Assiscurazioni Generali SpA v Arab Insurance Group

JurisdictionEngland & Wales
JudgeLord Justice Clarke,Sir Christopher Staughton,Lord Justice Ward
Judgment Date13 November 2002
Neutral Citation[2002] EWCA Civ 1642
Docket NumberCase No: A3/2001/2450
CourtCourt of Appeal (Civil Division)
Assicurazioni Generali Spa
Arab Insurance Group (B.S.C.)

Lord Justice Ward

Lord Justice Clarke and

Sir Christopher Staughton

Case No: A3/2001/2450





The Hon Mr Justice Morison

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Julian Flaux QC and Mr Simon Picken (instructed by Holman, Fenwick and Willan) for the Appellant

Mr Stewart Boyd QC and Mr Richard Millett (instructed by LeBoeuf, Lamb, Greene and MacRae) for the Respondent

Lord Justice Clarke



This is an appeal by the defendant retrocessionaires ("ARIG") from a judgment or order of Morison J, which was finally made on 9 November 2001, in which he gave judgment for reinsurers ("Generali") for US$8,751,000 plus interest of US$1,450,000 after the trial of an action in which he held ARIG liable under the terms of two quota share retrocession contracts ("the contracts"). He also ordered ARIG to pay Generali's costs, part on the standard and part on the indemnity basis, and refused permission to appeal. Tuckey LJ subsequently granted permission to appeal on the merits, but refused permission to appeal on indemnity costs.



Generali is and was an Italian insurer and reinsurer with a branch office in London. ARIG is and was an insurer and reinsurer based in Bahrain with an established place of business in London. The judge held that the contract between the parties was made on 9 September 1992. It related to the year from 2 July 1992 to 2 July 1993, but in March or April 1993 was extended for two months until 2 September 1993.


The background to the contract was as follows. In about 1989 Alexander Howden and others developed packages of insurance risks, which essentially concerned builders' risks in relation to small to medium sized construction projects in the USA, notably in California. Initially Generali acted as direct insurer of the contractors' risks. It was, however, decided that it was desirable, if not essential, to insert a US based insurance company between the insured and Generali. As a result, an insurance company called United National Insurance Group of Pennsylvania ("United") entered into the direct insurance contracts with the insured as a front for Generali. United thus reinsured the risks with Generali, but subject to such reinsurance, or strictly retrocession, as it sold on the market. In the event Generali retained part of the risk but retroceded part of the risk to others, including ARIG which took 7.5 per cent.


As effectively the direct insurer or lead reinsurer, Generali had to have a system for investigating and evaluating the claims which it received from the insured contractors. To that end it had previously entered into a contract dated 1 July 1991 with Gay & Taylor Inc ("G&T"), which was a company of loss adjusters, to evaluate and process the claims. That contract was still in force at the relevant time. It included an obligation upon G&T to establish a claim file and "to investigate all claims and to recommend the amount of loss Reserve to be established with respect to such claim".


Generali paid claims under the insurances and made claims against ARIG under the contract. ARIG continued to accept premium and to pay claims until 7 February 1999 but thereafter refused to pay any more claims. As a result Generali commenced this action against ARIG, which relied upon a number of defences. All the defences failed at the trial. By way of appeal ARIG raises some of those defences again.

Approach of the Court of Appeal


CPR rule 52.11 provides, so far as relevant, as follows:

"(1) Every appeal will be limited to a review of the decision of the lower court unless –

(a) a practice direction makes different provision for a particular category of appeal; or

(b) the court considers that in the circumstances of an individual appeal it would be in the interests of justice to hold a re-hearing.

(3) The appeal court will allow an appeal where the decision of the lower court was

(a) wrong; …

(4) The appeal court may draw any inference of fact which it considers justified on the evidence."


Mr Boyd correctly observed that ARIG has not suggested that this appeal should be by way of rehearing and not by way of review. He further drew attention to the contrast between CPR rule 52.11(1) and RSC Order 59 rule 3, which it replaced and which provided that "an appeal to the Court of Appeal shall be by way of rehearing". Mr Boyd submitted that it follows both from the contrast between "review" and "re-hearing" within CPR rule 52.11(1) itself and between "review" in CPR rule 52.11(1) and "rehearing" in RSC Order 59 rule 3 that the approach of the Court of Appeal when conducting a review must be different from its approach when conducting a rehearing, either under CPR rule 52.11(1)(b) or under RSC Order 59 rule 3.


There is plainly force in that submission, although the position is complicated by the fact that "rehearing" does not always have the same meaning. Thus, under the RSC, an appeal to the judge from a master under RSC Order 58 rule 1 proceeded by way of rehearing, but it was a rehearing of a different kind from that conducted by the Court of Appeal under RSC Order 59 rule 3. This can be seen from Tanfern Ltd v Cameron-MacDonald [2000] 1 WLR 1311 per Brooke LJ, giving the judgment of the court, at paragraph 30.


That was a case in which the court gave guidance in relation to a number of aspects of appeals conducted under the CPR. However, as I read it, neither the guidance nor the case was concerned with appeals on the merits after a trial. Brooke LJ said this:

"The appellate approach: the general rule

30. As a general rule, every appeal will be limited to a review of the decision of the lower court. This general rule will be applied unless a practice direction makes different provision for a particular category of appeal, or the court considers that in the circumstance of an individual appeal it would be in the interests of justice to hold a rehearing: CPR r 52.11(1). The appeal court will only allow an appeal where the decision of the lower court was wrong, or where it was unjust because of a serious procedural or other irregularity in the proceedings in the lower court: CPR r 52.11(3).

31. This marks a significant change in practice, in relation to what used to be called "interlocutory appeals" from district judges or masters. Under the old practice, the appeal to a judge was a rehearing in the fullest sense of the word, and the judge exercised his/her discretion afresh, while giving appropriate weight to the way the lower court had exercised its discretion in the matter. Under the new practice, the decision of the lower court will attract much greater significance. The appeal court's duty is now limited to a review of that decision, and it may only interfere in the quite limited circumstances set out in CPR r 52.11(3).

32. The first ground for interference speaks for itself. The epithet "wrong" is to be applied to the substance of the decision made by the lower court. If the appeal is against the exercise of a discretion by the lower court, the decision of the House of Lords in G v G (Minors: Custody Appeal) [1985] 1 WLR 647 warrants attention. In that case Lord Fraser of Tullybelton said, at p 652:

"Certainly it would not be useful to inquire whether different shades of meaning are intended to be conveyed by words such as 'blatant error' used by the President in the present case, and words such as 'clearly wrong', 'plainly wrong', or simply 'wrong' used by other judges in other cases. All these various expressions were used in order to emphasise the point that the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible".


Mr Boyd submitted that the same approach should be adopted to an appeal of this kind. However, for my part I would not accept that submission. As Brooke LJ makes clear, Lord Fraser was considering the correct approach where the appeal is against the exercise of a discretion by the lower court. An appeal of the kind with which we are concerned challenges the judge's conclusions of fact, not the exercise of a discretion.


Brooke LJ was not considering an appeal of this kind beyond observing that it is by way of review under CPR rule 52.11(1) and that the question is whether the judge was wrong under rule 52.11(3). An appeal to the Court of Appeal under RSC Order 59 rule 3, although expressed to be by way of rehearing, was not a "rehearing in the fullest sense of the word" because (for example) the Court of Appeal never exercised its discretion afresh unless and until it had held the judge to have exercised his discretion wrongly. Moreover it did not hear the oral evidence again. In these circumstances it seems to me that, although expressed to be by way of rehearing, it was very much an appeal by way of review of the decision of the trial judge.


Thus, for example, in cases in which the court was asked to reverse a judge's findings of fact which depended upon his view of the credibility of the witnesses, it would only do so if satisfied that the judge was plainly wrong. This can be seen from many cases, as for example The Ikarian Reefer [1995] Lloyd's Rep 455, where the court reversed the decision of the trial judge that the...

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