Gan Insurance Company Ltd v Tai Ping Insurance Company Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE MANCE
Judgment Date03 July 2001
Neutral Citation[2001] EWCA Civ 1047
Docket NumberCase No: A3/2000/2750 A3/2001/0459
CourtCourt of Appeal (Civil Division)
Date03 July 2001
Gan Insurance Co. Ltd.
Appellant/Respondent
and
Tai Ping Insurance Co. Ltd.
Respondent/Appellant

[2001] EWCA Civ 1047

Before:

Lord Justice Mance

Lord Justice Latham and

Sir Christopher Staughton

Case No: A3/2000/2750

A3/2000/2756

A3/2001/0459

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH

DIVISION (LONGMORE J.)

Royal Courts of Justice

Strand, London, WC2A 2LL

Colin Edelman QC & Colin Wynter (instructed by Messrs Elborne Mitchell Solicitors for Gan)

David Railton QC & John Lockey (instructed by Messrs Stephenson Harwood Solicitors for the Tai Ping)

LORD JUSTICE MANCE

Introduction

1

The issues before us 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). Gan for its 2% line and another reinsurer, Eagle Star, for a further 2%, were approached through brokers and wrote their lines on a separate broker's 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.

2

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.

3

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:

"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"

4

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. From 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 present pleadings, Gan alleges, amongst other things, that Tai Ping failed to co-operate in the investigation and assessment of loss and agreed a settlement of Winbond's claim and admitted policy liability without Gan's approval.

The Issues Appealed

5

On 21 st June 2000 Longmore J. decided a number of preliminary issues, including issues of alleged misrepresentation and non-disclosure relating to the reinsurance. Following his decision, Tai Ping made an application for summary judgment on three further points, which were determined by Andrew Smith J. on 8 th February 2001. We are at present only concerned with (a) appeals (with permission of Longmore J) from his decision on four issues of law arising under the Claims Co-operation Clause and (b) an appeal by Gan (for which Andrew Smith J gave permission) on one of the three points that he decided. The remainder of Longmore J's decision is not under appeal, and the appeal by Gan against the other two points determined by Andrew Smith J. (for which permission has now also been granted) remains for hearing on a date to be fixed.

6

The four preliminary issues that Longmore J decided were:

"(ii) Whether, as a matter of construction, compliance by Tai Ping

with the provisions of the claims co-operation clause was a

condition precedent to liability on the part of Gan.

(iii) Whether, as a matter of construction, breach of subparagraph

(c) of the claims co-operation clause is only established by

showing that Tai Ping both settled and/or compromised Winbond's

claim and admitted liability.

(iv) Whether there are to be implied into the slip policy the

following terms: (a) that reinsurers may not withhold approval of a

settlement unless there are reasonable grounds for withholding

approval; (b) that reinsurers will respond with reasonable

promptness to a request for approval of a settlement.

(v) Whether, as a matter of construction of the slip policy, Tai

Ping, even if shown to have been in breach of the claims co-

operation clause, is entitled to recover under the slip policy, if and

to the extent that it is able to show that it was in fact and in law

liable to Winbond in Taiwan, and under Taiwanese law for at least

its proportion of the settlement figures of Taiwanese $2.65 million."

7

Longmore J answered these issues as follows:

(ii) Yes

(iii) Yes

(iv) (a) Yes

(b) Longmore J. did not think it useful to answer this

issue, "because, if a request goes unanswered, it will be

tantamount to a refusal".

(v) No

8

Gan appeals the judge's decisions on issues (iii) and (iv)(a), while Tai Ping (contingent upon Gan pursuing its appeal) appeals the decisions on issues (ii) and (v). The issue before us decided by Andrew Smith J. is whether the settlement agreement dated 30 th July 1997 contained an admission in writing. This turned upon whether such an admission was constituted by a recital in the settlement agreement that "a fire within the scope of coverage under [the policy] occurred on 14 October 1996 at the Winbond FAB III" and upon Tai Ping's agreement under the agreement to pay Winbond NT$2.65 billion "as the total amount due under the Policy" (in circumstances where the claim had been for some NT$3.70 billion).

9

The four issues decided by Longmore J. are in certain respects inter-dependant. The issue decided by Andrew Smith J. depends on Longmore J's affirmative answer to issue (iii). The arguments open on both issues (iv) and (v) depend very much on the correct answer to issue (iii). The ambit of the Claims Co-operation Clause (cf. issues (ii) and (iii)) may also be material when considering whether both issues (iv) and (v) can be answered against Tai Ping. And an answer to issue (v) in Gan's favour may suggest the answer to issue (iv) in Tai Ping's favour given by the judge, and vice versa.

10

Longmore J. observed that, since Gan both put forward the Claims Co-operation Clause, and seeks to rely on it, it should in case of any real ambiguity be construed against Gan. However, he felt able to come to clear conclusions on each of the issues of construction without invoking that approach.

Issue (iii) – Claims Co-operation Clause, sub-clause (c): one or two subjects?

11

I start, like the parties before us, with issue (iii). The judge considered that the operation of sub-clause (c) of the Claims Co-operation Clause requires both a settlement and/or compromise and "an additional element before the condition precedent is to bite, namely, an admission of liability". He regarded it as "idle to speculate why reinsurers might only wish to invoke the clause if there is not only a settlement or compromise, but also an admission of liability", since "That is what the clause says, and that is the end of the matter".

12

I start with some basic principles governing interpretation of documents such as the present, as stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich B.S. [1998] 1 WLR 896, 912H-913C:

"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to...

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