Ashfaq v International Insurance Company of Hannover Plc

For the purposes of Unfair Terms in Consumer Contracts Regulations 1999 and ICOBS, insurance taken out to protect property let to tenants for rent is connected with the insured’s property-letting business. The insured is therefore a commercial customer, even if he has another occupation, a different mortgage, or describes the property as his home. Where the evidence gives no real prospect of establishing consumer status, the court should not speculate that further evidence may emerge or adjourn a summary-judgment hearing on that basis. At common law, a proposal form containing a basis-of-contract clause has contractual effect and its statements operate as warranties. An inaccurate statement can therefore defeat the claim where the policy incorporates the proposal form.

The insured owned a property in Huddersfield which was let to students. After a fire, he claimed an indemnity under a residential let property policy. The insurer relied on an incorrect statement that no prosecution was pending and pleaded a condition precedent, breach of warranty, and material non-disclosure or misrepresentation. It also counterclaimed for repayment of interim payments.

The High Court, before His Honour Judge Behrens in the Technology and Construction Court, entered summary judgment for the insurer and ordered repayment. The appeal challenged the refusal of an adjournment, the effect of the Unfair Terms in Consumer Contracts Regulations 1999 and ICOBS, and the materiality of the undisclosed prosecution. The central issue was whether the insured had a real prospect of showing that the policy was consumer rather than business insurance.

1. Disposition. Flaux LJ delivered the judgment, with Briggs LJ and McFarlane LJ agreeing. The appeal was dismissed. Summary judgment for the insurer on the claim and counterclaim was upheld.
2. Consumer status. The policy application, the residential let property scheme, the business definition, and the loss-of-rent cover showed that the insurance protected property being used for letting to students for rent. It was therefore connected with the insured’s trade, business or profession and was not ordinary domestic house insurance. The example in ICOBS concerning property bought under a buy-to-let mortgage supported the same commercial classification. The result was not altered by the insured’s separate occupation as a company director, the type of mortgage, references to the property as a home, or family wording in the policy. There was no evidence establishing a sufficiently arguable private purpose. The consumer principles discussed in Overy v Paypal (Europe) Limited [2012] EWHC 2659 (QB) therefore did not assist the insured.
3. Adjournment and summary judgment. The court should not speculate that evidence may appear later where the material before it gives no real prospect of success. The reference to Micawberism in Tennant v Associated Newspapers Group [1979] FSR 298 reinforced that conclusion. The refusal of an adjournment was a case-management decision, supported by the absence of evidence, the prior legal representation, the undisputed essential facts, and the costs of delay. It disclosed no appealable error under the Civil Procedure Rules.
4. Breach of warranty. At common law, the principle summarised in Genesis Housing Association v Liberty Syndicate Management [2013] EWCA Civ 1173 applied: a basis-of-contract clause gives the proposal form contractual effect and its statements operate as warranties. The policy expressly incorporated the proposal and information supplied by the insured. The incorrect answer concerning pending prosecutions therefore gave the insurer an unanswerable defence of breach of warranty. It was unnecessary to decide the alternative defences based on the condition precedent or material non-disclosure and misrepresentation.

• Court of Appeal (Civil Division): Appeal dismissed on 12 May 2017; the High Court’s summary judgment and counterclaim orders were upheld: [2017] EWCA Civ 357.
• High Court of Justice, Leeds District Registry, Technology and Construction Court: His Honour Judge Behrens entered summary judgment for the insurer on 30 November 2015, dismissed the indemnity claim, and ordered repayment of interim payments.