ING RE (placecountry-regionUK) Ltd v R&v VERSICHERUNG AG
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE TOULSON,Mr Justice Toulson |
| Judgment Date | 29 June 2006 |
| Neutral Citation | [2006] EWHC 1544 (Comm) |
| Docket Number | Case No: 2003/1105 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 June 2006 |
[2006] EWHC 1544 (Comm)
Mr Justice Toulson
Case No: 2003/1105
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Jonathan Hirst QC and Mr Roger Masefield (instructed by Norton Rose, Solicitors, London) for the Claimant
Mr Colin Edelman QC and Mr Charles Dougherty (instructed by LeBoeuf Lamb Greene & MacRae, Solicitors, London) for the Defendant
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The issues in this case are whether the defendant is bound by a contract signed by an agent supposedly on its behalf, but without authority to do so, on the grounds either that the agent had ostensible authority to do so or, if not, that the defendant ratified the contract. The case concerns an 85% reinsurance treaty which began as follows:
"This agreement is made by Risk Insurance and Reinsurance Solutions, a company duly authorised to bind the reinsurer to indemnify the Reinsured for all losses of whatsoever nature arising under business ceded to their so-called "2002 BLOCK QUOTA SHARE TREATY"…"
Risk Insurance and Reinsurance Solutions ("Risk") was not a company but a name used by a group of companies. These included an English company, Risk Insurance and Reinsurance Solutions Limited ("Risk London") and a French company, Risk Insurance and Reinsurance Solutions SA ("Risk Paris"). Risk London was not licensed to underwrite insurance and so the binding of risks was done by Risk Paris. Risk's operations were under the general control of Mr Jean-Claude Chalhoub, who was the group Chief Executive Officer and based at the Paris office. The treaty was signed by Mr Jean-Noel Yvon, an accident and health underwriter employed by Risk Paris.
The present trial was a sequel to a judgment given on 18 November 2004 by Moore-Bick J after the trial of an action between the present defendant and a number of Risk companies (referred to collectively in the judgment as Risk) [2004] EWHC 2682 (Comm). That trial focused on the relationship between Mr Chalhoub and one of the defendant's senior underwriters, Mr Daniel Gebauer, relating in particular to two binding authorities, signed in September 2001, under which the defendant authorised Risk Paris to write contracts of reinsurance on its behalf negotiated through the London market. The judge found that there was a dishonest conspiracy between Mr Chalhoub and Mr Gebauer in relation to those two binding authorities. Those binding authorities had nothing to do with the present claimant, but in the final section of his judgment the judge considered the validity of the quota share treaty to which this action relates. He found that Risk had no actual authority to enter into the contract on behalf of the defendant. The claimant was not a party to that action. However, it accepts in the light of that judgment that Risk had no authority to execute the treaty, but it claims that Risk had ostensible authority to do so and that in any event the defendant ratified the contract. The defendant disputes those claims.
Background and personnel
The defendant is a large and reputable German reinsurance company. Mr Gebauer joined it in July 2000 as a senior underwriter and head of one of the departments dealing with non-life treaty reinsurance. He was suspended from duty on 29 November 2002 and resigned a week later.
The claimant is an English reinsurance company with offices in London. It is a subsidiary of Relia Star Life Insurance Company, which is based in Minneapolis and has a division called ING Re. The claimant began underwriting in the London market with effect from July 1997. Its managing director and chief underwriter was Mr Jonathan Bowers. He was in charge of the day to day operations of the office. He built up a substantial book of personal accident and health reinsurance business. In 2001 its total earned premium net of reinsurance was in the region of £35 million.
In early 2002 the Minneapolis office made a strategic decision to close down the group's London operation and the claimant ceased underwriting in March 2002. Initially ING Re hoped that it might be able to find a buyer for its London operation.
Risk London was incorporated in September 2001 and opened its London office in March 2002.
On 9 August 2002 Mr Bowers sent an email to Mr Chalhoub saying that his American colleagues were interested in a straight sale of the claimant and wanted monetary offers. He added that "ING are also interested in a loss portfolio transfer of all risks sometime in 2003 and want to sell the 2002 block as well". Mr Chalhoub asked for further detailed financial information, which Mr Bowers provided.
On 28 August 2002 Mr Chalhoub called Mr Bowers to say that the defendant was offering to take over the renewal of the claimant's account for 2003. Mr Chalhoub asked whether Mr Bowers would be interested in coming to work for Risk London in order to manage the account and facilitate the transfer of business. Mr Bowers said that he would think about the offer.
On 5 September 2002 Mr Chalhoub came to London to meet Mr Bowers. The meeting was not at the claimant's offices but at the office of Mr Chalhoub's brother. At the meeting Mr Chalhoub gave to Mr Bowers copies of three documents: (1) a letter on the defendant's paper dated 16 November 2001 addressed "To whom it may concern", (2) a binding authority headed "Agreement No ING 19H2A#PA" provided by the defendant to Risk and dated 27 August 2002 ("the binder"), and (3) a one page document headed "Memorandum of Authority No ING 19H2A#PA" from the defendant to Risk of the same date ("the Memorandum of Authority"). Mr Bowers did not put these documents on the claimant's files but kept them at his home. At the meeting Mr Chalhoub urged Mr Bowers to join Risk London in order to look after the book of business that he was hoping would be transferred to the defendant through Risk at renewal.
The "To whom it may concern" letter was signed by Mr Gebauer and read as follows:
"We confirm that Risk Insurance and Reinsurance Solutions has been authorised to accept business on our behalf. This agreement came into effect on 1 October 2001 and will continue until and after 31 December 2004.
We confirm that:
We will guarantee to discharge without deduction set-off or counterclaim all liabilities to your clients arising under any business written on our behalf by Risk Insurance and Reinsurance Solutions and,
Payments of any premium to Risk Insurance and Reinsurance Solutions shall be deemed to constitute payment to us and,
We shall give you at least 90 days prior written notice of any changes in or withdrawal of Risk Insurance and Reinsurance Solutions authority and notwithstanding any such change or cancellation we shall continue to honour all obligations in respect of business accepted or agreements made by Risk Insurance and Reinsurance Solutions on our behalf prior to the effective date of the change or cancellation and,
In no case our liability shall exceed the limits indicated in the relevant underwriting authority.
This Letter of Comfort is subject to the Confidentiality Agreement attached thereto."
The binder began with the following paragraphs:
"RISK REFERENCE ING 19H2A#PA
ACCEPTANCES
Agreement of the reinsurer to accept from Risk Insurance and Reinsurance Solutions SA (here and after named Risk) reinsurance accounts previously written by ING and offered to the reinsurer at their individual anniversary dates as declared by Risk.
TYPE
All business specifically allocated and falling broadly within the following classes of business: Reinsurance of Accidental Death and Dismemberment including but not limited to Personal Accident, WC, Bodily Injury from occupation or 24/24 hours, Total and Partial Disablement from Accident or Sickness, War, Assistance, Repatriation, Kidnap and Ransom, Travel, Medical Expenses, Lost of License, Loss of Occupation, Credit Cards and/or in accordance with original conditions and/or as declared and ceded herein by Risk.
FORM
This Agreement serves as the entire contract between Risk and the reinsurer as agreed and prepared by Risk and in accordance with the terms herein.
PERIOD
Commencing at 24 hours on date September 1 2002, for an indefinite period of time, except if cancelled 210 days prior to any anniversary date. First anniversary date to read January 2 2004. Each individual account to run to its natural expiry, irrespective of the date of termination of this Agreement. Tacit renewal as original.
INTEREST
Accounts previously underwritten by ING and accepted by Risk on behalf of the reinsurer and/or as original.
LIMIT
USD 750.000 (or currency equivalent) any one person.
There was also a heading "Risk Fees" but they were not shown in the version given by Mr Chalhoub to Mr Bowers. The binder then set out a list of conditions and concluded with provisions about accounts, settlements and claims.
The binder had two signatories, one of whom was Mr Gebauer. Attached to it was a list of reinsurances underwritten by the claimant.
The Memorandum of Authority began with the same Risk reference followed by three paragraphs under the headings Acceptances, Type and Period. The wording of two of those paragraphs was identical to the wording of the equivalent paragraphs in the binder. The wording of the paragraph headed Acceptances differed from the wording of the equivalent paragraph in the binding authority in that it omitted the words "previously written by ING and offered to the reinsurer at their individual anniversary dates". So in...
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