England and Wales Court of Appeal (Civil Division) Decisions

Gan Insurance Company Ltd. v The Tai Ping Insurance Company Ltd. [2002] EWCA Civ 248 (1st March, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Andrew Smith J

		Royal Courts of Justice Strand, London, WC2A 2LL
		1st March 2002

Lord Justice Mance : This is the judgment of the court.

Introduction

1. In a judgment dated 3^rd July 2001, this court (composed of Latham LJ, Sir Christopher Staughton and Mance LJ) decided an appeal relating to a judgment given by Longmore J (as he was) on 21^st June 2000 and considered an appeal relating to a further issue decided by Andrew Smith J on 8^th February 2001. As was then pointed out, two other issues decided by Andrew Smith J on that date remained for subsequent hearing. Those two issues, both involving an appeal by Gan, now fall to be determined.
2. The background was stated in the introduction to Mance LJ’s judgment of 3^rd July 2001. We repeat it here, with some alterations addressing the present context. The issues arise from a facultative reinsurance placed with Gan Insurance Company Limited of London (“Gan”) by The Tai Ping Insurance Company Limited (“Tai Ping”) in March 1996. The reinsurance was for 2%, part of a line of 35%, underwritten by Tai Ping on an erection all risks and third party liability insurance taken out by Winbond Insurance Corporation (“Winbond”). This liability insurance covered machinery whilst in the process of erection, installation and commissioning from 15^th February 1996 in a building called Fab 3 at a science park in Taiwan. The sum reinsured in respect of the machinery was expressed as “up to” a little over NT$ 6.5725 billion (on a 100% basis). In relation to the reinsurance Tai Ping used the services of Taiwanese brokers, Aon Risk Services Taiwan Ltd, who in turn instructed London brokers, Jenner Fenton Slade (who either became or can for present purposes be equated with Aon Group Limited). Through them, Gan for its 2% line and another reinsurer, Eagle Star, for a further 2%, were approached and wrote their lines on a separate brokers’ slip. Tai Ping had previously reinsured other parts (in total 31%) of its line of 35% without the intervention of brokers, in particular 3.1% with treaty reinsurers, 12.5% with Cologne Re, 10% with Allianz, 5% with Munich Re and 0.4% with Central Re.
3. The reinsurance underwritten by Gan and Eagle Star was in slip form, providing inter alia:

“CONDITIONS: Full Reinsurance Clause NMA 416

Claims Coop Clause (Wording T.B.AGD)

Cancellation Clause as original plus 30 days.

….

All amendments, additions, deletions or endorsements hereto to be agreed by the Leading Reinsurance Underwriter only, such agreement to be binding on all other Underwriters subscribing hereto.

….”

4. In the slip, the second condition had originally read “Claims Control Clause (Wording T.B. AGD)”, but the word “Control” was altered to “Co-operation” at Gan’s request.
5. The Full Reinsurance Clause NMA 416 provides as follows:

“REINSURANCE WARRANTY CLAUSE (FULL R/I. CLAUSE No. 1)

(Approved by Lloyd’s Underwriters’ Non-Marine Association)

Being a Reinsurance of and warranted same gross rate, terms and conditions as and to follow the settlements of the ....................... Company and that said Company retains during the currency of this Policy at least ....................... on the identical subject matter and risk and in identically the same proportion on each separate part thereof, but in the event of the retained line being less than as above, Underwriters’ lines to be proportionately reduced.”

6. Gan required and on 21^st March 1996 initialled the following Claims Co-operation Clause (“CCC”):

“CLAIMS CO-OPERATION CLAUSE

Notwithstanding anything contained in the Reinsurance Agreement and/or Policy wording to the contrary, it is a condition precedent to any liability under this Policy that:-

a) The Reinsured shall, upon knowledge of any circumstances which may give rise to a claim against them, advise the Reinsurers immediately and in any event not later than 30 days;

b) The Reinsured shall co-operate with Reinsurers and/or their Appointed Representatives subscribing to this Policy in the investigation and assessment of any loss and/or circumstances giving rise to a loss;

c) No settlement and/or compromise shall be made and liability admitted without the prior approval of Reinsurers.

All other terms and conditions of this Policy remain unchanged.

SCOR (UK) Clause 012 4/83”

7. A fire occurred in the building damaging the machinery during the process of its erection, installation and commissioning. Winbond pursued a claim. Tai Ping in December 1996 claimed to avoid the original insurance for misrepresentation. Winbond reacted strongly, issuing proceedings on 6^th May 1997, which led to two court appearances and a site visit. In July 1997 negotiations took place, leading to a settlement or compromise in writing made between Winbond and Tai Ping on 30^th July 1997. In the pleadings, Gan alleges, amongst other things, that Tai Ping (i) failed to co-operate in the investigation and assessment of loss and/or circumstances giving rise to a loss, (ii) agreed a settlement of Winbond’s claim and admitted policy liability without Gan’s approval, and (iii) failed in agreeing such settlement to act in a proper and businesslike manner.
8. The two issues which are now before us were decided by Andrew Smith J against Gan under Part 24. They are whether Gan has any real prospect of showing (A) a failure by Tai Ping to co-operate in the investigation and assessment of loss and/or circumstances giving rise to a loss and/or (B) a failure by Tai Ping to act in a proper and businesslike manner in settling Winbond’s claim. Andrew Smith J decided that Gan had no such prospect in either case. In so deciding the first issue, Andrew Smith J expressed certain conclusions regarding the scope in law of paragraph (b) of the CCC. In so far as he did this, it was agreed between the parties before us, in the light of the full argument that we heard, that we should not simply confine ourselves to considering whether Gan’s case on construction has a real prospect of success, but should, if otherwise appropriate, determine the proper interpretation of the clause.
9. We start with a word about the relevance of the two issues before us, following the court’s judgment of 3^rd July 2001. We wrote asking the parties about this prior to the hearing of the present appeal. It transpires that there is an outstanding application for permission by Tai Ping to appeal to the House of Lords against the decision of 3^rd July 2001. If such permission were to be granted and the appeal were to succeed, Gan would wish to be able to advance the additional defences which Andrew Smith J excluded. Further, even if permission is refused, or an appeal fails, Tai Ping says, speculatively, that it “will give consideration to an application to amend its Counterclaim to allege breach of the implied terms set out in the July 2001 judgment of Mance LJ (Latham LJ agreeing)”. If it were to obtain permission to do this, and were to succeed on any case thereby raised, the further defences which Andrew Smith J excluded could again become material. Hence, the parties’ continuing interest in the resolution on appeal of the issues determined against Gan by Andrew Smith J. We turn therefore to those issues.

Issue (A) – paragraph (b) of the CCC

10. In relation to issue (A), Gan’s pleaded case was that Gan requested Tai Ping by letter dated 28^th April 1997 to instruct consulting forensic scientists, Burgoyne & Partners, to investigate and report on whether six fire precautions or protection systems (viz. fire alarm, fire hose and hydrant, carbon dioxide, sprinkler, foam water and fog water systems) designed by independent specialists in such systems, Angel Engineering Limited (“Angel”), were present at the risk location at the time of the fire and how they performed in the detection and extinction of the fire; but that, in breach of paragraph (b) of the CCC, Tai Ping failed to co-operate at all in instructing Burgoyne & Partners or in facilitating or making such investigations. Gan further pleaded that these investigations were relevant to the issue whether or not any fire precautions present at the risk location complied with representations allegedly made by Tai Ping to Gan which were based on representations allegedly made by Winbond to Tai Ping prior to the inception of the insurance of Winbond, and were thus relevant to the issue of Tai Ping’s liability to Winbond, and particularly to Tai Ping’s entitlement to avoid its contract of insurance with Winbond for material non-disclosure and/or misrepresentation and/or to repudiate any liability to Winbond.
11. Andrew Smith J considered that there were four separate answers to Gan’s case as pleaded on issue (A). They were, in summary, that:

(1) Gan had not identified any specific shortcoming in the “thorough and detailed” reports prepared by Burgoyne & Partners, which Gan saw in 1997;

(2) it was common ground that the CCC did not impose any obligation on Tai Ping to carry out unnecessary or pointless investigations; that the premise to Gan’s requests had been that Winbond had indicated upon the placement of the insurance that there would be fire fighting precautions such as those indicated in drawings prepared by Angel; but that it was now common ground (as Gan itself had asserted before Longmore J) that Winbond did not do so;

(3) paragraph (b) of the CCC did not cover investigation of matters whereby Tai Ping might be able to avoid its policy with Winbond; and

(4) it was common ground that paragraph (b) of the CCC did not cover investigations with a view to showing whether or not Tai Ping was in breach of the reinsurance or of its duties uberrimae fidei in its placement, which, as a matter of interpretation of Gan’s letter dated 28^th April 1997, was all that Gan had requested.

12. Gan’s letter dated 28^th April 1997 to Tai Ping’s London reinsurance brokers referred to Gan’s role as reinsurer of Tai Ping and as a following retrocessionaire in respect of Tai Ping’s reinsurance with Central Re. It said that, as a result of questions raised by Royal Insurance as leader of the Central Re retrocession, Gan had looked at the underwriting information provided to Gan as reinsurer of Tai Ping. It asserted that this included the Angel drawings and a statement that there were the six separate fire protection systems to which we have already referred. It asserted that, with the exception of the alarm and sprinkler systems, no mention was made of how the other systems operated “in the adjusters’ reports or in the forensic report of Burgoyne & Partners”. It went on:

“we now request that our cedent takes immediate steps to instruct Messrs Burgoyne & Partners to review the adequacy and functioning of each of the fire precautions mentioned in the placing information and to prepare a report considering:-

(a) Whether the precautions were as stated in the underwriting information.

(b) Whether those precautions were in place and serviceable as required by Endorsement 206.

(c) What part those precautions played in the actual detection and containment of the fire.

(d) Whether those precautions were installed and commissioned in accordance with the specification supplied by Angel Engineering Consultants.

(e) Whether the installation as installed commissioned and tested was in accordance with competent engineering standards.

From our participation on the slip led by Royal, we know that Central have raised these concerns with Tai Ping. We understand that there has been a reluctance to address these issues resulting in the Royal imposing a general reservation of rights which we will adopt and ratify on our behalf insofar as we participate on the Royal slip.

We think it is only fair to point out that should our reinsured on this slip, the Tai Ping, fail to respond to our request that these matters be investigated, then we will consider that to be a breach of the Claims Co-operation Clause.

Accordingly we would be grateful if you would bring to the attention of the Tai Ping our concerns and invite them to carry out the investigations we have suggested or alternatively if those investigations have already been carried out let us have a copy of any report prepared by the adjuster or forensic investigator dealing with the same.

We look forward to hearing from you with your confirmation that our concerns have been passed on to Tai Ping and thereafter with the Tai Ping’s response as soon as possible.”

13. Endorsement 206, to which this letter referred, is a Special Condition concerning Fire Extinguishing, which can, for present purposes, be assumed to have been incorporated in the insurance between Winbond and Tai Ping and which provided, inter alia:

“Sufficient [or “ample”] and effective fire-extinguishing facilities should be installed at the place of work.”

14. For the purposes of the application under Part 24, the admitted receipt by Tai Ping’s London brokers of the letter dated 28^th April 1997 was accepted as sufficient receipt by Tai Ping. In fact, Tai Ping says, the brokers failed to pass on the letter or the requests in it to Tai Ping. Gan’s case of failure to co-operate is based exclusively upon Tai Ping’s alleged failure to respond to the terms of Gan’s letter dated 28^th April 1997. Both for completeness and because of references made to it during submissions, it is, however, appropriate to note the subsequent course of events.
15. On 7^th July 1997 Gan wrote again to the brokers, referring to and attaching a copy of the letter of 28^th April 1997, together with a copy of a lengthy letter from the Royal Insurance dated 26^th June 1997. The Royal’s lengthy letter focused on the placing information which the Royal asserted had been given to it and, it presumed, to Tai Ping to the effect that the project had “a very good fire protection system”, including the six fire protection systems “in every floor” and sprinkler heads in the roof voids in accordance with the Angel drawings, and to the effect that endorsement 206 was incorporated into the original insurance. The Royal acknowledged that Messrs Burgoynes had considered “in some detail” the sprinkler, alarm and fire hydrant system, but took issue with Tai Ping’s failure to involve the Royal in the discussions which had taken place with Tai Ping’s treaty reinsurers. It asserted that there had been want of co-operation under the CCC, inter alia by ignoring the Royal’s “legitimate request for an extension of the forensic scientist’s report to include a consideration of whether the fire precautions, in being at the time of the loss, complied with those represented to us and, we believe, to our cedent at the time of underwriting the risk”. The Royal said, in conclusion, that:

“It is our view that our cedent is unquestionably in breach of the Claims Cooperation Clause and that in all probability the six fire precautions listed in the fax from Alexander Howden dated 13 February 1996 to which we have referred to above were not fully and/or properly installed and in operation at the risk site prior to the inception of the risk or the loss as we were led to believe by the original presentation of the risk.”

16. Gan in its letter dated 8^th July 1997 said:

“We do not appear to have been provided with Robins’ fifth report or the lawyers’ opinions as far as the Tai Ping slip is concerned but otherwise we find ourselves in a virtually identical position to the Royal. That can perhaps best be summed up by saying that we have raised entirely legitimate requests requiring our cedent to instruct the loss adjusters and forensic scientists to investigate whether the fire precautions which existed at the time of the loss reflected the underwriting information provided to us when we wrote the reinsurance.

No proper action has been taken to investigate the issues raised and we would have expected the Tai Ping as the leading direct underwriter to have played a leading role in investigating and satisfying the concerns raised by the reinsurance market.

We are saddened that this has not been the case. We have not even had a response to our letter of 28 April confirming that our request was being dealt with or at least explaining why our cedent felt unable to do so.

In the circumstances, we feel compelled to follow the action taken by the Royal and expressly adopt everything they have said as far as it is relevant to our reinsurance of the Tai Ping. In our letter of 28 April we made it clear that if the Tai Ping failed to respond to our request for these matters to be investigated, we would consider that to be a breach of the claims co-operation clause.

Sufficient time has passed for the Tai Ping to have either co-operated with us and caused the issues which we raised in our letter of 28 April to be properly investigated or at least to have given some proper grounds for why it was inappropriate to take action on our request. We must now conclude that the Tai Ping are content to be in breach of the claims co-operation clause.

It is not necessary for us to be able to establish that we have been prejudiced by Tai Ping’s breach, but we nevertheless adopt for our own part all that has been said by the Royal concerning the actual prejudice which has been suffered. This applies equally forcefully to our position.

In case there has been some misunderstanding or some breakdown in communication, before closing our file, we will also allow Tai Ping a seven day period to respond to the observations made in this letter.”

17. In response it appears that a copy of the adjusters’ fifth report was supplied to Gan, together with a copy of a fax dated 17^th July 1997 from Aon Risk Services Taiwan Ltd, which suggested that Tai Ping should brief the London brokers direct on the current status of the claim. Whatever may then have passed between Tai Ping and the London brokers, the latter were able to write to Gan in a fax dated 23^rd July 1997 as follows:

“It would appear that the Tai Ping had denied coverage under the CAR policy and in return had received a lawsuit from Winbond. Tai Ping with Co-Insurers had set about defending that suit in the course of which they took a legal opinion, a copy of which has been provided to you and which we believe should substantially address the concerns raised in your letters of the 28^th April and the 8^th July. No doubt you will wish to study this and we look forward to receiving your thoughts on the claim as now presented in due course.”

18. The legal opinion to which the brokers referred must, on the face of it, have been supplied to Gan by 23^rd July 1997. It consisted of a very full, 31 page report by Liao & Partners dated 21^st July 1997. That opinion stated at paragraphs 19.2-4 that, far from representing the existence of the six separate systems or precautions as per the Angel drawings, Winbond had told Tai Ping that there were during the installation and commissioning periods no more than “temporary fire-fighting facilities”. As to endorsement 206, Liao & Partners’ advice, after detailed review of the facts and the law, was that it was questionable whether the Robins and Burgoyne reports supported a conclusion of breach; they considered that there was only a 30% prospect of establishing one.
19. By 4^th August 1997, when Gan responded to this information and to the brokers’ letter dated 23^rd July 1997, Tai Ping had reached its settlement with Winbond. Gan now asserted expressly that its previous requests had been asking Tai Ping “to investigate matters which may have provided Tai Ping with grounds for avoiding their liability to Winbond ab initio for mis-representation”. Gan expressed alarm at the discrepancy between its previous understanding regarding the basis on which the risk had been presented to Tai Ping and the basis on which Gan continued to maintain that it had been presented to it. Gan said that, if the basis of presentation to Tai Ping was as set out in Laio & Partners’ legal opinion, “then we can understand why Tai Ping did not implement our request to have Burgoyne’s prepare the report we requested”, although this was not to be misinterpreted as “approval release or waiver of our objections to their breach”. Gan amplified this by saying that:

“Either our cedent is in blatant breach of the claims control clause by having failed to carry out the reasonable and pertinent enquiries which we requested (in addition to the other breaches as highlighted by Royal’s letter [a reference, it appears, to a letter dated 1^st August 1997, not put before us]) or those enquiries were irrelevant because the only representations made by Winbond were that there would be “temporary” fire fighting precautions and our reinsurance has been procured by gross misrepresentation of the risk.”

20. We interpose that the suggestion of gross misrepresentation of the risk by Tai Ping to Gan was litigated at length before Longmore J, and failed. It appears that, in so far as there was any misrepresentation, it occurred in the context of the Central Re placement; Gan, when accepting the direct reinsurance of Tai Ping, relied upon information presented to it as reinsurer of Central Re, but that could not assist Gan to avoid its direct reinsurance of Tai Ping.
21. In its pleaded defence Tai Ping asserted both that the investigations which Gan sought were not relevant to the issue of Tai Ping’s liability to Winbond, and that they were in any event satisfied in all relevant respects by the production to Gan of Messrs Burgoynes’ first four reports. It gave the following particulars:

“A. (Whether the precautions were as stated in the underwriting information)

The Burgoyne reports confirmed that the systems in place corresponded to what was shown in the Angel plans.

B. (Whether those precautions were in place and serviceable as required by Endorsement 206).

The Burgoyne reports confirmed the systems in place and confirmed their serviceability.

C. (What part those precautions played in the actual detection and containment of the fire).

The Burgoyne reports described in detail the part played by those precautions in the detection and containment of the fire.

D. (Whether those precautions were installed and commissioned in accordance with the specification supplied by Angel).

The Burgoyne reports confirmed that the six systems in place were consistent with the drawings.

E. (Whether Angel approved the final installation).

This question was irrelevant, as it was never represented to the Claimant that Angel were to approve, or had approved, the final installation. In any event, it was answered: Burgoyne’s 3^rd report explained that the installation of the fire protection systems was being undertaken by Takasago and Crystal Engineering.

F. (Whether the installation (sic) as installed, commissioned and tested was in accordance with competent engineering standards).

This question was irrelevant, as there was no representation made to the Claimant that the precautions had been installed, commissioned and tested in accordance with competent engineering standards or otherwise. In any event, Burgoynes’ 4^th report confirmed that the systems complied with Taiwanese fire and safety regulations, which was the only relevant issue between the Defendant and Winbond.”

22. In answer to a request from Gan, Tai Ping further particularised its pleading on 1^st November 1999, giving detailed references to the pages in the reports said to satisfy the requests concerning the fire alarm, fire hose and hydrant, carbon dioxide, sprinkler and foam water systems. Gan’s reply had denied, pending receipt of such particulars, that the reports, whether taken together or separately, answered all or any of the requests. After receipt of the particulars, no further pleading was served by Gan. When the matter was argued before Andrew Smith J, he was shown, although not asked to read, the reports. Gan was challenged to state specifically the respects in which the reports failed to address relevant matters, but failed, in the Judge’s view, to do so.
23. Before us, Mr Edelman QC pointed to a witness statement dated 3^rd November 1999 in which his instructing solicitor, Mr Fisher of Elborne Mitchell, maintained that the requests were material since they went to issues arising under the Winbond insurance, such as whether Winbond had taken all reasonable precautions to prevent loss, and had complied with endorsement 206 and with “other policy machinery requiring Winbond to maintain proper fire precautions”. Mr Fisher referred to the policy and to Tai Ping’s defence to Winbond’s claim in the Taiwanese courts. The way in which Mr Fisher thus sought to explain relevance falls outside Gan’s pleaded case. But Elborne Mitchell had by letter dated 5^th December 2000 indicated that Gan would, if necessary, wish to amend to plead that Gan’s requests were relevant, generally, to the issue of Tai Ping’s liability to Winbond. The judge said expressly that he thought it appropriate to deal with the application on the basis that such an amendment had been made. His reference (in the context of his fourth reason) to the question whether Tai Ping was in breach of the reinsurance indicates that he did look at the matter on that basis.  We agree that he was right to do so, particularly since the point depends basically on interpretation of the letter, and limited consideration of Tai Ping’s potential defences to Winbond’s claim.
24. Having reached this point, we find it convenient to start with the judge’s fourth reason for rejecting Gan’s defence under paragraph (b) of the CCC. This was that Gan’s letter dated 28^th April 1997 was asking simply and solely for investigations which would establish whether or not Tai Ping was in breach of the reinsurance or of their duties uberrimae fidei in its placement. To the extent that the letter was concerned with placing information and with the supposed discrepancy between that and the six represented protection systems and the Angel drawings, we would not quarrel with the judge’s conclusion. It does not seem to us that Gan made it in any way clear that it was interested in investigating anything other than its own right to avoid as against Tai Ping. It may well be that information reaching a reinsurer is, commonly, information which will have been used on the placement of the original insurance. Experience indicates that that is not always so; and, quite apart from the possibility of misunderstandings, information (or supposed information) which was not available at the time of the insurance placement may be specifically acquired for the purposes of placing a reinsurance. Anyway, what matters under paragraph (b) of the CCC is what Gan was requesting. So far as avoidance was concerned, that was in our judgment information bearing on the question whether Gan could avoid as against Tai Ping. It is common ground that such information was not properly exigible under paragraph (b) of the CCC.
25. However, as a matter of interpretation, we consider that the judge was wrong to treat this as the only area of investigation requested. At least, the second and last requests in the letter appear to us to have been related and relevant to compliance (by Winbond) with the terms of the original insurance. The reference under the head of “Original Conditions” in the reinsurance slip to form 206 was a reference to it as a term of the original insurance, not as a term of the reinsurance.
26. Mr Fisher’s reference in his witness statement to endorsement 206 fits into the language of the letter of 28^th April 1997. His reference to taking “reasonable precautions” and “other policy machinery requiring Winbond to maintain proper fire precautions” is less easy to relate to any particular issue between Winbond and Tai Ping. It may have been a reference to condition 11 in Chapter 3 of the policy, obliging the insured “at all times [to] take precautions against occurrence of accidents ….”. However, such conditions are, under English law (with which Taiwanese law must be assumed to correspond, in the absence of any assertion to the contrary), generally understood to require no more than the avoidance of gross negligence. Further, although condition 11 was pleaded in Tai Ping’s Taiwanese defence, it was pleaded in conjunction with another condition excluding liability for wilful act, gross negligence, or illegal action of the insured or its agent, and the focus was on the question whether Winbond had, by starting to use the factory without obtaining an occupancy permit, acted illegally. Nevertheless, we agree with Gan’s submission that its letter dated 28^th April 1997 did more than ask Tai Ping for information relevant to any issue of avoidance. It also embraced issues relevant to Tai Ping’s liability under the terms of the insurance issued to Winbond. To that extent therefore we disagree with the judge’s fourth reason. Further, on grounds which will appear more fully when considering the judge’s third reason below, we consider that such information fell within the scope of information which Gan could properly request Tai Ping to obtain pursuant to the latter’s duty to co-operate under paragraph (b) of the CCC.
27. The judge’s second reason assumes (contrary both to his own view and to our conclusion above in relation to the fourth question) that, so far as Gan’s letter dated 28^th April 1997 was dealing with potential avoidance, it was doing so not merely in relation to Tai Ping’s reinsurance, but at least in part in relation to Winbond’s insurance with Tai Ping. In that respect, the judge considered that any investigations requested would have been pointless, since no such representation had ever been made. The judge recites that it was common ground that there was no obligation under paragraph (b) of the CCC to carry out investigations which would in fact have been pointless.
28. Gan submits, in effect, that the judge has misunderstood its position. It accepts that there could be no obligation to undertake investigations, which were obviously pointless when requested. What is pointless cannot however be judged with hindsight. Here, Gan’s requests related to matters which appeared to it to be relevant when requested. The purpose of paragraph (b) of the CCC is to entitle a reinsurer to information which it can then use, when co-operating further under paragraph (b) and/or when deciding whether to approve any settlement proposed under paragraph (c) of the CCC. Gan submitted that it was therefore Tai Ping’s duty, if necessary, to co-operate by pointing out why the request was, if it was, pointless. There seems some force in Gan’s submission on this point. If Gan was under some misconception as to the basis of that placement, it might be thought that Tai Ping’s duty to co-operate extended to pointing out the misconception. That is not, however, how the case against Tai Ping has ever been pleaded or formulated in any proposed amendment, and it is unnecessary to reach any final decision on the point. The only allegations made are of failure to co-operate by instructing a further report by Burgoynes.
29. Any validity which the judge’s second reason might otherwise have, as a complete answer to Gan’s defence is, however, removed by our conclusion (above) that the letter dated 28^th April 1997 did not merely raise matters relevant to avoidance, but also raised matters relevant to Tai Ping’s liability to Winbond under the original insurance terms. The request cannot in this respect be said to have been pointless. Whether it was or had already been satisfied by delivery of Burgoynes’ four reports is a different, factual issue, which we consider in the context of the judge’s first reason (below).
30. We turn therefore to the judge’s first reason for rejecting Gan’s defence. This was, in effect, that Gan had received all the information to which it was entitled, in the form of Burgoynes’ “thorough and detailed” reports. In his witness statement Mr Fisher asserted that the very fact that Gan wrote its letter dated 28^th April 1997 showed that relevant questions could not have been satisfactorily answered by any investigations already undertaken by Burgoynes. That is a self-serving assertion, and vulnerable to the suggestion that it is based on false premises. First, we note that, in its letter of 28^th April 1997, Gan referred to “the forensic report of Messrs Burgoyne & Partners”, in the singular. It seems conceivable that Gan may not in writing have taken into account all four of Messrs Burgoynes’ reports (although the significance of this, if so, could not be evaluated without examining the reports in detail). Mr Fisher confirms in his witness statement (paragraph 29) that all the reports had been produced and sent to Gan at that time. Secondly, and more significantly, Gan’s major concern was, on any view, that Messrs Burgoynes should investigate the adequacy and functioning of fire precautions corresponding with the representations and drawings upon which Gan was asserting that the placing had been based. If (as can now be seen) no such representations or drawings were made or relevant on the placing with either Gan or, for that matter, Tai Ping, any support (for an argument that Burgoynes’ reports omitted to cover relevant matters) to be derived from the mere fact that the request in the letter was made is correspondingly limited.
31. We turn to consider in more detail the scope of the requests made by Gan’s letter dated 28^th April 1997 and the extent to which it may be said that the four Burgoyne reports answered them. For this purpose, we continue to treat the letter dated 28^th April 1997 as having the scope which we have held that it had - in other words as embracing Winbond’s compliance with endorsement 206 and other terms of the original insurance. We have set out above the course of the pleadings and of argument. In that light the judge was in our view entitled and right to conclude that Gan had no real prospect of showing that the Burgoynes’ reports did not adequately cover all facts relevant to such compliance.
32. When asked in what respect Gan still submitted that the Burgoynes’ reports were inadequate, Mr Edelman referred to Longmore J’s judgment and to paragraph 6 of a witness statement dated 17^th November 2000 by Tai Ping’s solicitor, Mr Lowe of Stephenson Harwood. We gain no assistance in this connection from the former. In the latter, Mr Lowe raised the hypothesis that Gan’s complaint might be “that Burgoynes were not asked to verify that the fire precautions throughout the building (as opposed to at the place of the fire) complied with the Angel drawings”, and submitted that this was irrelevant as Winbond had not represented that they would. In submitting that this shows that Messrs Burgoynes’ reports were incomplete, Mr Edelman originally said that Gan’s concern was as to how a small electric fire could burn down a whole plant. If the Burgoyne reports failed to deal with fire affected areas, then one could understand the concern. But, as Mr Railton pointed out in reply, not only was the point made by Mr Edelman a wholly new one, not raised before the judge, but there was no basis for it in Longmore J’s judgment or in what Mr Lowe had said. Mr Railton told us that the plant consisted of several buildings, only one of which was destroyed by the fire. There is nothing to show or suggest that the Burgoynes’ reports did not deal, as one would expect, with the fire precautions throughout the building which was affected by fire. We have also already noted in passing the Royal’s comment in its letter of 26^th June 1997 on the detailed consideration given by Burgoynes to such fire systems as were present. On a fair reading of Gan’s (and the Royal’s) requests, we do not think that they were seeking further investigations and information in relation to buildings not affected by fire. The point being itself entirely new, unpleaded and uninvestigated, we do not consider that Gan should in any event be granted permission to rely on it now. In so far as Gan was pursuing in its letter the chimera of a case of mis-misrepresentation (regarding further fire systems and/or the Angel drawings), then, even if its request is treated as (a) going to the position as between Winbond and Tai Ping and (b) having any relevance in fact, there appears to be no real basis for thinking that the Burgoynes’ reports did not show the actual position. In any event, we regard any such request as irrelevant for reasons indicated above when dealing with the judge’s fourth and second reasons (see paragraphs 24 and 28).
33. In the result, it seems to us that the judge was right to conclude that Gan had not shown any real prospect of showing that the requests made by its letter dated 28^th April 1997 were not fully and adequately answered in all relevant respects by the Burgoyne reports which Gan admittedly received. We therefore agree with the judge’s first reason for rejecting Gan’s case under paragraph (b).
34. It is thus unnecessary to consider the judge’s third reason in the terms in which it is formulated. But, since we have concluded that Gan’s requests went not merely to avoidance, but also (although as a subsidiary matter) to Tai Ping’s liability towards Winbond, it is appropriate to say something at this point about the scope of paragraph (b) of the CCC. The matter is also of some general interest. The judge’s reasoning was straightforward. Whether Tai Ping could avoid its insurance of Winbond could not fall within the words “circumstances giving rise to a loss”. It fell equally outside the words “investigation …. of any loss”. Otherwise, the judge observed, the term “any loss” would have so wide an interpretation that the phrase “circumstances giving rise to a loss” would be surplusage. The judge’s approach treats the paragraph as moving from a narrower exercise of investigation and assessment of a loss to a wider exercise of investigation (and presumably assessment) of the circumstances of the loss. The investigation of a loss is, on this approach, be a confined concept.
35. Mr Edelman for Gan submits that the judge’s interpretation of paragraph (b) does not give full weight to all the words used – “investigation” as well as “assessment” of both “any loss” and any “circumstances giving rise to a loss”. In essence, the full width of the concept of “investigation …. of any loss” should not be restricted by the fact that the draughtsmen took care to make express reference to the investigation of causation (“circumstances giving rise to a loss”). Investigation of any loss should be read as wide enough to cover investigation of all matters relevant to a claim. The difficulty remains, on this submission, that, so read, the further reference to investigation of causation does seem essentially superfluous. However, it is fair to say that superfluity is by no means unknown in reinsurance and other commercial contracts.
36. The clause must have been intended to bear some relationship to the ordinary course of claims handling and investigation. We also see force in Mr Edelman’s submission that some light on its scope is likely to be thrown by its association with paragraph (c). One obvious purpose of the obligation to co-operate under paragraph (b) is to put reinsurers in a position where they can make a sensible judgment regarding any proposal made to settle or compromise or admit liability under paragraph (c). Both these considerations seem to us to support a wider interpretation of paragraph (b) than would follow from the judge’s reasoning.
37. The clause must at least extend to the determination of the nature, scope and amount of any loss and whether it fell within the policy cover. The ordinary course of claims handling would include considering not merely the nature, scope and quantum of any loss, and the application of the policy cover to such a loss, but also whether the loss involved any breach of any policy term or warranty. Although a breach of warranty has, conceptually, the effect of determining the whole insurance as from the breach, as distinct from providing a simply defence, it would seem to us quite unrealistic to treat investigation of a potential breach of warranty directly related to the loss as outside the scope of “investigation … of any loss”. (A potential breach of warranty unrelated to the particular loss may well be a different matter, under the terms of paragraph (b).) Mr Railton accepted the force of the proposition that paragraph (b) would embrace investigation of breaches of condition or warranty related to the loss, and we consider that it must. If that is so, then our conclusion that Gan’s requests extended to compliance with endorsement 206 and other terms of the original insurance, and that Gan should be permitted to advance this case, means that paragraph (b) was to that extent at least applicable.
38. Addressing the pleaded case that Gan’s request related to potential avoidance by Tai Ping of its original insurance of Winbond, Mr Railton submitted that non-disclosure leading to avoidance ab initio was, on any view, a quite distinct matter, outside any possible scope which paragraph (b) might properly be given. Again, however, we cannot be so categoric. A (mis-)representation related to the circumstances later giving rise to the loss is the sort of matter that would, inevitably, be investigated. It would seem anomalous if paragraph (b) did not operate in relation to it. In some circumstances, such a representation might expressly be made a term of the contract. It would be strange if paragraph (b) operated then but not otherwise. A mis-representation unrelated to the loss may well, again, be quite a different matter. In the event, it is, however, unnecessary finally to determine the scope of paragraph (b) in respect of potential misrepresentation giving rise to avoidance ab initio, even if its subject-matter is related to that of the loss which has arisen.
39. In the result, the judge’s first reason remains valid, and we would on that ground uphold his decision to dismiss Gan’s claim that Tai Ping was in breach of paragraph (b) of the CCC.

Issue (B) – failure to act in a proper and businesslike manner

40. We turn to issue (B), whether Gan has a real prospect of showing a failure by Tai Ping to act in a proper and businesslike manner in settling Winbond’s claim. The judge started his judgment on this issue, by saying:

“Mr Railton’s insistence that Gan should not be permitted to depart from their pleaded case is particularly relevant to [this] issue …..”

41. Earlier in his judgment, the judge made clear that Gan’s solicitors’ letter dated 5^th December 2000, suggesting certain amendments, did not touch on this issue. The pleading position was (and remains) as follows. In paragraph 7(12) of its defence, Tai Ping had pleaded that its settlement with Winbond at the end of July 1997 was reasonable and businesslike. In its reply, paragraph 22, Gan denied this. As a matter of law, however, the onus lay upon Gan to plead and prove any failure by Tai Ping to act in a proper and businesslike manner in settling Winbond’s claim: see eg Insurance Company of the State of Pennsylvania v Grand Union Insurance Co [1990] 1 Ll.R 208. Mr Fisher, in his affidavit, suggested that the onus must be reversed under a reinsurance where paragraph (b) of the CCC is incorporated and/or broken. But the incorporation and any breach of paragraph (b) give rise to independent rights and remedies. We do not see that they affect the onus regarding any residual duty to ensure that any settlement is made in a reasonable and businesslike manner, and Mr Edelman did not argue the contrary before us.
42. In response to Tai Ping’s request for further information in respect of Gan’s denial, Gan pleaded failures by Tai Ping in seven specific respects, which the judge set out. The first related to Tai Ping’s failure to obtain Gan’s consent, a matter which, as the judge pointed out, went only to paragraph (c) of the CCC. The second, fourth, fifth and sixth particulars all relied on the false premise that Winbond had represented on placement that there were fire precautions in accordance with the Angel drawings, and the third on the false premise that Winbond had represented that permanent fire precautions were or would be in place. The seventh and last related to Winbond’s alleged failure to co-operate, an allegation which the judge had already rejected, and a particular which could anyway only go to paragraph (b) of the CCC. Before us, the judge’s rejection of each of these particulars was not challenged by Gan.
43. The sole aspect of issue (B) with which we are concerned arises as follows. The evidence before the judge included a witness statement dated 3^rd November 2000 of Mr Fisher, of Gan’s solicitors. This included some 16 paragraphs (nos. 39 to 53) advancing further points on issue (B) on which Gan sought to rely. In reply Tai Ping’s solicitors wrote on 9^th November 2000, giving notice that they would submit that parts of Mr Fisher’s statement should be ignored as addressing unpleaded and therefore irrelevant issues. In a further witness statement on 17^th November 2000 Mr Lowe of Tai Ping’s solicitors again refused to address unpleaded issues. As we have pointed out, neither in Gan’s letter dated 5^th December 2000 nor in any other way, did Gan then suggest any amendment of its pleadings in relation to issue (B).
44. The judge dealt with Mr Fisher’s evidence in the context of issue (B) as follows:

“I should, however, add that there is nothing in Gan’s evidence which suggests to me that the settlement was not proper and businesslike for some reason which has not been pleaded.  I would specifically mention two points:

a) First, Gan relied heavily on the views expressed by other reinsurers.  I cannot tell what information those other reinsurers had when they criticised Tai Ping and the other Taiwanese insurers. Gan cannot simply rely upon the views of other reinsurers to answer the application for summary judgment.

b) Secondly, in their facsimile of 1 August 1997 Tai Ping refer to pressure from the Ministry of Finance and “the publicity concern of Insurers’ social image”. It does not seem to me that these remarks raise real issues about the proper and businesslike nature of the settlement, reading the facsimile as a whole, bearing in mind the small difference between the settlement figure and that which the “main reinsurers” approved and having regard to the evidence of Mr Hayden. It is striking that Gan do not state in their evidence that they believe that Winbond’s claim could have been settled for less than the amount paid by the insurers, not that the insurers had a good defence to the claim, nor that at a trial Winbond would have been awarded less than NT$2.65 million.”

45. Gan’s failure to raise the aspects of the settlement which are now said to have been unbusinesslike until Mr Fisher’s statement can be readily understood. Mr Fisher was only able to address these aspects at all, because of documentation exhibited to and disclosed for the first time by Tai Ping (in the context of the argument about whether the settlement had involved an “admission”) by an affidavit of Mr Paul Hayden of Tai Ping’s solicitors sworn 11^th October 2000. The documentation included a number of letters from other reinsurers of Tai Ping, complaining about Tai Ping’s failure to keep them informed or otherwise co-operate. If failure to co-operate by Tai Ping in relation to Gan is immaterial to the issue whether the actual settlement was reasonable and businesslike, failure to co-operate with other reinsurers must a fortiori be immaterial. In the lengthy paragraphs of his statement, Mr Fisher also cited extensively from the other reinsurers’ correspondence and complaints. Embedded in these paragraphs, one can also find submissions that the documentation disclosed a case requiring trial, to the effect that the settlement was made in the face of differing legal opinions (Liao & Partners’ and that of Dragon Juniper in association with Masons), without seeking to resolve these by obtaining from Winbond documents suggested by Baker & McKenzie, lawyers instructed at the instance of Tai Ping’s other reinsurers, and/or without obtaining Baker & McKenzie’s final view (see paragraph 44 of Mr Fisher’s statement, referring to Baker & McKenzie’s subsequent report dated 27^th August 1997), and a submission that reinsurers’ correspondence disclosed a case that Tai Ping had, in effect, capitulated in the light of its own commercial interests, rather than on the basis of the legal merits (paragraph 45 et seq.).
46. The other reinsurers’ correspondence contained vigorous expressions of surprise and indignation at the way in which Tai Ping had, without further discussion or notice, moved from figures which had been arrived at, in lengthy meetings with legal advisers and reinsurers, as the highest that could be offered to Winbond, to the still higher figure at which settlement was reached. They also expressed concern about the part played in Tai Ping’s thinking by “local business considerations”. Swiss Re recorded a repeated reference by Tai Ping of its worries about “damage to reputation” and “loss of business” and asked rhetorically whether Tai Ping considered that Swiss Re should finance such concerns. Tai Ping’s own letter dated 1^st August 1997 said, as the judge noted, that the considerations which had influenced Tai Ping included “the hard pressure of Ministry of Finance, the publicity concern of Insurers’ social image”.
47. It is something of a mystery why Gan did not attempt to formulate any amended case on issue (B) in December 2000, or before the matter came on before the judge in 8^th February 2001. The only explanation we were given was that Gan did not wish to incur unnecessary expense, but that did not prevent it producing draft amendments on other aspects by its letter dated 5^th December 2000. It is true that, in order to resist an application under Part 24, the respondent to the application need not file a defence. If he has not already done so, the time for doing so is suspended - see Part 24.4(2) – and any factual defence which the respondent may wish to advance will simply appear in the evidence it files under Part 24.5(1). The position is somewhat different if the respondent has already filed a defence. Even so, we have no doubt that circumstances can arise in which a respondent might, without presenting any formal draft, properly raise in evidence a new factual defence, particularly one which had only just come to its attention and which must necessarily depend for its merits on further disclosure of documents and information by the applicant. A decision to give judgment under Part 24 is no mere procedural decision. It is one which deprives the respondent of any opportunity ever to pursue a claim or defence, which is said to have no real prospect of success, in this case before full documentation or information is available. Nevertheless, it is incumbent on a respondent to make sufficiently clear in a concise way the nature of any such proposed claim or defence.
48. In the light of Mr Fisher’s somewhat diffuse statement, the absence of any draft amendment and the submissions before him, the judge considered that Gan should be confined to its pleaded case, although, for good measure, he added two comments on Mr Fisher’s new points. We do not of course have a transcript of the submissions before him, although we have counsel’s skeleton before the judge and the original skeleton lodged to seek permission to appeal. It seems to be fair comment that the principal emphasis placed before him was on Tai Ping’s dealings with other reinsurers and on the fact and severity of the criticisms levelled in this regard by such reinsurers.
49. Subsequently to the hearing before the judge, Gan has sought to formalise and regularise its case by “volunteering” particulars. These are still based on the other reinsurers’ correspondence, but they identify specific respects in which, it is submitted, Gan ought to be allowed to pursue a case that Tai Ping’s conduct was unbusinesslike. Their basic theme is that the correspondence asserts and/or raises the inference that the settlement far exceeded any figure which could be justified by the prospects, as discussed and assessed at the time. The voluntary particulars further state that the correspondence asserts and/or raises the inference that other reinsurers were surprised or sceptical about a number of matters, such as (in summary) that (i) the settlement exceeded the level of any authorisation they had given, (ii) Tai Ping’s “sweeping concessions” simply capitulated, in the face of Winbond’s threat to claim punitive damages and/or in order to close the file, and/or because of local business considerations, damage to reputation or loss of business, (iii) the use of Liao & Partners and/or failure to involve Baker & McKenzie and the apparent difference between these firms regarding the facts and (iv) the failure to use a form of settlement prepared by Baker & McKenzie (the form used instead having according to counsel’s skeleton before the judge a number of defects summarised by Baker & McKenzie in its letter dated 27^th August 1997 written after the settlement).
50. These voluntary particulars may still be open to criticism for appearing to plead as material the fact that reinsurers’ criticisms were made, rather than the underlying facts asserted by the criticisms. But in his submissions before us Mr Edelman made clear that Gan’s case would be that Tai Ping acted in an unbusinesslike manner in some or all of the respects identified by the reinsurers. In particular Tai Ping went beyond any justifiable level of settlement, it side-lined Baker & McKenzie and it allowed extraneous factors to influence it to (in effect) give in to Tai Ping. It seems quite likely that, despite the way in which they are drafted, that was what the voluntary particulars also intend. Any actual amendment of the pleadings will no doubt make clear that the case intended relies on the actual facts being as reinsurers asserted, and not on the making of the assertions.
51. In response, Mr Railton maintained his submission that the judge was right to approach the matter on the basis of the pleaded case and submitted that we should do so too. He further submitted that even Gan’s case as now put still lacked any real prospect at trial. In this last respect, Mr Railton pointed to a report of the adjusters, GAB Robins, dated 12th August 1997, stating their conclusion that the settlement was “not unreasonable” and recommending it “for favourable consideration”. This was, of course, written after the event in circumstances which have not been investigated. Mr Railton also relied, as did the judge, on the absence of any evidence that Winbond’s claim could have been settled for less than it as, although Mr Railton qualified this by adding that “the closest that Gan comes to this is to suggest that Tai Ping gave in too early and settled for too much as a result of local pressure”. The qualification is, in our judgment, of relevance. The matters which Gan now wishes to raise go beyond reliance on mere “views” of reinsurers about the appropriateness of the settlement. So viewed, the other reinsurers give sufficient chapter and verse about their complaints, to justify further enquiry as to whether or not Tai Ping did handle this claim in a reasonable and businesslike manner. We are looking at the matter at an interim stage, before full discovery. Although there is an onus on Gan, Gan was not itself involved at the time and its only source of information is what Tai Ping happens to have disclosed to Gan by Mr Hayden’s affidavit. The court should not, in this situation, set too high a barrier to further investigation.
52. The same applies, it seems to us, to the submission (adopted by the judge) that the evidence does not positively assert that a lesser settlement could have been reached. The obligation is to reach a settlement in a reasonable and businesslike manner. If, as we consider, there is now a case meriting further investigation as to whether Tai Ping did act in such a manner, there seems to us also to be a sufficiently real prospect that this may have had an effect on the ultimate settlement figure, to justify further investigation and trial. The gist of reinsurers’ complaints was, after all, that carefully considered settlement figures perceived as maxima had been exceeded, and that Tai Ping may have been influenced by extraneous matters (although, we add, we heard no argument on the question whether and to what extent the matters referred to by reinsurers would count as extraneous in this context). In this connection, we add that it seems to us very arguable, as Gan submitted, that the judge under-estimated the difference between the settlement level which most reinsurers were prepared to contemplate and the level at which Tai Ping, without their consent, in fact settled.
53. In these circumstances, we have come to the conclusion that, however the matter may have been put and may have appeared before the judge, it would be wrong now to refuse to allow Gan to pursue its defence that Tai Ping acted in an unbusinesslike manner in making the settlement it did. We have some sympathy with the judge’s refusal to look beyond the pleadings, having regard to the uncertainty and imprecision regarding the nature of the broader case being presented to him. We are not well placed to judge how precisely the matter was argued, and in any event we consider that Gan’s lawyers should have set out the new points Gan would wish to add to the existing particulars of its reply in a concise written form in advance of the hearing. However that may be, we are confident, at least in the light of the voluntary particulars and the further explanation of Gan’s case given before us by Mr Edelman, that Part 24 is now at all events inappropriate.
54. We would accordingly set aside the judge’s order in relation to this part of Gan’s case. We will hear counsel on the precise form of order appropriate to give effect to this judgment.

Order:

55. The Claimant's appeal be allowed in part and dismissed in part and that the Order, dated 8^th February 2001, of the Honourable Mr Justice Andrew Smith, be further varied (further to the variations effected by this Court's Order of 3^rd July 2001) as hereinafter set out:
56. The Claimant to be at liberty to advance at trial the Claimants' contention, as set out in paragraph 22 (1^st line) and paragraph 36 of their Re-Amended Points of Reply, to the effect that Tai Ping did not act in a proper and businesslike manner in reaching and making its settlement with Winbond.
57. Paragraph 8 of the Re-Amended Points of Claim and the words "and without having co-operated with the Claimant in respect of the matters set out above" in paragraph 9 of the Re-Amended Points of Claim, be struck out, the Claimants having no reasonable prospect of succeeding on this issue at trial.
58. Costs before Andrew Smith J to remain undisturbed.
59. Costs before the Court of Appeal on this appeal to be costs in the case.
(Order not part of approved judgment)