England and Wales Court of Appeal (Civil Division) Decisions

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.

“In his present state he cannot work and I do not expect him to resume work in the future.”

“There are several inconsistencies between his symptoms and physical signs suggesting that he is not a reliable witness. ... In my opinion, therefore, although undoubtedly this man suffered a significant injury to his back and neck which is very likely to be causing continued symptoms, he may be reluctant to admit improvement and recovery. The diagnosis is of soft tissue injuries only and there is no evidence of significant neurological dysfunction. The natural history of this condition is resolution of symptoms within 1-2 years and recovery of function. ... I believe that if he makes the psychological adjustment necessary to want to obtain work and to want to sort his life out, then he will achieve significant recovery of his symptoms and will be suitable for some sort of employment, probably sedentary and clerical.”

“Electromyographic studies (tests on the muscles to detect abnormalities) were performed in June ’89 and a myelogram (assessment of the spinal cord by inserting a dye in the spinal canal) in Nov. ’89 failed to reveal significant abnormalities.

When assessed today (30/1/91) it would appear that he is still in a great deal of pain and is unable to move unaided and unsupported. He has numbness and weakness in both upper and lower limbs and is on painkilling medication. These symptoms and signs are extremely difficult to explain and I would certainly recommend a second opinion from a neurologist. In my opinion the accident has probably partially contributed to his present state. Physiotherapy and rehabilitation may improve his clinical state but it is very unlikely that he will ever be normal again. In his present state he cannot be gainfully employed and I do not foresee him returning to a full-time job in the future.”

“PROGNOSIS.

1. I feel that this man requires further specialised investigation on the lines of MRI and CT scans to definitely exclude any spinal pathology.

2. He also requires further assessment by a neurosurgeon to exclude any neurological abnormality in view of his bizarre symptoms and signs.

3. In my opinion he is unable to resume his previous or any alternative occupation because of extreme pain ...

5. I found him psychologically stable and mentally orientated to time and place ...

IN CONCLUSION.

I feel that this man has sustained severe injury to his neck and back resulting in severe pain. He also presents with rather bizarre symptoms and positive neurological deficits which require further investigation. I think that this man’s problems will continue in the long term.”

“Taking into account that all your current symptoms that are not of a permanent nature, we have assessed the degree of permanent disability that can be regarded as due to your accident as being £10,000 and on the assumption this is acceptable to you we attach our form of discharge for your signature and return.”

“From the evidence that has been read by a Chief Medical Officer, we could at this stage increase our offer to 10% which amounts to £20,000.

If this is acceptable to the client, can you please let us know or alternatively can you please let us have full reports from the suggested neurosurgeon and also reports of any MRI and CT scans.”

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:-

“Unless you agree that our client is entitled to payment in full, it appears there is no alternative but for him to institute proceedings for what is rightly due and owing to him.”

The Judge’s Conclusions.

“Having regard to the correspondence, principally to the letters to which I have referred in this judgment, and to the evidence of the claimant, Mr Capuano [the defendants’ solicitor] and Mr Keen [the defendants’ insurance manager], I find that both before and after the expiration of the six-year period the defendants, and the defendants acting through Davies Lavery [their solicitors], led Mr Seechurn to believe that the defendants were willing to continue considering his claim under the Disability Compensation Plan and would apply for a stay of proceedings if proceedings were issued before they had reached a final conclusion in the light of all the medical evidence they desired.

Mr Seechurn had made it clear that it was his intention to issue proceedings. In addition to saying that they would apply to stay the proceedings, the defendants made it clear that there would be costs consequences, or possible costs consequences, if proceedings were issued before they had reached finality with regard to the extent of disablement.

I find that Mr Seechurn relied on what he was told with regard to the defendants being willing to give further consideration to his claim up to the time when the limitation point was taken. I also find that although the claimant expressed reluctance from time to time to co-operate with the defendants with regard to further medical examination, that reluctance was primarily in relation to the tests with the Dynatron machine. He had reservations about the independence of the defendants’ doctors but he had in fact seen Mr Cobb and Doctor Nieman and did agree to submit himself for further examinations when he wrote on 30^th July 1998. And I find, as I have already mentioned, that on being informed of the limitation point which was being taken, he did immediately complain that he had been misled.

The claimant’s primary case with regard to the limitation is that in equity the defendants are estopped from relying on Section 5 of the Act. I have been referred to the relevant passages in Chitty, in particular to the speech of Lord Cairns in Hughes v. Metropolitan Railway cited in paragraph 3-080, where Lord Cairns said that if one party leads the other “to suppose that the strict rights arising out of the contract will not be in force, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have taken place between the parties”. The requirements for the equitable doctrine to operate are that there must be a legal relationship giving rise to rights and duties between the parties. I am satisfied that requirement is fulfilled here in respect of the insurance contract. “... a promise or a representation by one party that he will not enforce against the other his strict legal rights arising out of that relationship:” I find that there was at least a representation arising out of the correspondence (to which I have referred) that the defendants would continue to look at and consider Mr Seechurn’s claims over and above the sum of £20,000 that had already been paid.

“An intention on the part of the former party that the latter will rely on the representation”: I find that that is proved. It is clear, in my view, from the terms of the correspondence, in particular the reference to “staying proceedings", or “penalties” with regard to “costs”, that it was the intention of the defendants, through their solicitors, that the door should be kept open.

And the further requirement that there should be “reliance by the other party”, I find that there was reliance by the claimant who, despite the intimation that proceedings would be started, stayed his hand. Although the matter became unduly protracted, and lay in abeyance for considerable periods of time, I find that the claimant never abandoned his intention to bring proceedings, albeit at one stage he took the alternative course of referring the matter to the Ombudsman, but that he did not proceed.

The claimant, who is now publicly funded, could have obtained legal aid at an earlier stage. The fact that he did not do so, indicates to me that he was relying on the statements made by or on behalf of the defendants that they would look further at the merits of his claim. I bear in mind that even where those requirements are satisfied, the operation of the doctrine may be excluded if it is nevertheless not inequitable for the first party to go back on his promise. My view is that it would be inequitable, in the circumstances of this case, to allow the defendants to rely on the limitation defence.

I find that Mr Seechurn was induced to believe, by the correspondence and statements therein, that the door would be kept open. In so finding, I bear in mind that the representation must be clear or unequivocal. I so find. I think, viewed objectively, a reasonable person reading the correspondence, especially with regard to the letters to which I have drawn attention, would conclude that the door was held open. The defendants appeared to be speaking with two voices, and where a defendant does that, then, in my view, it is entirely reasonable for a person to conclude – and indeed it is consistent with the policy of the defendants – that they prefer to avoid proceedings and to settle the matter amicably if they could do so. That, in my view, would discourage any reasonable person from issuing proceedings because they would rely on that course of conduct being pursued by the defendant.

It was, in my view, an entirely reasonable course for them to take, and one consistent with the policy expressed by Mr Keen, of willingness to assist their customer. I do not think that they can now turn round and say, as was said in evidence: “Oh, but we are not a charity, we are entitled to insist on our strict legal rights”. My view is that they had forborne to do that and led Mr Seechurn into thinking that they would, as I have said, continue to negotiate with him; and, in those circumstances, I think they are not entitled to rely on Section 5 of the Limitation Act.”

The submissions to us.

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.

The Law.

“... it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results – certain penalties or legal forfeiture – afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which are thus taking place between the parties.”

“Even if one assumes that a man who makes a representation of fact which he reasonably interprets in one way but which the representee reasonably interprets in another may in some circumstances be bound by the interpretation placed on it by the representee, it surely cannot be that a man who in response to a request for an indulgence which he reasonably interprets in one way makes an unenforceable promise as to his future conduct which the other party reasonably interprets in a sense different from that intended can be in a worse position than if the request for an indulgence had been an offer to contract and the granting of the indulgence an acceptance of the offer.”

“It is well settled that that principle [of equitable estoppel] requires that one person should have made an unequivocal representation that he does not intend to enforce his strict legal rights against the other; yet it is difficult to imagine how silence and inaction can be anything but equivocal.

...

But silence and inaction are of their nature equivocal, for the simple reason that there can be more than one reason why the person concerned has been silent or inactive.”

“A shared assumption is not, on the authorities, sufficient to establish an estoppel unless it is communicated. It follows that if, in this case, there was no shared assumption to the effect that A.R.C. had a valid claim that was not time-barred, there could be no communication by H.L.B. that they were making any such assumption. It also follows from what we have said above that the communication required would, in any event, be not simply that A.R.C. had a valid claim, but also that H.L.B. would not take any defence that might be open to them on the basis of a statutory limitation period.”

“... A.R.C. would have to satisfy the court that there was some clear and equivocal representation by H.L.B. to A.R.C. that its claim was a valid claim, and, in addition, that H.L.B. would not rely upon any statutory limitation defence.”

The questions which arise in this appeal.

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.

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

“In the meantime we would state that any action commenced by your client will be vigorously defended and we reserve the right to exhibit our client’s letter to you of 26^th June 1991 to the court when the question of costs is discussed.”

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.

“As we have discussed with you on the telephone our client is prepared to reconsider the level of your client’s disability on the basis that he consents to undergo further medical examination and be referred to a pain control and rehabilitation clinic.”

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.

“I cannot state that he does not have pain, but I do consider that the degree of pain is exaggerated, particularly as his behaviour when excited contrasts markedly with his apparent freedom from pain when he is dressing and undressing and even when he is walking. As far as his apparent weakness and sensory loss of the arm and leg are concerned I believe this is spurious.

With regard to his incontinence of urine ... I suspect that the wetness of his underpants came from the tap and not from his bladder. I would agree therefore that the estimation of a level of permanent disability for Mr Seechurn at 10% is reasonable and that a level of compensation of £20,000 is in the circumstances generous.”

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:-

“I consider that these opinions quoted from above, reinforce the conclusions which I stated in my report of 27^th November and I do not wish to alter or amend those conclusions.”

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

“We are having up-to-date medical reports prepared for the purposes of preparation of our papers to issue proceedings against your client.”

“As you know, I am prepared to fight my case tooth and nail. I gather from your solicitor that you too is [sic] prepared to defend it vigorously. You may be aware that litigation in the High Court is a very costly business. However I am covered by legal insurance. The question of cost is not going to hinder me from seeking redress.”

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

“In order to give your client the benefit of the doubt our client is prepared to go to the expense of carrying out further medical examination. To this effect therefore we would request that your client be examined by an orthopaedic consultant and also undergo examination with a Dynatron 2000 machine which will be able to confirm the level of his disability.”

“On the basis of those reports your client was paid £20,000 which we considered to be a satisfactory settlement under the terms of his policy with our client. However, if it is your case that Mr Seechurn’s physical disabilities will continue then before our clients are prepared to make any further payment they wish him to undergo the medical examination referred to in our letter of 13^th April. Our client is not attempting to avoid their obligations under the policy but merely wish to determine that the amount they are required to pay is in accordance with the policy and is reasonable. As you will appreciate should Mr Seechurn decide to litigate then he will have to undergo further medical examinations in any event and if he does commence legal proceedings prematurely then we reserve the right to bring the contents of this letter to the attention of the court.”

“If your client wishes to progress this matter then we would suggest he adheres to our request as contained within the third paragraph of our letter of 13^th April to you. We believe that the outcome of those tests will decide, once and for all, whether your client has a valid claim under the policy and if he has, then it will be dealt with promptly. If your client then disagrees with those results he can either proceed with his application to the Insurance Ombudsman Bureau or alternatively commence legal proceedings. We trust you will be good enough to speak to your client to resolve the position and let us know which way he wishes to proceed.”

“In view of ... (your) obdurate attitude and unfair comment (re: my condition) I would rather refer the whole issue to a real independent and unbiased authority namely the Insurance Ombudsman ...”

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:-

“I therefore refuse to be seen by any doctor recommended by you and undergo further medical tests etc., unless the reasons are given why my doctor’s reports are being ignored. ... In these circumstances I feel more happy to leave it to the Insurance Ombudsman to decide ... I can always take legal action if ever I am not satisfied with the Ombudsman’s decision.”

“Because of the contradictions in the various reports we do not believe that, without being subject to a further medical examination, that either the Insurance Ombudsman or any other party will be able to rule in respect of your claim. Finally, if proceedings should be issued we would advise you that there is a wealth of case law which would entitle our clients to apply for a stay (of) proceedings if you refused to undergo a further medical examination. ...

We would reiterate that neither we nor our clients wish to be difficult nor do we intend to cast any dispersions [sic] upon your own medical evidence save that we will say that the evidence is inconsistent and in part contradictory. If you submit to the further medical examinations that we have requested then we believe that it may well be possible for this matter to be concluded amicably once the results are known.”

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

The correspondence after the expiry of the period of limitation.

“I make it categorically clear to you that I am not prepared to undergo any further medical examination or be tested by the Dynatron 2000 machine.”

“In accordance with the Insurance Ombudsman’s request and on behalf of the Chief Executive ... we are therefore formally notifying you that we do not feel that we can consider your claim further without the benefit of a further medical examination. We would, however, like to make it quite clear that we are not refusing to investigate your claim further to see whether additional benefit might become payable to you as a consequence of that examination. What we cannot do is, however, consider your claim further without the benefit of that examination and since you are refusing point blank to have this examination this has to be a matter for you.”

“I am sure if I start litigation the court will take a different view from you. The court will permit me to seek to enforce the contract ...”

The response of 20^th December 1995 was:-

“We have already made it perfectly clear that we are not prepared to proceed further with your claim unless our solicitors can arrange for you to be medically examined again.”

“(i) Whilst we note that you have stated that you wish the matter to go to court we must advise you, and we would suggest you obtain your own legal advice on this point, that if legal proceedings are issued that you would in any event have to undergo further medical examinations by our client’s own consultant. Any refusal by you to do so could result in our clients applying for a stay of the proceedings until such time as those examinations have been concluded. In the circumstances, we would ask that you reconsider your stance on undergoing further medical examinations as any failure by you to do so by you will result in our clients having no alternative but to refuse to consider your claim any further.”

“There then appears to have been a letter, dated either 1^st June or 18^th June, typed on Mr Seechurn’s behalf by his nephew, with reference to the letter of 21^st April. Unfortunately, that letter was not received by Davies-Lavery until a copy of it was sent considerably later.”

In it he states that:-

“I have never refused to be medically examined but what concerns me this time is the introduction of what seems to be a mechanical examination. I have made enquiries on the Dynatron 2000 machine ... I will not take any risk in subjecting myself to a test of which I have not been provided the necessary details and safeguards. ... I must emphasise here that I am determined to have this matter referred to court and I shall be seeking the appropriate advice in this connection.”

“However, having reviewed the file of papers, it would appear that the incident giving rise to your injury occurred on 16^th September 1988, approximately 10 years ago. Your claim against Cigna would be under the contract of insurance. There is a 6 year limitation period in which to bring actions for breach of contract and it would appear to me that this period has expired and Cigna have no further liability to you.”

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

“I have been led to believe that we are still in negotiations. I wrote to you on 18^th June 1997 in response to your letter of 1^st April 1997. (Copy enclosed). You deliberately did not reply to my letter. You had a sinister motive. You were playing for time.”

“I cannot see how you have been led to believe we are still in negotiations. I have noted the copy of my letter of 21^st April 1997 ... However, at the time of writing that letter I had not considered the limitation period.”

There the relevant correspondence ends.

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.

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:-

a) If the claimant submitted to the further medical examinations requested, it might “well be possible for this matter to be concluded amicably once the results [were] known”.

b) If proceedings were brought without further medical examination, the defendants would refer the correspondence to the court and seek a stay of the proceedings pending such a further examination.

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

“I realised the limitation period had already come into force. I advised Mr Seechurn immediately I became aware of it.”

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.

Detriment.

The period after the claim had become statute-barred.

The requisite promise.

Detriment.

Conclusions.

Lord Justice Thorpe:

Lord Justice Keene: