New Hampshire Insurance Company v MGN Ltd
| Jurisdiction | England & Wales |
| Judge | Potter J,Staughton,McCowan,Auld L JJ |
| Judgment Date | 06 September 1996 |
| Court | Court of Appeal (Civil Division) |
| Date | 06 September 1996 |
Court of Appeal.
Potter J; Staughton, McCowan and Auld L JJ.
Kenneth Rokison QC and Christopher Hancock (instructed by Kennedys) for the insurers other than Chubb.
Patrick Phillips QC, Alexander Layton QC and Neil Hext (instructed by Sedwick Detert Moran & Arnold) for Chubb Insurance Co of Europe.
Iain Milligan QC and Stephen Morris (instructed by Norton Rose) for Maxwell Communication Corp plc.
Iain Milligan QC and David Edwards (instructed by Lovell White Durrant) for MGN.
John Lockey (instructed by Stephenson Harwood for 15th defendant in action 440, and Nabarro Nathanson for 3rd to 7th defendants and 16th to 19th defendants in action 440) for the Pension Fund and Bishopsgate Management Ltd.
The following cases were referred to in the judgments:
Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (“The Good Luck') [1988] 1 LI Rep 514.
Black King Shipping Corp v Massie (“The Litsion Pride”) [1985] 1 LI Rep 437.
Brogden v Metropolitan Railway CoELR (1877) 2 App Cas 666.
Commercial Union Assurance Co v Niger Co Ltd (1922) 13 LI L Rep 75.
Commonwealth Construction Co Ltd v Imperial Oil LtdUNK (1977) 69 DLR (3d) 558.
Cox v Bankside Members' Agency [1995] CLC 180.
General Accident Fire and Life Assurance Corp Ltd v Midland Bank LtdELR [1940] 2 KB 388.
Leon v CaseyELR [1932] 2 KB 576.
Lishman v Northern Maritime Insurance CoELR LR 10 CP 179.
MacMillan Inc v Bishopsgate Investment Trust plcUNK [1996] BCC 453.
National Oilwell (UK) Ltd v Davy OffshoreLtd [1993] 2 LI Rep 582.
NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1985) 4 NSWLR 107.
Niger Co Ltd v Guardian Assurance Co Ltd (1921)6 LI L R 239.
Phillips v Foxall (IS72)ELR LR 7 QB 666.
Prudential Staff Union v HallELR [1947] KB 685.
Punjab National Bank v de Boinville [1992] 1 LI Rep 7.
Rozanes v Bowen (1928) 32 LI L Rep 98.
Rust v Abbey Life Assurance Co LtdUNK [1979] 2 L1 Rep 334.
Samuel (P) & Co Ltd v DumasELR [1924] AC 431.
St Paul Fire & Marine Insurance v McConnellDowell Constructors Ltd [1993] 2 LI Rep 503.
Sumitomo Bank of California v Iwasaki (1968) 447 Pac R (2nd) 956.
Vitol SA Geneva v NorelfLtd Bermuda [1996] CLC 1,159.
Youell v Bland Welch & Co Ltd (No. 1) [1990] 2 LI Rep 423.
Insurance — Fidelity insurance — Insurance for Maxwell group of companies -Cover for losses resulting from dishonest or fraudulent employees — Claims in respect of dishonest and fraudulent acts of director and associates — Whether companies insured as a group or as separate companies — Whether cover joint or composite — Whether losses resulting from transfers between group companies covered by policies — Whether continuing duty of disclosure on assured—Whether insurers entitled to avoid against all assured if any one were in breach — Whether liability limited.
This was an appeal against a decision of Potter J in the Commercial Court on preliminary issues of law concerning fidelity insurance policies.
Member companies of the Maxwell group were insured from 1 August 1988 to 18 January 1992 under four fidelity insurance policies underwritten by the New Hampshire Insurance Co (“the insurers”), the plaintiff in the insurers” action. The policies were in respect of loss resulting from the dishonest or fraudulent acts of employees to limits increasing from £25m for 1988-89 to £50m for 1991-92. Following the death of Robert Maxwell various companies in the group (“the claimants”) made claims under the policies in respect of losses alleged to have been suffered as a result of dishonest and fraudulent acts on the part of Robert Maxwell and/or various of his associates. The insurers rejected those claims and denied liability on the basis that (1) the claims made did not fall within the terms of the policies because the losses claimed result from transfers made between companies within the group and were not “losses” and/or were not the result of dishonest acts as defined by the policies. (2) They were entitled to avoid the policies for breach of the duty of utmost good faith, which imposed a continuing duty of disclosure on the various insureds during the currency of the policies and entitled the insurers to avoid against all assureds if any one assured were in breach. (3) If they were liable, such liability was restricted to the limit of that year's cover, between £25m and £50m as applicable.
Four groups of parties made claims under the policies, the trustees of the five main pensions schemes for the benefit of the employees of the Maxwell group of companies, Bishopsgate Investment Management Ltd (“BIM”) which was responsible for managing many of the assets of the pension schemes, MGN Ltd and various other Mirror group companies (“MGN”) and Maxwell Communication Corp plc and various of its subsidiaries (“MCC”). There were two groups of insurers, New Hampshire and various others, the great majority of subscribers to all layers in the first and second years and all of the insurers to the layers of up to £40m in the third and fourth years. The second group comprised Chubb Insurance Co of Europe SA (“Chubb”) who insured the whole of the layer £10m in excess of £40m in the third and fourth years.
The insurers brought an action (“the insurers” action”) against all the claimants apart from MCC, who counterclaimed against the insurers and Chubb. The insurers sought declarations that they had validly avoided the insurance for non-disclosure or not incurred any liability to the claimants, or such liability as they had incurred was limited. MCC brought a second action (“the MCC action”) against the insurers and Chubb. MCC and six other claimants pursued their claims under the insurance against all of the insurers and Chubb.
Waller J ordered the trial of preliminary issues in both actions. Four (A, B, C and E) were agreed between the parties before the Commercial Court hearing. The preliminary issues were determined by Potter J, who held that the assured was not a single entity; the companies were insured severally in respect of their several interests, the cover being composite rather than joint. Although in principle non-disclosure by one company would not entitle the insurers to avoid against other companies, the interrelationship between the Maxwell companies might in fact have created parallel duties of disclosure.
Potter J decided the specific issues before him as follows:-
1. On issue D, which concerned primarily defences as to the scope of cover, the contracts of insurance in question were contained in or evidenced by the relevant slips.
2. On issue F the assured was not a single entity but all those companies falling within the definition of the assured, and the cover provided was composite rather than joint. Accordingly the assured companies were insured severally in respect of their several interests.
3. On issue G in principle non-disclosure by one assured would not constitute nondisclosure by others or by itself give rise to a right to avoid as against those others, but, as a caveat, the interrelationship between the various companies in the Maxwell group and the overlapping functions of a number of their servants and officers were likely to have created situations whereby an officer of company A, as well as exercising functions in company B, would also have had knowledge of the affairs of company C and/or the actions or intentions of its officers of such a kind that he would have been under parallel duties of disclosure and/or obligations of good faith in respect of all three.
4. On issue H, a loss resulting from a transfer of assets from one assured to another was capable of constituting loss falling within the terms of the contracts of insurance and the Chubb policies.
5. On issue I the acts giving rise to and/or intended to give rise to a transfer of assets from one assured to another were capable of constituting dishonest or fraudulent acts for the purposes of those contracts.
6. On issue J the cover provided by the contracts of insurance was renewed annually. It was not continuous from inception to termination.
7. On issue K, which concerned the point(s) in time when the assured were under a duty to disclose matters material to the insurers, the assured companies under the contracts of insurance and/or the Chubb policies were under a duty to disclose material matters to the insurers and/or Chubb: (a) when applying for and/or negotiating the insurance provided under the policy of insurance and Chubb policies up to the moment at which a binding contract of insurance was concluded in every case; (b) when applying for and/or negotiating any renewal of such contracts of insurance; (c) when applying for and/or negotiating any endorsement or alteration to the terms of the insurance, such obligation of disclosure being limited to the material facts relating to the endorsement or alteration; (d) when making and presenting any claim limited to the disclosure of matters material to that claim.
8. On issue L, which concerned the limits on loss under the insurance, (1) the policy limits applied separately to each company within the group as a limit per insured company. (2) The limits applied separately and non-cumulatively to each policy year. (3) There was an aggregate limit on the primary layer in each policy year of £1m on claims for loss in respect of which the same employee was concerned or implicated, but subject to the provisions of s. 12 of the policy in respect of loss straddling two policy periods.
The insurers appealed on issues D, F, G, H, I, K and L and the claimants cross-appealed.
Held, dismissing the insurers' appeal and setting aside the cross-appeal:
1. Acceptance by the assured could not be inferred from silence in the case of the Chubb policy since in each case the policy did not supplement what was in the slips but contradicted them. The Chubb forms of policy were therefore not part of...
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