PROVING THINGS 108: PROVING PROFESSIONAL NEGLIGENCE WITHOUT EXPERT EVIDENCE

In Avondale Exhibitions Ltd v Arthur J. Gallagher Insurance Brokers Ltd [2018] EWHC 1311 (QB) His Honour Judge Keyser QC (sitting as a Judge of the High Court) considered the issue of whether it was necessary to adduce expert evidence to establish breach of duty in a professional negligence claim against insurance brokers. The absence of expert evidence played a part in the judge’s dismissal of the claimant’s claim.

“.. it is striking and significant that Avondale asks the court to find that Giles fell below the standard of reasonably careful and competent insurance brokers without adducing any expert evidence as to the standards in that profession.”

THE CASE

The claimant company suffered a loss after a fire. The insurers refused to indemnify  and make payment on the grounds that the claimant had failed to disclose certain criminal convictions. The claimant sued the defendant – its insurance brokers.  The judge rejected the claimant’s case that the brokers had been told, expressly, of the convictions. The claimant’s second ground was that the defendant was negligent in failing to explain fully the importance of disclosure.

THE JUDGMENT ON THIS ISSUE

“Breach of duty

1. 1. I turn to the question whether Giles was in breach of duty by failing to take reasonable steps to bring to Avondale’s attention the importance of making the necessary disclosure and to elicit the relevant information. The legal framework has been set out above; the critical point is summarised in para 17.

   2. The case for Avondale may be summarised, very briefly, as follows. The role of the broker is to act as intermediary between the client and the insurer and, in particular, to ensure that correct information and all material information is given to the insurer. This role explains the rationale for the broker’s duties, as set out by David Steel J at para 56 of his judgment in Environcom (para 12 above). In the present case the necessary information was not given to the insurer. Though not determinative, that is a prima facie indication that the broker did not adequately fulfil its role. The two ways of doing so would have been to ask a direct question about convictions and to give a clear and proper explanation of the requirements of disclosure. It is accepted that there is no general duty, applicable in all cases, to ask oral questions or give oral explanations. However, in the particular circumstances of this case, Giles cannot reasonably rely on the questions or explanations in the documents that it provided to Avondale but was obliged to enquire and explain orally. First, that documentation was both complex and bulky. Mr Davies said in cross-examination that he did not realistically expect that his clients would read the full extent of the documentation; there was a real risk that a client would just pay the bill and file the documents. Second, Mr Watkins was a hard-working man but obviously not a man of great education or commercial prowess. He could not be regarded—indeed, was not regarded by Giles—as a sophisticated businessman. Third, the relevant question was easily asked in a moment; all possibility of misunderstanding could have been eliminated by the simplest of enquiries (which Mr Phillips helpfully demonstrated in court). Fourth, there were obvious moments when the necessary question ought to have been asked: (a) the first meeting with Mr O’Brien in 2007. Mr O’Brien’s evidence was that his practice since 2009 or 2010 has indeed been to ask such a question, though he did not previously do so; (b) when Mr Goodfield took over the file in 2009, especially as the file was in a poor condition and gave indication of the need to check that the information held was accurate; (c) when the business passed from Intex Exhibitions to Avondale and there was a new client; (d) upon each policy renewal, when it was important to ensure that there had been no material changes and that the client understood its responsibility to make full disclosure.

   3. Accordingly, it is fundamental to the case as so advanced that, in the circumstances of this case, Giles was under an obligation to do either or both of two things: first, orally ask Mr Watkins whether he had any convictions; second, orally explain the requirements of disclosure.

   4. Whether in contract or in tort (and it is unnecessary to distinguish between them for the purposes of this judgment), Giles’s obligation was to exercise reasonable skill and care. The standard of skill and care required of a professional person is to be determined by the court by reference to the profession concerned, in this case that of insurance brokers. Among the ways in which the matter is sometimes put is that the required standard is that achieved by reasonably competent or ordinarily competent members of the profession. It is clear, in my judgment, that, however the matter is put, the profession cannot be the ultimate arbiter of the applicable standard, because it is ultimately for the court to decide what amounts to reasonable competence and the court may conclude that the standards ordinarily observed by a particular profession fall short of what is reasonably required. Accordingly: “The extent of the legal duty in any given situation must, I think, be a question of law for the court”: Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch. 384, per Oliver J at 402.

   5. It is usual for a court to require expert evidence as to the standards ordinarily observed within a profession before it will find that a professional’s conduct amounts to negligence. Thus in Sansom v Metcalfe Hambleton and Co [1998] P.N.L.R. 542, Butler-Sloss LJ said at 549:

“[A] court should be slow to find a professionally qualified man guilty of a breach of his duty of skill and care towards a client (or third party) without evidence from those within the same profession as to the standard expected on the facts of the case and the failure of the professionally qualified man to measure up to that standard.”

To similar effect, in Pantelli Associates Ltd v Corporate City Developments Number Two Ltd [2010] EWHC 3189 (TCC), Coulson J said at para 17:

“Save in cases of solicitors’ negligence, where the Court of Appeal has said that it is unnecessary (see Brown v Gould & Swayne [1996] 1 PNLR 130), and the sort of exceptional case summarised at paragraph 6-009 – 6-011 of Jackson & Powell, Sixth Edition, which does not arise here, it is standard practice that, where an allegation of professional negligence is to be pleaded, that allegation must be supported (in writing) by a relevant professional with the necessary expertise. That is a matter of common sense: how can it be asserted that act x was something that an ordinary professional would and should not have done, if no professional in the same field had expressed such a view? CPR Part 35 would be unworkable if an allegation of professional negligence did not have, at its root, a statement of expert opinion to that effect.”

1. 1. I do not regard these and similar dicta as establishing a rule of law that expert evidence is required in every case before a finding of professional negligence can be made. They rather indicate a matter of common sense, as Coulson J put it, in most cases. As the passage in Jackson & Powellreferred to by Coulson J shows (see now the same paragraphs in the eighth edition), expert evidence is not required if the practice or conduct complained of has no rational basis or is so obviously unsupportable as to require no such evidence for it to be found to be negligent. One is entitled to bear in mind in this regard that the nature of the role being performed by the professional may be more or less technical and more or less dependent on professional qualifications: the practice in surgical oncology or (as in Pantelli) quantity surveying will raise considerations different from those raised by insurance brokering. (This point ought not to be over-stated. It is worth noting that in both Environcom and Synergy there was expert evidence, as was to be expected of a broker.) As mentioned above, the standard reasonably to be required of a professional is a matter for the court.

   2. Despite this, it is striking and significant that Avondale asks the court to find that Giles fell below the standard of reasonably careful and competent insurance brokers without adducing any expert evidence as to the standards in that profession. Some reliance was placed on the guidance in 5.1.4G of the Insurance Conduct of Business sourcebook (ICOBS) of the Financial Services Authority. But that guidance comes nowhere near indicating a professional standard such as Avondale alleges, and perhaps for that reason ICOBS was not referred to by Mr Phillips in his closing submissions. The lack of expert evidence significantly limits, though it does not altogether exclude, the possibility of a finding that Giles’s conduct was such as to constitute a breach of the common-law duty of care or the contractual obligation to exercise reasonable skill and care. Mr Phillips sought to rely on answers given by Ms Hewlett in cross-examination as indicating what Giles ought reasonably to have done. But Ms Hewlett is not and never has been a broker. Answers given and concessions made by Giles’s other witnesses may carry some weight and will fall to be considered when determining the issue of breach of duty, but they must be taken in context and weighed carefully.

   3. The starting point must be that, as was common ground between the parties, there is no general obligation, applicable in every case, to give an oral explanation of material disclosure and make an oral enquiry about convictions. Therefore the contention is that a reasonably skilful and careful broker would have done these things in the particular circumstances of this case. This contention is advanced without any evidence as to a relevant professional standard at any material time. The simplicity of the material question (“Have you got any criminal convictions?”) and the potential consequence of non-disclosure (avoidance of the policy) are not particular to this case. If they were determinative of the issue, the obligation to give oral explanations and make oral enquiries would be general or nearly so, which is not argued.

   4. One particular matter relied upon by Avondale is Mr Watkins’ lack of sophistication. It is true that he does not give the impression of peculiar intelligence or education or of unusual business acumen. But there is nothing to suggest that he was not as savvy as an ordinary businessman. One witness described Mr Watkins as “sharp”, meaning I think astute or “on the ball”. That seems right. As the narrative shows, Mr Watkins continually had an eye to the requirements of his business and to proper opportunity to advance or protect his legitimate interests. He also gives every impression of having paid more attention to the detail of his insurances than he was willing to admit in evidence.

   5. Another matter relied on by Avondale is the sheer bulk of the documentation by which Giles says it made the necessary enquiries and gave the necessary explanations. Thus Mr Davies said that he did not realistically expect clients to read all the documentation. This point can be, and I think has been, exaggerated. Insofar as there was an impenetrable mass of verbiage, it lay in the detailed terms and conditions of the policies, as it always does. Presumably, very few people would read all of that. However, as the foregoing narrative has sought to indicate, and as a perusal of the documentation on which the narrative is based confirms, the material paperwork for present purposes was both limited in amount and clearly highlighted. I shall not repeat what is set out above. Time and again, the letters from Giles to Mr Watkins or Avondale identified specific documentation and made clear the need to check the accuracy of the information provided to the insurers. The documentation so identified was not by any means unduly long or dense. The factual bases set out in the Market Presentations and the Statements of Fact were clear, concise and easy to read and verify or correct. The explanations of the duty of full disclosure of material facts were clear and full and attention was properly drawn to them; they were not tucked away where they might not be seen. It is of course correct that the explanations of the duty did not specify that convictions were material facts. However, this does not assist Avondale: first, there is no evidence that there was a professional standard requiring that it should do so; second, unless all possible material facts are set out in the explanation of the duty, specific mention of one or more such facts is liable to be misleading as creating a false impression that the duty is restricted to particular matters; third, it is clearly impossible to set out all material facts. Convictions only appear to be specially significant because of the issues that arise in this case; fourth, the documentation provided to Avondale repeatedly mentioned convictions, which made it entirely obvious that convictions were properly to be disclosed.

   6. I do not consider that Mr Phillips’ attempt to identify particular occasions when specific oral enquiries or advice were required improves Avondale’s case. Every engagement of a broker has an initial occasion of contact, so the fact that Mr O’Brien had an initial meeting with Mr Watkins does not explain why a relevant duty should arise in this case. There is no evidence as to the standards within the profession as at 2007, or indeed as at any other date. It is of interest to note that Mr Watkins had been in the exhibitions business for some twenty years at that time (much of it through a limited company) and had already been instructing other brokers; he did not come to Giles as a novice. The change of personnel from Mr O’Brien to Mr Goodfield obviously required that Mr Goodfield should acquaint himself with the client, but it did not of itself indicate any reason why the oral advice and enquiries should have been requisite in this case as distinct from any other. Mr Watkins had been the client for two years and continued to be so. Mr Phillips referred to the evidence that Mr O’Brien had left the file in something of a mess (see in particular paras 37 and 39 above). However, there is neither evidence nor reason to suppose that that had anything to do with the disclosure made by Mr Watkins, and Mr Goodfield spent considerable time addressing such problems as did exist (see paras 37 to 40 above). There was indeed a change of client in 2010, when Avondale was substituted for Mr Watkins. However, this needs to be seen in the particular circumstances of the case. Avondale was in effect just the incorporation of the same business and, in practical terms, Mr Watkins’ role was unchanged, though he was now a de facto director rather than a sole trader. If there is no general obligation to hold direct oral communications of the relevant sort at the outset of a relationship between broker and client, there is in my judgment no good reason to hold that Giles was under such an obligation in 2010 by reason of the substitution of a new client. Mr Phillips submitted that, as Ms Hewlett had remarked, the matter ought to have been dealt with by means of a formal proposal and a new policy, rather than an amendment to an existing policy. However, this does not assist Avondale: first, Ms Hewlett is not a broker and her evidence on this point is not expert evidence; second, QBE did not actually impose such a requirement; third, however the matter might have been dealt with technically, the important thing was the nature of the information being passed to the insurer, and the formal change of client did not indicate that the relevant information had or might have changed. In fact, the relevant information was set out in the usual manner for Avondale to check and it was not corrected (see paras 55 to 60 above).

   7. Accordingly, and on the facts of this case, I hold that Giles was not in breach of duty to Avondale.”