Lincoln National Life Insurance Company v Sun Life Assurance Company of Canada and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance,Lord Justice Longmore,Lord Justice Jacob |
| Judgment Date | 10 December 2004 |
| Neutral Citation | [2004] EWCA Civ 1660 |
| Docket Number | Case No: 2004 0545 A3 & 2004 0547 A3 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 December 2004 |
[2004] EWCA Civ 1660
The Right Honourable Lord Justice Mance
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Jacob
Case No: 2004 0545 A3 & 2004 0547 A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
Hon Mr Justice Toulson
Lower Court Reference 2003 Folio 575.
Royal Courts of Justice
Strand, London, WC2A 2LL
JONATHAN SUMPTION QC, DOMINIC KENDRICK QC, and JAWDAT KHURSHID (instructed by Clifford Chance) for the First Appellants and (instructed by Barlow Lyde & Gilbert) for the Second and Third Appellants.
IAN HUNTER QC and Ms JULIET MAY (instructed by CMS Cameron McKenna) for the Respondent.
INTRODUCTION
This appeal concerns the correct analysis of an arbitration award relating to a dispute between X and Y, and its relevance in a subsequent, separate arbitration between X and Z in which the legal position between X and Y is an issue. X represents the three appellants to this court, Sun Life Assurance Company of Canada, American Phoenix Life and Reassurance Company and Phoenix Home Life Mutual Insurance Company ("Sun/Phoenix"), Y represents Cigna Reinsurance Company of Europe SANV ("Cigna"), and Z represents the respondents in this court, The Lincoln National Life Insurance Company ("Lincoln"). Because arbitration awards are generally confidential, it is worth mentioning that the award between Sun/Phoenix and Cigna was made available to Lincoln with, it seems, Cigna's consent (and certainly to Cigna's knowledge and without Cigna applying to prevent it occurring) following an order made by the arbitrators in the arbitration between Sun/Phoenix and Lincoln.
Sun/Phoenix commenced an arbitration against Cigna, claiming that Cigna had reinsured them under Occupational Accident ("Occ/Acc") reinsurances (covering 50% of losses of (a) $32,500 excess of $17,500 and (b) $200,000 excess of $50,000). These reinsurances were allegedly concluded in August/September 1998 in respect of incoming business underwritten on Sun/Phoenix's behalf by Centaur Underwriting Management Limited of Bermuda ("Centaur"). Sun/Phoenix alleged that the Occ/Acc business so reinsured included seven whole account reinsurances accepted by Centaur to run for three years from 1 st December 1997 to protect a personal accident pool underwritten and managed by Unicover Managers Inc. of New Jersey ("Unicover"). The arbitrators were Mr Nicholas Legh-Jones QC, Mr Gordon Cornish and Mr Brian Kellett. Sun/Phoenix lost this arbitration, since the tribunal by its award dated 14 th March 2002 declared that the whole Cigna reinsurance had been validly avoided for misrepresentation and non-disclosure by the brokers, Stirling Cooke Brown Reinsurance Brokers Limited ("SCB"), by whom it had been placed.
A second arbitration was commenced by Lincoln against Sun/Phoenix. In it, after losing the Cigna arbitration, Sun/Phoenix contended by amendment to their counterclaim that the Occ/Acc reinsurances had never covered their exposure on the Unicover book of insurances, and that such exposure was recoverable accordingly from Lincoln under the terms of a reinsurance covering loss of US$90,000 excess of $10,000 any one loss in respect of risks attaching during the period 1 st October 1996 to 31 st December 1997. It is common ground that whether such exposure was recoverable from Lincoln depended upon whether the Occ/Acc reinsurances with Cigna would, apart from their avoidance, have covered it. This is because the Lincoln reinsurance incorporated a Net Retained Lines ("NRL") clause, signifying the following terms:
"This Agreement applies only to that part of the Original Policies which the Reinsured retain net for their own account and in computing the Ultimate Net Loss, only loss or losses in respect of such Net Retained part of the Original Policies shall be included.
The amount of Reinsurers' liability in respect of loss or losses shall not be increased by reason of the inability of the Reinsured to collect from any other reinsurers whether specific or general, any amounts which may have become due from them whether such inability arises from the insolvency of such other reinsurers or due to the cancellation of such other reinsurance by the Reinsured or by such other reinsurers for whatever reason or for any reason whatsoever."
It is not, and was not below, in issue that this clause applies to risks covered under a reinsurance which is later successfully avoided ab initio– even a reinsurance (like the Cigna reinsurance in fact) effected after the Lincoln reinsurance. Nothing in this judgment should therefore be taken as commenting on any argument that might have been raised to the contrary in a case like the present where the Occ/Acc reinsurances were not placed until after the Lincoln reinsurance.
The issue before us arises because Lincoln contend that, in addition to or in the course of holding that the Cigna reinsurance had been validly avoided, the Cigna arbitrators also determined that, apart from such avoidance, the Unicover book would have been covered by the Cigna reinsurances. That, Lincoln submits, was and is a binding determination as to the position as between Sun/Phoenix and Cigna, on which Sun/Phoenix cannot go back as against Lincoln in the present arbitration.
The Lincoln tribunal (composed of Mr John Rowland QC, Mr Brian Wood and Mr Anthony Robertson) considered by its award dated 27 th May 2003 that it was "bound by the decision of the Cigna tribunal", but it went on to conclude that the Cigna tribunal were "not focusing on the issues that [had] arisen in [the Lincoln] arbitration" and "were not analysing the evidence before them with a view to providing any insight into the issues that [had] to be decided" in the Lincoln arbitration. Accordingly the Lincoln tribunal concluded that it was necessary for it to "reach its own view as to whether or not Cigna could ever have been bound to indemnify [Sun/Phoenix] in respect of losses arising from the Unicover whole account reinsurances". Its own factual conclusion —based on the witness statements, transcripts of evidence and submissions from the Cigna arbitration, albeit subject to redaction of parts identified by Sun/Phoenix as immaterial —was that "Cigna never agreed to cover the Unicover reinsurances and could never have been required to pay losses arising from the Unicover reinsurances".
Lincoln obtained permission to appeal from Tomlinson J who certified two questions of law as being of general public importance. Only one remains relevant:
"Whether the [Lincoln] Tribunal was free to depart from a binding obligation by an earlier tribunal of rights and obligations arising between Sun/Phoenix and Cigna set out in the Award of [the Cigna Tribunal] dated 14 March 2002."
The appeal came before Toulson J who treated this question as requiring "analysis (a) of the findings of the Cigna arbitrators and (b) of their relevance in the Lincoln arbitration". He concluded in his judgment dated 26 th February 2004 (a) that, contrary to the conclusion of the Lincoln tribunal, the Cigna tribunal had addressed the issue whether losses on the Unicover book would have been recoverable under the Cigna reinsurances but for Cigna's avoidance thereof, and had "reached an unambiguous decision" to the effect that "the Unicover whole account reinsurances were reinsured by Cigna, but that the Cigna reinsurance[s] had been validly avoided"; and (b) that, that point having been raised before and decided after hearing full evidence by the Cigna tribunal, the Cigna tribunal's "award determined the position between Sun/Phoenix and Cigna, on which the liability of Lincoln depended" and could be relied upon by Lincoln against Sun/Phoenix. This was so, he said, even though (if the Cigna award had been to opposite effect) Sun/Phoenix could "not necessarily" have relied on it against Lincoln.
Toulson J gave permission to appeal to this court on both (a) "the [Lincoln] Tribunal's analysis of the findings in the Cigna Award; and (b) the relevance of the findings in the Cigna Award in the Lincoln Arbitration". Mr Jonathan Sumption QC representing Sun/Phoenix has presented submissions, and Mr Ian Hunter QC representing Lincoln, has responded under four main heads, which I recapitulate as follows:
(1) The correctness of the Lincoln tribunal's analysis of what the Cigna tribunal did or did not decide.
(2) Whether the Lincoln tribunal's analysis of what the Cigna tribunal decided was open to review in court as one of law.
(3) Whether, if the Cigna tribunal decided that the Unicover book was covered by the Cigna reinsurances and the Lincoln tribunal erred in law in reaching a contrary view, the Cigna tribunal's decision in this respect created an issue estoppel or was by way of obiter dictum or collateral rather than fundamental to its award.
(4) Whether Sun/Phoenix was bound in the Lincoln arbitration by any decision by the Cigna arbitration tribunal that the Unicover book was covered by the Cigna reinsurances.
I shall consider the parties' submissions under these four heads. However, it is convenient to start with issue (2).
ISSUE (2) —WHETHER THE LINCOLN TRIBUNAL'S ANALYSIS OF WHAT THE CIGNA TRIBUNAL DECIDED WAS OPEN TO REVIEW IN COURT AS ONE OF LAW.
This is a curious point. Mr Sumption acknowledges that the exercise of analysis, of the effect of the Cigna award, in which the Lincoln tribunal engaged required the Lincoln tribunal to direct itself...
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