High Court

Wildgust and Another v Governor and Company of the Bank of Ireland and Norwich Union Life Assurance Society 

1998/5275 P 

28 July 1998 

MORRIS P: 

Counsel for the Norwich Union Life Insurance Society ("Norwich Union") has applied at the close of the plaintiff's case for a non suit. This judgment is given on that application. 

In the particular and unusual circumstances of this case it appears to me that the following issues fall to be determined in Ruling that application:- 

(a) Have the plaintiffs established any case against the Norwich Union on the evidence now before the court assuming such evidence was accepted by the court. 

(b) If so what case has been made out (again assuming that the evidence before the court is accepted). 

(c) If the plaintiffs have made out a case has this case been sufficiently pleaded so as to put the Norwich Union on notice of the case being made against them so as to allow them the opportunity to meet this case. 

(d) If the case made has not been adequately pleaded then what course should this court adopt in the interest of justice. 

Before turning to deal with the issues I believe it is necessary to set out in concise form the facts that are relied upon by the plaintiff to support the case made. In reciting these facts I do so on the basis that there is evidence to support a finding of these facts. 

The first named plaintiff is a business man and is the principal if not the sole shareholder in the second-named plaintiff company. That company, Carrickowen Limited was incorporated for the purpose of holding two commercial units in Industrial Estates in Coolock. The first-named plaintiff ("Mr Wildgust") and his late wife wished to create an arrangement whereby they would sublet smaller units within these commercial units at a rent sufficient to pay the mortgage on the property and thereby create a pension fund for themselves. With this intention they applied for and obtained from Hill Samuel Merchant Bankers a loan of £215,000 (which sum was subsequently increased by an additional £50,000) which loan was secured by the primary security of a mortgage over the property in favour of Hill Samuel and was backed by a personal guarantee from Mr Wildgust and the late Mrs Wildgust. As an additional secondary security Mr and Mrs Wildgust were required to obtain and assign to Hill Samuel a policy of insurance on their joint and several lives. All of these transactions were satisfactorily carried through. 

Mr Wildgust put in place an arrangement whereby the rents of the tenants occupying the sub-units were paid direct, in the first instance, into a company account with Allied Irish Banks but this arrangement was subsequently changed to one whereby the rents were paid into a company account in the Bank of Ireland at their Ballsbridge branch and arrangements were made with the bank that the premiums on the life policy were to be discharged to Norwich Union by direct debit. The premiums were due monthly on the 23 of each month. 

A breakdown in the system occurred as a result of which the direct debit payment due on the 23 of March, 1992 was not paid. Mr Wildgust held the Bank of Ireland responsible for this fact. They were accordingly joined as defendants in the present claim however after the hearing had progressed for some days a settlement was reached between Mr Wildgust and the Bank of Ireland as a result of which they were struck out of the case. 

Because of the failure to discharge the premium due on the 23 of March, 1992 the Life Policy lapsed. The late Mrs Wildgust died on the 1 of January, 1993. The amount payable under the terms of the policy on her death was not paid as the Norwich Union claimed that the policy had lapsed. Mr Wildgust brings this action to enforce payment of that amount and claims that as a result of withholding payment consequential loss has been suffered by him and by his company. 

Turning now to the issues which I believe arise at this stage. 

(a) Have the plaintiffs established any case against the Norwich Union? The cases made on Mr Wildgust's behalf are; 

(a) It is alleged that in the contract of insurance which Mr and Mrs Wildgust entered into with Norwich Union there was an implied condition which required the Norwich Union to inform Mr Wildgust and Carrickowen Limited if a breakdown in the direct debit system occurred so that the monthly premium was unpaid. It is stated that neither Mr Wildgust nor his company were informed of this breakdown and the fact that the premiums had not been paid and accordingly there was a breach of contract on the part of the Norwich Union such as would entitle the plaintiffs to any damages which resulted. 

The claim that this term is to be implied into the contract is made on the basis that it is one that is so normal and natural and obvious that it would go without saying that it would be included. 

I take as a convenient summary of the law that part of Mr Justice Lynch's decision in Carna Foods Limited and Edmund Mallon v Eagle Star Insurance Company (Ireland) (judgment delivered the 28 May, 1979) at which on page 10 of the unreported judgment he says; 

"Apart from cases where the law implies some terms into certain kinds of contracts whether by statute or by common law (for example sale of goods, hire purchase, landlord and tenant, sale of lands etc) one can imply a term into a contract only when the implied term gives effect to the true intention of all the parties to the contract who might be effected by such implied term. The learned trial judge in his judgment in this case which is now reported in (1995) 1 IR at 526 quoted from the well known dictum of MacKinnon LJ in Shirelaw v Southern Foundries (1926) Limited reported in [1939] 2 KB 206 and I will also quote that dictum here; 

"Prima facie that which in any contract is left to be implied and needed not to be expressed as something so obvious that it goes without saying: so that if while the parties were making their bargain an officious bystander were to suggest some express provisions for it in their agreement, they would testily suppress him with a common "oh of course" ". 

Here the evidence before the learned trial judge is quite clear to the effect that if such a term were sought to be included in the insurance policies at the time when the plaintiff was seeking insurance the defendants would not have contracted with the plaintiffs at all. If the officious bystander had interrupted in relation to condition 13 of the policy and had asked the defendants "if you do cancel will you give your reasons for cancelling?" the defendants answer would have been an emphatic "no" whereas to imply such term into the policies the answer would have to be by both parties "yes of course". Expressed rather testily to discourage the officious bystander from further interrupting." 

The conditions of the policy dated the 23/11/89 are silent as to any such provision. I can well understand that somebody entering into the policy with the insurance company might find it convenient to be reminded in the event of a default on his part in making payment of the premium however on the other hand I can see that an insurance company might well resist having an obligation to this effect imposed upon them simply because they would not wish to undertake that obligation. 

In my view notwithstanding the desirability or convenience of such a provision I can see no circumstance in which the obligation to provide the insured with notice of failure to pay a premium could be deemed to be part of the contract on the grounds that it was obviously the intention of both parties that it should be. 

In Trollope and Colls Limited v North West Metropolitan Regional Hospital Board [1973] 2 All ER 260 at page 268 Lord Pearson said; 

"An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessarily to give business efficacy to the contract, a term which although tacit formed part of the contract which the parties made for themselves". 

I am unable to identify, as fitting into that category, a term requiring the insurance company to give notice of failure to pay the premium notwithstanding the fact that it appears to have been the practice for the Norwich Union to transmit to certainly some of the parties notice of the breakdown of the direct debit. 

Accordingly it is my view that no case has been made out under this heading. 

(b) The second case made on behalf of the plaintiffs arises out of a telephone conversation which Mr Kevin O'Hanlon, Manager of Hill Samuel, had with a representative of the Norwich Union Insurance Company on the 22 April, 1992. In his evidence Mr O'Hanlon said that prior to the 22 April, 1992 he had been aware of the fact that Mrs Wildgust, one of the insured lives, had been diagnosed with cancer and that on the 6 of April, 1992 Hill Samuel had received information that the direct debit on the policy had been returned unpaid. He said that he contacted Mr Wildgust who informed him that he had sent a cheque in settlement to keep the policy in order. Mr O'Hanlon said that on the 22 of April, namely the last date of the days of grace provided by the policy, he telephoned the Norwich Union and was informed that the cheque had been received and everything was correct and in order. On that basis he took no action. He said that if he had known that the premium remained unpaid then it would have been paid by Hill Samuel in order to keep the policy alive. He said that he was confident that this would have occurred particularly in view of Mrs Wildgust's state of health. 

It is submitted on behalf of the plaintiffs that in these circumstances there was negligence on the part of the Norwich Union in that their servant or agent gave Mr O'Hanlon incorrect information which they knew would be relied upon and that accordingly they are responsible for loss or damage resulting therefrom which were foreseeable. 

On behalf of the Norwich Union it has been submitted, inter alia, that there was no communication made to either of the plaintiffs in this case and accordingly a claim under the principles of Hedley Byrne v Heller ([1964] AC 465) cannot arise. Moreover it is submitted that it is apparent that Mr Wildgust was aware of the fact that there had been a breakdown in the direct debit machinery since he assured Mr O'Hanlon that the premium had been paid by cheque and therefore no reliance was placed by him on any representations made by the servant or agent of Norwich Union. 

With regard to the relevant law the plaintiff submits that on the principles enunciated by the Supreme Court in Ward v MacMaster [1989] ILRM 400 and in particular the judgment of McCarthy J, the elements necessary to create a situation in which liability can arise are firstly a duty of care and secondly reasonable forseeability. 

In his judgment in Forshall and Fine Arts and Collections Limited v Walsh and Others (unreported) 18 June, 1997 Mr Justice Shanley at page 64 of his unreported judgment deals with the circumstances in which a party seeking damages for negligent misrepresentation must establish in the following terms; 

"A party seeking damages for negligent misrepresentation must establish that the representative failed to exercise due care in making the representation as a result of which representation the person to whom it was made was induced to enter into a particular agreement and suffered damage in consequence of the inaccurate representation. Closely aligned to the claim of negligent misrepresentation is the wider tort of negligent misstatement. In relation to negligent misstatement the first matter a plaintiff must establish is that the defendant owed him a duty." 

In Ward v MacMaster [1989] ILRM 400 McCarthy J considered that the duty of care arose from the proximity of the parties, the forseeability of damage in the absence of any compelling exemption based on public policy. In CaparoIndustries plc v Dickman [1990] BCLC 273 Lord Bridges in his speech to the House of Lords said; 

"What emerges is that in addition to the forseeability of damage necessary ingredients in any situation giving rise to a duty of care are that there should exist between the parties owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope on the parties for the benefit of the other". 

While noting that the judgment of Shanley, J is under appeal at the present time nothing he has said in regard to this aspect of the law differs, in my view, from the law as established in Ward v MacMaster which I accept to be a correct statement of the law. 

Accordingly in approaching this matter on the basis of an application for a non-suit I am satisfied that the plaintiffs have presented the court with evidence which, if accepted, would establish that there was a negligent misstatement of fact by the servant or agent of the Norwich Union, that this statement was communicated to Hill Samuel and by reason of the relationship between Hill Samuel and the plaintiff (ie that or mortgagor and mortgagee) there was a proximity between the Norwich Union and the plaintiffs. I am also satisfied that evidence has been tendered which shows that damage as a result of misstatement was foreseeable. The fact that Mr Wildgust personally knew that the premium had not been paid is in dispute as he has given evidence, which the court could accept, that he believed he was in credit with his premium payment the fact that he did not rely on the Representations made by the Norwich Union is in my view of no relevance once Mr O'Hanlon of Hill Samuel did rely on these representations and damage resulted to the plaintiffs who were in proximity to Norwich Union the cause of action is established. 

Furthermore I am satisfied that the plaintiffs have adduced evidence before the court which if accepted could lead the court to conclude that the enquiry made of the Norwich Union of the 24 of April by Mr O'Hanlon was made by Hill Samuel in their capacity as the agents for Mr Wildgust and his company and that the making of a negligent misstatement to Hill Samuel equated in all respects to the making of the statement to the plaintiffs. 

Accordingly in my view evidence has been tendered to the court which would in the ordinary way result in a refusal of this application. However it now is necessary to consider the third issue namely whether this case has been pleaded. 

(c) This issue arises because from the outset Norwich Union has objected to the manner in which the plaintiffs have pleaded their case and in fact sought to have the second part of paragraph 4 of the Statement of Claim struck out. This application I refused on the assurance of counsel for the plaintiffs that evidence to support this plea would be tendered. 

I now turn to consider the case actually pleaded. 

Paragraphs 14, 15 and 16 of the Statement of Claim and paragraph 6A of the Notice for Particulars and Replies are relevant. 

Paragraph 14 of the Statement of Claim alleges that the defendants wrongfully and negligently and in breach of agreement and in breach of trust the Norwich Union terminated the policy and have wrongfully failed, refused and neglected to reinstate it in the absence of a clear medical report. The balance of that paragraph alleges that the Norwich Union, being aware of the medical condition of Margaret Wildgust embarked on a course of conduct "designed to avoid its obligations in relation thereto". 

Paragraph 15 alleges a "practice and custom in banking" for bankers to renew policies and paragraph 16 alleges that the defendants wrongfully failed and refused and neglected to reinstate the policies. 

As I read these paragraphs and paragraphs 6A of the Replies to Particulars I am unable to find any case based upon negligent misstatement or broadly based on the Hedley Byrne v Heller principle. 

Counsel for the Norwich Union has informed the court, and I accept, that had he been aware of the fact that the case would be run on the Hedley Byrne v Heller principle he would have met the case in a different way. In these circumstances I believe that it is unjust to the Norwich Union to require them to meet the case now made on the present pleadings. I am satisfied that, subject to the next paragraph hereof the action should be dismissed. 

(d) With regard to the fourth issue which arises in this case namely what steps the court should take in the interests of justice I am satisfied that if this case is merely struck out that the plaintiff will be deprived of the opportunity of seeking justice to which he may well be entitled. I believe that it is in the interests of justice that he should be allowed to amend his statement of claim to plead the case which he wishes to make. I believe that this relief should only be given on terms to the Norwich Union. Those terms would be that they would be allowed the costs of the days on which this matter has been at hearing on the basis of days at hearing (as opposed to costs of the action). I propose to make an order on the basis that the plaintiff seeks this relief, that he be allowed to deliver an amended Statement of Claim with all the consequential orders providing for Notices for Particulars and a Defence subject to the condition as to costs as set out above.