Parker & Anorr v The National Farmers Union Mutual Insurance Society Ltd

In a civil fraud case, the standard remains the balance of probabilities, but the evidence must have cogency commensurate with the seriousness of the allegation. The court should test oral evidence against contemporaneous documents, objective facts, motives and overall probabilities.

A document is a sham only where all parties share the common intention that it should create different, or no, legal rights and obligations from those it appears to create. An insurance policy covering persons with different interests is composite, so one insured’s wilful misconduct does not ordinarily defeat another insured’s claim.

A policy condition requiring documents is not unfair merely because it is expressed broadly, where the insurer’s requests must be relevant and reasonable and regulatory rules prevent unreasonable rejection of claims.

The claimants sought indemnity under a household insurance policy for fire damage to Crossfield, contents and alleged lost rent. The defendant insurer alleged non-disclosure of a fraudulent watch claim, arson, fraudulent means, a sham tenancy and failure to provide requested bank statements.

The court found that Mr Parker had made a fraudulent 2007 watch claim and had directed others to commit the arson. The policy was composite, and Mrs Parker was not shown to have known of the earlier fraud or to have participated in the arson. The central remaining issue was whether her failure to provide bank statements breached a condition precedent and whether that condition was unfair or its enforcement unreasonable.

1. Fraud and arson. The balance of probabilities applied, but the evidence had to be commensurate with the gravity of the allegations. The court tested the evidence against objective facts, documents, motives and probabilities. It found that the 2007 watch claim was fraudulent and that the only probable explanation for the fire was that persons acting on Mr Parker’s direction had set it.
2. Sham tenancy. Applying the definition in Snook v London & West Riding Investments [1967] 2 QB 786, a sham required a common intention that the apparent legal rights and obligations should not bind the parties. The September lease and November rent agreement were not shams. Mr Parker did not expect payment because he intended to destroy the property, while Mr Steele hoped to avoid his liability; those intentions did not constitute a common intention to create different legal rights.
3. Composite insurance. The policy was composite because the claimants had different interests in the property. Mr Parker’s fraud entitled the NFU to avoid his cover, and his wilful misconduct independently defeated his claim. Mrs Parker’s cover was not avoided because her knowledge of the 2007 fraud was not proved, and her claim was not defeated by Mr Parker’s misconduct.
4. Document condition and unfairness. The condition requiring provision of written details and documents requested by the insurer was binding under regulations 5–8 of the Unfair Terms in Consumer Contracts Regulations 1999. The insurer’s discretion had to be exercised reasonably and requests had to be relevant. The condition did not create a significant imbalance because the insurer needed access to documents held by the assured, and ICOBS prevented unreasonable rejection for an immaterial or unconnected procedural breach.
5. Application of ICOBS. ICOBS rules 8.1.1 and 8.1.2 were legally binding on the insurer, whether or not implied terms of the policy. The requested bank statements were relevant to the suspected fraudulent fire claim and the refusal to provide them was connected with the breach. The NFU’s rejection of Mrs Parker’s claim was therefore not unreasonable.
6. The claims failed. The NFU succeeded on its counterclaim against Mr Parker for restitution of the sums paid on the 2007 watch claim and for the costs of investigating the fire.
7. Obiter, if Mrs Parker had been entitled to recover, the NFU would have become subrogated on payment to her rights against Mr Parker and could have obtained a declaration to that effect.

First-instance decision. No prior appellate decision is stated in the judgment.