BTO Insight

Insurers’
Representation Unit
Newsletter
October 2007
BTO Insight
Welcome to the latest
edition of BTO Insight.
Contact:
Carly Forrest
cfo@bto.co.uk
Editor
Issue 12
Material Breach of
Contract - or something less?
“Neigh” Liability
Let’s Have a Heated
Debate!
A Bullish Approach - Part II
Twenty’s Plenty?
Disclosure of Genetic
Information
Brechin Tindal Oatts
48 St. Vincent Street
Glasgow G2 5HS
T: 0141 221 8012
F: 0141 204 0135
45/51 Hanover Street
Edinburgh EH2 2PJ
T: 0131 220 2777
F: 0131 220 0010
E: lawyers@bto.co.uk
www.bto.co.uk
Material Breach of Contract -
or something less?
The case of Magnet Ltd v Cape (2007 GWD
25-427) provides an interesting discussion on
the various possible outcomes in a case of
material breach of contract. Alistair Murdoch,
one of our Solicitor Advocates, appeared on
behalf of the Pursuers.
The case was one in which a kitchen supplier
sought payment for the supply and fitting of a
kitchen to a customer. It was accepted that there
were numerous, though minor, defects in the
installation, but the suppliers were willing and
able to rectify these defects. Expert reports for
both parties confirmed remedial works were
both feasible and likely to resolve all the
problems.
The Defender however was not prepared to
allow the Pursuers to carry out the remedial
works and insisted that the kitchen should
simply be removed and that he should pay
nothing. His contention was that the Pursuers
were not simply in breach of contract, but rather
in material breach of contract and in those
circumstances the Pursuers were not entitled to
insist on any performance (i.e. payment) from
him.
Although rejecting the Pursuers’ primary
submission i.e. that the defects were not
material, the Sheriff nevertheless found
substantially in their favour, awarding them
£13,000 of the £14,000 sued for, by virtue of his
analysis of the law on material breach of
contract.
The Sheriff felt that the number of defects,
combined with the disruption and time required
to put them right, meant that the Pursuers were
indeed in material breach of contract. However,
that did not entitle the Defender simply to walk
away paying nothing at all as was claimed. The
Sheriff held there were also obligations on the
Defender if he truly intended to rescind the
contract in light of the Pursuers’ material breach.
In particular, the Sheriff held that the Defender
was under an obligation to allow the Pursuers
an opportunity to remedy their breach if the
circumstances allowed for that. In some cases a
material breach might be irretrievable; in other
cases it might be curable. The present case
undoubtedly fell into the latter category.
However, the Defender failed to allow an
opportunity for remedial works to proceed. He
refused initially to speak to the Pursuers.
Eventually, he did meet one of their managers
when the remedial works were identified and it
was agreed the works would be carried out in
exchange for a payment to account. The
Defender’s cheque then bounced and, the
Defender reverted to insisting that the kitchen
be removed. In his evidence he accepted that
the kitchen was usable and indeed had been in
constant use for a period of 15 months.
In the circumstances, the Sheriff held that the
Defender had not performed the obligations
incumbent on him if he wished to pursue the line
he did at Proof. He had not at any time given the
Pursuers their opportunity to put matters right,
with the result that his entitlement to rescind
never arose. Accordingly, he had no right to
rescind and the Pursuers were entitled to rely on
the contract.
The Sheriff went on to decide “as a matter of
fairness” (an interesting basis for this aspect of
his decision!) that the anticipated cost of the
remedial works should be deducted from the full
price. Evidence as to that cost was contained
within the expert reports. Accordingly, the Sheriff
allowed that deduction from the price even
although the Defender had no pleadings or
counterclaim to that effect. The Defender’s
position had been that the contract was “all or
nothing” but the Sheriff exercised his inherent
power to award a lesser sum than that sued for.
This case illustrates that there can be varying
degrees of breach of contract, and indeed
different varieties or varying degrees of material
breach. As so often is the case, each action
must be looked at on its own merits. It is worth
bearing in mind that in cases of material breach
of contract, there may not be an automatic right
to rescind the contract, but the circumstances
may dictate that an opportunity to remedy is
afforded.
The result, although it might have been
unexpected in strict terms of the pleadings in the
case, is also a useful illustration of the flexibility
that courts can exercise in arriving at a “fair”
decision!
www.bto.co.uk

“Neigh” Liability
2. If a more capable horse of “Suchard’s” type was placed with
an inexperienced rider, an accident of the type which
occurred was foreseeable.
The riding school denied this and moved the Court to absolve
them of any responsibility. The riding school said that the Court
had to consider whether Mrs McGregor could prove that
“Suchard” should not have been selected for her on that
particular day.
The case of Anne McGregor v LMRS Farm Limited [2007]
CSOH153, called in the Outer House of the Court of Session
recently before Lady Dorrian.
The Pursuer raised an action against a riding school after she
was thrown from a horse during a lesson. She argued that the
riding school were in breach of their duty to take reasonable
care for her safety. This was repudiated by the riding school
and the matter proceeded to Proof. Damages were agreed at
£30,000 and therefore the Proof proceeded on liability alone.
On the day Mrs McGregor was injured she was having her
tenth riding lesson. The first three/four lessons were in basic
beginners and the next five lessons were at a standard level
for beginners (level 2) where the riders learned to trot and
canter. Mrs McGregor had previously been riding a horse
called “Third Time”. On the day of the accident she had moved
up to level 3. The riding school made this decision. Her horse
“Third Time” had gone lame and a different horse “Suchard”
was provided to her. To highlight the difference between each
horse, Mrs McGregor described “Third Time” as being a
reliable Volvo, with “Suchard” being a Ferrari!
The basis of Mrs McGregor’s case was that she should not
have been on that horse in that class on that date. Her
position was that:
1. The horse was accustomed to more advanced riders and
not to inexperienced riders who might give incomplete or
confusing signals to the horse; and
Lady Dorrian was satisfied that the riding school, when making
their decision to use “Suchard”, were aware of the need not to
put a horse that was “too sharp” with a less experienced rider.
Lady Dorrian did not accept that it was negligent to place the
horse with a rider at a lower level just because that horse was
more accustomed to riding at a more advanced level. Mrs
McGregor did not establish that there was such a thing as a
level 2 or level 3 horse. Lady Dorrian accepted that the horse
was well known to the riding school and that it was upon their
assessment of the horse’s temperament and character that
they had based their decision. She accepted that the riding
school had taken the “nature of the horse” into account. The
expert called as a witness for Mrs McGregor said that when
deciding with which horse to place a rider she would have
taken into account factors such as:
1. How the horse had behaved in more advanced lessons;
2. The horse’s sensitivity; and
3. The horse’s degree of obedience.
Lady Dorrian accepted all of these factors had been taken into
account by the riding school. She accepted that Mrs
McGregor had been good for her standard of riding and had
appeared relatively confident at the time. She also accepted
that Mrs McGregor had indicated a willingness to canter on the
horse on that particular day.
It was fortunate that the riding school were able to convince
Lady Dorrian that they knew their horse’s temperament well,
and had taken this into account when making the decision to
place the horse with a rider. On this basis, no damages were
awarded to Mrs McGregor. Lady Dorrian concluded that the
decision to place her on “Suchard” was a reasonable one and
that the riding school were not liable.
.........................................................................................................................................................
Let’s have a heated debate!
The importance of taking some cases to Debate cannot be
underestimated.
In Chinn v Cyclacel in the Court of Session, Lord McEwan
refused Jury Trial and dismissed an action where the Pursuer
was claiming Work Related Upper Limb Disorder, agreeing that
the Pursuer’s pleadings were “misconceived and totally
confused”. In particular, the Pursuer had failed to properly
specify “any recognisable injury” describing her condition in
three alternatives. The decision can be seen at
http://www.scotcourts.gov.uk/opinions/2007csoh142.html. The
Pursuer has reclaimed.
For further information, contact Stephen Bryceland
sbr@bto.co.uk

A Bullish Approach: Part II
In the July edition of Insight, we reported on the case of
Michael Davidson v John McIrvine, Aberdeen Sheriff
Court, 19 February 2007, in which the Pursuer failed in his
action against the owner of a bull which had escaped onto the
road. The Pursuer collided with the bull and sustained injuries
as a result. The Defenders were held to be not at fault.
However, the Pursuer appealed against the Sheriff’s decision.
The Pursuer submitted that three new findings in fact should
be added to those made by the Sheriff: a) the Defenders were
aware that bulls could jump over fences of up to eight feet,
which was twice the height of the fences in operation, b) the
Defenders were aware that bulls and other animals often
escaped to the road by running through the Defender’s farm
and the Defender himself was often required to put them back
into the field and c) bulls kept out on their own such as this
often escaped to seek out cattle.
The Sheriff Principal upheld the Sheriff’s decision and refused
the appeal. He held firstly that it would not be right to add the
proposed finding in fact a) without adding a qualification that it
would be virtually impossible for a bull to jump over a fence of
up to eight feet in height. He felt the proposed finding in fact
b) was misleading because it was clear from the evidence that
.........................................................................................................................................................
Twenty’s Plenty?
the Pursuer was referring to other people’s bulls and also the
route taken by these bulls was not stated. In relation to c) it
was an overstatement to say that bulls kept on their own would
“often escape and seek out nearby cattle”.
The Sheriff Principal went on to say that even if the additional
findings in fact had been accepted, a further finding in fact that
it was reasonably foreseeable that if the bull escaped from the
barn it would end up on the road, would not have been added.
The appeal was therefore refused.
This decision reaffirms the views set out in our July edition that
for a Pursuer to succeed with this type of claim at Common
Law, he must be able to establish three key points:
• Did the Defender owe the Pursuer a duty of care?
• Was this duty breached?
• Was the accident a reasonably foreseeable consequence
of that breach?
As demonstrated by this case, if the Pursuer is unable to
satisfy the Court on these key points, his claim is unlikely to
succeed.
In the case of Morag Lawson v the Broomfield Holiday
Park, Dingwall Sheriff Court, 13 July 2007, the Pursuer raised
an action for damages in respect of injury she sustained when
she tripped over a speed bump on the roadway leading to the
holiday park. The accident occurred at night and there was no
pavement she could have walked on.
The Pursuer’s case was based on Common Law and the
Occupiers’ Liability (Scotland) Act 1960. She claimed the
Defenders had failed to demonstrate reasonable care for her
safety as the speed bump represented a hazard which
presented a reasonably foreseeable risk of injury to
pedestrians. She also claimed the lighting was inadequate and
insufficient for pedestrians to see where they were walking,
and that there was insufficient warning of the hazard itself.
Although the word ‘slow’ was painted on the hump, this was on
the side which was facing away from her. In any event, she
claimed the lettering was worn, barely visible and not visible at
all in low lighting.
The Sheriff found that liability had been established against the
Defender. He preferred the Pursuer’s evidence on almost
every issue. However, this was due in no small part to
credibility issues in relation to the Defenders’ main witness, the
tenant and operator of the holiday park. He gave evidence that
photographs he had taken after repainting the ‘slow’ sign some
weeks after the accident showed the hump in the same
condition as it had been at the time of the accident. The Sheriff
had no hesitation in finding that this witness had deliberately
misled the Court and this had a grave effect on the amount of
credit which could be placed on his evidence regarding other
issues such as the adequacy of the lighting.
The Court did, however, make a finding of 20% contributory
negligence. In coming to this view, the Court had regard to
three significant factors:
• The Pursuer was aware of two speed bumps on the
roadway as she had passed over them earlier when she
and her husband drove into the site;
• Although her route was initially illuminated by light from the
reception building she ought to have taken more care for
her safety in the knowledge that there were speed bumps
there;
• It would have been reasonable in the circumstances for her
to have carried a torch or even returned to her camper van
to collect a torch.
The Pursuer submitted there should be no finding of
contributory negligence as she was not well acquainted with
the site, she had not previously passed over the bump on foot
and could not reasonably have been expected to remember it,
or its location, simply through passing over it as a passenger
in a camper van.
Although the finding of contributory negligence may have
provided some small consolation to the Defenders, this case
serves as a warning to consider fully the credibility and
reliability of important witnesses before making the decision to
proceed to Proof.
It was held that the lighting was inadequate and that there
were a number of reasonable precautions which the Defender
could have taken, such as illuminating the speed bump,
erecting warning signs or painting the bump in bright colours to
alert pedestrians to its presence.

Disclosure of Genetic Information
The potential use of genetic information in
assessing risk and the level of premiums
remains an unresolved issue for the
insurance industry. Here we identify some
key arguments and the approaches taken
in various jurisdictions.
Taking a strictly legal view, an insurance
contract is a contract uberrima fides, i.e. in
the utmost good faith, which means that
any information having a bearing on the
assessment of risk must be disclosed to
the insurer. That obligation however is
often restricted to specific disclosures in the proposal.
Currently in the UK, there is a moratorium until 2011 on the
right of insurers to require disclosure of genetic test results.
One exception to this is the genetic condition Huntington’s
Disease, where insurers can require that the results of genetic
testing be disclosed to them.
Why permit disclosure of genetic information?
If it is accepted that insurers can legitimately seek and obtain
other kinds of health information that predicts insurance risk,
then why should they not seek genetic information that is
predictive in the same way?
If insurers were denied access to any kind of health
information, the industry would only be able to differentiate
premiums according to very general risk markers such as
age, sex, place of residence, occupation, etc. If, however,
insurers are permitted to obtain certain kinds of health
information such as body mass index, cholesterol
concentration, results of a physical examination etc. are there
still any principled reasons for excluding genetic information?.
Genetic information is not special. It is not inherently more
specific, predictive, sensitive, or private than other kinds of
health information.
Presently, insurers can require disclosure of family history. In
reality, such disclosure can amount to genetic information.
Clearly, for some diseases, such as Huntington’s Disease,
premiums are already raised if there is a family history, in
much the same way as it is feared they would be if there was
a positive genetic test.
There is an argument that better knowledge of genetic
susceptibility might actually lead to individuals obtaining
insurance where previously they had been unable to, for
example, where there is a family history of a disease but the
individual is proven not to be at risk.
There may be difficulties in defining what counts as genetic
information. Genetic information can be obtained without
invasive testing. Is taking a family history thus a basic form of
genetic test? The most common genetic test is probably
routine blood typing in hospitals but does that mean that
knowledge of an individual’s blood type is one of the pieces of
knowledge that an insurer may not seek?
It is thought that the requirement of disclosure may deter
people from having genetic tests that are relevant to their
health care. This may well be true, but the same is true for
other health information - similar arguments were made about
HIV testing.
Finally, experts have argued that allowing insurers to use
genetic information is dangerous because a positive test for a
“disease” gene does not mean illness is certain. Uncertainty
exists as to how the industry might use the many genetic
“markers” for common serious diseases such as cancer and
heart disease.
Current position in other countries
Similarly, other countries are considering the impact of
genetic testing on insurance. In the USA, the Senate has
passed the Genetic Information Non-discrimination Act of
2005, which is currently making its way through the legislative
process. This would prohibit discrimination on the basis of
genetic information with regards to insurance and
employment.
In Australia, the Human Genetics Commission of Australia
was set up in 2003 to advise the government, insurers and
the public on matters relating to genetics, including the use of
tests for insurance purposes. Currently, no tests may be taken
for insurance, although current results are used, with written
consent.
Meanwhile, our neighbours in Europe for example, Belgium,
Austria, Denmark, Estonia, France, Luxembourg and Norway
have very strict legislation surrounding genetic information.
Insurers are prohibited from asking questions about previous
genetic testing and they cannot impose a genetic test on an
individual.
In Sweden and the Netherlands, however, a compromise
situation exists in that the use of genetic information is
prohibited only if the sum insured does not exceed £100,000.
The results of the moratorium will be published in 2011. Given
the advances in medical science, it may be only a matter of
time before genetic information will be used to some extent in
determining insurance premiums.
Why preclude disclosure of genetic information?
There is a political argument that unfair discrimination could
arise from false beliefs about genetic information.
Use of complete information (including genetic information) in
underwriting could lead to a situation that is actuarially fair but
socially unfair. Actuaries are, reasonably enough, concerned
that if they are barred from using genetic test information they
will price risks incorrectly. The result could be that the
premiums collected would not cover the payments made and,
in particular, that people would have an incentive to buy
policies to cover risks known to them but unknown to the
insurer.
For more information on:
Breach of Contract: Alistair Murdoch ajm@bto.co.uk
Personal Injury: Louise Hay lmh@bto.co.uk
Occupiers’ Liability: sbr@bto.co.uk
Genetics: Douglas Jessiman dwj@bto.co.uk
Policy Issues: Bill Speirs wscs@bto.co.uk
New Insurance Seminar Programme
commences on Thursday 25 October 2007.
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The information in this newsletter is not intended to be relied upon as a definitive statement of the law.