Court grants leave to defend insurance claim where insurer undertook defense but dispute remains triable.

[*255] 1981 Febr. 17

(G. NICOLAOU, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Andreas Charalambous,

Plaintiff,

v.

Norwich Union Fire Ins. Soc. Ltd., through their representatives P.M. Tseriotis Ltd., (Agents),

Defendants.

(Action No. 3516/78).

Civil Procedure - Summary judgment - Order 18 of the Civil Procedure Rules - Principles applicable - Claim against insurers for indemnity under policy of insurance - Insurers alleging that plaintiff in breach of essential conditions of policy - Whether undertaking of defence of proceedings, against assured, by insurers precludes them from disputing their liability to the assured - Defendants have raised a triable issue entitling them to leave to defend.

Civil Procedure - Appeal - Does not operate as a stay of execution - Rule 18 of Order 35 of the Civil Procedure Rules.

Insurance - Motor Insurance - Proceedings against assured - whether undertaking of defence of, by insurers precludes them from disputing their liability to the assured.

I. Avraamides, for the Plaintiff,

E. Vrachimi (Mrs.) for L. Papaphilippou, for the Defendants.

RULING

The following ruling was delivered by:-

G. NICOLAOU, D.J.: By his specially [*256] endorsed writ of summons filed on 14th September, 1978, the plaintiff in the present action claims the sum of £978.250 mils together with legal interest thereon as from 29.5.78 this being the amount of the judgment with costs awarded against the present plaintiff who was defendant in Action No. 1211 /77 of the District Court Nicosia, which had been brought to recover damages resulting from a motor accident. The plaintiff’s claim is based on a policy of insurance under which the defendants as insurers undertook to indemnify the plaintiff against certain risks including that’ in respect of which there arose the said Judgment in Action No. 1211/77.

The defendants entered an appearance on 10.10.78 but failed to file a defence with the time specified by the Civil Procedure Rules. on 4.11.78 the plaintiff filed an application for judgment in default of defence which, however, was withdrawn on 15.12.78 in view, apparently, of an application filed by the defendants on 28.11.78 by which they sought a stay of the proceedings on the ground, shortly, that the dispute to which the present action related was one covered by an arbitration clause contained in the said policy of insurance. On 1.2.79 the plaintiff filed an opposition to that application which was, after a number of adjournments for mention granted at the instance of the parties, finally heard on 6.7.79 and dismissed by the Court in a considered ruling given on 24.10.79. [*257]

On 3.11.79 the plaintiff filed the present application for summary judgment .under 0.18 r.1 (a) possibly adopting this course in view of the tenor of the said ruling of the Court in the defendants’ application for a stay of proceedings.

The present application to which an opposition was filed on 10.11.79 came before the Court on 16.11.79 when it was set down for hearing on 1.3.80. Apparently, however, the parties preferred to seek a settlement but after repeated adjournments granted at their instance the application was on 25.9.80 again fixed for hearing and was tried on 25.10.80. It should be noted here that, in the meantime, on 15.3.80 the plaintiff filed a supplementary affidavit in which there were referred as exhibits, photocopies of the said policy of insurance (marked “A”) and the said judgment in Action No. 1211/77 (marked “B”).

At the trial of this application the parties offered argument, for their contentions each relying on their affidavits filed in support without either seeking to cross-examine the deponent of the other’s affidavit or affidavits.

The main grounds of opposition are shortly:-

(a) that pending the determination of an appeal of the defendants against the dismissal of the defendants’ application for a stay of the proceedings, no fresh step should be taken in the action; [*258]

(b) that the affidavit filed in support of the application is irregular in that it is not accompanied by the documents referred to therein contrary to 0.18 r.2;

(c) that the defendants, have a good defence;

(d) that the action is premature or that no cause of -action has been disclosed “in that the “plaintiff might be entitled to indemnity “ only if and when he paid the judgment given “ against him in Action No, 1211/77”.

It would be convenient to deal at this stage with the first argument of the defendants that this application should not proceed pending the determination of an appeal against the ruling of the Court dismissing the defendants application for a stay of the proceedings. The pendency of an appeal doe’s not of itself operate as a stay of proceedings and the Court has not been moved for for an order in this behalf under 0.35 r.18. I will not, therefore, entertain such an argument in the present application for summary judgment.

The procedure for summary judgment under 0.18 of the Civil Procedure Rules is modelled on the pre-1962 English

0.14 and decisions on this latter afford useful guidance. The power to give summary judgment under 0.18 is “intended only to apply to cases where there is no “reasonable doubt that a plaintiff is entitled to judgment [*259] “ and where, therefore, it is

inexpendient to allow a “ defendant to defend for mere purposes of delay”: Jones v. Stone (189U)A.C 122. It is an extraordinary procedure which bye-passes the

ordinary procedure for the trial of actions in a way which precludes a defendant from contesting the plaintiff’s claim further. Judgment under 0.18 should, therefore, only be given where there has been strict compliance with the formalities laid down therein and the Court is satisfied that there is no real possibility that the defendant may have a defence. Compliance with the procedural requirements’ of 0.18 is necessary in order to vest the Court with jurisdiction to give summary judgment and so unless the plaintiff first satisfies these procedural requirements the substantive question whether the defendant may or may not have a defence cannot arise.”

In the present instance the plaintiff has satisfied the procedural requirements. The argument of the defendants that the affidavit filed in support of the ‘ application is irregular in that it is not accompanied by the documents referred to therein has been effectively met by the filing of a supplementary affidavit accompanied by the said documents as exhibits referred to therein. In my view it is sufficient that such documents should be .before the Court as at the date of trial despite the decision in Begs v. Cooper 40 L.T. 29 which though relating to a similar provision turned on a different mode of proceeding under it. [*260]

The objection of the defendants that the action is premature or that the indorsed writ of summons does not disclose a cause of action in that, if .the plaintiff is entitled to be indemnified by the defendants in respect of the judgment given against him in Action No. 1211/77 he can make a claim against the defendants only after he has paid the judgment debt may, perhaps, go both to the substance and to the form for, in respect of this latter, the validity of the endorsement is a pre-requisite to obtaining summary judgment (See Gold Ores Reduction Co. v. Parr, Law Journal 1892, 522). This may, however, be disposed of very shortly by a mere reference to the terms of the said policy as they appear in section II thereof under which the liability of the defendants is to indemnify the Insured “against all sums including claimant’s costs and expenses which the Insured shall become legally liable to pay…..”. I, therefore, find no merit in this argument either.

The plaintiff having brought his case within 0.18 r.1, it remains to be considered whether the defendants have shown that they have a good defence to the action on the merits or whether they have disclosed such facts as may be deemed sufficient to entitle them to defend.

In paragraph 9 of the defendants’ affidavit it is alleged that the defendants have a good defence to the action, this being that (a) the plaintiff is not covered by the said policy of insurance; and (b) that even if the plaintiff is covered by the said policy, he was in breach of essential conditions thereof including breach [*261] of clause 4, in that he failed to report to the defendants that in consequence of the said accident a third person sustained injuries and/or in that he represented the accident as trivial or insignificant. These averments have not been challenged by cross-examination but at the end of the day it is, nonetheless, upon the defendants to satisfy the Court of the sufficiency of the material that they have furnished.

What the defendants need do in order

to obtain leave to defend is only to show that there is a triable issue; Jacobs v. Booth’s Distillery Co., 85 L.T. 262 (H.L.). It is not enough, however, merely to deny the

claim in a general way. The defendants’ affidavit must “condescend upon particulars” in order that the Court may ascertain whether there is a bona fide defence: Wallingford v. Mutual Society, (1880) A.C. 685 The Court should not, of course, endeavour to try the case upon affidavits though it must examine whether what is proposed to be set up as a defence has conceivably any prospect of success: see Saw v. Hakin, (1885)5 T.LR.72, and Krapp-Fisher v. Crisp, (1936) 3 All E.R. 560.

The first ground of defence proposed to be set up under (a) above, in so far as it is not a statement of the position consequent upon the second ground, must fail for lack of particularity as no facts are given from which to ascertain whether it is real. The second ground, which is substantial, must be examined in the light of the [*262] uncontradicted allegations contained in the affidavit filed in support of the application, that the plaintiff had reported the accident which was the subject matter of Action No. 1211/77 to the defendants and that “after consultation” with them and following their instructions an “advocate of their choice was retained to defend that case”, and that further, this advocate “was conducting the case “receiving instructions directly from the defendants”. Though the defendants do not directly answer these allegations of the plaintiff, it is implicit in their position as they state it, that their said conduct does not necessarily preclude them from setting up the proposed defence. On this I agree with the defendants. The statement in Halsbury’s Laws of England 3rd Edn. Vol. 22 para.

695 that “The insurers, by assuming or continuing the defence of “proceedings against the assured with full knowledge of “the circumstances may be precluded from disputing -their “liability to the assured” in support of which are cited the decisions in Etchells, Congdon and Muir Ltd. v. Eagle Star & British Dominions Insurance Co., (1 928) 72 Sol. Jo 242 and McCormick v. National Motor and Accident Insurance Union, (1934) 50 T.L R. 528, C.A. in my opinion correctly sets out the position on the matter. Such questions are factual and depend on all the facts and circumstances of each particular case. The proposition made in MacGillivray on “Insurance Law” 5th Edn. para. 2050 at p. 994 cited by learned counsel for the plaintiff that, “if an insurer “undertakes the defence of a claim he admits liability in [*263] “in respect of it and cannot afterwards say that the loss “was not one covered by the policy” on the authority of B. Roth Tool Co v. Amsterdam Casualty, (1908) 161 Fed. Rep.

709 the report of which has not been available to me, is, in my view, inaccurate and misleading, and does not represent the law on the matter.

I should add, that the submission of counsel for the plaintiff that the issues arising from the proposed defence of the defendants have already been disposed of by the ruling of the Court dismissing the application of the defendants for a stay of proceedings, is, in my view, misconceived and I cannot accept it, though it is, in the event, explained by the terms of that ruling. I must say, with great respect to the learned judge who made that ruling, and this is necessary for finally disposing of the present application, that in my humble opinion it was not open to the Court in the context of that application in which the said ruling was made, to make findings relating to a possible defence of the defendants.

On the material before me and in the light of all the above, I find that the defendants have raised a triable issue entitling them to leave to defend.

In the result, unconditional leave is granted to the defendants to defend the action.[*264]

On the question of costs, in all the circumstances of the case I make no order as to costs.

Unconditional leave to defend granted with no order as to costs.