was offered on the basis of a market presentation rather than on the

basis of the insurer’s proposal form. After noting the facts, Mr Barne QC noted that the court

found that there was nothing in the brokers’ presentation which would have prompted a

reasonable insurer to make further enquiries. The insurer was entitled to take the

summaries at face value, and no waiver arose. As Parker LJ put said at pages 511 to 512:

“So long as [the] summary is fair, the insurer cannot complain that the full details of

the experience were not disclosed. He must however be entitled to assume that the

summary is fair. From this follows that, if he then proceeds to negotiate on the basis

of the summary without enquiry as to its accuracy, he waives nothing. He can

assume both that it is accurate as far as it goes and that, if it covers only part of the

past experience, there is nothing in the part omitted which would vitiate the

“The judge clearly recognised the importance of a fair presentation, though I find

myself in disagreement with his conclusions, to which I come later. However, if I

may respectfully say so, the error which he made in many passages of his judgment,

is, first, that he appears to have failed to appreciate that, due to the overriding nature

of the duty to disclose material facts, the fairness of the broker's presentation in

summary form must necessarily be assessed before the underwriter's reaction to such

“I have also to endorse the comments of Lords Justices Kerr and Parker on the error

of the judge's reliance on Mr. Lee's approach to this insurance. It ignores the

underwriter's right to be informed of all material circumstances before he decides

[48] He submitted that as the CTI case made clear, the fairness of an insured’s market

presentation must be assessed before the underwriter’s reaction is taken into account. As

similar point was made by Gibson LJ in WISE v Grupo Nacional [2004] 2 Lloyd’s Rep 483

“If there was a fair presentation of the risk and the reasonably careful reinsurers

would have been put on inquiry but failed to make an inquiry which they could have

made easily, they will be treated as having waived disclosure of what they would

have discovered had they made that inquiry. However the court should not subvert

the duty of the assured to make a fair presentation of the risk by finding that the

reinsurers were put on inquiry and failed to discover for themselves the material

This is, Mr Barne QC submitted, because the underwriter’s entire approach to pricing the

risk, and the overall approach to be taken to the insured’s request for cover, may have been

formulated on the basis of an unfair presentation. Accordingly, he submitted, the pursuer’s

case on waiver fails because, contrary to what is asserted by the pursuer, there was no

“further inquiry”. In the circumstances of this case, the fairness of the pursuer’s

presentation must be assessed before the defender responded by providing a quotation.

[49] Mr Barne QC stressed that, on his analysis, this is not a case of a “non-inquiry”

waiver. There is nothing that put the defender on notice in respect of the undisclosed

information. In any event, this form of waiver has been superseded by the terms of

[50] Mr Barne QC argued the pursuer’s case could only possibly gain any traction if the

defender’s email is construed as containing a “further inquiry”. The defender’s position is that

it did not contain any such inquiry. But if the defender’s email was construed as containing a

further inquiry, then, following the Doheny case, in the circumstances of the present case, there

[51] Mr Barne QC queried whether the form of implied waiver ultimately relied on obiter

by the Court in the Doheny case survives the codification of insurance law in terms of the

2015 Act. But even if it does, the pursuer’s case is irrelevant because there are no averments

[52] In the present case, there can be no suggestion that the pursuer relied on the

defender’s email in not disclosing the undisclosed information. Had the Market

Presentations been completed accurately, the undisclosed information would have been

disclosed. He submitted that the failure to disclose this information preceded, and was

causally unrelated to, the defender’s email. A plea of waiver would only be available in the

event that the pursuer had, as a result of the defender’s request for information, been led to

believe that only a limited disclosure was required. In Orakpo v Barclays Insurance Services

Ltd [1995] LRLR 443, the proposal form required the assured to tick “yes” or “no” boxes.

The assured, faced with a question as to the condition of his house, ticked the box indicating

that the house was sound, an answer only partly true as the house was badly affected by dry

rot. The assured’s defence to a claim of misrepresentation was that the proposal form did

not allow a full answer to be given. The Court of Appeal, rejecting this defence, ruled that

[53] In any event, adopting the test endorsed by the Court in the Doheny case, there is

nothing in the defender’s email that would justify a “reasonable man” thinking that “the

insurer had restricted his right to receive all material information, and consented to the

omission of the particular information in issue”. There is nothing in the defender’s email

that impinges on or restricts the duty of fair presentation. The “reasonable man” would not,

having regard to the defender’s follow-up email, be justified in thinking that the defender

(i) had restricted its right to receive all material information, and (ii) consented to or waived

the prior failure by the pursuer to disclose the undisclosed information.

[54] In the present case, the defender’s follow-up email was the defender’s response to

the information that had been provided. The defender was confirming the basis on which it

was offering its Property Owners policy at an annual premium of £19,000 plus IPT. The

defender was not seeking further information to allow it to decide “what is the appropriate

[55] For the purposes of the debate, the undisclosed information is treated as a material

circumstance. Accordingly, the pursuer was in breach of the duty of fair presentation in

submitting the Market Presentation and asking for a quotation on the basis of it without

disclosing the undisclosed information. As at 24 March 2017, the defender did not know of

that prior breach and therefore cannot be taken to have impliedly waived the pursuer’s

breach of that obligation. Under reference to E Reid and J Blackie, Personal Bar (2006), at

paragraph 3-11, Mr Barne QC submitted that waiver, implied or express, is the

abandonment of a known right. He referred to Lord Bingham in Millar v Dickson 2002

“In most litigious situations the expression ‘waiver’ is used to describe a voluntary,

informed and unequivocal election by a party not to claim a right or raise an

In the course of oral submissions, Mr Barne also referred to paragraphs 15-02 and 15-04 of

[56] Mr Barne QC invited the court to repel the pursuer’s motion and to grant the

[57] The principal issue in this case is whether the pursuer breached the duty under

section 3(1) of the 2015 Act to make a fair presentation of the risk and, as a subsidiary issue,

in the event that the undisclosed information was material, whether the defender insurer

[58] So far as Counsel’s researches could ascertain, this is the first case under part 2 of the

2015 Act to address these issues. It is appropriate, therefore, to begin with a consideration of

the 2015 Act, before turning to parties’ submissions and the cases they referred to on the

[59] The 2015 Act, which applies only to non-consumer insurance contracts, followed

the 2014 Joint Report of the Law Commissions. It marks a significant departure from the

former law in certain respects, including the abolition of any rule entitling avoidance of an

insurance contract for breach of the duty of utmost good faith: section 14(1) of the 2015 Act.

The defining feature, formerly, of a contract of insurance as being one of utmost good faith

(and the obligations of disclosure that entailed) is also modified by the 2015 Act and by the

Consumer Insurance (Disclosure and Representation) Act 2012 (“the 2012 Act”): see

section 14(2) of the 2012 Act. Equally significant is the creation in part 2 of the 2015 Act of

the statutory obligation of an insured to make a “fair presentation of the risk” to the insurer

(“the fair presentation duty”), and which replaces the duty of disclosure at common law and

as articulated in section 18 of the MIA 1906: sections 21(2) and (3) of the 2015 Act.

[60] The 2015 Act imposes a duty on the prospective insured to make a “fair

presentation” of the risk for of which insurance is sought. This replaces the common law

rules (as also, in part, articulated in some provisions of MIA 1906) imposing a duty to

disclose every material circumstance. In their Joint Consultation Paper, Insurance Contract

Law: The Business Insured’s duty of Disclosure and the Law of Warranties (Law Com

Consultation Paper No 204; Scottish Law Com Discussion Paper No 195) (“CP3”), the two

Law Commissions noted (at paragraph 5.12ff) that what is required to comply with the duty

to make a “fair presentation of the risk” is more limited than the common law requirements

of disclosure, and which itself had a sound basis in the case law. As an illustration of the

courts’ discussion of the articulation of the duty in terms of a fair presentation, the Law

Commissions cited Clarke J’s observations in Garnat Trading & Shipping (Singapore) Pte

Limited and Another v Baominh Insurance Corporation [2010] EWHC 2578 (Comm);

“A minute disclosure of every material circumstance is not required. The assured

complies with the duty if he discloses sufficient to call the attention of the

underwriter to the relevant facts and matters in such a way that, if the latter desires

further information, he can ask for it. A fair and accurate presentation of a summary

of the material facts is sufficient if it would enable a prudent underwriter to form a

proper judgement, either on the presentation alone, or by asking questions if he was

sufficiently put upon enquiry and wanted to know further details, whether to accept

[61] The Law Commissions returned to this issue in their Joint Consultation Paper,

“Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by

the Insured (Law Com Consultation Paper No 182; Scottish Law Com Discussion Paper

No 134)(“CP4”) at paragraph 5.50. In CP4 the two Law Commissions also identified (at

paragraph 5.6) five problems with the current law. The first of these was that the duty of

disclosure was poorly understood and the fourth was that the law (eg as embodied in

MIA 1906) gave rise to too many disputes and encouraged “underwriting at claims stage”.

[62] The key provision in part 2 of the 2015 Act is section 3, which defines the fair

(1) Before a contract of insurance is entered into, the insured must make to the

(2) The duty imposed by subsection (1) is referred to in this Act as ‘the duty of fair

(b) which makes that disclosure in a manner which would be reasonably clear

correct, and every material representation as to a matter of expectation or

(4) The disclosure required is as follows, except as provided in subsection (5)—

(a) disclosure of every material circumstance which the insured knows or ought

(b) failing that, disclosure which gives the insurer sufficient information to put a

prudent insurer on notice that it needs to make further enquiries for the

(5) In the absence of enquiry, subsection (4) does not require the insured to disclose a

(6) Sections 4 to 6 make further provision about the knowledge of the insured and of

[63] There are several elements to the fair presentation duty:

1) certain matters must be disclosed (per section 3(3)(a)), and set out in s 3(4);

2) the manner of presentation must be ‘reasonable clear and accessible’ to a prudent

3) every material presentation as to a matter of fact must be substantially correct

and every presentation of a matter of expectation or belief must be made in good

[64] As will be clear from the circumstances set out above, the principal issue in this case

is the alleged non-disclosure of the undisclosed information, which engages the first of these

elements. For present purposes it suffices to focus on section 3(4)(a), requiring the

disclosure of “every material circumstance” which the insured knows or ought to know. (In

this case, neither party raised any issue as to the pursuer’s knowledge of the undisclosed

information. Accordingly, I pass over sections 4, 5 and 6 of the 2015 Act, which make

provision for actual or deemed knowledge of the insured and the insurer. Similarly, no

issue arose as to the inaccuracy of what was represented, and for which further provision is

[65] Section 7(3) of the 2015 Act provides that a circumstance is “material” if it would

“influence the judgement of a prudent insurer in determining whether to take the risk and, if

so, on what terms”. Examples are provided in section 7(4) of things that may be material

“anything which those concerned with the class of insurance and field of activity in

question would generally understand as being something that should be dealt with

As this is a debate, the materiality of the undisclosed information is presumed. Accordingly

no evidence would be led at this stage for the purpose of this subsection.

[66] The fair presentation duty arises and must be discharged before the insurer accepts

the risk, and section 7(6) provides for withdrawal or correction of a representation before the

contract of insurance is entered into. Returning to subsections 3(4) and (5) of the 2015 Act, it

is important to note that there is no duty to disclose something as to which the insurer

“waives” information: section 3(5)(e). (This reflects section 18(3)(c) of MIA 1906.) Waiver

therefore remains part of the legal landscape mapped out by the 2015 Act. The pursuer’s

fall-back position in this case is that, by reason of the narrow scope of the defender’s Moral

Hazard stipulation in the defender’s email (see paragraph [11], above), the defender waived

the obligation to disclose the undisclosed information. Mr Barne QC disputes that this was

[67] It was not suggested by either Senior Counsel that the 2015 Act altered the prior law

on waiver. Under the pre-2015 Act case law, waiver typically arose in an insurance context

1) The first was where the prospective insured submitted information which

contained something that would prompt a reasonably careful insurer to make further

enquiries, and the insurer fails to do so. The insurer cannot thereafter rely on the

information that would have been elicited by its further enquiry to avoid the

contract. The insurer has waived the information that further enquiries would have

revealed. An example of this may be found in the case of WISE (Underwriting

Agency) Ltd v Grupo Nacional Provincial SA [2004] 2 All ER (Comm) 613 (at

paragraph 63). Section 3(4)(b) of the 2015 Act provides for this form of waiver. That

2) The other form in which waiver arises is where the insurer asks a “limiting”

question, ie one from which a prospective insured may reasonable infer that the

insurer has no interest in knowing, and has waived, information falling outside the

scope of the question or questions, even if that information was otherwise material.

The classic example is where the proposal form asks about convictions within the last

5 years and which can instruct waiver of information about convictions more than

5 years ago. Doheny was one of the cases cited by the parties for its discussion (albeit

These two forms of waiver are also discussed in the 2014 Joint Report of the Law

Commissions at, respectively, paragraphs 4.21 to 4.27 (waiver by omission) and

paragraphs 4.28 to 4.30 (limited questions) as well as in one of the leading textbooks,

Colinvaux‘s Law of Insurance (11th ed) at paragraphs 7-163 to 7-164 (limited questions) and at

[68] Two other features of the pre-2015 Act case law on waiver should be noted, namely,

that waiver is not readily to be inferred (per MacGillivray at paragraph 17-089; in Doheny

Parker LJ stated that an assured must show a “clear case” (at p 511)) and the person

asserting waiver (here, the pursuer) bears the onus of establishing waiver. The latter

proposition reflects Scottish procedure and practice, requiring the party who asserts a state

[69] Both parties referred to Doheny, and it is convenient to consider the discussion of

waiver in that case. In Doheny the claimants completed two proposal forms for insurance,

for themselves personally and also for a company of which they were directors. The

“No director/partner in the business, or any Company in which any director/partner

have had an interest, has been declared bankrupt, and the subject of bankruptcy

The claimants did not disclose in the proposal forms that they had been directors and

shareholders in companies which had been the subject of insolvency proceedings. The

claimants challenged the insurer’s rejection of the claim and argued that the declaration

applied only to individuals and not companies. The Court of Appeal approached this as a

matter of the proper construction of the declaration, construed against the intention of the

parties that any insolvency on the part of the claimants or any company in which they had

previously had an interest, should be declared. It found that as the words “made any

arrangement with creditors” was equally habile to cover corporate as well as personal

insolvency, then other parts of the declaration must also have been intended to be applicable

to companies in which the claimants had been concerned. Furthermore, the court held that a

reasonable insured would have concluded that the insurers were interested in the solvency

not only of themselves as individuals but also of any corporate vehicle used by them. On

that basis, the court concluded that there had been a breach of the declaration and that the

[70] There is an extended discussion of the concept of waiver in the opinion of

Longmore LJ (at paragraphs 14 to 21). That passage includes the observation to the effects

that, as a result of asking certain questions, an insurer may show that it is not interested in

certain other matters and can be taken to have waived disclosure of those other matters.

Longmore LJ refers to the then current edition of MacGillivray (at paragraph 17-17

(paragraph 17-20 in the 2018 14th edition)) and its treatment of the well-known case of Hair v

Prudential Assurance Co Ltd [1983] Lloyd’s Rep 667. (The passage in MacGillivray is headed

“Effect of questions in proposal form”.) Longmore LJ’s observations are as follows:

14. Anything I say on this topic will be obiter only, but since it was attractively

and forcefully argued by Mr David Turner on behalf of insurers that the decision of

Woolf J in Hair v Prudential Assurance [1983] 2 Lloyds Rep 667 should be confined to

consumer as opposed to business insurance and that the passage of MacGillivray's

Insurance Law (7th ed Para 626, now 10th ed Para 17–19) on which Woolf J relied is

15. The argument is as follows: — (1) The concept of waiver of disclosure of

information derives from section 18(3)(c) of the Marine Insurance Act 1906 which

provides: — ‘In the absence of inquiry the following circumstances need not be

disclosed, namely…(c) any circumstance as to which information is waived by the

insurer’; (2) in this context it has been held that the assured can only rely on waiver

in a clear case CTI v Oceanus [1984] 1 Lloyds Rep 476, 511–2 per Parker LJ. In

particular, an insurer who fails to ask a question will not have waived his right to

have a fair presentation made to him unless there was a suspicion that circumstances

existed which might vitiate the presentation, see WISE (Underwriting Agency) Ltd v

Grupo Nacional Provincial [2004] EWCA Civ 962, 20th July 2004; (3) Since CTI v

Oceanus and WISE v GNP, there is no place for a separate doctrine of waiver as set

out in the current para 17–19 of MacGillivray based on any implication that, because

an insurer asked certain questions he was not concerned to have answers to

questions on related subject matter; (4) Hair v Prudential Assurance should now,

therefore, be overruled or, at least, confined to cases which can correctly be called

16. In my view this argument breaks down at its first stage. The relevant sub-

section of the 1906 Act is premised on the fact that no inquiry is made — the

statutory prefatory words are ‘In the absence of inquiry’. The proposal form in the

present case is, however, an inquiry. It is, moreover, a focussed and detailed inquiry

17. There can be no doubt that, when a proposal form is submitted to the insured

who answers the relevant questions, authority has laid down that an insurer as a

result of asking certain questions may show that he is not interested in certain other

matters and can, therefore, be said to have waived disclosure of them. The matter is

variously put in the authorities but they are, in my view, accurately summarised in

the passage of MacGillivray part of which was relied on in 1983 by Woolf J in Hair's

‘17-17 The questions put by insurers in their proposal forms may either

enlarge or limit the applicant's duty of disclosure. As a general rule the fact

that particular questions relating to the risk are put to the proposer does not

per se relieve him of his independent obligation to disclose all material facts.

Thus, if a burglary insurance proposal form asks questions chiefly concerned

with the nature of the proposer's premises and the business carried on there,

this will not of itself relieve him of his duty to disclose material facts relating

to his personal experience, such as the possession of a criminal record.

17-18 It is possible that the form of the questions asked may make the

applicant's duty more strict. The applicant may well be reminded by a

particular question that the general duty of disclosure enjoins him to state

material facts in his possession relating to the subject-matter of the question

17-19 It is more likely, however, that the questions asked will limit the duty of

disclosure, in that, if questions are asked on particular subjects and the

answers to them are warranted, it may be inferred that the insurer has

waived his right to information, either on the same matters but outside the

scope of the questions, or on matters kindred to the subject matter of the

questions. Thus, if an insurer asks, ‘How many accidents have you had in the

last three years?’ it may well be implied that he does not want to know of

accidents before that time, though these would still be material. If it were

asked whether any of the proposer's parents, brothers or sisters had died of

consumption or been afflicted with insanity, it might well be inferred that the

insurer had waived similar information concerning more remote relatives, so

that he could not avoid the policy for non-disclosure of an aunt's death of

consumption or an uncle's insanity. Whether or not such waiver is present

depends on a true construction of the proposal form, the test being, would a

reasonable man reading the proposal form be justified in thinking that the

insurer had restricted his right to receive all material information, and

consented to the omission of the particular information in issue?’

18. Mr Turner drew our particular attention to the judgment of Asquith LJ in

Schoolman v Hall [1951] 1 Lloyds Rep 139 where it was held that detailed questions

about the trading nature of the insured's business did not waive the obligation on the

part of the insured to disclose that he had had criminal convictions. Asquith LJ

‘It is unquestionably plain that questions in a proposal form may be so

framed as necessarily to imply that the underwriter only wants information

on certain subject-matters, or that within a particular subject-matter their

desire for information is restricted within the narrow limits indicated by the

terms of the question, and, in such a case, they may pro tanto dispense the

proposer from what otherwise at common law would have been a duty to

The dispensing of the duty to disclose is here put in terms of ‘necessary implication’

from the questions asked. Cohen LJ preferred the formulation of Mathew J in

Laing v Union Marine Insurance Company (1895) 1 Com Cas 11 at page 15 that the

‘which the underwriter waives as to which the assured may reasonably infer that the

Birkett LJ contented himself with relying on the 3rd edition of MacGillivray where it

was said merely that ‘the form and nature of the questions, or the declaration by the

assured, or the conditions in the policy may substantially modify the duty of

19. These extracts only show that different judges sometimes formulate the same

concept in somewhat different terms. In that particular case none of the Lords

justices had any difficulties in deciding that, whatever the words of the declaration,

they did not excuse the failure to disclose a criminal conviction. Taking into account

the different formulations in that case and the other cases cited by MacGillivray, I see

no reason to qualify the test set out in the last sentence of paragraph 17–19 which has

existed in its present form since, at least, the 6th edition of that work.

20. Nor do I see any reason to confine the reasoning of that paragraph to what

may be called insurance contracts with consumers as opposed to business insurance

contracts. It is not desirable in principle that the law about inferences from proposal

forms or declarations should differ in the one sort of contract from the other.

21. So I turn to the particular facts of our case. My somewhat tentative view is

that, if (contrary to the view expressed above) the true construction of the declaration

is that it only applies to insolvency of individuals despite the presence of the concept

of a corporate entity in the very clause itself, the insurer has made it plain that he is

not interested in insolvencies of the corporate vehicle through which the insured is

trading. I cannot be sure that I am not being over-influenced by (as I see it) the

oddity of the construction of the declaration which is the necessary starting-point for

the waiver inquiry. That is why my obiter conclusion has to be expressed in tentative

[71] The first type of waiver discussed, of the insurer failing to follow up a matter of

which it was put on notice, does not here arise. The instant case concerns the second type of

waiver. Classically, that form of waiver was considered in the context of a series of question

contained in the proposal form and which was described in Doheny to be an “enquiry”, even

a “focused and detailed enquiry” (at para 16). This is explicable as the doctrine was

developed by the courts to control the unfairness arising when a proposer answered in good

faith all of the questions on an insurer’s proposal form only to discover, after a claim was

made, that the insurer also considered other matters to be material but for which no

prompting question had been included in the proposal form. (This illustrates the first of the

problems of the current law identified by the Law Commissions in CP4, referred to above, at

[72] It respectfully seems to me that the focus of the discussion in Doheny was to consider

and reject the argument, made on behalf of the claimant, that the wording of the declaration

was sufficiently narrow as to waive any obligation to disclose the corporate insolvencies of

the companies with which the claimants had been connected (see paras 16 to 17). The court

affirmed the test to be applied (set out above, at paragraph 19 of its judgment). The

observations in Doheny are clearly predicated on the proper interpretation of the question

concerned construed in the context of the proposal form. That the question was not

considered in isolation, but in the context of the proposal form, is perhaps even clearer in

the observations of Staughton LJ in the same case, at paragraph 37. In that passage he noted

the reference to insolvencies of a company elsewhere in the proposal form and which was

sufficient to displace the contention that a reasonable man reading the proposal form would

be justified in thinking that the insurer had consented to the omission of reference to the

insolvency of a company in which the claimant had an interest. Neither party addressed me

on whether this formulation (at para 17 of Doheny) was consistent with the statutory

expression of waiver in the 2015 Act. For my own part, in the context of insurance, and as

distinct from waiver or personal bar as it arises in Scots law in other contexts, I am inclined

to approach this on the basis that the 2015 Act did not seek to innovate on or alter the

existing law on what constitutes waiver in the context of insurance contracts and the test

affirmed by the Court of Appeal remains good law (even if it potentially falls to be applied

to other communications (beside proposal forms) from an insurer).

[73] As noted above, parties referred to other, non-insurance, cases on waiver (eg Armia

Ltd, AWG Group Limited and Fieldoak Limited (in receivership, referred to in paragraphs [41]

and [42], above, or other elements of that form of waiver (eg reliance). For completeness, I

should record that the submissions about waiver in other contexts, with its associated

requirements of reliance by the counterparty or knowledge of the circumstances instructing

waiver being necessary on the part of the other, are not part of the particular meaning of

waiver as understood and applied in insurance law. I therefore need not comment on those

[74] For completeness, I should address the case of Economides v Commercial Union

Assurance Co plc [1997] 3 All ER 635, to which Mr Dunlop QC referred for the observation of

Simon Brown LJ (as he then was) at page 45g-j. In particular, he relied on the sentence that,

“[w]here, as here, material facts duly are dealt with by specific questions in the

proposal form and no sustainable case of misrepresentation of rises, it would be

remarkable indeed if the policy could then be avoided on grounds of

Several features of this case must, however, be noted. First, the case concerned the

interpretation of a conventional proposal form comprised of questions posed by the insurer.

Secondly, it concerned a consumer contract and to which, as is clear from the same

paragraph in which this sentence is found, the Association of British Insurers’ Statement of

General Insurance Practice (“the ABI SGIP”) was relevant and considered by the Court of

Appeal. Thirdly, that part of the ABI SGIP quoted by the Court of Appeal equated what was

“material” with the specific questions contained in the proposal form (and which may be

seen as clarifying the scope of the duty of disclosure in favour of consumer insures). In

other words, the Court was not on a matter of law determining that the subject matter of the

question was necessarily material, it was simply proceeding on that as a given. Fourthly, in

that case the Court of Appeal was considering the truthfulness of a representation made. It

was in relation to that circumstance, that the court expressed the view that the test for

non-disclosure was the same for misrepresentation, being a test of “honesty” and whether

the insured had “reasonable grounds” for his belief in the accuracy of his valuation.

Accordingly, this is the relevant context in which to place the sentence Mr Dunlop QC

founds on, and the Court of Appeal’s observation that it would be “remarkable” if the policy

could be avoided on the grounds non-disclosure. None of those features is present in this

case. The instant case concerns a non-consumer contract to which a new statutory test of

non-disclosure falls to be applied, and which does not concern the accuracy or completeness

of a positive representation, much less one made in response to questions in a proposal

form. Finally, no issue of waiver arose in the case of Economide, whereas the issue at debate

in the instant case is whether the parts of the defender’s email the pursuer relied on

constituted a waiver (in the second form discussed) by the defender of disclosure of the

[75] The question, then, is whether the matters relied on by the pursuer in the defender’s

email constituted the kind of enquiry instructing waiver in this case. Neither party sought

to identify any context against which the documentary materials fell to be construed. For

the purposes of this debate, the court was being asked to construe the Market Presentation

and the email (and only those documents) without reference to any factual matrix or prior

dealings between the parties. Neither party argued that the email was ambiguous or that it

[76] For this second type of waiver, the test to be applied in construing an insurers’

questions is to ask: would a reasonable person reading the proposal form be justified in

thinking that the insurer had restricted its right to receive all material information and

consented to omission of the particular information not disclosed? (per Doheny at

paragraph 19, R&R Developments Ltd at paragraph 40, and MacGillivray at paragraph 17-020).

[78] The starting point is that the Market Presentation presented in this case was intended

to be the totality of the information the pursuer placed before the insurers in fulfilment of

his duty to make a fair presentation. In other words, this is not a case where the insurers

were faced with several documents submitted by the insurer which, collectively, would

constitute the fair presentation and where discrepancies between them might invite further

enquiry. (It follows that, while Mr Dunlop QC’s submission that a proposer’s duty of fair

presentation need not be confined to one document is correct as a generality, the defender’s

email was not part of the pursuer’s presentation of the risk and so that argument is not a

sound basis for taking the email into account, as he urged.) Furthermore, as ultimately

presented, neither party argued that this case falls into the category of cases where, by

reason of some feature of the presentation, the insurer was placed under a duty to make

further enquiry and, having failed to do so, that that constituted waiver of whatever further

information might have been disclosed by such an enquiry (ie a case falling within

[79] The defender was here faced with the Market Presentation in which the client name

was stated to be both a limited company (Kaim) and the pursuer as an individual. This is

reinforced by the status of the entity as having been given as “limited”, and which was only

partly correct. That part of the Market Presentation in respect of which it was said the

undisclosed information should have been disclosed was the entry:

“Select any of the following that apply to any proposer, director or partner of the

Trade or Business or its Subsidiary Companies if they have ever, either personally or

together with the relevant option which the defender contends should have been

selected (but which was not known to it at the time it considered the Market

“been declared bankrupt or insolvent or been the subject of bankruptcy proceedings

[80] While parties wish to reserve the question of materiality, it is nonetheless necessary

to give some consideration to the critical wording, including the opening part of this

declaration, as part of the exercise of construction the parties have asked the court to

undertake. This is not for the purpose of determining the question of materiality, on which I

express no view, but to understand the nature of the material and the proposer’s

presentation, and to which the defender’s email was a response. The difficulty for the

insurer faced with the Market Presentation was that it was not aware of the options in the

drop down menu (a point the pursuer has emphasised, to argue that the defender’s case

lacked the element of reliance necessary for waiver in a non-insurance context). The phrase

highlighted, in any business capacity, is prima facie a very broad formulation, but, as

presented in the Market Presentation, it was a statement of affairs without a conclusion.

Without further information, that sentence was virtually meaningless. I therefore turn to

[81] Mr Barne QC urged me to disregard the defender’s email and to proceed on the basis

that the insurer had assessed and accepted the risk on the basis of the Market Presentation

alone. That, with respect, is a contention of fact which would require proof. It suffices to

note that Mr Dunlop QC did not accept that contention. Parties made no submissions on the

legal character of the defender’s email, and whether it had the effect itself of concluding the

contract, or operated as a counter offer, or had some other effect (eg as concluding the

contract but imposing a suspensive condition or being suspensive of the conclusion of a

contract). It follows that I do not express any view on that matter. Parties simply proceeded

on the basis that a contract of insurance had been concluded between the parties and to

which the Market Presentation and the defender’s email related. The Court proceeds on that

basis but without, at this stage, determining at what point the contract of insurance was

[82] It suffices for present purposes to note that the defender’s email potentially

introduces a number of contingencies. The defender’s proposed terms were included as an

attachment to the email (the proposed terms have not been produced) and the proposed

premium for the each of the properties was offered (under the heading “Premiums

Breakdown”). There was the possibility, therefore, that the pursuer might not have wished

to accept insurance on the terms proposed or at the premia offered, or to proceed with all of

[83] Another feature that is suggestive that the defender’s email was contingent, was the

heading “Subjectivity” and the matters raised under that heading. “Subjectivity” may not

have been the correct word but it clearly meant “subject to”: even Mr Dunlop QC

contended for this reading. Accordingly, this part of the defender’s email is stating that the

defender’s terms were “subject to” satisfaction of the stipulations (to use a neutral word)

under this heading. These included the matters set out as “Management” features, namely,

an electrical certificate, satisfactory housekeeping, an exclusion zone of 10m for any outside

storage and the use of any the alarm system while the premises were closed. Some of these

might be conditions of a continuing character (eg the use of any alarm); others might have

required to have been satisfied prior to or by the inception of the contract (eg electrical

[84] The next matters to which the defender’s terms were “subject to” (under the heading

of “Subjectivity”) were the matters going to moral hazard. In the context of insurance

contracts, it is well established that there are a category of facts recognised as affecting moral

hazard and which, if present, may present an increased risk. As a generality, the case law

has confirmed that such matters require to be disclosed even in the absence of a specific

question to elicit these matters. On the case law, it is uncontroversial that matters going to

moral hazard, such as previous convictions or the prior insolvency of a prospective insured

and the associated vehicles through which it may have previously traded, may be material

and (if proved to be so) require be disclosed. This is amply illustrated in cases such as

O’Connor v Bullimore Underwriting Agency Ltd 2004 SCLR 346 at paragraph 54, per

[85] Parties argued this issue in a relatively formal sense, by focusing on whether the

Moral Hazard stipulation was or was not a “question”. Mr Dunlop QC argues that the

stipulation is a limiting question; Mr Barne QC’s reply was that this was not “an enquiry”.

Neither considered it in any wider context, either of the remainder of the defender’s email,

or the Market Presentation, to which the defender’s email was a response. I am not

persuaded that the part of the Moral Hazard stipulation both parties referred to is a

“question” or “enquiry”, or should be construed as such. However, in my view, that

conclusion is not itself a basis to resolve the issue (as both parties approached it).

[86] It respectfully seems to me that the case law on the construction of proposal forms,

including the application of waiver in its second form (ie by limiting questions) may require

to be approached with a degree of circumspection in a case such as the present. The

observations in the cases and the discussion in MacGillivray (at paragraph 17-018ff) cited to

the Court are predicated on the use of a conventional proposal form proffered by the insurer

and to which an insured responds. By contrast in this case, and in common with CTI, the

prospective insured initiated the approach in the form of the Market Presentation, the scope

of which the prospective insured controlled. In the conventional proposal-type case, there

may be greater scope for applying the doctrine of waiver, as the insurer controls the scope of

the information it seeks; it signals (via the questions asked) what it regards as material and,

by implication, it may be taken as waiving matters outside the scope of the questions posed.

The second type of waiver was developed to control unfairness that might flow from an

insurer invoking some other matter, beyond the scope of the proposal questions, as material.

(Although the law has never been that materiality was confined to the questions on a

proposal form). The 2015 Act shifted the burden of identifying what is material to the

insured in the form of the duty to make a fair presentation of the risk. One consequence is

that that may affect the application of this second type of waiver, not least because there is

no longer a proposal form (“the extended enquiry”) that falls to be construed (and which is

the context in which this form of waiver arises). There is, therefore, no in limine

identification by the insurer of the scope of what it considers material and which could form

[87] While proposal forms were characterised as an “enquiry”, no like presumption

operates in respect of an insurer’s response to a proposer’s initial presentation. Accordingly,

consideration requires to be given to what is the form or purpose of an insurer’s response to

a proposer’s market presentation. An insurer’s response may take a variety of forms. It may

be a question eliciting further information; it may be a limiting question waiving matters

outwith the scope of that question. It may, however, be confirming or clarifying the

particular information presented. It may be a stipulation as to a state of affairs to exist at

inception or to be maintained during the policy term. If such responses are uncritically

construed as “enquiries” defining or limiting the scope of what the insurer considers is

material, then one of the aims underlying the reforms of simplifying the process of

presenting and assessing any risk would be defeated, if it required insurers, faced with a

brief presentation, defensively to ask a large number of questions lest it be argued that it

[88] Returning to the documents of this case, the correct approach is to construe the part

of the email the parties focused on (ie the Moral Hazard stipulation) in the relevant context.

This includes the Market Presentation, to which the defender’s email was a response, as well

as the particular context of the Moral Hazard stipulation within the defender’s email.

Starting with the Market Presentation, the insurer was not aware of the options in the drop

down menu of the broker’s internal software programme available to complete either the

“Select any…” entry to complete the Moral Hazard declaration or the separate declaration of

[89] In the form in which it appeared, the Moral Hazard declaration was incomplete, in

sense that the insurer could not know the subject-matter of that declaration; it did not know

to what, precisely, the answer of “None” related. The Moral Hazard declaration in the

Market Presentation was, as it were, a sentence with a known subject but an unknown

predicate. The insurer only knew the ‘subject’ of the Moral Hazard declaration, which

concerned “any proposer, director or partner of the Trade or Business or its Subsidiary

Companies if they have ever, either personally or in any business capacity” (emphasis

added). If one strips out the references to the company (ie the proposed co-insured Kaim),

as it related to the individual proposer (the pursuer), the proposed Moral Hazard

declaration bore to cover the pursuer’s involvement “either personally or in any business

capacity”. That is, as already observed, prima facie of very wide scope and habile to include

other entities with which the defender was involved “in any business capacity”. What the

defender could not divine was the state of affairs asserted to be ‘None’.

[90] The defender’s response, in the form of the Moral Hazard stipulation was, in my

view, directed to eliciting the content of the declaration. In particular, it did so in the form of

a stipulation addressing the critical features going to moral hazard (insolvency, prior

convictions and an adverse insurance history) to ensure that a certain state of affairs

subsisted in respect of these elements going to moral hazard. In particular, it was a

stipulation inter alia that the “proposer…either personally or in any business capacity” (the

object of the Moral Hazard declaration) has “never been declared bankrupt or insolvent had

a liquidator appointed”. This part of the defender’s email, the Moral Hazard stipulation,

was not concerned with or altering the ‘subject’ of the Moral Hazard declaration (this was

known to the insurer). In my view, the reference to the “Insured” was shorthand for

covering both Kaim and the pursuer, and the longer formulation (“any proposer, director….

or in any business capacity”) reflected in the opening phrase of the Moral Hazard

[91] This analysis of the Moral Hazard stipulation, as a stipulation that a certain state of

affairs existed, is also consistent with other features of the email under the “Subjectivity”

heading which I have described (see para [83], above). The Moral Hazard stipulation

appeared among the list of other matters which the insurance offered was “subject to” and

in respect of which the insurers were requiring that a state of affairs be achieved (eg the

electrical certification) or be maintained during the currency of the policy (eg use of the

alarm). None of these other matters was posing questions or eliciting further information.

[92] Having regard to the wider context (ie the defender’s email as a response to the

Market Presentation), and construing the Moral Hazard stipulation in the context of the

“Subjectivity” part of the defender’s email, in my view the proper interpretation of this part

of the defender’s email is that it operated as a condition or stipulation of the kinds of moral

hazards that required to be addressed. In my view, read in this context, no reasonable reader

of this Moral Hazard stipulation would understand it as waiving that part of the Moral

Hazard declaration relating to “any other business capacity” in which the pursuer might

have acted. In the context of the remainder of the email I have already described, and coming

as it does as a response to the Market Presentation, I do not accept the pursuer’s argument

that this part of the email instructs a case of waiver. In any event, in the circumstances I have

identified, this is not a “clear” case of waiver. It follows that the pursuer’s motion for

declarator does not succeed on the single basis on which it was advanced for the purposes of

the debate. As parties have approached the issue of waiver as one to be resolved solely on

the basis of the documents, and without proof of any surrounding circumstances, in the light

of the decision I have reached, there is little utility reserving that issue to form part of any

[93] Accordingly, I shall find that the pursuer’s averments of waiver are irrelevant and

fall to be excluded from any probation. All other matters remain outstanding. I shall put the

case out by order to confirm the terms of the interlocutor and the appropriate procedure to

be adopted in respect of the remaining issues.

Scottish Court of Session Decisions