Gan Insurance Company Ltd v Tai Ping Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance |
| Judgment Date | 01 March 2002 |
| Neutral Citation | [2002] EWCA Civ 248 |
| Docket Number | Case No: A3/2001/0459 QBCMF |
| Court | Court of Appeal (Civil Division) |
| Date | 01 March 2002 |
[2002] EWCA Civ 248
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Andrew Smith J
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Brooke
Lord Justice Mance and
Mr Justice Park
Case No: A3/2001/0459 QBCMF
Colin Edelman QC & Colin Wynter (instructed by Elborne Mitchell) for the Appellant
David Railton QC & John Lockey (instructed by Stephenson Harwood) for the Respondent
This is the judgment of the court.
Introduction
In a judgment dated 3 rd July 2001, this court (composed of Latham LJ, Sir Christopher Staughton and Mance LJ) decided an appeal relating to a judgment given by Longmore J (as he was) on 21 st June 2000 and considered an appeal relating to a further issue decided by Andrew Smith J on 8 th February 2001. As was then pointed out, two other issues decided by Andrew Smith J on that date remained for subsequent hearing. Those two issues, both involving an appeal by Gan, now fall to be determined.
The background was stated in the introduction to Mance LJ's judgment of 3 rd July 2001. We repeat it here, with some alterations addressing the present context. The issues arise from a facultative reinsurance placed with Gan Insurance Company Limited of London ("Gan") by The Tai Ping Insurance Company Limited ("Tai Ping") in March 1996. The reinsurance was for 2%, part of a line of 35%, underwritten by Tai Ping on an erection all risks and third party liability insurance taken out by Winbond Insurance Corporation ("Winbond"). This liability insurance covered machinery whilst in the process of erection, installation and commissioning from 15 th February 1996 in a building called Fab 3 at a science park in Taiwan. The sum reinsured in respect of the machinery was expressed as "up to" a little over NT$ 6.5725 billion (on a 100% basis). In relation to the reinsurance Tai Ping used the services of Taiwanese brokers, Aon Risk Services Taiwan Ltd, who in turn instructed London brokers, Jenner Fenton Slade (who either became or can for present purposes be equated with Aon Group Limited). Through them, Gan for its 2% line and another reinsurer, Eagle Star, for a further 2%, were approached and wrote their lines on a separate brokers' slip. Tai Ping had previously reinsured other parts (in total 31%) of its line of 35% without the intervention of brokers, in particular 3.1% with treaty reinsurers, 12.5% with Cologne Re, 10% with Allianz, 5% with Munich Re and 0.4% with Central Re.
The reinsurance underwritten by Gan and Eagle Star was in slip form, providing inter alia:
"CONDITIONS: Full Reinsurance Clause NMA 416
Claims Coop Clause (Wording T.B.AGD)
Cancellation Clause as original plus 30 days.
….
All amendments, additions, deletions or endorsements hereto to be agreed by the Leading Reinsurance Underwriter only, such agreement to be binding on all other Underwriters subscribing hereto.
…."
In the slip, the second condition had originally read "Claims Control Clause (Wording T.B. AGD)", but the word "Control" was altered to "Co-operation" at Gan's request.
The Full Reinsurance Clause NMA 416 provides as follows:
"REINSURANCE WARRANTY CLAUSE (FULL R/I. CLAUSE No. 1)
(Approved by Lloyd's Underwriters' Non-Marine Association)
Being a Reinsurance of and warranted same gross rate, terms and conditions as and to follow the settlements of the ………………….. Company and that said Company retains during the currency of this Policy at least ………………….. on the identical subject matter and risk and in identically the same proportion on each separate part thereof, but in the event of the retained line being less than as above, Underwriters' lines to be proportionately reduced."
Gan required and on 21 st March 1996 initialled the following Claims Co-operation Clause ("CCC"):
"CLAIMS CO-OPERATION CLAUSE
Notwithstanding anything contained in the Reinsurance Agreement and/or Policy wording to the contrary, it is a condition precedent to any liability under this Policy that:—
a) The Reinsured shall, upon knowledge of any circumstances which may give rise to a claim against them, advise the Reinsurers immediately and in any event not later than 30 days;
b) The Reinsured shall co-operate with Reinsurers and/or their Appointed Representatives subscribing to this Policy in the investigation and assessment of any loss and/or circumstances giving rise to a loss;
c) No settlement and/or compromise shall be made and liability admitted without the prior approval of Reinsurers.
All other terms and conditions of this Policy remain unchanged.
SCOR (UK) Clause 012 4/83"
A fire occurred in the building damaging the machinery during the process of its erection, installation and commissioning. Winbond pursued a claim. Tai Ping in December 1996 claimed to avoid the original insurance for misrepresentation. Winbond reacted strongly, issuing proceedings on 6 th May 1997, which led to two court appearances and a site visit. In July 1997 negotiations took place, leading to a settlement or compromise in writing made between Winbond and Tai Ping on 30 th July 1997. In the pleadings, Gan alleges, amongst other things, that Tai Ping (i) failed to co-operate in the investigation and assessment of loss and/or circumstances giving rise to a loss, (ii) agreed a settlement of Winbond's claim and admitted policy liability without Gan's approval, and (iii) failed in agreeing such settlement to act in a proper and businesslike manner.
The two issues which are now before us were decided by Andrew Smith J against Gan under Part 24. They are whether Gan has any real prospect of showing (A) a failure by Tai Ping to co-operate in the investigation and assessment of loss and/or circumstances giving rise to a loss and/or (B) a failure by Tai Ping to act in a proper and businesslike manner in settling Winbond's claim. Andrew Smith J decided that Gan had no such prospect in either case. In so deciding the first issue, Andrew Smith J expressed certain conclusions regarding the scope in law of paragraph (b) of the CCC. In so far as he did this, it was agreed between the parties before us, in the light of the full argument that we heard, that we should not simply confine ourselves to considering whether Gan's case on construction has a real prospect of success, but should, if otherwise appropriate, determine the proper interpretation of the clause.
We start with a word about the relevance of the two issues before us, following the court's judgment of 3 rd July 2001. We wrote asking the parties about this prior to the hearing of the present appeal. It transpires that there is an outstanding application for permission by Tai Ping to appeal to the House of Lords against the decision of 3 rd July 2001. If such permission were to be granted and the appeal were to succeed, Gan would wish to be able to advance the additional defences which Andrew Smith J excluded. Further, even if permission is refused, or an appeal fails, Tai Ping says, speculatively, that it "will give consideration to an application to amend its Counterclaim to allege breach of the implied terms set out in the July 2001 judgment of Mance LJ (Latham LJ agreeing)". If it were to obtain permission to do this, and were to succeed on any case thereby raised, the further defences which Andrew Smith J excluded could again become material. Hence, the parties' continuing interest in the resolution on appeal of the issues determined against Gan by Andrew Smith J. We turn therefore to those issues.
Issue (A)—paragraph (b) of the CCC
In relation to issue (A), Gan's pleaded case was that Gan requested Tai Ping by letter dated 28 th April 1997 to instruct consulting forensic scientists, Burgoyne & Partners, to investigate and report on whether six fire precautions or protection systems (viz. fire alarm, fire hose and hydrant, carbon dioxide, sprinkler, foam water and fog water systems) designed by independent specialists in such systems, Angel Engineering Limited ("Angel"), were present at the risk location at the time of the fire and how they performed in the detection and extinction of the fire; but that, in breach of paragraph (b) of the CCC, Tai Ping failed to co-operate at all in instructing Burgoyne & Partners or in facilitating or making such investigations. Gan further pleaded that these investigations were relevant to the issue whether or not any fire precautions present at the risk location complied with representations allegedly made by Tai Ping to Gan which were based on representations allegedly made by Winbond to Tai Ping prior to the inception of the insurance of Winbond, and were thus relevant to the issue of Tai Ping's liability to Winbond, and particularly to Tai Ping's entitlement to avoid its contract of insurance with Winbond for material non-disclosure and/or misrepresentation and/or to repudiate any liability to Winbond.
Andrew Smith J considered that there were four separate answers to Gan's case as pleaded on issue (A). They were, in summary, that:
(1) Gan had not identified any specific shortcoming in the "thorough and detailed" reports prepared by Burgoyne & Partners, which Gan saw in 1997;
(2) it was common ground that the CCC did not impose any obligation on Tai Ping to carry out unnecessary or pointless investigations; that the premise to Gan's requests had been that Winbond had indicated upon the placement of the insurance that there would be fire fighting precautions such as those indicated in drawings prepared by Angel; but that it was now common ground (as Gan itself had asserted before...
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