A monthly review of property & construction, insurance, commercial & financial risks Issue 77: November 2012 In this issue - Restriction of strict liability in fire cases - Subrogated recovery and deliberate acts - Promptness and litigants in person - Business Insured's Duty of Disclosure and the Law of A somewhat mixed collection of cases this month - to include whether a party was liable under the rule in Rylands v Fletcher, whether a property insurer is able to bring a subrogated recovery against a motor insurer where damage has been caused deliberately and, finally, the use of injunctions to deter litigants in person. Thanks go to Marise Gellert, Alison Heard and Christopher MacQueen respectively for their contributions. Simon Thomas For more information on their respective cases, please contact Marise on 020 7469 6249 or msg@greenwoods-solicitors.com, Alison on 020 7469 6236 or arh@greenwoods-solicitors.com, or Christoper on 020 7469 6267 or cmq@greenwoods-solicitors.com. For more information on the other items featured below please contact Simon Thomas on 020 7469 6266 or dst@greenwoods-solicitors.com. Warranties Consultation RESTRICTION OF STRICT LIABILITY IN FIRE CASES Conferences - Greenwoods Major Bodily Injury Group Spring Conference Bristol One Redcliff Street BS1 6NP T. 0117 910 0200 London Bedford Square 18 Bedford Square WC1B 3JA T. 020 7323 4632 London Market Office 77 Gracechurch Street EC3V 0AS T. 020 7220 7818 Manchester 57 Spring Gardens, M2 2BY T. 0161 245 6520 Milton Keynes 2 Eskan Court Campbell Park MK9 4AN T. 01908 298200 Southampton 3600 Parkway Solent Business Park, Fareham PO15 7AN T. 01489 882900 www.greenwoods-solicitors.com Stannard (trading as Wyvern Tyres) v Gore (2012) In this recent Court of Appeal case the appellant, Mr Stannard ("S") successfully appealed against a decision that he was liable under the rule in Rylands v Fletcher [1868] for damage caused to the land of the respondent, Mr Gore ("G"). The judgment involved a wholesale review of strict liability pursuant to the rule in Rylands v Fletcher and consideration of whether, and if so how, it applies to fire cases. S ran a business supplying, fitting and balancing vehicle tyres and stored some 3,000 tyres on its premises, which were next to G s premises. Some of the tyres were stored on purpose built racks but many were simply 'piled high' in a space between the two premises, used as a storage area for new and part used tyres, with some stored along the wall separating the two premises. It is estimated that there were some 3,000 tyres stored in and outside the building at the time of the fire, caused by S s wiring or electrical appliances. The fire quickly intensified, ignited the tyres, and spread to G s premises. At first instance the Court found that S had a defence to a claim of negligence, under the Fires Prevention (Metropolis) Act 1774 section 86, because the fire was accidental. However, it found that the rule in Rylands v Fletcher applied because the haphazard way in which the tyres were stored was dangerous and a non-natural use of the land within the meaning of the rule. The issue considered on appeal was whether there was a special operation of the rule in Rylands v Fletcher when damage to a claimant s land was caused by the spread of fire. The Court of Appeal held that: (1) the decision in Transco Plc v Stockport MBC [2003] remained the seminal authority for the test to be applied in Rylands v Fletcher. The proper approach was that: the defendant had to be the owner or occupier of land; he had to bring, keep or collect an exceptionally dangerous or mischievous thing on his land; he had to have recognised, or ought reasonably to have recognised, that there was an exceptionally high risk of danger or mischief if that thing should escape; Personal Injury l Property & Construction l Insurance l Commercial & Financial Risks l Fraud l Health & Safety l Motor Prosecutions
Page 2 of 5 RESTRICTION OF STRICT LIABILITY IN FIRE CASES CONT D his use of the land had to be extraordinary and unusual; the thing had to escape from his property into or onto the property of another; and the escape had to cause damage of a type relevant to the right and enjoyment of the claimant s land. Cases of fire damage were likely to be very difficult to bring within the rule, for several reasons. First, it was the thing which had been brought onto the land which had to escape, not the fire which was started or increased by the thing. Second, whilst fire might be a dangerous thing, the occasions when it was brought onto land might be limited to cases where the fire had been deliberately or negligently started by the occupier. Third, starting a fire on one s own land might well be an ordinary use of the land. In this particular case, the thing brought onto S s land was a large stock of tyres, which were not, of themselves, exceptionally dangerous or mischievous. The Court at first instance accepted that tyres have the following particular recognised characteristics so far as fires are concerned: "(a) They are not in themselves flammable, and in their normal state will not ignite unless there is sufficient flame or heat from another source. (b) Once, however, a primary fire has developed, and intensified it can produce sufficient heat or flame to ignite rubber composite tyres. (c) If tyres catch fire then combustion develops rapidly depending on the quantity of tyres present and how they are stored. (d) Once fire takes hold of tyres they are difficult to put out." There was no evidence that S recognised or ought to have recognised that there was an exceptionally high risk of danger or mischief if the tyres escaped. In any event, what had escaped was the fire, not the tyres. The Court at first instance had, therefore, been wrong to conclude that the escape of fire brought the case within Rylands v Fletcher principles. In any event, keeping tyres on the premises of a tyre-fitting business was not an extraordinary or unusual use of the land and on that basis, liability under the rule in Rylands v Fletcher had not been established. (2) Lord Justice Lewison indicated that he would go further in limiting the scope of strict liability in relation to fire. A fire which started accidentally had not been brought onto the land by the occupier for his own purposes. Under section 86 of the Fires Prevention (Metropolis) Act 1774, a person was expressly exempted from liability for accidental fires. Parliament must have intended to change the common law proposition that a man must use his own as not to injure another. The decision in Mason v Levy Auto Parts of England Limited [1967], which followed Musgrove v Pandelis [1919], was wrong and should have been overruled. An occupier of land should not be liable to his neighbour for a fire that began accidentally unless he was negligent in failing to prevent its spread. The Court of Appeal decision in Stannard was unanimous and provides a useful re-statement of the rule in Rylands v Fletcher itself and the application of that rule. Whilst restricting it, the judgment on appeal does not entirely rule out the application of Rylands v Fletcher strict liability in spread of fire cases but it is clear that cases will very much turn on their particular facts. What is now clear is that Rylands v Fletcher will only assist in cases where what was 'brought onto' the land was the fire itself and even then, only where that was not considered to be an ordinary use of the land. SUBROGATED RECOVERY AND DELIBERATE ACTS EUI Limited v Bristol Alliance Limited Partnership [2012] Is a property insurer entitled to recover from a motor insurer where there has been damage caused to property by way of the deliberate act of the driver? That was the issue to be considered recently by the Court of Appeal. This case concerned property damage that occurred at around 1.00am on 12 December 2008 when James Williams ("J") drove his car at speed (sometimes at 100 mph) on the outskirts of Bristol. J deliberately swerved his car into a low wall which launched his vehicle spinning into the air, bouncing off the roof of a car waiting at a junction before smashing into the plate glass window of the House of Fraser store causing over 200,000 worth of damage. J was seriously injured and almost died. He was convicted of dangerous driving and of causing criminal damage. The Recorder who sentenced him to 21 months imprisonment said "It is clear you suffered from serious depression at that time and the purpose of your driving was to kill yourself." The damage to the shop windows was covered by the property owner's policy of property insurance and its insurers brought a subrogated claim against J to recover its outlay. Although J did have motor insurance, his policy did not cover damage arising out of his deliberate acts. It was common ground between the parties that the damage was caused by a deliberate act. Therefore, this particular use of the vehicle by J was uninsured. Normally, this would not be an issue because damage to property caused by
Page 3 of 5 SUBROGATED RECOVERY AND DELIBERATE ACTS CONT D an uninsured vehicle would be paid by the motor insurer under the scheme set up by the MIB. However, an exception in the MIB agreement is that the scheme does not extend to compensating those who suffer property damage where such damage was insured by the victim's own insurer who brings a subrogated claim for recovery. The property insurer contended that upon proper construction of the policy, sections 145 and 151 of the Road Traffic Act 1998 and the European Directives on Motor Insurance, the motor insurers must cover damage to property whether caused deliberately or not. The motor insurer's position was that because the policy expressly excluded damage deliberately caused, with the result that this damage is not covered by the motor insurance policy, upon the proper construction of section 151 they were not obliged to indemnify the claimant. There was a trial of the following preliminary issue: Is the claimant entitled to recover from the motor insurer even if the motor insurer is right in contending that: (a) the damage to the claimant's premises was the result of a deliberate act by J; and (b) the insurance obtained by J excluded "any...damage...arising as a result of...deliberate act caused by you". At first instance, the trial judge answered in the affirmative and the motor insurer appealed the decision. On Appeal it was held that under the Road Traffic Act 1988 not all damage to property had to be covered. Section 145(4)(b) of the Act did not require the policy to provide for insurance of more than 1 million in respect of damage to property arising out of any one accident. Liability for the property damage caused by J was not "covered by the terms of the policy" within section 151(2)(a) of the Act because the terms of the policy expressly excluded damage caused by the deliberate act of the driver. The Court of Appeal said it could not be right that the only requirement of section 151 was that the liability was of the kind which ought to have been covered by a policy complying with section 145 even if the actual policy did not cover that particular liability. The Act, together with the MIB arrangements, satisfied the aim and the spirit of the European motor insurance Directives to enable third party victims of accidents caused by vehicles to be compensated for all damage to property and personal injuries sustained by them. The exclusion of liability meant that J was uninsured but the Directives allowed for such uninsured losses to be paid under the MIB. Section 151 of the Act gave no right of recovery with the result that ordinarily a claim would be made against the MIB. However, the MIB scheme did not extend to compensating those who suffered property damage where such damage was insured by the victim's own insurer which brought a subrogated claim for recovery. The Appeal was therefore allowed. A disappointing result for property insurers looking to bring subrogated claims, but a welcome re-statement of the law that, in the context of motor insurance, deliberate acts leading to property damage will not lead to such recoveries being permitted. 'PROMPTNESS' AND LITIGANTS IN PERSON Tinkler & Anor v Elliott (2012) The Court was invited to consider whether a Judge had erred in setting aside an injunction made in the absence of a litigant in person. Under CPR Part 39.3 a party can apply to the Court for judgment to be set aside when they did not attend the hearing provided that they apply (i) promptly (ii) had a good reason for not attending and (iii) had reasonable prospects of success at trial. Mr Elliott ("E") was engaged by WA Developments International Ltd ( WADI ) to provide aviation consultancy services. His employment came to an end in March 2007 following a break down in the relationship between E and WADI caused by a whistle blowing incident. E issued a number of claims against WADI thereafter. These were compromised in July 2007 by way of a Tomlin Order. Under the terms of the Tomlin Order the parties agreed to settle all outstanding claims on a full and final basis. In consideration for this agreement, WADI paid E compensation and E provided an undertaking that he would not make any allegation about the illegal activities of WADI. Sadly, this did not bring a conclusion to the matter and various additional proceedings were brought by E. A hearing to determine whether a permanent injunction to enforce E's undertaking and whether a civil restraint order should be imposed upon E was listed for 15 March 2010. E did not attend the application, relying upon a letter from his GP indicating that he was unfit to attend court. In his absence, both the injunction and civil restraint order were granted. However, E was given permission to apply for relief. E did not apply for such relief until March 2012, some two years after the initial hearing. However, despite the delay, at first instance he was successful with the judge finding that: The Defendant was under a significant disadvantage throughout the material period as a result of the combination of health problems.and the fact that he was acting in person a litigant seeking to have a judgment set aside after this length of time would
Page 4 of 5 'PROMPTNESS' AND LITIGANTS IN PERSON CONT D normally face an uphill struggle to persuade a court that he should be allowed to do so. In my view however this is a special case on its facts, and having regard to all the circumstances the Defendant has persuaded me that it would be right to do so." That decision was appealed by WADI on the issue of promptness only. E explained the delay by his lack of knowledge of legal procedure and mental illness suffered within the period. The leading judgement in the Court of Appeal was provided by Lord Justice Maurice Kay. He considered that the argument put forward by E was: "...close to saying that an applicant with a reasonable explanation for his original non-attendance who has reasonable prospects of success at trial, should be given every opportunity to have his case considered on the merits, even after a delay such as the one in this case. The flaw in that approach is that it invests the judicial decision with a degree of discretion which is contrary to the structure of CPR 39.3(3). The element of discretion the court may grant the application comes into play only after the applicant has satisfied the three positive requirements including that of promptness. The judge s approach at this stage is essentially evaluative rather than discretionary." The Court considered that the mental illness explained part, but not all, of the delay. Therefore, the Court went on to consider whether the fact that E was a litigant in person should have any effect on the evaluative decision made by the Court. The Court found that " there may be facts and circumstances in relation to a litigant in person which may go to an assessment of promptness but, in my judgment, they will only operate close to the margins. An opponent of a litigant in person is entitled to assume finality without expecting excessive indulgence to be extended to the litigant in person. It seems to me that, on any view, the fact that a litigant in person did not really understand or did not appreciate the procedural courses open to him for months does not entitle him to extra indulgence. The fact that, if properly advised, he would or might have made a different application then cannot avail him now. That would be to take sensitivity to the difficulties faced by a litigant in person too far." The Court concluded that the requirement of promptness in bringing an application for relief had not been met and the appeal was allowed, with the injunction and civil restraint order being reinstated. This case is a welcome example of the Court taking a strong stand against a vexatious litigant in person. Whilst the Court accepted that litigants in person do need to be treated sensitively the Court must not lose sight of the interests of any other interested party. It also serves as a strong reminder of the importance of proactive case management and of complying with Court deadlines. BUSINESS INSURED S DUTY OF DISCLOSURE AND THE LAW OF WARRANTIES CONSULTATION We last reported on this in our September issue. The consultation closed in September 2012 and draft legislation is expected in 2013. We shall keep you advised of progress. DATES FOR YOUR DIARY Conferences GREENWOODS MAjOR BODILY INjURY GROUP SPRING CONFERENCE Date Time Location 14 March 2013 12.30-17.45 followed The Wellcome Collection Conference Centre by drinks reception 183 Euston Road London, NW1 2BE
Page 5 of 5 Other Greenwoods publications Greenwoods produce a number of regular publications on various topics, namely: PERSONAL INjURY ALERT (Weekly) MOTOR CRIME FOCUS (Quarterly) FRAUD REVIEW (Bi-monthly) H & S REVIEW (Quarterly) MARINE INSURANCE REVIEW (Quarterly) If you would like to subscribe to any of the above publications, please email crm@greenwoods-solicitors.com, indicating which you would like to receive. The information and opinions contained in this document are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. This document speaks as of its date and does not reflect any changes in law or practice after that date. Greenwoods is a firm of solicitors regulated by the Solicitors Regulation Authority in England and Wales. You can access the rules which regulate our professional conduct at: www.rules.sra.org.uk Greenwoods Solicitors 2012