Hughes v Metropolitan Railway

B e f o r e :

LORD JUSTICE WARD LORD JUSTICE THORPE and LORD JUSTICE KEENE ____________________

ACE INSURANCE SA-NV Appellant - and - SURENDRANATH SEECHURN Respondent ____________________

(Transcript of the Handed Down Judgment of Smith Bernal Reporting Limited, 190 Fleet Street London EC4A 2AG Tel No: 020 7421 4040, Fax No: 020 7831 8838 Official Shorthand Writers to the Court)

Jeremy Stuart-Smith Q.C. (instructed by Messrs Davies Lavery for the Appellant) Stephen Shaw (instructed by Messrs Ashley & Co. for the Respondent) ____________________

HTML VERSION OF JUDGMENT AS APPROVED BY THE COURT ____________________

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Lord Justice Ward:

At the trial of two preliminary issues, His Hon. Judge Previte Q.C. sitting in the Central London County Court found on 30 th January 2001 that:

i) the date of accrual of the cause of action for payment under two policies of disability insurance was 12 months after the disabling accident which befell the claimant on 16 th September 1988; and

ii) although proceedings were only brought over 10 years later on 7 th October 1998, the action had not become statute barred on 16 th September 1995 because the defendant insurers were estopped from relying on Section 5 of the Limitation Act 1980.

The first finding is now accepted, but the insurers appeal with the permission of Robert Walker L.J. against the second ruling.

Mr Seechurn came to this country from Mauritius in 1975 when he was about 30 years old and found work at the Post Office where he remained. On 16 th September 1988 he was a passenger on the upper desk of a London Transport bus and, having rung the bell, started to descend down the stairs. The bus stopped sharply causing him to lose his balance and roll downstairs hitting his head on the steps as he fell. A passenger saved him from falling into the roadway but he suffered severe injuries to his neck, to his upper and lower back and was admitted to hospital for treatment. He alleges that his condition had grown progressively worse over the years so that he was left in constant pain, severely handicapped in his mobility, totally incapacitated from work and now dependent on Social Security and Disability Benefit.

Fortunately Mr Seechurn had accepted invitations extended to holders of an American Express Card to take out policies of insurance with the defendant company, then known as Cigna Insurance Company of Europe s.a.-n.v. The first policy was taken out on 16 th March 1988 under the American Express Card Member Disability Compensation Plan. The benefit of that policy was a total sum of £250,000 in the event of his suffering permanent total disablement but the policy also required the insurer to pay a partial benefit as a proportion of the sum insured relative to the degree of permanent disability. These benefits were paid in the event of the insured suffering “bodily injury” meaning “injury which is caused by accidental means and which within 12 calendar months from the date of the accident results in the insured person’s permanent disablement”. “Permanent total disablement” was defined to mean “disablement which, having lasted for at least 12 months, will in all probability entirely prevent the insured person from engaging in his/her usual occupation or any other occupation for which he/she is fitted by reason of education, training or experience for the remainder of his/her life”.

The second policy was taken out on 7 th June 1988 under the American Express Card Member Triple Security Plan. This insured the card member in the sum of £150,000 in the event of his suffering permanent total disablement but provided for a payment of £1,500 per month for temporary total disablement payable for 12 months. There were slightly different definitions of “bodily injury” and “permanent total disablement” but nothing turns upon those differences.

In his witness statement, dealing with the history of his claim from the date of the accident to 1989 the claimant states that he did not at first know how serious his injuries were and certainly did not then believe that there was a risk that he would be permanently disabled. He says that he submitted the report form for a claim for temporary total disablement under the Triple Security Plan on 17 th October 1998, but this must be a typographical error for 1989. It is common ground that the insurers paid him the insured sums of £1,500 per month for 12 months and he has by common consent received £18,000 benefit under that plan.

On 3 rd May 1990 Mr Seechurn submitted a claim under the Disablement Compensation Plan, supported by his consultant orthopaedic surgeon Mr Thakkar who certified that:-

In August 1990 the claimant was seen by the defendant’s consultant orthopaedic surgeon, Mr Cobb, and his opinion was that:-

On 30 th January 1991 the claimant saw Mr Thakkar again. His conclusion was:-

The claimant sought a second orthopaedic opinion and Mr Tiwari reported on 5 th March 1991 that:-

Although the insurers had written on 24 th January 1991 that they were unable to make any payment under the Disability Compensation Plan as no evidence had been provided to suggest that the claimant had continuing and permanent injuries, they were prepared to reconsider the matter and on 28 th May 1991 they wrote:-

The claimant instructed solicitors, Anthony J. Newton & Co., who, in response to the insurer’s letter of 28 th May, sent the insurers copies of the reports from Mr Thakkar and Mr Tiwari, asserted that Mr Seechurn was permanently disabled, unable to engage in any form of employment and consequently entitled to the full amount due and payable under the policy. That elicited this response on 26 th June 1991:-

That offer was rejected as unacceptable on 30 th July 1991 when the claimant’s solicitors contended that he need not provide any further medical reports and seemed to draw the battle lines with the assertion that:-

As I have already set out, those proceedings were not in fact instituted until 7 th October 1998. In the intervening years there were periods both of silence and of correspondence which I will need to analyse in more detail in order to decide whether the judge erred in his conclusion that the course of correspondence and the insurer’s conduct gave rise to what Chitty on Contracts describes as a “forbearance in equity” (see paragraph 3-080 et seq).

The Judge’s Conclusions.

The judge decided as follows:-

The submissions to us.

Mr Jeremy Stuart-Smith Q.C. who appears before us although he did not appear below, submits that the judge erred in failing to appreciate that the correspondence was conducted staccato, each instalment being interspersed by unaccounted delay. In particular the judge had need to analyse the events before and contrast them with the events after the period of limitation expired. To establish the estoppel, the claimant would have to satisfy the following requirements:-

i) A clear and unequivocal promise or representation. (As both counsel used “promise” and “representation” almost interchangeably, I shall limit myself to “promise”.)

ii) The promise had to be not simply that the defendant was willing to continue to negotiate but essentially that the defendant would not rely on a limitation defence.

iii) Although the promise could be implied from the correspondence, or from conduct or even from silence, no implication would arise in this case because there was no duty on the defendant to advert to the onset of limitation or the fact that any action had become time-barred.

iv) The claimant had to rely upon the promise.

v) Relying on the promise the claimant would have to have altered his position to his detriment.

Mr Stuart-Smith submits that there was no promise by the defendant not to rely upon its rights and that no reliance or detriment can be shown, especially after the period of limitation had expired.

Mr Shaw, for the respondent, submits that the judge cannot be shown to have made such an egregious error in his assessment of the facts that he can be upset on appeal. He submits that the promise has to be construed through the eyes of the promisee, that it is not an objective test but at best a test of whether a lay person would be surprised by the promisor’s stance. He submits that the promises have to be construed as the defendant discouraging the claimant from issuing his proceedings by threats that if proceedings were issued they would apply for a stay and would seek their costs. It was a promise to keep the door to further consideration of the claim open. If that is the gist, then the claimant contends that it is inequitable for the defendant to shut the door by standing upon its legal rights and taking the limitation point. Whilst he accepts that there is no duty to advise that time was running out, or had expired, Mr Shaw submits that, against the background of its discouraging proceedings every time they are threatened, the defendant has to make it clear that it is not abandoning its defence and that it is keeping all its arguments open, otherwise the wrong impression is given making it unconscionable to go back to the assertion of its rights.

The Law.

It is probably unnecessary for the purposes of this judgment to explore what differences, if any, there may be between estoppel by representation, promisory estoppel, estoppel by convention, waiver or what Chitty on Contract paragraph 3-080 calls “forbearance in equity”. It may still be controversial whether or not “all these can now be seen to merge into one general principle shorn of limitations”, as Lord Denning M.R. suggested in Amalgamated Investments and Property Co. Ltd. v Texas Commerce International Bank [1982] Q.B. 84, 122 but counsel have not invited us to enter into that debate and I do not propose to do so. Since the essence of the claimant’s case is that the course of correspondence contained some assurance by the defendant not to raise a limitation defence, it seems to me that it is most likely to be a case of promisory estoppel for there is no representation of existing fact and no shared assumption supporting an estoppel by representation or by convention respectively. Both counsel agree that the judge was correct to apply, as the locus classicus , the decision in Hughes v Metropolitan Railway Co. (1877) 2 App. Cas. 439, and it is worth quoting fully from the speech of Lord Cairns at p.488:-

Subsequent authorities serve to highlight some of the important elements. First, the promise (or representation) must be clear and unequivocal. In Woodhouse Ltd. v Nigerian Produce Ltd. [1972] A.C. 741, 755, Lord Hailsham of St. Marylebone L.C. said:-

In Low v Bouverie [1891] 3 Ch 82 , 106, Bowen L.J. had said that:-

Addressing that passage, Lord Hailsham said in Woodhouse Ltd. v Nigerian Produce Ltd. at p.770:-

Later at p.757 he said:-

The speech of Lord Cross of Chelsea is interesting for the contrast he drew between estoppel by representation and a promisory estoppel. He said at p. 767:-

The promise may be made by conduct or may be implied, but mere inactivity is not normally sufficient. In Allied Marine Transport Ltd. v Vale Do Rio Doce Navegacao S.A. [1985] 1 W.L.R. 925, 937 and 941 Robert Goff L.J. said:-

It is, in my judgment, important to emphasise that the unequivocal unambiguous promise or representation has to be that the party did not intend to enforce his strict legal rights. That point is demonstrated by Republic of India v India Steamship Co. (No. 2) [1998] AC 878 . There the question was whether there was a waiver or estoppel which would defeat the defendant’s contention that the proceedings in the English Court should be struck out pursuant to section 34 of the Civil Jurisdiction and Judgments Act 1982 by reason of the plaintiff’s already having obtained judgment in an overseas court, Cochin. Dealing with the defence of estoppel by convention, Lord Steyn said at p. 914:-

Dealing with the plea of estoppel by acquiescence, Lord Steyn said at p. 915:-

The same principle will apply here.

The point arose directly in Hillingdon Borough Council v A.R.C. Ltd. (No. 2) [2000] 3 E.G.L.R. 97, a case drawn to our attention by Mr Stuart-Smith but to which unfortunately the judge was not referred. In that case, like this, the parties continued to negotiate the settlement of the claimant’s right to compensation before and after the claim became statute barred. Dealing with the plea of estoppel by convention, Arden J., giving the judgment of the Court of Appeal, said:-

Dealing with the question of promisory estoppel she said:-

It is common ground that the promise or representation must be made intending to affect the legal relations between the parties and the promisee or representee must rely upon it and alter his position.

It is usually said that this must be an alteration to the detriment of the promisee or representee. Although the law in Australia and in this country may not have moved in exactly the same direction at all times, the decision of seven judges of the High Court of Australia in Commonwealth of Australia v Verwayen (1990) 170 C.L.R. 394 is interesting. Both before and after proceedings had been commenced by the plaintiff, the Commonwealth repeatedly represented that it would not rely on a limitation defence. Then it changed its mind and was granted leave to amend to plead that bar. Mason C.J. drew a distinction between two types of detriment: detriment which would flow from the denial of the assumption upon which a party had relied and detriment which the party had already suffered by relying on that assumption. In that case the first or the broader type of detriment would have been the plaintiff’s failure in his action for damages and the second would have been his costs incurred in mounting it up until the date when the defence was amended. There is debate as to whether detriment is always required. In Hughes v Metropolitan Railway itself the promisee had forborne from taking steps that he would otherwise have taken to safeguard his legal position and it may be for the equitable doctrine to operate, all that is required is that it should be inequitable for the promisor to go back on the promise. That is the essence of Mr Shaw’s submission,that, as Oliver J. expressed it in Taylors Fashions Ltd. v Liverpool Trustees Co. [1982] 1 Q.B. 133, 155, all that need be established is that it was unconscionable for the defendant to seek to take advantage of the claimant’s mistake. I am content to approach the case appeal on that basis.

The questions which arise in this appeal.

From that review of the law, I conclude that the relevant questions are these:-

i) Is there a clear, unequivocal, unambiguous and unconditional promise by the insurers that they will not raise the defence that the action is statute barred. The focus has to be on whether or not they were giving up that right.

ii) The promise must be construed objectively, not subjectively. The question is whether the correspondence can reasonably be understood to contain that particular promise. It does not matter what Mr Seechurn thought it meant nor does it matter what a layman might have thought, as Mr Shaw contends, unless, of course, that layman is a passenger on the Clapham omnibus.

iii) The third question is whether Mr Seechurn relying on the promise, altered his position to his detriment or whether it would be inequitable or unconscionable not to hold the insurers to their promise.

An analysis of the correspondence.

As different considerations may apply before and after the claim became statute-barred, I will look separately at the correspondence in those two periods.

The correspondence up to the expiry of the period of limitation on 16 th September 1995.

As already set out, the position had been reached by the end of July 1991 that the claimant, through his solicitors, was claiming payment of the full amount due under the policies, asserting that he need not provide further medical evidence and threatening to institute proceedings. The defendant’s solicitors took the view that under the terms of the policy the claimant was obliged to provide reasonable assistance to the underwriters and thus they sought a further medical examination. On 22 nd August they wrote:-

The author of that letter, Mr Capuano agreed in evidence that he was not intending to shut the door, that he was anxious to avoid court proceedings if only the claimant would undergo further medical examinations.

On 21 st October 1991, the £20,000 was sent to the claimant’s solicitors expressed to be “in full and final settlement of your client’s claim based on a level of 10% disability”. The letter continued:-

Mr Capuano accepted that he was conveying a mixed message and that if he had simply said the £20,000 was the final offer, that would have resulted in litigation which was what he as seeking to avoid.

The claimant eventually in November 1991 elected to be seen by the insurer’s doctor, Dr. Nieman. He reported very unfavourably. He said:-

He did, however, later review that opinion in the light of medical records which had not been available to him at the time of his first report. He stated:-

Both those reports were in the hands of the claimant’s solicitors by February 1992.

Time passed and on 10 th November the insurer’s solicitors asked for confirmation that Mr Seechurn had agreed to accept the moneys paid in settlement. On 13 th November 1992 Newton & Co., Solicitors, wrote on Mr Seechurn’s behalf rejecting that offer and stating:-

Nothing happened for nearly a year. Mr Seechurn wrote directly to the insurers on 26 th October 1993 informing them that his doctor was of the view that he would never be gainfully employed again and that he was submitting his claim. The insurer’s response was that the evidence provided from the medical reports showed that he was not entitled to any further payment.

Once again matters apparently went to sleep but one has some sympathy for Mr Seechurn because it appears that at sometime in the interval his solicitor died but he instructed new solicitors, Ashley & Co. He wrote on 21 st February 1995:-

He added a postscript that he was also referring the matter to the Ombudsman.

The insurers replied that they had assumed from the lapse of time that he had accepted the money but indicated they were prepared to look at the matter again although it was likely that they would require a further medical examination. That was repeated by their solicitors to Mr Seechurn’s new solicitors. Davies-Lavery, for the insurers, wrote on 13 th April 1995:-

Mr Seechurn gave evidence to the judge that having received advice from an apparently responsible source, he was suspicious of the Dynatron test which he believed was of doubtful validity. He decided to refer the matter to the Insurance Ombudsman.

On 9 th May 1995 Davies-Lavery sent Ashley & Co. Dr Nieman’s two reports and stated in their letter, which the judge regarded as a significant letter bearing in mind that it was written three months (actually it was four months) before the limitation period would expire. Davies-Lavery said:-

The referral to the Ombudsman did not please the insurers. Davies-Lavery wrote on 24 th June 1995:-

On 9 th July 1995 Mr Seechurn wrote personally to Mr Keen of the insurers. He expressed the view that:-

He protested that the request to undergo further examination and tests were “ploys that you are using to undermine my claim and to pay me as less [sic] as possible”. He was convinced that all the insurers were trying to do was “to get a report to your liking. Obviously a doctor paid by you will dance to your tune”. So he wrote:-

Davies-Lavery responded on 16 th August 1995. The judge said, wrongly, that the letter was written on “the very day upon which the six year limitation period expired”, whereas in fact time had another month to run. The solicitors wrote:-

The judge viewed that last paragraph as holding out encouragement to the claimant.

The period of limitation expired without response to that letter and, of course, without the issue of proceedings.

The correspondence after the expiry of the period of limitation.

On 2 nd November 1995 Mr Seechurn wrote to the insurers informing them that he had referred the matter to the Ombudsman. He stated:-

It appears, however, that the Ombudsman is unable to investigate a complaint until in receipt of “a chief executor final decision letter”. Mr Seechurn called for it.

The insurers replied:-

Mr Seechurn considered that that was a further demonstration that all the insurers were wanting to do was to evade payment. He wrote on 11 th December 1995 saying that:-

The response of 20 th December 1995 was:-

There the correspondence rested until 19 th March 1997 when Mr Seechurn submitted a recent report from a neuro-spinal consultant and stated that he wished the matter to go to court. Davies-Lavery informed him that until he consented to undergo examinations by an orthopaedic consultant and submit to the Dynatron 2000 test the insurers were not in a position to reconsider the claim. They stated:-

The judge deals with what then happened as follows:-

In it he states that:-

A year passed. On 30 th July 1998 Mr Seechurn wrote to the insurer’s solicitors referring to the letter of 1 st June 1997 and informing them that he had recently been examined by his own orthopaedic consultant and that his condition was worsening. He said that he was prepared to submit himself to a further medical examination at the insurer’s expense.

The reply of 13 th August 1998 brought matters to a head. When they had retrieved their papers from storage they wrote:-

Not surprisingly Mr Seechurn was outraged. He wrote on 24 th August 1998 protesting that:-

Mr Capuano replied on 11 th September 1998:-

There the relevant correspondence ends.

I turn, therefore, to answering the three questions I posed with reference to the periods before and after the action had become statute barred.

The period leading to the claim becoming statute-barred on 16 th September 1995.

The first and second requirements for a clear unequivocal unconditional promise, objectively construed, not to rely on its right to plead limitation.

The correspondence shows:

i) The claimant’s solicitors were preparing to issue proceedings on 13 th November 1992, well within the limitation period.

ii) The defendant’s solicitors were requesting the claimant to undergo examination by their nominated orthopaedic surgeon and to submit to the Dynatron test to determine whether they were required to make any further payment.

iii) The defendant’s solicitors were asserting that:-

iv) The claimant was, however, steadfastly refusing to be seen by the defendant’s doctors or to submit to the Dynatron test.

I do not disagree with the judge’s conclusions that the defendant was intending to keep the door open and was promising that it would continue to look at and consider Mr Seechurn’s claims over and above £20,000 that had already been paid. That, in my judgment, is not enough to enable the claimant to establish a promise of the kind which satisfies the first and second requirements I have outlined.

The judge seems to me to have fallen into two errors. First, any promise to keep the door open was conditional upon the claimant submitting to the further medical examination. He refused to accept that condition. That position was made even clearer by the exchange of correspondence after September. There was a categorical refusal by the claimant on 2 nd November 1995 and a firm reiteration of the defendant’s position in its letter of 20 th December 1995 making it perfectly clear that they were not prepared to proceed without the further medical examination. Even if the door was still open after 16 th September 1995, the claimant failed to accept the terms which would have helped him across the threshold.

Secondly, what the judge failed to consider, no doubt because his attention was not drawn to the need to do so, was whether or not there was a clear unequivocal promise or representation or common assumption, call it what you will, that the defendants would forgo their right to plead the Limitation Act 1980. I find nothing in the correspondence which justifies finding that there was any promise to that effect or anything at all like that effect. To say that the door was open to further negotiations or even to point out that the proceedings could be stayed pending medical examination, did not in my judgment, carry any implication that a limitation defence would not be taken. As Lord Steyn observed in Republic of India , there was no duty on the defendant’s solicitor to warn of this impending fall of the guillotine. Furthermore, as the authorities make clear, silence or inaction are of their nature equivocal. Although the test is whether the letters objectively construed contained the necessary promise, expressed or implied, there seems to be no reason to doubt the evidence Mr Capuano gave (transcript of 26 th January, p.41D) that when he reviewed the file again in August 1998:-

The judge made no finding about this. The letter of 11 th September 1998 is consistent with his evidence. The inference is almost irresistible that, sadly, not one of the three firms of solicitors applied their minds to limitation until it was too late.

In my judgment the claimant fails to establish this first requirement and that is fatal to any estoppel operating against the defendants. The correspondence is typical of the attempts to negotiate a settlement of a claim with all the usual thrust and counter-thrust (or bluff or counter-bluff) of potential litigants striving to come to terms without losing too much face. That is not enough to found an estoppel.

Detriment.

If the necessary promise had been established, I would have had no difficulty in accepting that it was intended to be acted upon, and was relied upon with the result that Mr Seechurn suffered the detriment of losing his right to approach the judgment seat. It would then have been inequitable and unconscionable for the defendant to plead the time bar.

The period after the claim had become statute-barred.

The requisite promise.

The nature of the promise did not change. There was again an expression of willingness to consider the claim provided the requested medical examinations were undertaken and the same warning that the defendant would apply to stay the proceedings pending such examinations. The defendants were urging the claimant to seek advice: he was maintaining his determination to go to court. There were two substantial periods of delay, first from 20 th December 1995 to 19 th March 1997 and secondly from 1 st June 1997 to 30 th July 1998. The limitation point was said to have been taken immediately the defendant’s solicitors became aware of it.

For the same reasons I have already given, no clear promise to surrender the defendant’s legal rights can be established. To assert that the door to compromising the claim was still open was not impliedly to promise that a limitation point would not be taken if the negotiations failed and the proceedings started out of time.

Detriment.

After the limitation period had expired it is difficult to see how the claimant could have altered his position to his detriment. His claim was doomed. He could not be worse off. The claimant had steadfastly refused to undertake the required examinations. The defendants were receptive to reconsidering his claim if fresh medical evidence justified it. Who knows what would have happened had he consented? The defendant had been extraordinarily patient and amenable. Alas the claimant changed his mind too late. I can see nothing inequitable or unconscionable in the defendant refusing in those circumstances to engage in further negotiations or in their denying liability for a claim which had become very stale.

Conclusions.

In my judgment no estoppel of any kind can be established. This is most unfortunate for the claimant. I have no doubt that he laboured under a misapprehension that his claim was never at risk of being defeated as it has been. His solicitors would not appear to have put him on guard and I feel sympathic towards him. Sadly, however, I am in no doubt that the appeal has to be allowed with the result that his claim is to be dismissed.

Lord Justice Thorpe:

I agree that this appeal should be allowed. I have some sympathy for Mr Seechurn, as, I suspect, did Judge Previte. I also accept Mr Shaw’s submission that Mr Seechurn’s ability to save himself by reliance on the equitable doctrine of forbearance depends upon the impression gained from the relevant correspondence. Having read the judgment and Judge Previte’s summary of that correspondence I shared his view that Mr Seechurn was entitled to equitable relief. However Mr Stuart-Smith’s guided tour of the totality of the correspondence led me to the opposite conclusion. Judge Previte’s judgment compresses the chronology in a number of significant respects. Nor does his judgment sufficiently convey the extent to which Mr Seechurn communicated; sometimes directly, sometimes through solicitors, sometimes to insurers, sometimes to their solicitors and sometimes to the Insurance Ombudsman. There is both a lack of consistency and a neglect in pursuit which tell strongly against Mr Seechurn. It is only surprising to me that the appellant’s solicitors did not take the limitation point sooner.

Lord Justice Keene:

I also agree.