Insurance Company of Africa v Scor (UK) Reinsurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,LORD JUSTICE ROBERT GOFF,LORD JUSTICE FOX |
| Judgment Date | 22 November 1984 |
| Judgment citation (vLex) | [1984] EWCA Civ J1122-3 |
| Docket Number | 84/0513 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 November 1984 |
[1984] EWCA Civ J1122-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. JUSTICE LEGGATT)
Royal Courts of Justice
Lord Justice Stephenson
Lord Justice Robert Goff
and
Lord Justice Fox
84/0513
1982 I No. 295
MR. RICHARD YORKE QC and MR. STUART ISAACS (instructed by Messrs. Davies Arnold & Cooper, Solicitors, London EC4V 6AD) appeared on behalf of the Defendants (Appellants)
MR. IAN HUNTER QC and MR. STEVEN GEE (instructed by Messrs. Elborne Mitchell & Co, Solicitors, London EC3R 6DS) appeared on behalf of the Plaintiffs (Respondents)
This is an appeal by reinsurers against two judgments of Mr. Justice Leggatt given on 21st December 1982 and 7th February allowing insurers' claims against them. The plaintiff insurers are The Insurance Company of Africa ("ICA"). The defendant reinsurers are Scor (UK) Insurance Co. Ltd. ("Scor"). ICA's claim arises out of a fire which on 7th February 1982 totally destroyed a warehouse and its contents in Monrovia, Liberia. The premises were owned by the Government of Liberia, but let to Africa Trading Co. (Liberia) Ltd. ("ATC") for the storage of its goods there. ATC insured with ICA against fire, the building for $500,000 and the contents for $3 million. ICA did not pay ATC's claim; they were successfully sued in Liberia before a judge and jury, and were on 5th August 1982 adjudged liable to pay ATC $3,500,000, general damages of $600,000 and costs amounting to $58,000. ICA paid all those sums by October 1982, but Scor refused to repay them to ICA. They refused because they alleged that Mr. Ali, described by the judge as "in effect the sole proprietor of ATC2", had caused the fire, his company's claim was fraudulent and ICA were not legally liable to pay them the sums insured under their policy with ATC or the damages or costs also awarded against them by the Liberian court.
Before Mr. Justice Leggatt Scor failed to prove arson and fraud. On appeal to this court they apply for a new trial on various grounds and also in order to prove fraud by further evidence, which they allege was not available at the trial, is credible and might result in judgment being given in their favour.
The facts which gave rise to ATC's claim, to Scor's allegation of fraud and to the judgments against ICA in Liberia and in their favour in this country are fully set out in the first judgment of the learned judge reported in [1983] 1 Lloyd's List Reports, 541 and I shall not repeat them, but extract those which are material to this judgment. The plaintiffs' general agents and managers of insurance claims were a company called Intrusco. Intrusco's parent company was Insurance Company of North America ("INA"), whose president in Washington was Mr. Gibbons. Their executive vice-president was Mr. Merriam, who was also the president of Intrusco. They put the claim in the hands of a local adjuster, Mr. Koval.
On 7th February 1982, while the fire was still burning, Mr. Koval came to the scene of it. He is the only loss adjuster in Liberia, where he has carried on business as Insurance Adjusters (Liberia) Ltd. for the past nine years. Though unqualified, he has considerable professional experience in working for both insurers and insured. On 8th February he was instructed to carry out preliminary investigations by Mr. Merriam. The same day ATC notified Intrusco in writing of the fire and damage, Intrusco advised the London brokers and next day the brokers notified the re-insurers. The sum reinsured in the London market was 98.6% of $3,500,000 and Scor were the lead reinsurers with a share of 11.53% of 98.6%.
While Mr. Koval was investigating the fire and adjusting the losses of ATC and another company, Intrusco obtained the services of another adjuster from INA. On Intrusco's assurance that no arson was suspected, INA instructed their second choice, Mr. Cassell, from their Athens office. Mr. Cassell arrived in Liberia on 17th February, discussed and spot-checked with Mr. Koval the work he had done on the adjustments, found nothing substantially wrong with them, and returned to Athens on the 19th. On 26th February Mr. Koval produced a report of 16 pages and on 9th March Mr. Cassell produced a shorter report. These reports were forwarded to London brokers and reinsurers by the end of March.
The extract from Mr. Koval's report which is to be found in the judge's judgment refers to the fact that the last physical stock inventory had been taken on 2nd January 1981 but none had been taken in January 1982, and to the near impossibility of tracing documentary evidence of withdrawals from stock because of the chaotic filing system or lack of system. He attached to his report his own work sheets, ATC's sheets comprising the stock inventory of 2nd January 1981 and other documents including ATC's income tax returns and reports from the National Fire Service and the C.I.D. which did not establish with certainty the cause of the fire. ATC were given a full clearance and ICA were becoming anxious to pay ATC's claim, payable under their policy within 60 days of proof of loss.
However, on 6th April Scor raised the question of average, and required confirmation that the policy covered only one location. Those matters were disposed of to their satisfaction, but on 13th and 15th April they received from Monrovia the first two of three anonymous letters. The first letter's contents were shortly and correctly summarised by the judge as follows:
"….. that Mr. Ali, who is in effect the sole proprietor of ATC, had deliberately set fire to his warehouse with the co-operation of the head of the Army and that Mr. Merriam had been guaranteed 350,000 United States dollars to keep quiet. The reinsurers were urged not to rely on Intrusco's report because they were involved as well; and not to pay the claim readily lest others be encouraged to set their own premises on fire".
The letter described Mr. Ali as "a feared man", and the second letter substantially repeated the allegations of the first, adding that recent claims had been settled by insurance companies without proper investigation on police, fire and loss adjuster's reports which were easily fixed by payments, that ATC was "a very influential and dangerous person" with a very bad reputation and top connections, and suggesting that Scor should "send one of your trustworthy investigators to question some of the Lebanese and Indian businessmen" before paying the claim.
On 15th April Scor wrote to the brokers that certain information had been received, the nature and source of which they were not prepared to disclose, and that London market reinsurers were not prepared to make any payment in respect of the claim until their investigations into the information were completed. The same day they instructed the well-known insurance investigators, Robert Bishop Adjusters Ltd.
Meanwhile both Mr. Merriam and Mr. Cassell had telephone conversations with the brokers informing them that there were no suspicious circumstances about the fire or ATC's conduct. On 20th April the brokers wrote to Scor protesting at the delay in paying the claim, and learnt as a result that Mr. Bishop's investigators had been sent to Liberia to investigate "allegations made by third parties".
The investigators were Mr. Moore and Mr. Simpson. They arrived in Monrovia on 21st April and they left on 27th and 28th April. Their visit was described by the judge as "a curious episode", of which full details were set out in his judgment and need not be repeated. They took Mr. Koval's report and instructions from Mr. Bishop to try, among other things, to identify the writers of the anonymous letters and perhaps "to front Miriam (sic) up at the end of your enquiries". They succeeded in identifying to their satisfaction the writers of the letters as a Mr. and Mrs. Hassanyeh, though the couple did not admit as much to them. They did not confront Mr. Merriam with the allegation made by the letters, but they conducted their enquiries with what the judge called "a lack of finesse" which led Mr. Gibbons to instruct Mr. Merriam to refuse to co-operate with them and made it (in the judge's words) "no surprise that their mission was unsuccessful". They did not succeed in obtaining evidence from Lebanese or Indian businessmen or any other source that Mr. Ali had committed arson or fraud, or that Mr. Merriam or Intrusco—or Mr. Koval—was implicated in either.
On 27th April Scor received the third anonymous letter, clearly written by the same hand as the second. The writer elaborated charges of arson and fraud against members of the Lebanese and Indian business community, and of collusion against Intrusco and Mr. Merriam, the fire and police services and—for the first time—the loss adjuster, who "writes his reports exactly as required by the insured" for a remuneration of between 5% and 10% of the claim. On 29th April Mr. Ali wrote on behalf of ATC to Instrusco invoking the clause in the policy which stipulated that the amount of loss should be payable 60 days after proof of loss was received by Intrusco, and accordingly requested immediate settlement of the claim for $3,500,000.
There followed communications between ICA's Washington office, Scor's managing director and the brokers, ending in Scor's instructing their solicitors on 10th May to avoid the reinsurance policy on the grounds of misrepresentation and non-disclosure on the part of ICA. Their solicitors' letter...
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