Ashfaq v International Insurance Co of Hannover Plc
Citations:  EWCA Civ 357;  Lloyd’s Rep IR 228;  HLR 29;  CLY 1340.
The claimant let out a house to students. He applied to the defendant, an insurance company, for a policy for the house. His brokers completed a proposal form for the insurance, which included a declaration that the claimant had no criminal convictions nor any pending prosecutions. This declaration was stated to be the ‘basis’ of the contract. In fact, the claimant was subject to proceedings for assault and criminal damage. The insurance policy was issued.
A few months later, the house was damages by fire. The claimant made an insurance claim. The defendant made some payments, but refused the claim when it discovered that the claimant had been subject to criminal proceedings when they took out the policy. The claimant sued to enforce the contract, while the defendant counter-claimed for the payments which they had already made.
The defendant argued that the claimant’s false declaration entitled them to avoid the policy. The judge at first instance agreed, and granted summary judgment in the defendant’s favour. The claimant appealed. He argued that the ‘basis of contract’ provisions of the policy were unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
- Was the claimant a ‘consumer’ for the purposes of the regulations?
Regulation 3 defines a consumer as: ‘any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession’.
The Court of Appeal held in favour of the defendant. They explained that the claimant had no prospect of establishing that he was a consumer. This was because he was in the business of letting the property for rent, which was a purpose related to the trade, business or profession of letting property.
This Case is Authority For…
Where an individual is acting for more than one purpose, one of which is trade or business-related, they are not a consumer unless that purpose is negligible or insignificant.
The individual’s purpose is assessed objectively. Someone who is actually a consumer may deprive themselves of consumer protection if they give the other party the objective impression that they are acting for business purposes.