Deutsche Rückversicherung A.G. v Walbrook Insurance Company Ltd

JurisdictionEngland & Wales
Judgment Date21 April 1994
Date21 April 1994
CourtQueen's Bench Division
[QUEEN'S BENCH DIVISION] DEUTSCHE RUECKVERSICHERUNG A.G. v. WALBROOK INSURANCE CO. LTD. and Others GROUP JOSI RE (formerly GROUPE JOSI REASSURANCE S.A.) v. SAME 1994 March 15, 16, 17, 21, 22; April 21 Phillips J.

Practice - Affidavits - Interlocutory proceedings - Affidavit containing references to Department of Trade and Industry report as source of information and belief - Whether necessary for deponent to identify original source of evidence admissible at trial - Companies Act 1985 (c. 6), s. 432(2) - R.S.C., Ord. 41, r. 5(2) - Banking - Letter of credit - Injunction to restrain beneficiary - Plaintiffs opening letters of credit in favour of defendants - Plaintiffs alleging fraud by defendants - Whether interlocutory injunction restraining defendants drawing on letters of credit to be granted

The plaintiffs were respectively German and Belgian reinsurance companies which had procured the opening of letters of credit in favour of the defendant insurance companies. The plaintiffs sought declarations that their reinsurance contracts with the defendants were void. The actions were originally pleaded on the basis of the plaintiffs' own illegality in carrying on insurance business in the United Kingdom without statutory authorisation, but were subsequently amended to claim that the reinsurance contracts had been avoided for fraudulent misrepresentation and/or non-disclosure on the part of the defendants, the allegation being that overriding commission payable under the reinsurance contracts which should have been paid to the defendants had been misappropriated by certain directors of the underwriters to whom the placing, administration and handling of the reinsurance had been delegated. The plaintiffs purported to avoid the contracts on the ground of non-disclosure. In support of the allegation of fraud the plaintiffs produced an affidavit which referred to a Department of Trade and Industry report of investigations under section 432(2) of the Companies Act 1985 of some of the defendant companies as a source of information and belief. The plaintiffs applied for interlocutory injunctions to restrain the defendants from drawing on the letters of credit, or alternatively to restrain them from disposing of any sums they might draw under the letters of credit, and the defendants, who objected to the inclusion in the plaintiffs' affidavit of statements which relied on the Department of Trade and Industry report as the source of the deponent's information and belief, applied for the references to the report to be struck out under R.S.C., Ord. 41, r. 6F1 as not complying with Ord. 41, r. 5(2).

On the applications:—

Held, (1) dismissing the defendants' application to strike out the references in the plaintiffs' affidavit to the Department of Trade and Industry report, that, having regard to the purpose of R.S.C., Ord. 41, r. 5(2), which was to enable a deponent to put before the court, frequently in circumstances of great urgency, facts which he could not prove of his own knowledge, it was not necessary at an interlocutory stage for a deponent to identify an original source of evidence which would be admissible at trial as the source of his information or belief (post, p. 1025D–F).

Savings & Investment Bank Ltd. v. Gasco Investments (Netherlands) B.V. [1984] 1 W.L.R. 271 not followed.

(2) Dismissing the plaintiffs' applications for injunctions restraining the defendants from drawing on the letters of credit, that the requirement to show a prima facie case of fraud before the court would grant an injunction restraining a bank from paying under a letter of credit applied equally where the injunction was sought to restrain the beneficiary from drawing on the letter of credit; that, despite the fact that a clear prima facie case of fraud as alleged by the plaintiffs had been shown, the fraudulent conduct did not, on the face of it, have an impact on the risks being reinsured and therefore the contracts of reinsurance did not appear to have been validly avoided; and that, accordingly, the plaintiffs had not made out a clear case that the defendants would be acting fraudulently if they drew on the letters of credit (post, pp. 1030E, H, 1032G, 1033D–E, 1034H–1035B).

In re Hampshire Land Co. [1896] 2 Ch. 743 and R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. [1978] Q.B. 146 applied.

(3) Dismissing the alternative claim for an injunction restraining the defendants from disposing of any sums they might draw under the letters of credit, that the plaintiffs had failed to show any basis on which they could assert a proprietary interest in moneys that might be paid to the defendants by banks, out of the banks' own funds, pursuant to obligations undertaken under letters of credit (post, p. 1036F–G).

Agip (Africa) Ltd. v. Jackson [1991] Ch. 547, C.A. distinguished.

Per curiam. The power of the court to grant an interlocutory injunction is one that should be flexible and not fettered by the technical rules of admissibility of evidence that apply at a trial (post, p. 1025F).

The following cases are referred to in the judgment:

Agip (Africa) Ltd. v. Jackson [1991] Ch. 547; [1991] 3 W.L.R. 116; [1992] 4 All E.R. 451, C.A.

American Cyanamid Co. v. Ethicon Ltd. [1975] A.C. 396; [1975] 2 W.L.R. 316; [1975] 1 All E.R. 504, H.L.(E.)

Belmont Finance Corporation Ltd. v. Williams Furniture Ltd. [1979] Ch. 250; [1978] 3 W.L.R. 712; [1979] 1 All E.R. 118, C.A.

Blackburn, Low & Co. v. Vigors (1887) 12 App.Cas. 531, H.L.(E.)

Bolivinter Oil S.A. v. Chase Manhattan Bank N.A. (Practice Note) [1984] 1 W.L.R. 392; [1984] 1 All E.R. 351; [1984] 1 Lloyd's Rep. 251, C.A.

Container Transport International Inc. v. Oceanus Mutual Underwriting Association (Bermuda) Ltd. [1984] 1 Lloyd's Rep. 476, C.A.

Dong Jin Metal Co. Ltd. v. Raymet Ltd. (unreported), 13 July 1993; Court of Appeal (Civil Division) Transcript No. 945 of 1993, C.A.

El Ajou v. Dollar Land Holdings Plc. [1994] 2 All E.R. 685, C.A.

Fitzherbert v. Mather (1785) 1 Durn. & E. 12

Grosvenor and West End Railway Terminus Hotel Co. Ltd., In re (1897) 76 L.T. 337, C.A.

Hampshire Land Co., In re [1896] 2 Ch. 743

Hamzeh Malas & Sons v. British Imex Industries Ltd. [1958] 2 Q.B. 127; [1958] 2 W.L.R. 100; [1958] 1 All E.R. 262, C.A.

Harbottle (R.D.) (Mercantile) Ltd. v. National Westminster Bank Ltd. [1978] Q.B. 146; [1977] 3 W.L.R. 752; [1977] 2 All E.R. 862

Houghton (J.C.) & Co. v. Northard, Lowe and Wills Ltd. [1928] A.C. 1, H.L.(E.)

Howe Richardson Scale Co. Ltd. v. Polimex-Cekop (unreported), 21 June 1977, Donaldson J.; [1978] 1 Lloyd's Rep. 161, C.A.

Kwei Tek Chao v. British Traders and Shippers Ltd. [1954] 2 Q.B. 459; [1954] 3 W.L.R. 496; [1954] 1 All E.R. 779

Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 Q.B. 391; [1989] 3 W.L.R. 563; [1989] 3 All E.R. 14, C.A.

Newsholme Bros. v. Road Transport and General Insurance Co. Ltd. [1929] 2 K.B. 356, C.A.

Owen (Edward) Engineering Ltd. v. Barclays Bank International Ltd. [1978] Q.B. 159; [1977] 3 W.L.R. 764; [1978] 1 All E.R. 976, C.A.

Pan Atlantic Insurance Co. Ltd. v. Pine Top Insurance Co. Ltd. [1993] 1 Lloyd's Rep. 496, C.A.

S.B.A. Properties Ltd., In re [1967] 1 W.L.R. 799; [1967] 2 All E.R. 615

Savings & Investment Bank Ltd. v. Gasco Investments (Netherlands) B.V. [1984] 1 W.L.R. 271; [1984] 1 All E.R. 296

Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803, H.L.(E.)

United City Merchants (Investments) Ltd. v. Royal Bank of Canada [1983] 1 A.C. 168; [1982] 2 W.L.R. 1039; [1982] 2 All E.R. 720, H.L.(E.)

United Trading Corporation S.A. v. Allied Arab Bank Ltd. (Note) [1985] 2 Lloyd's Rep. 554, C.A.

SUMMONSES

On 30 July 1993 and 17 August 1993 the plaintiffs, Deutsche Rueckversicherung A.G. and Group Josi Re (formerly Groupe Josi Reassurance S.A.), respectively German and Belgian reinsurance companies, each issued writs against the defendants, Walbrook Insurance Co. Ltd. and 14 other insurance companies, seeking declarations that certain reinsurance contracts made between the parties and letters of credit opened in the defendants' favour were illegal, unenforceable and void. The plaintiffs obtained ex parte injunctions in July 1993 restraining the defendants from drawing on the letters of credit. Those injunctions were set aside on 21 December 1993 by Clarke J. on the ground that the letters of credit would not be tainted by the illegality of the underlying contracts. The plaintiffs had, shortly before the hearing on 21 December, substantially amended their pleadings to allege that they had avoided the reinsurance contracts for fraudulent misrepresentation and/or non-disclosure, those matters being reserved for a subsequent hearing. On 21 January 1994 the plaintiffs issued summonses in each action seeking an interlocutory injunction to restrain the defendants from drawing on the letters of credit. On 9 March 1994 the defendants issued cross-summonses by which they sought, under R.S.C., Ord. 41, r. 6, to strike out from the plaintiffs' affidavit in support references to a report by the Department of Trade and Industry on certain of the defendant companies as their source of information or belief. The applications were heard in chambers but judgment was given in open court.

The facts are stated in the judgment.

A.V.B. Bartlett Q.C. and Marion Egan for the plaintiffs.

Stewart Boyd Q.C. and David Joseph for the defendants.

Cur. adv. vult.

21 April. Phillips J. read the following judgment. I am concerned with two actions which are now consolidated. The second is almost, but not quite, a carbon copy of the first. The defendants in each action are the same. They are insurance companies which belonged to a pool for some or all of the period 1974 to 1980. The plaintiffs in the first action are a German reinsurance company. The plaintiffs in the second action are a Belgian reinsurance company. Pleadings and...

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