Dornoch Ltd v Mauritius Union Assurance Company Ltd

JurisdictionEngland & Wales
JudgeLord Justice Tuckey,Lord Justice May,President of the Family Division
Judgment Date10 April 2006
Neutral Citation[2006] EWCA Civ 389
Docket NumberCase No: A3/2005/2499
CourtCourt of Appeal (Civil Division)
Date10 April 2006

[2006] EWCA Civ 389

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM COMMERCIAL COURT

MR. JUSTICE AIKENS

2005/80 – [2005] EWHC 1887 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Rt. Hon. Sir Mark Potter

President of The Family Division

Lord Justice May and

Lord Justice Tuckey

Case No: A3/2005/2499

Between:
Dornoch Ltd. & Ors
Respondents
and
The Mauritius Union Assurance Company Ltd.
Appellants
and
The Mauritius Commercial Bank Ltd.

Mr Michael SWAINSTON Q.C. and Alan MACLEAN (instructed by Clyde & Co.) for the Respondents

Mr Ali MALEK Q.C. and Mr Mark HUMPHRIES, Solicitor Advocate (instructed by Linklaters,) for the Mauritius Union Assurance Co. Ltd.

Mr Gavin KEALEY Q.C. and Mr David BAILEY (instructed by Clifford Chance) for The Mauritius Commercial Bank Ltd.

Lord Justice Tuckey
1

This is a reinsurance jurisdiction dispute. The first appellant, The Mauritius Union Assurance Company Limited (MUA) , insured the second appellant, The Mauritius Commercial Bank Limited (MCB) , under three policies, each of which it reinsured 100% back to back in the London market. One of the reinsurances contained a Mauritius jurisdiction clause. This appeal concerns one of the others. Aikens J. held, [2005] EWHC 1887 (Comm), that MUA had failed to show a good arguable case that such a clause was incorporated into this contract. He held that English law was its proper law, as it was of the torts alleged against MUA and MCB, and that England was clearly the appropriate forum in which to decide the reinsurers' claims for declaratory relief against MUA and in tort against MUA and MCB. Accordingly he refused to set aside his earlier order for service out of these proceedings. MUA and MCB appeal with the permission of the judge.

The Contracts

2

MCB is a commercial bank and MUA an insurance company in Mauritius. From June 1999 MUA provided bankers' blanket insurance for MCB which it renewed for 12 months from 30 June 2002 to 30 June 2003. The renewal was not completed until MUA's reinsurances were in place. MCB's cover consisted of a primary bankers blanket policy on the broker's BRS 98 form covering a variety of risks including employees infidelity, premises and transit and two excess policies. The excess policies provided increased cover for infidelity and premises and transit respectively. Each of these policies was expressly subject to Mauritius law and jurisdiction. Their other terms do not matter except that they covered losses occurring or discovered during the policy period.

3

MCB's primary policy was reinsured in the bankers blanket market and led by Munich Re. This primary reinsurance covered most but not all the risks covered by the underlying policy. It was expressed to be on the "J (a) form plus Wordings as agreed Original Wording based on …." BRS 98. The conditions on the slip included "Wording as per BRS 98" "Mauritius Jurisdiction Clause", "Terrorism Exclusion Clause" and "90 day Premium Payment Warranty". There is some uncertainty as to which original wording was attached to the slip but, like the judge, I shall assume that it showed that the underlying primary policy was subject to Mauritius law and jurisdiction.

4

The excess infidelity policy was also reinsured in the bankers blanket market and led by Munich Re. It was on a slip policy which contained the terrorism exclusion and premium payment warranty clauses contained in the primary reinsurance, but no jurisdiction clause.

5

The excess premises and transit policy was reinsured by the respondents (Reinsurers) in the specie (articles of high value) market. That is because premises cover of this kind is not for buildings and ordinary contents but for loss of or damage to high value contents held by banks and similar institutions. This is the reinsurance (the Reinsurance) the subject of this appeal. It was also written on a slip policy. The cover was excess 50m. Mauritian Rupees any one loss. The relevant conditions set out in the slip are:

Conditions: To follow all terms and conditions of the primary policy together with riders and amendments applicable thereto covering the identical subject matter and risk …

Coverage extended to include infidelity – 72 hour discovery period.

Terrorism Exclusion NMA 2921.

LSW 3000 – 90 days

Jurisdiction Clause

The primary policy referred to is the primary reinsurance. The evidence before the judge was that the extension to the infidelity cover was a London market wording designed to provide cover if for example an employee facilitated entry by thieves to secure premises over a weekend. The 72 hour limit was to exclude cover in respect of systemic infidelity going back over a long period. A similar clause was added to the underlying premises and transit excess insurance but not to the primary insurance or Reinsurance. I shall explain how the words Jurisdiction Clause came to be included in the slip later.

The proceedings

6

On 14 February 2003 MCB announced that it had discovered a large scale fraud which had resulted in the misappropriation of over 600m. Rupees between 1991 and 2002. Three months later MCB started proceedings in Mauritius claiming the losses it had suffered from this fraud against thirty-eight defendants. The fraud is alleged to have been committed by one of the bank's senior managers. He is alleged to have siphoned off and fraudulently misappropriated funds belonging to MCB over the eleven year period by means of various unauthorised advances and transfers, the proceeds of which were paid to a number of recipients by cheque.

7

The fraud action was soon followed by a claim by MCB in Mauritius against MUA under the three direct insurance policies (The Mauritius insurance action) .

8

On 19 January 2005 Reinsurers notified MUA that they had avoided the Reinsurance for misrepresentation and non-disclosure. On 1 February 2005 Aikens J. gave permission to serve the present proceedings on MUA and MCB in Mauritius. Reinsurers claim declarations that they have validly avoided the Reinsurance alternatively that the loss falls outside its scope and damages for misrepresentation against MUA and damages for deceit, alternatively negligent misstatement, against MCB. They contend that there is no cover because the losses claimed are not attributable to premises or transit risks. The claim is for losses represented by cheques drawn on and paid from MCB accounts as a result of a long running fraud. None of the many losses occurred within the 72 hour discovery period and only one of them exceeds the 50m. Rupee excess point and that relates to a cheque drawn in December 1994. The allegations of misrepresentation made against MUA and MCB are based upon answers given in a Lloyds bankers policy proposal form signed by officers of MCB to the effect that it was a well run orthodox banking business when in fact it was nothing of the sort. Reliance is placed on a forensic accountants' report which discloses impropriety by senior staff of the bank and serious irregularities in its management. The allegations of non-disclosure are based on this report and local press reports of wrongdoing at the bank.

9

On 21 February 2005 the Supreme Court of Mauritius gave permission to join Reinsurers to the Mauritius insurance action as "Defendants – in – Guarantee", the equivalent of a Part 20 claim against a third party in this jurisidiciton.

General Approach

10

Before considering the issues which arise on this appeal I should note that the hearing before the judge took 4 days. He records that he was provided with 8 large and 1 small ring-binder files of evidence, 90 authorities and over 100 pages of skeleton arguments. His polite protest is recorded at [10] of his judgment.

11

I should like to add my own rather stronger protest. We were provided with the same volume of material. Counsel very skilfully managed to finish their submissions in the two days which we had available, but we, like the judge, were provided with an unnecessarily large volume of material for an application/appeal of this kind where the general legal principles to be applied are well settled and the judge is not required to reach final conclusions on any issue other than which is the appropriate forum for trial of the proceedings. This may not have been a case to which Lord Templeman's strictures in Spiliada [1987] 1 AC 460 at 465 needed to be followed to the letter but it is possible that memories of what he said have faded. They echo what was said earlier by Lord Radcliffe ( Vitkovice v Korner [1951] AC 869 at 884) and are worth repeating:

It seems to me that the solution of disputes about the relative merits of trial in England and trial abroad is pre-eminently a matter for the trial judge. Commercial court judges are very experienced in these matters. In nearly every case evidence is on affidavit by witnesses of acknowledged probity. I hope that in future the judge will be allowed to study the evidence and refresh his memory of the speech of Lord Goff in this case in the quiet of his room without expense to the parties; that he will not be referred to other decisions on other facts; and that submissions will be measured in hours and not days. An appeal should be rare and the appellate court should be slow to interfere.

This court should, and I will, follow this advice also.

The Central Issue

12

With what I have just said in mind it is clear that the issue at the heart of this appeal is whether the Reinsurance was subject to a Mauritius jurisdiction clause. This is essentially a short question of construction of the slip policy in the context of the other insurance and reinsurance contracts to which I have referred. If the Reinsurance...

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