Sun Life Assurance Company of Canada v Lincoln National Life Insurance Company
| Jurisdiction | England & Wales |
| Judge | Mance,Longmore,Jacob L JJ |
| Judgment Date | 10 December 2004 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 December 2004 |
Court of Appeal (Civil Division).
Mance, Longmore and Jacob L JJ.
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 Juliet May (instructed by CMS Cameron McKenna) for the respondent.
The following cases were referred to in the judgments:
Blair v CurranUNK (1939) 62 CLR 464.
Bradley v Eagle Star Insurance Co LtdELR [1989] AC 957.
Brewer v BrewerUNK (1953) 88 CLR 1.
Bruns v Colocotronis (The Vasso)UNK [1979] 2 Ll Rep 412.
Carl Zeiss Stiftung v Rayner & Keeler Ltd (No. 2)ELR [1967] 1 AC 853.
Drake Insurance plc v Provident Insurance plcUNK [2003] EWCA Civ 1834; [2004] 1 CLC 574.
Duchess of Kingston's Case (1776) 2 Smith LC (13th ed) 644.
Executor Trustee and Agency Company of South Australia Ltd v Deputy Federal Commissioner (South Australia)UNK (1939) 62 CLR 545.
Fidelitas Shipping Co Ltd v V/O ExportchlebELR [1966] 1 QB 630.
George Moundreas & Co SA v Navimpex Centrala NavalaUNK [1985] 2 Ll Rep 515.
Good Challenger Navegante SA v Metalexportimport SA (The Good Challenger)UNK [2004] 1 Ll Rep 67.
Henderson v HendersonENR (1843) 3 Hare 100; 67 ER 313.
Hayter v Nelson Home InsuranceUNK [1990] 2 Ll Rep 265.
Heyman v Darwins LtdELR [1942] AC 356.
Hollington v F Hewthorn & Co LtdELR [1943] KB 587.
Hunter v Chief Constable of West Midlands PoliceELR [1982] AC 529.
Johnson v Gore Wood & CoELR [2002] 2 AC 1.
Kitchin, ReELR (1881) 17 Ch D 668.
McIlkenny v Chief Constable of West Midlands PoliceELR [1980] QB 283.
Mills v CooperELR [1967] 2 QB 459.
Norway's Application, Re (No. 2)ELR [1990] 1 AC 723.
Petrie v NuttallENR (1856) 11 Exch 569.
Post Office v Norwich Union Fire Insurance Society LtdELR [1967] 2 QB 363.
Sacor Maritima SA v Repsol Petroleo SAUNK [1998] 1 Ll Rep 518.
Secretary of State for Trade and Industry v Bairstow [2003] EWCA 321; [2004] Ch 1.
Stargas SpA v Petredec Ltd (The Sargasso)UNK [1994] 1 Ll Rep 412.
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co LtdELR [1972] AC 741.
Young, Ex parteELR (1881) 17 Ch D 668.
Arbitration — Reinsurance — Issue estoppel — Arbitrators in arbitration by Sun/ Phoenix against Cigna decided that Unicover book would have been covered by Cigna reinsurances but that reinsurances had been validly avoided for misrepresentation and non-disclosure by brokers — In second arbitration by Lincoln against Sun/Phoenix, Sun/Phoenix contended that Unicover exposure recoverable under Lincoln reinsurances — Lincoln arbitrators decided that Cigna never agreed to cover the Unicover reinsurances — Second tribunal free to depart from finding of first tribunal — First tribunal's finding on whether Unicover book fell within Cigna reinsurances collateral and not necessary for its decision — Finding did not create issue estoppel — Issue estoppel required mutuality of parties.
This was an appeal from the judgment of Toulson J ([2004] EWHC 343 (Comm); [2004] 2 CLC 36) concerning the correct analysis of an arbitration award relating to a dispute between the appellant insurers, Sun/Phoenix, and reinsurers, Cigna, and its relevance in a subsequent, separate arbitration between Sun/Phoenix and reinsurers, Lincoln, in which the legal position between Sun/ Phoenix and Cigna was an issue.
Sun/Phoenix commenced an arbitration against Cigna, claiming that Cigna had reinsured them under Occupational Accident (Occ/Acc) reinsurances (covering 50 per cent of losses of (a) $32,500 excess of $17,500 and (b) $200,000 excess of $50,000). The reinsurances were allegedly concluded in August/September 1998 in respect of incoming business underwritten on Sun/Phoenix's behalf by 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 December 1997 to protect a personal accident pool underwritten and managed by Unicover. The arbitrators declared that the whole Cigna reinsurance had been validly avoided for misrepresentation and non-disclosure by the brokers, 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 October 1996 to 31 December 1997. Whether such exposure was recoverable from Lincoln depended upon whether the Occ/Acc reinsurances with Cigna would, apart from their avoidance, have covered it, because the Lincoln reinsurance incorporated a net retained lines (NRL) clause.
Lincoln contended 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, and submitted that that was a binding determination as to the position as between Sun/Phoenix and Cigna which Sun/Phoenix could not go back on in the Lincoln arbitration.
The Lincoln arbitrators considered that although they were bound by the decision of the Cigna tribunal, it had not focussed on the issues that had arisen in the Lincoln arbitration, and that they had to reach their own conclusion on the Unicover whole account reinsurances, which was that Cigna never agreed to cover the Unicover reinsurances and could never have been required to pay losses arising from the Unicover reinsurances.
On appeal Toulson J concluded 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 reinsurances had been validly avoided; and 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.
Sun/Phoenix appealed.
Held, allowing the appeal:
1. The Lincoln tribunal's analysis of what the Cigna tribunal decided was open to review in court as one of law.
2. The Cigna tribunal had held that the Cigna reinsurances would, but for their avoidance, have covered the Unicover book.
3. That part of the award was not necessary for the Cigna tribunal's decision. It was directed to an issue which the Cigna tribunal correctly stated did not arise in view of its decision on avoidance. Although expressed as part of the dispositive award, it was in fact obiter. Cigna, which won on avoidance, had no basis for appealing against it. If Sun/Phoenix had been able to appeal on the issue of avoidance, then the scope of the Cigna reinsurances might have become a necessary issue for determination, but there was no such appeal. The Cigna tribunal did hold and express the view that the Unicover book would have been covered by the Cigna reinsurances, but its expression of that view was not fundamental to its decision on avoidance, and was collateral. It would have arrived at precisely the same conclusion as it did regarding avoidance, even if it had formed an opposite view to the effect that the Unicover book fell outside or was excluded from the scope of the Cigna reinsurances.
4. The principles of res judicata and issue estoppel applied between parties to the original proceedings or their privies. It could not be suggested here that either principle had any direct application as between Sun/Phoenix and Lincoln. Nor was there any suggestion of abuse of process. There was no foundation in legal principle for a suggested new principle that the position as between Sun/Phoenix and Lincoln could be proved by producing the award between Sun/Phoenix and Cigna. There might be cases in which an award could be evidence in subsequent proceedings even though it would not be conclusive evidence. In the absence of any third-party or consolidation procedure in arbitration, parties might be put into the position of making inconsistent cases in different proceedings. In litigation it was possible to make inconsistent cases in the same proceedings; doing so later, in different proceedings, might come under the head of abuse of process. But that was no reason to extend the law of issue estoppel in arbitration proceedings beyond its proper sphere. (George Moundreas & Co SA v Navimpex Centrala NavalaUNK[1985] 2 Ll Rep 515doubted.)
Mance LJ:
1. 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...
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