Bertram Breach v Lloyds TSB Insurance

Where an insured presents a fraudulent claim, the insurer may avoid the policy and repudiate the whole claim if the fraudulent element is more than de minimis and sufficiently serious to amount to a breach of the insured’s duty of good faith. The fraudulent element’s proportion of the total claim is not determinative. On an application for permission to appeal, factual findings will not ordinarily be reopened where they were open to the trial judge on the evidence. Proposed evidence that was available at trial will generally not provide a proper basis for an appeal. The application was therefore dismissed.

The claimant sought £41,200 under a property and contents insurance policy after fire damage to his home. The insurer had paid approximately £47,000 under the policy, but later avoided it for fraud and counterclaimed repayment. The Burnley County Court dismissed the claim and entered judgment for the insurer in £55,748.63.

The claimant applied for permission to appeal, alleging misleading cross-examination, non-disclosure of documents, factual inaccuracies, misrepresentation by counsel, prejudice arising from delay in delivering judgment, and failure to consider favourable evidence. The central issue was whether those grounds had a real prospect of success.

Application dismissed; no order for costs.

1. Applicable insurance principles. The court proceeded on the basis of legal propositions that had been common ground at trial and had not been challenged. A fraudulent part of a claim is material where it is more than de minimis and, considered in isolation, is sufficiently serious to constitute a breach of the insured’s duty of good faith. The proportion of the fraudulent part to the total claim is not determinative. Where the fraud is substantial, the insurer may repudiate the whole claim rather than only the fraudulent part.
2. Grounds concerning the conduct of the trial. The allegations that the insurer’s counsel had misleadingly cross-examined the claimant’s wife and that relevant documents had not been produced disclosed no real prospect of success. The evidence about the allegedly wrong computer was not critical to the Recorder’s reasoning. The claimant’s solicitors knew about the documents and could have sought appropriate interim orders.
3. Factual findings. The appeal was properly tested against three matters relied on by the Recorder: the alleged purchase of computer equipment for £5,000 shortly before the fire; an upgrade from a 500 to a 550 megahertz processor; and peripheral equipment omitted from a salvage list signed by the claimant. The Recorder’s conclusions were findings of fact supported by the evidence and could not realistically be disturbed.
4. Fresh evidence. A principal guideline governing evidence on appeal is whether it was unavailable to be adduced at trial. The explanations and bank evidence relied on by the claimant were available at trial but were not put before the Recorder. They therefore could not create a real prospect of success.
5. The three items were significant in themselves, in relation to the computer-equipment claim, and, although less substantially, in relation to the overall fire claim. They could not be treated as immaterial or de minimis. The remaining grounds either concerned complaints against the claimant’s own legal advisers, were unsupported, or repeated matters already addressed.

1. Court of Appeal (Civil Division): On 7 October 2002, Lady Justice Arden dismissed the application for permission to appeal, applying the real-prospect-of-success threshold. [2002] EWCA Civ 1818
2. Burnley County Court: Mr Recorder Laprell dismissed the claimant’s insurance claim and entered judgment for the insurer on its counterclaim in £55,748.63 by an order dated 23 August 2002.