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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Wise (Underwriting Agency) Ltd & Ors v Grupo Nacional Provincial SA [2004] EWCA Civ 962 (20 July 2004)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/962.html
Cite as: [2004] EWCA Civ 962
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Simon
Strand, London, WC2A 2LL |
||
B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE RIX
and
THE RIGHT HONOURABLE LORD JUSTICE LONGMORE
____________________
| WISE (UNDERWRITING AGENCY) LTD & Ors |
Claimant/ Respondent |
|
| And - |
||
| GRUPO NACIONAL PROVINCIAL S.A. |
Defendant/Appellant |
____________________
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Nigel Cooper (instructed by Messrs Waltons & Morse) for the Respondent
____________________
Crown Copyright ©
- This appeal lies between London reinsurers and a Mexican insurance company and concerns the reinsurance of cargo cover for a Cancun retailer's imports of luxury goods from Miami. The essence of the dispute is the reinsurers' complaint that they were not told that the retailer imported Rolex and other high-value branded watches. The reinsurers avoided their contract on that basis. At trial there were issues of misrepresentation, materiality, waiver, inducement, and affirmation. Apart from misrepresentation, the judge decided each of those issues against the reinsured. On appeal, the reinsured has not pursued the issue of materiality, nor given much prominence to the issue of inducement. The real battle-ground has been waiver and affirmation.
- The reinsured acknowledges that the appeal is one of fact, and makes no complaint of the judge's statements of law. Nevertheless, the appeal has raised interesting points relating, in the case of the waiver issue, to the application of principle to fact, and, in the case of the affirmation issue, to the court of appeal's position as a finder of fact.
- There was no policy. The reinsurance contract was made on about 28 December 2000 on the basis of a slip presentation, which, unusually, was not even initialled by the reinsurers' underwriter. The slip provided as follows:
- Ordinary Transit Risk terrestrial, maritime and air
- Total and/or partial theft.
- Wetting
- Spots
- Pollution
- All risk of cargo as per GNP wording
- Warehouse to warehouse
- Theft by bulk by hole [sic]
- Breakage, bump, bend or crack
- Oxidation
- Contact with other charges [cargoes?]
- Spillage
- Strikes and civil commotion
- Loading and unloading manoeuvres.
- Damage for derailed. [sic]
- Lay up for 15 fifteen days
- Cancellation clause (60 days)
- Cooperation clause as per GNP wording"
- The slip contained an Information clause as follows:
- There was also information concerning the logistics of the transport and security measures, eg that at Miami consolidation was made for all the North American and European suppliers.
- The judge, Simon J, found that the meaning of various parts of the slip conditions and information was not clear, even allowing for spelling mistakes. It was common ground that the slip, which had as a matter of fact been translated from Spanish and was on the notepaper of the Mexican producing brokers, Grupo Internacional de Reaseguro ("GIR"), was clearly the product of a non-English speaker.
- The original insured was, as stated in the slip, Perfumeria Ultra SA ("Perfumeria") of Cancun and Miami. Its Mexican insurer, the second largest insurance company in Mexico, was Grupo Nacional Provincial SA ("GNP"), here the appellants. The reinsurers were a group of Lloyd's syndicates for whom WISE (Underwriting Agency) Ltd, here the respondents, entered into the slip contract (the "reinsurers"). The reinsurers' cargo underwriter was Mr Roger Bennett.
- GIR acted as GNP's reinsurance brokers. In May 2000 it approached Collard & Partners ("Collards"), London reinsurance brokers to place reinsurance on the London market. Vic Lancaster-Smith was employed by Collards as a placing broker with responsibility inter alia for Latin American and, in particular, Mexican reinsurance business. With his assistance, Collards ceded the Perfumeria risk at that time to HIH Insurance (Asia) Ltd ("HIH") under an open cover. In November 2000 Mr Lancaster-Smith received instructions to cancel the HIH cover as at the end of 2000 and seek new reinsurance. On this occasion, he employed a facility from WISE under which Collards could place, on a facultative basis, marine cargo reinsurance in respect of business primarily originating from the Americas. He negotiated the placing with Mr Bennett, whom he knew well. He had done business with him over a number of years.
- The WISE open cover described the "Voyage" as "principally but not limited to sendings to/from/within Americas, Central/South and United States of America" and the "Interest" as "All Goods and/or Merchandise and/or Cargo of every description…" However, there was a long list of "Exclusions" which had been negotiated with Mr Bennett. The list included livestock, bloodstock, jewellers block, furriers block, cigarettes, fresh flowers, fish catch, mobile phones and computers and computer parts, and stock and/or goods at retail premises. Many of those exclusions had been listed at Mr Bennett's own request.
- The slips prepared by GIR for presentation to GNP and reinsurers respectively were in different languages. The slip presented to GNP was in Spanish, and also included additional information concerning packaging which (as translated for the purposes of the trial) was inter alia as follows:
- The judge commented:
- The loss occurred on the night of 3/4 April 2001 when a quantity of goods was stolen from a container parked outside the warehouse premises of Perfumeria in Cancun.
- First quantification of the loss as notified to GNP appears to have put it at only $50,000, but on 18 April 2001 Mr Lancaster-Smith visited the offices of WISE to tell Mr Mark Landymore, who handled cargo claims for the agency, of a loss in the sum of about $800,000. Mr Landymore drew up a memorandum of that meeting on the same day. The document is headed "Theft of Rolex watches", and it is apparent that a question was immediately raised as to whether the reinsurance covered watches: "How are watches within the scope of the Policy?" is the first of a number of "discussion points" referred to. It was said that a surveyor would be instructed, but without prejudice to liability. A surveyor subsequently reported to the reinsurers on 16 July 2001 that the stolen items amounted to a cost value of $817,798, of which some $700,000 related to Rolex watches. The claim ultimately litigated reflected the same figures, as adjusted for the agreed deductible and the reinsurers' interest of 90%.
- The suggestion that watches were not covered by the reinsurance was an odd one. The exclusions did not include watches and the interest clause expressly covered "All real and personal property of any kind and description…All the shipments done by the insured consistent in but not limited to…jewelery…" Even so, Mr Landymore's memorandum includes a manuscript entry also dated 18 April to the effect that Mr Lancaster-Smith "Agreed that it was never the intention to cover "watches"". Mr Bennett, who shared an office with Mr Landymore, agreed that he saw a draft version of Mr Landymore's memorandum the same day. His witness statement, however, makes an additional and different point from that concerning coverage, to the effect that when he was told of the claim –
- Two days later, on 20 April 2001, Mr Lancaster-Smith went to visit Mr Bennett. Mr Bennett's evidence at trial concerning this meeting was to this effect (Day 1, page 78):
- That, of course, was reverting to the coverage point. When Mr Bennett was pressed about this, he agreed that he had not spoken on that occasion to Mr Lancaster-Smith of his concern about an unfair presentation and avoiding cover, and explained his silence on that score as follows (Day 1, page 95):
- The meeting of 20 April 2001 was a significant event for the purpose of the litigation, because it was GNP's case, although disputed by the reinsurers, that on that occasion Mr Bennett gave to Mr Lancaster-Smith an oral 60 day notice of cancellation under the reinsurance contract, as evidenced by an e-mail which Mr Lancaster-Smith sent on the same day to GIR in the following terms:
- That e-mail was not of course between the parties to this litigation, but on a further visit by Mr Lancaster-Smith to Mr Bennett's offices a copy of it was shown to Mr Bennett, who took another copy for his own files, from where it came forward in due course as part of the reinsurers' disclosure. That second meeting cannot be dated, other than that it appears to have taken place between 20 April and a third meeting between the two friends which occurred on about 21 May.
- Mr Lancaster-Smith said that on that (third) occasion he had asked Mr Bennett to withdraw the notice of cancellation. He did so because on 17 May GIR had e-mailed him as follows:
- However, Mr Bennett had refused to do so, and Mr Lancaster-Smith therefore replied to GIR by e-mail on 21 May as follows:
- Mr Bennett, however, denied having given any notice of cancellation. His evidence about the three meetings was in these terms. As for 20 April, he was challenged with Mr Lancaster-Smith's e-mail to GIR of that day and asked (Day 1, page 127):
- Mr Bennett was immediately pressed about the copy of that e-mail on his file (Day 1, pages 127/128):
- Finally, Mr Bennett was asked about the meeting of around 21 May, which he said that he did not recall, adding (Day 1, page 128):
- Because the reinsurers were claimants in this litigation, seeking declarations of non-liability, Mr Bennett had given evidence prior to Mr Lancaster-Smith. When the latter came into the witness-box he appears to have been rendered somewhat uncertain either because his memory had faded with the passing of time and/or because he was influenced by Mr Bennett's own certainty. In his original witness statement dated 3 April 2002 (at paras 47/50) he had appeared confident both that on 20 April Mr Bennett had given a 60 day notice of cancellation and that around 21 May Mr Bennett had been asked but had refused to retract that notice. At that time there had been no denial in the reinsurers' pleadings that a notice of cancellation had been discussed or even given, only that it had not amounted to an affirmation of the contract. Thus GNP's defence had pleaded (at para 15) that "on or about 20 April 2001 the [reinsurers] gave 60 days' notice of cancellation of the Cession. The [reinsurers] thereby elected to affirm the Cession": to which the reinsurers' reply had pleaded (at para 9):
- There is no suggestion in that pleading, to which a standard statement of truth was subscribed, that a notice of cancellation had not been given, only that it did not amount to an affirmation of the contract.
- However, in his witness statement exchanged in April 2003 Mr Bennett had said this (at para 29):
- In his supplementary witness statement of June 2003 Mr Lancaster-Smith responded to paragraph 29 of Mr Bennett's statement in terms which might have suggested that he was in large part relying on the terms of the contemporaneous documents rather than on his own memory. He said:
- In cross-examination at trial, Mr Lancaster-Smith was pressed about his recollection of these meetings (at Day 2, page 143/152), with some success:
- I will have to consider the effect of this evidence below when I reach GNP's appeal on the issue of affirmation. For the present I would observe that it was not until 28 June 2001, in a letter from WISE to Collards, that a non-disclosure point was formally taken, or indeed that there is any contemporary documentary evidence that the point was under consideration. By that time any 60 day notice given on 20 April would have run its course. WISE's letter, which is signed by Mr Landymore, began as follows:
- On 10 August 2001 there was a further communication from the reinsurers, stating that they were avoiding the reinsurance for non-disclosure of the following matters:
- The reinsurers began these proceedings, claiming declarations of non-liability, on 24 August 2001, within a fortnight of their avoidance of their contract. Their case of non-disclosure reflected but also elaborated the terms of their letter of 10 August. They claimed of three undisclosed circumstances: (1) that the goods being shipped included Rolexes and other high-value branded watches; (2) that Perfumeria was the only authorised dealer for Rolex watches in the state of Quintana Roo, Mexico; and (3) that the shipment of high-value branded watches such as Rolexes was or might be on a regular basis. At that time there was no allegation of misrepresentation. As stated above, GNP relied in their defence inter alia on affirmation by reason of the giving on 20 April 2001 of a notice of cancellation, and in their reply the reinsurers denied that by giving 60 days notice of cancellation they were thereby electing to affirm the contract. That reply was served on 19 June 2002.
- On 18 March 2003 the reinsurers amended their particulars of claim to include allegations of misrepresentation. These were that in the course of the negotiations for placing the reinsurance Mr Lancaster-Smith told Mr Bennett that Perfumeria's shipments would generally consist of goods for the tourist trade with only occasional imports of high value for display, and that the risk generally covered was cosmetics. On 27 February 2003 Mr Bennett had signed a witness statement supporting these allegations. He also there said that he did not give a notice of cancellation. When that witness statement was later exchanged, it was the first time that GNP had been told that the giving of the notice of cancellation was in issue.
- The trial took place over four days in late July 2003. Mr Lancaster-Smith and Mr Bennett were the principal witnesses of fact, but there were a number of others, including Mr Landymore. There were also expert underwriting witnesses on the issue of materiality: Mr Nicholas Gooding, of Wellington Underwriting Agencies Limited who gave evidence on behalf of the reinsurers, and Mr Kenneth Boden, now retired after marine underwriting for a number of Lloyd's syndicates, on behalf of GNP.
- The judge made the following comments in his judgment about these principal witnesses. First, that he was sceptical about Mr Bennett's case of misrepresentation which, as he pointed out, was raised by way of late amendment and substantially elaborated in the course of evidence (para 16). Secondly, and specifically in the context of inducement, that Mr Bennett's evidence was not satisfactory in a number of respects, whereas Mr Lancaster-Smith was in contrast an engagingly frank witness (para 43). Thirdly, that Mr Bennett's review of the slip presentation was casual. Fourthly, however, that when he said that he never covered watches and would not knowingly have done so, he was telling the truth (ibid). Fifthly, that he was unable to accept the entirety of the evidence of either expert (para 26).
- Having rejected the reinsurers' case on misrepresentation, the judge turned next to the question of non-disclosure. He appears to have regarded the elements of material non-disclosure, viz knowledge by the assured (here GNP), materiality and non-disclosure, all as something which could be definitively decided before the question of waiver was considered. Thus he dealt with matters under the following headings: Were these circumstances known to GNP? Were these circumstances disclosed to the Reinsurers? Was the disclosure material? Waiver. Inducement. Affirmation.
- He held that only the first of the three complaints of non-disclosure (see para above) was known or ought to have been known to GNP: therefore the reinsurers' case on avoidance went forward only on the basis that GNP ought to have disclosed that the shipments included Rolexes and other high-value branded watches. There is no appeal from that finding. He next rejected a submission that there had in fact been disclosure of that circumstance under the information provided in the slip about "clocks". The characteristic of a watch, he said, in contradistinction to a clock, is its portability, by which I understand him to mean its portability on the person. He therefore accepted the reinsurers' submission that –
- I understand that, in its context, to be a decision as to the meaning of the document. The question of waiver has not yet been reached. But there is a danger that it has been anticipated. There is no appeal against that decision, as a matter of language.
- Thirdly, the judge considered the issue of materiality and concluded that because watches and in particular brands such as Rolex are regarded by underwriters as attractive targets for thieves, being portable, high value and easily disposable, their inclusion in the shipments was, subject to the issue of waiver, a fact material to be disclosed. There is no longer any appeal from that finding of materiality.
- The remaining issues of waiver, inducement and affirmation are the three issues which remain as the subject matter of this appeal.
- The judge found the relevant law in MacGillivray on Insurance Law, 10th ed, 2003 at para 17-83, and in citations from CTI v. Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd's Rep 476 at 496 and 511, and concluded briefly as follows (at para 37):
- On this appeal, Mr Gavin Kealey QC, on behalf of GNP, has emphasised the following matters. Under the information provided in the slip, large quantities and values of 'clocks' were being regularly shipped from Miami to Cancun. Indeed, it was the single most important category of goods in financial terms identified in the slip, with average values of individual items at $1,500 and highest values up to $18,000, and maximum values per shipment of up to $1,000,000 and three shipments per month. Cancun was well known to be a high class tourist resort within a duty-free zone, and in any event the nature of the retail trade in Cancun was something which the reinsurers in the ordinary course of their business ought to have known (see the Marine Insurance Act, 1906 at section 18(3)(b)). In such circumstances a reasonable underwriter ought to have known that watches including high value branded watches would be a typical part of Perfumeria's trade. Jewellery was also mentioned in the slip, with its potential high values referred to. The underwriters who gave evidence in the case, namely Mr Bennett, Mr Gooding and Mr Boden, as well as the judge, agreed that it was apparent that the slip had been written by someone whose language was not English, and that for that and other reasons the presentation would give rise to numerous inquiries. Indeed, it was agreed that on any view and taken as a whole the kinds of goods shipped from Miami to Cancun by Perfumeria were attractive to thieves and that the trade in general would need caution on the part of an underwriter. Moreover, it was Mr Bennett's own case that he would never have covered watches, and never had. In these circumstances, the reference to 'clocks' begged further inquiry: What are these clocks carried from Miami to Cancun with such high values and with such regular shipments? The possibility that 'clocks' was a mistranslation from the Spanish could not be far away, and in any event the idea of millions of dollars of expensive clocks being transported to Cancun and sold there was astonishing.
- On behalf of the reinsurers, on the other hand, Mr Nigel Cooper submitted that the judge had been entitled to come to the conclusion he had, for the reasons he had given. An appeal on the facts should only be allowed in the most exceptional circumstances and only if this court were to be satisfied that the judge was plainly wrong: Assicurazioni Generali SpA v. Arab Insurance Group [2003] 1 WLR 577, especially at paragraphs 12, 22, 196/7. GNP was again seeking, despite their failure before the judge, to subvert the overriding obligation on an assured to make a fair presentation. It was a matter of common-sense that 'clocks' was to be treated as a reference to clocks and clocks only. The judge was right to say that a London underwriter should be entitled to accept such information about the description of goods at face value. Even Mr Boden, GNP's expert, had agreed that an underwriter who accepted the placement at face value was not being unreasonable (Day 3, page 78); and Mr Lancaster-Smith agreed that there was nothing which should have put Mr Bennett on inquiry (Day 2, page 136). Why should an underwriter have to reach for his (Spanish) dictionary? He was not obliged to play detective. Mr Cooper accepted that the doctrine of waiver in this context was ultimately founded in the concept of fairness, but there was nothing unfair in taking the presentation of a large Mexican insurer, assisted by professional Lloyd's brokers, at face value.
- Although the parties did not disagree about the applicable legal principles, and in particular were agreed that the ultimate question was, as Parker LJ said in CTI at 511/512, whether the underwriter is put on inquiry by the terms of the presentation (and yet fails to ask the question which would have disclosed the non-disclosure relied upon), I do not think that it is ultimately possible to adjudicate between the opposing positions reflected in the appeal on this issue without giving some further consideration to the place of waiver in this context.
- Section 18 of the 1906 Act provides as follows:
- It follows that where the section 18(3)(c) doctrine of waiver applies, there is no need for disclosure, and it is impossible to talk of non-disclosure or even of materiality. The section 18(1) obligation of disclosure is subject to section 18(3) ("Subject to the provisions of this section"). Section 18(3) sets out examples where disclosure is not necessary, either because the information is not material (eg section 18(3)(a) and (d)), or because it is in any event known or waived (subsection (b) and (c)).
- In truth it is not possible to determine whether a presentation is unfair or not without taking into account, where the issue is raised, the other side of the section 18 coin. It will be recalled that the setting of section 18 is that "the utmost good faith" is to be observed by both parties (section 17). It is a mutual duty: Banque Keyser Ullmann SA v. Skandia (UK) Insurance Co Ltd [1990] 1 QB 665, [1991] 2 AC 249. As Mr Cooper accepted in the course of submissions, the doctrine of waiver is ultimately founded on the concept of fairness. It would not in my judgment be fair to castigate a presentation as unfair and thus put an assured in peril of the draconian remedy of avoidance where an insured had waived the relevant information. The mutuality of the doctrine of good faith underlines this proposition.
- Thus in the seminal case of Carter v. Boehm (1766) 3 Burr 1905 Lord Mansfield spoke of the danger of the insurer's silence as unbalancing the fairness of the contract, at 1918/1919:
- Much water has, of course, flowed under the bridge since Carter v. Boehm: but that passage in Lord Mansfield's judgment has in recent years been given modern resonance by Lord Lloyd of Berwick in Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1995] 1 AC 501 at 555E and by Lord Hobhouse of Woodborough in Manifest Shipping Co Ltd v. Uni-Polaris Insurance Co Ltd [2003] 1 AC 469 at paragraph 57 when he said that –
- The leading modern case on waiver is CTI. Kerr LJ stressed the mutual considerations in this passage of his famous judgment at 496/7:
- The "so that" of that passage well expresses the balanced nuance of the question. However, a passage at 497 most of which was cited by Simon J below could possibly lead to the impression that the ultimate fairness of a presentation is to be judged before any question of waiver can be taken into account. Kerr LJ said –
- I can visualise that the reference in that passage to section 18(2) in the absence of section 18(3) might support the view that the fairness of a presentation can be judged without taking into account the latter subsection. The statute, however, makes it clear that that is impossible and, in my judgment, Kerr LJ immediately goes on to indicate that that is not what he should be taken to mean, for he goes on to discuss an extract from the judgment of Lord Esher MR in Asfar v. Blundell [1896] 1 QB 123 at 129 in the following terms. Lord Esher said:
- Kerr LJ commented that this view of things was explicable as long as what was omitted from disclosure was something normal, but not if it was unusual or special. He said (at 498) –
- Mr Cooper himself relied in his skeleton on Greenhill. That was a case in which the assured cargo owner had failed to disclose to underwriters of the cargo's on-carriage across the Atlantic from Halifax to Nantes the plainly material fact that the cargo had already suffered injury during pre-carriage from New York to Halifax! A defence of waiver was run to the effect that the underwriter was on inquiry – on the basis that he must be prepared for the possibility of any risk. In these circumstances it is not surprising that Scrutton LJ spoke in these terms, in a case in which the respondent was not called upon, at 85/87:
- It seems to me that none of that is of any relevance to this case, which is not about unusual or abnormal incidents. I note that Simon J did not in this context cite from or refer to Greenhill. Nor has it even been submitted that the importation to or sale in Cancun of Rolex or other high value watches is something unusual or abnormal. Of course, the evidence would not have supported such a submission. Whereas Scrutton LJ's comments are entirely understandable in the context of the extreme argument which was put to that court, it must, in general, be going too far to say that the doctrine of waiver only operates in respect of matters which an insurer is "bound to know", for that would seek to collapse section 18(3)(c) into subsection (b).
- To revert to CTI, Parker LJ dealt with the matter of waiver in this way (at 511/2):
- Finally, Stephenson LJ said this (at 529):
- All that was said in the context in CTI of a dispute over whether the assured's previous claims experience had been fairly disclosed. On the facts it was held to be "not merely an unfair summary, but a gross distortion of the true picture" (at 499).
- There is one other passage in the judgment of Kerr LJ (at 496) to which I should refer (although neither the parties nor the judge relied on it) where he criticised the trial judge because –
- What did Kerr LJ mean in that passage? In Iron Trades Mutual Insurance Co Ltd v. Companhia de Seguros Imperio [1991] 1 Re LR 213 at 224 Hobhouse J, immediately before referring to that passage, said:
- I do not think that this can have been intended as anything other than a way of emphasising that where there is real unfairness on the part of the proposer, he should not and perhaps cannot look to the doctrine of waiver to save him. If anything more was intended, then, in respectful disagreement with a master of this branch of the law, I would emphasise that such an analysis is at odds with section 18 of the Act. For that seeks to identify situations where, although there is in one sense a failure by a proposer to mention facts which are potentially material, there may ultimately be no material non-disclosure and thus no breach of the utmost duty of good faith (in modern parlance, and by way of summary, no "unfair presentation") because of the absence of any need to make such disclosure. Ultimately, therefore, it is impossible to state whether a presentation is unfair or not without taking the section 18(3) factors into account. Hobhouse J's analysis, if viewed too strictly, would simply foreclose any question of waiver, which cannot be right. For similar reasons, I do not regard Kerr LJ as stating a point of principle, as distinct from emphasising that a presentation comes first. Otherwise, he would simply have been at odds with Lord Esher's well known dictum from Asfar v. Blundell which Kerr LJ went on to discuss (see paras 51/52 above).
- I would therefore conclude that Kerr LJ and Hobhouse J were simply illustrating the point that if a presentation, without regard to waiver and section 18(3)(c), is prima facie to be viewed as unfair, then a proposer may be in difficulties. I would, however, again emphasise that in CTI the court was dealing with a grossly unfair presentation; and point out that in Iron Trades the passage on waiver was obiter, for Hobhouse J held that the defendant reinsurers had failed to establish an unfair presentation.
- In my judgment, the authorities on waiver have to be considered in the light of section 18 and, where subsection (3)(c) is concerned, Carter v. Boehm. It must in my view be remembered that the question is ultimately not whether an "unfair" presentation has been waived, but whether, taking both sides of the matter into consideration, the presentation is unfair or alternatively it would be unfair of the insurer to seek to avoid on a ground on which he was put on inquiry and should have satisfied himself.
- Thus it was that the parties were agreed before Simon J that the law was satisfactorily summarised in MacGillivray at para 17-83, where the following is found:
- Ultimately, it seems, the question is: Has the insurer been put fairly on inquiry about the existence of other material facts, which such inquiry would necessarily have revealed? The test has to be applied by reference to a reasonably careful insurer rather than the actual insurer, and not merely by reference to what such an insurer is told in the assured's actual presentation but also by reference to what he knows or ought to know, ie his section 18(3)(b) knowledge. The reasonably careful underwriter is neither a detective on the one hand nor lacking in common-sense on the other hand. Mere possibilities will not put him on inquiry, and very little if anything can make up for non-disclosure of the unusual or special. Overriding all, however, is the notion of fairness, and that applies mutually to both parties, even if the presentation starts with the would-be assured.
- It seems to me that the facts in the present case are not essentially in dispute, or if they are at all, only barely so. GNP made a detailed presentation and but for an error in the translation from the Spanish of a single word, relojes, no issue of non-disclosure would have arisen. This is not therefore a case, such as Greenhill, where an assured relies on mere possibilities. Nor is it a case where the non-disclosure is of something special or unusual. There is nothing special or unusual about a Cancun retailer such as Perfumeria selling watches, even valuable branded watches, and it was not suggested that there was. On the contrary, what would have been special, unusual, indeed to my mind extraordinary, is for Perfumeria to have been selling each year millions of dollars of valuable clocks, at an average cost (that is, as I understand the claim put forward, the cost to Perfumeria, inclusive of importation expenses) of $1500 each, rising to $18,000. A standard retail mark-up of such luxury goods is 100%, but whatever it might be, such goods are clearly going to sell at very serious prices. Despite Mr Gooding's ex post facto searching of the internet for examples of clocks which could sell at these price levels, let alone could explain this astonishing trade in a holiday resort, neither he (carriage clocks, "atmos" clocks) nor anyone else could really begin to make sense of GNP's information about "clocks". No one even suggested that Perfumeria was selling antique clocks.
- If, therefore, Perfumeria's clock trade was extraordinary and inexplicable, there was nevertheless something about which Mr Bennett was absolutely certain, and that was that he had never been prepared and would never be prepared to cover watches in transit. The judge said that he accepted Mr Bennett's firm evidence on this subject, even though it had been challenged at trial on the basis that in that case Mr Bennett would have negotiated an exclusion for watches in the underlying open cover. Moreover, Mr Bennett's evidence was that his aversion to watches, of which, since he had never covered them, he said he had no personal experience, reflected his market knowledge. Thus (at Day 1, pages 45/6) the following is found:
- The present issue is in these circumstances to my mind ultimately a very short point. The underwriter, speaking not only of his personal experience and aversion, but of his experience of the market generally, would not be willing to cover watches, but he does not say so and does not include them in his long list of exclusions. He is presented with a slip which speaks, in the context of Cancun, a well-known resort, of valuable shipments of jewellery and of a huge and regular trade in "clocks", indeed "clocks" are the single most important category of goods shipped for Perfumeria to Cancun. Jewellery to my mind would plainly be capable of including gold or jewelled watches. The slip has clearly been drawn up by a draftsman not entirely familiar with the English language: that is not surprising, for it has been drawn up and presented on GIR's own notepaper and GIR, like the would-be assured, GNP, comes from Mexico, where Spanish is the language. Mr Bennett is in business as a marine underwriter under the open cover facility granted to Collards to reinsure specifically trade between the Americas. I would regard it as a matter of essential common-sense, let alone as the act of the prudent underwriter put on inquiry, that a question be asked as to the clocks. The question might, I suppose, come in several forms. It might be, as Mr Kealey submits: "What are these clocks that are to be carried from Florida to Cancun with such high values and with such regular shipments?" Or it might be, less aggressively: "Could "clocks" be an error in translation for watches, or clocks and watches?" Or it might simply be: "I need to know something more about these clocks: it seems an unusual trade for Cancun." In whatever form the question came, it is inconceivable that it would not have led immediately to the disclosure that the clocks were watches, and indeed, given the values involved, high value branded watches. If the particular brand was then important, it would be as soon revealed that they were Rolexes. I am simply unable to accept the judge's conclusion that whereas "a focussed enquiry by a more alert underwriter would have eventually elicited the fact that the high-value brand name watches were being carried", this was not a "clear case". It would have taken a single simple question asked in response to an obvious problem. In answer to the test: Would a reasonably careful insurer have been fairly put on inquiry, given what he knew from GNP's presentation and his general section 18(b)(2) knowledge? The answer to my mind should be yes. If the question is instead the overriding question: Is the ultimate assessment of GNP's presentation that it is unfair, or would it be unfair to allow the reinsurers a remedy of avoidance in such a case? I would answer that the presentation was fair, and that it would be unfair to allow reinsurers to take advantage of an error of translation in a case where, on the evidence, an exclusion of watches would seem to have been the obvious solution.
- It is possible to elaborate this conclusion, but that in my judgment is the essence of it. Simon J came to the opposite conclusion, for briefly expressed reasons: it was not a "clear case" for the answer would only have been "eventually elicited"; an underwriter should be able to accept a description of goods to be insured "at face value"; the use of the word "clocks" in its context should not have raised any suspicion in the mind of a reasonable underwriter. On an exercise of judgment these are understandably conclusionary reasons. However, for reasons already expressed, I am unable to understand why the raising of a single question about a subject which, in context, would be close to a prudent underwriter's mind, viz the problem and exclusion of watches, should be described in these terms. Possibly the essence of the judge's approach is in his view that "In the normal case an underwriter on the London Market dealing with a London Broker should be able to accept at face value a description of goods to be insured at face value". The repetition of "at face value", although probably unintended, emphasises the essential thought. However, we are not concerned with "the normal case", but with this case. This was, of course, a transaction on the London market conducted in English: but the strength of the London market is its internationalism, and it was conducted with an underwriter specialising in transport between the Americas, indeed the open cover named GNP, a leading Mexican insurer, as one of only ten "Principal Cedants", all of them plainly Latin American firms.
- A question arose about the role of expert witnesses in assisting the court to answer a question under section 18(3)(c). The witnesses in this case appear to have been asked to address that question both in their reports and in their oral evidence. The judge does not appear expressly to have regarded their evidence as relevant to his decision on waiver: he does not mention them in that regard, only in the context of materiality, where experts have a well recognised role. Moreover, he was conscious that at times the experts were being asked to give evidence as to the meaning of words (Day 3, page 91). Nevertheless, we were referred by counsel for both parties to passages in the experts' evidence on the question of waiver. It seems to me that in as much as a section 18 waiver question may depend not only on materiality (subsection (2)), but also on what an insurer in the ordinary course of his business ought to know (subsection (3)(b)) and, for the purposes of subsection (3)(c) itself, on what a reasonably careful and prudent insurer would be put on inquiry about, there is room for evidence about industry knowledge and practice. But there is a grave danger that the expert witness will be used to answer the question which is ultimately for the judge. Moreover, in Thames and Mersey Marine Insurance Company Limited [1911] AC 529 at 538 Lord Alverstone CJ said that "The practice of underwriters as to accepting any risks or not making inquiries on particular points cannot, in my opinion, affect the duty as defined by statute, and cannot properly be received as evidence of waiver in any particular case." We were not, however, addressed on this topic by counsel other than in answer to our own enquiries, and in any event not by reference to any authority. In the circumstances, and especially as the judge does not appear to have been influenced by the experts, I am reluctant to enter further on the topic. There are, however, interesting and informative discussions on the subject, for instance in MacGillivray at paras 17-43/44 ("there remains the possibility that the witness, in representing current practice, may too easily be made the embodiment of the "prudent insurer"") and in Good Faith and Insurance Contracts, by Eggers, Picken and Foss, 2004, 2nd ed, at paras 18.10/14 ("The court may draw assistance from such evidence, but is not bound to accept it, especially where the expert testimony on behalf of the assured and the insurer are equally persuasive").
- In these circumstances, I do not think that reference to the experts' testimony is very profitable, but, as both parties urged upon the court respective passages from it, I will briefly allude to it. Mr Gooding started from a point of view that it was highly unlikely that he would have written the risk in the first place ("I was never particularly keen on goods transiting into Mexico", Day 3, page 27). He accepted that it was quite apparent that the slip had not been drafted by a natural English speaker and therefore agreed that "one would certainly want some clarification in terms of some of the expressions they used" (Day 3, page 28). He gave many examples of the inquiries which the slip would appropriately have generated, such as those "about the exact type of interest one was insuring" (Day 3, page 30) and including further details about the jewellery ("would beg further enquiry", Day 3, page 44) and even questions about the robustness of valuable clocks to stand up to ocean transit (Day 3, pages 43 and 52) – a question which in my view would immediately have exposed the linguistic error at the root of this litigation – but the one matter which he resolutely sought to oppose was the idea that he would ask any (other) question about clocks ("I know what "clock" means"). Even so, when he was asked whether he would have wanted to know "what sort of clocks are we talking about here?", he said "…I probably would ask but you can also make some assumptions" (Day 3, pages 53/54). It emerged that at the $18,000 end "one could certainly imagine freestanding clocks that one sees in lawyers' offices and those clocks called atmos clocks" (Day 3, page 54). He accepted that if "watches" had been mentioned instead of clocks, then, given the values mentioned in the slip, he would be on notice of the shipment of high value branded watches including Rolexes (Day 3, page 58). He accepted that some of the interests mentioned in the slip were similar to goods shipped to duty free areas and that he knew Cancun was a duty free area (Day 3, pages 32/33).
- Mr Boden also knew Cancun as a duty free area, typical of other similar holiday spots, such as the Caribbean (Day 3, page 76). He agreed with Mr Gooding that he too would not have been keen on this risk, and that anything out of Miami into Central or South America would need to be looked at "rather carefully, if at all" (Day 3, page 84). He had personal experience in the London market of checking Italian translations (Day 3, page 75). He regarded higher value watches, such as those made with gold or as fashion items, as jewellery, albeit the dividing line between jewellery and a mere time-piece was cloudy (Day 3, pages 89/90). As for the information about clocks, he said (at Day 3, page 77) –
- That is very much of a mixed bag, with on the whole the experts giving merely their personal views, which is unlikely to be of much, if any, help to a judge. Simon J appears to have been influenced by Mr Boden's last cited answer, and, as far as it goes, it supports his decision. In my judgment, however, reliance on that is to wrest a single answer out of the evidence as a whole. What strikes me is the sheer common-sense of Mr Boden's answer, which I highlight not as a matter of evidence but as illustrating what I see as the issue: "I cannot see why they would be taking clocks to Mexico". On the other hand, I am deeply sceptical, again as a matter of common-sense and my own, if somewhat more limited experience of the world – unlike both Mr Gooding and Mr Boden, I have not been to Cancun but I have heard of it – of the evidence given by Mr Gooding in the following passage, which again I cite not as a matter of evidence but as throwing light on the issue (at Day 3, pages 55/56):
- I can only say that most of those answers, which after all were addressed to a Cancun shop in a duty free area in the context of this presentation, with jewellery of up to $50,000 in value and clocks as the main item in terms of values, with average pieces at a cost price of $1,500 and a highest value of $18,000, strike me as utterly unbusinesslike. Tea towels, cheaper watches and $1,500 (import cost) carriage clocks. One need only stroll through a duty free area such as Heathrow (reduplicated in its essentials in many parts of the world) to see how unreasonable that picture is.
- I have asked myself whether, on an issue where there was no disagreement as to the legal test to be applied, and where a judicial assessment has to be made as to a relatively simple enquiry, it is legitimate for this court to arrive at a different solution from that favoured by the judge. However, this issue did not depend on the credibility of the witnesses, and the underlying facts were barely in dispute. Nor does it seem to me that the answer to the essential question posed (Would a prudent insurer have been put fairly on inquiry?) involves an assessment of a number of different factors which have to be weighed against each other, a matter of degree closely analogous to an exercise of discretion. Nor again does it seem to me that the test is analogous to a vague and impressionistic standard such as similarity of design (cf Designers Guild Ltd v. Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR 2416). In these circumstances it seems to me that Mr Cooper's reliance on Assicurazione Generali v. Arab Insurance Group, if he intended reference of that authority to this issue, was for the most part beside the mark.
- Perhaps the most relevant dictum in this connection, however, is Lord Hoffmann's much cited remarks from Biogen Inc v. Medeva plc [1997] RPC 1 at 45, quoted in Assicurazioni itself at para 19 and concluding in this sentence –
- The matter can perhaps be tested against Longmore LJ's reasons for dismissing the appeal. It is possible that this is simply a narrow disagreement over the application of the law to the facts, for instance as to whether the case for waiver is sufficiently "clear" either for the operation of the doctrine at all or at any rate for its operation at the level of appeal. On reflection, however, I would like to suggest that our difference proceeds from something somewhat broader, and that is from our respective perspectives of the significance of the non-disclosure complained of and of the lesson of Carter v. Boehm. Thus Longmore LJ begins his discussion of waiver (at para 104 below) by commenting on "the now uncontested fact that it was material for reinsurers to be informed that high value brand name watches were to be carried as part of the cargo to be insured". However, all that was uncontested was that the carriage of such watches was material: since that concession was made subject to the appeal on waiver, it was always and remained GNP's case that disclosure of more than was said was not necessary to a fair presentation.
- Similarly, in approaching the application of the law to the facts, Longmore LJ says (at para 114 below) that because an insurer is entitled to assume that the presentation to him is fair, "he must be entitled to take at face value what is said on the slip" and Peter Gibson LJ writes to similar effect (at para 132 below). Simon J himself founded himself on the notion that the solution depended on the concept of face value. I would not wish to undervalue to any degree the importance of what is said (or not said) in a presentation, that is, as it were, the prima facie position. But unless "face value" is just a way of signalling a conclusion, it cannot be used as the essential part of the reasoning without wholly undermining the doctrine of waiver. It is only, subject to the value of the argument on waiver, the "first face" of the argument. It may of course prove to be the critical and determining factor for the ultimate decision that has to be made, but, in my judgment, the issue of fairness cannot be resolved without considering the matter in the round. Where a proposer for insurance makes an error in the translation of his presentation, but the error, against the background of the trade, begs a simple question (and I would say an obvious one), and does so in circumstances where the insurer knows (but the proposer does not) that he would never be prepared to insure the goods in question (here, watches) but keeps that information to himself, I think it is unfair of the insurer to say that he has been dealt with unfairly and is entitled to treat his contract as something he can avoid. I do not accept that GNP's information can be said to put the reinsurers off inquiry. Mr Bennett knew that he would not insure watches. He is asked to insure clocks. I do not understand how the question-begging reference to millions of dollars of clocks puts Mr Bennett off the inquiry he has in his mind, the concern about watches with which on the evidence he approaches the proposal.
- Finally, and with reference to Carter v. Boehm, I would refer to where Longmore LJ (at para 117 below) cites Marc Rich & Co v. Portman [1996] 1 Lloyd's Rep 430, [1997] 1 Lloyd's Rep 225 (CA). That was another case, like CTI, of undisclosed loss records, this time in the context of a comparatively new and rarely used underwriting market in which liability to demurrage was insured. It was held, not surprisingly, that in the absence of disclosure of the loss experience, the presentation was unfair (at 443). There was nothing at all to put the underwriter on enquiry. At first instance Longmore LJ held himself bound by CTI and cited Greenhill. In such circumstances he was not impressed by a citation of Carter v. Boehm (at 444). The decision, if I may say so with respect, was plainly correct, but I beg leave to doubt whether Carter v. Boehm, unhelpful as its citation may have been on the facts of that case, was, to my thinking, adequately recognised in the passage where my Lord said that "it takes one into another world. I have to be governed by the Marine Insurance Act, 1906…" In this court Carter v. Boehm was dealt with more kindly, eg at 231 where Leggatt LJ remarked that "The Act follows closely the pattern indicated by Lord Mansfield in Carter v. Boehm…" As for the decision, this court dealt with the waiver claim on the basis that the failure to disclose the insured's loss experience made the resulting presentation "wholly unfair", just as in CTI (at 234). For good measure, Leggatt LJ went on to point out that nothing was disclosed to put the underwriter on inquiry, that there was no finding that the insured's losses were not unusual, and that an insured's loss experience is always special to the insured.
- I draw attention to these matters, because I think that at bottom our different conclusions about this appeal on the subject of waiver may reflect a different attitude to the relevance of Carter v. Boehm in this connection. Lord Lloyd in Pine Top and Lord Hobhouse in Manifest Shipping (see at para 48 above) have reminded us in recent years of Lord Mansfield's continued influence in this area, for all the changes which have been wrought over the centuries since he sought to introduce a doctrine of good faith not only into insurance law but also (unsuccessfully) into the general law of contract. As Professor Malcolm Clarke has observed in a closely analogous context at para 23-12A of The Law of Insurance Contracts, 2004: "Today, there is some movement back to Lord Mansfield" (and see also para 23-13C).
- Rich & Portman was not cited to the court by either counsel, so that I am a little concerned at drawing more out of it than a response to Longmore LJ's reliance on it. However, I would observe that there was another argument in that case which it seems to me comes much closer to the facts of this case than the issue of waiver of non-disclosure of Marc Rich's loss experience. The underwriters also relied on non-disclosure of the characteristics of the port to which Marc Rich traded (as being likely to increase the liability to demurrage). In that respect Longmore LJ would have been willing, it seems, to contemplate that there would have been waiver (see at 445).
- In sum, with genuine respect for the considerations which have led the judge and my Lords to a different conclusion on this issue, I think that there is more that divides us than simply a different reading of the facts of this case. I would allow the appeal on this issue.
- The factual material relating to the issue of affirmation, however, is much richer and here there certainly is a question as to the credibility of the witnesses, for Mr Lancaster-Smith and Mr Bennett gave conflicting evidence as to the giving of a notice of cancellation. I refer to the oral and documentary material set out above.
- It is now common ground that, contrary to the point originally taken in the reinsurers' reply, a notice of cancellation pursuant to the contract can amount to its affirmation, provided it is done at a time when the reinsurers know of their right to avoid for non-disclosure: see Mint Security Ltd v. Blair [1982] 1 Lloyd's Rep 188 at 198, Iron Trades Mutual Insurance Co Ltd v. Companhia de Seguros Imperio [1991] 1 Re LR 213 at 225.
- The judge rejected GNP's case of affirmation in these two paragraphs:
- It is to my mind plain from those reasons that the judge was not prepared to go as far as to accept Mr Bennett's evidence that he had never communicated a cancellation to Mr Lancaster-Smith. He seems rather to acknowledge that something to the point was said ("what Mr Bennett had said"), but that it did not amount to an unequivocal and informed choice to affirm. This is to be contrasted with Mr Bennett's evidence, which the judge accurately expressed as an emphatic denial, which is best summed up in his answer (at Day 1, page 127, quoted above) –
- That "All I know" and reference to Mr Lancaster-Smith are not consistent with a more nuanced explanation, such as "We did talk about the possibility of cancellation, and I suggested that he inform GNP of that, but the matter was under investigation and there was an issue of avoidance to be clarified first"; or even "I am giving you a 60 day notice of cancellation under the contract, but that is without prejudice to an issue of avoidance which we have first to clarify". Nevertheless, the judge was obviously concerned that the conversation was possibly along such lines.
- In these circumstances, where the judge's decision was not founded on the judge's acceptance of the credibility of Mr Bennett (on the contrary the judge was critical of Mr Bennett at paragraph 43 of his judgment, cited above), there was particular force in Mr Kealey's major criticism, which was that the judge nowhere mentioned the indisputable fact that Mr Lancaster-Smith's e-mail of 20 April 2001, although addressed to GIR, not Mr Bennett, ended up in Mr Bennett's file, from which it was produced on discovery. That e-mail, of course, stated "we have received 60 days notice effective today to cancel this cover". Mr Bennett explained how that had happened: Mr Lancaster-Smith had brought it to a meeting, and he had taken a copy of it. In these circumstances Mr Kealey was entitled to say that the fact that the notice of cancellation there recorded came to the attention of Mr Bennett, inter partes, and was not repudiated by Mr Bennett, was important evidence in support of GNP's case and Mr Lancaster-Smith's evidence that the notice had been given by Mr Bennett, that at the later meeting around 21 May Mr Bennett had been asked but refused to withdraw it, and that he, Mr Lancaster-Smith would not have e-mailed GIR in the terms of his communications of 20 April and 21 May unless he had had conversations with Mr Bennett to the effect there recorded. Indeed, once Mr Bennett's evidence about taking a copy of the e-mail is borne in mind, it is difficult to allow without further comment the judge's aside "(neither side communicated in writing with the other)".
- That comment suggests that the judge may have overlooked the significance of the e-mail of 20 April. I would be reluctant to conclude that that had happened, but, while it is an everyday occurrence for a judge to bear well in mind even what he does not deal with expressly in his reasons, it is less easy to accept that he has in mind evidence which would require an important qualification of something he has expressly said. Mr Kealey has made submissions by reference to the closing written and oral arguments of counsel at trial which might explain why the judge had treated this issue of affirmation relatively lightly.
- In these circumstances I do not think that there is anything in Assicurazioni which would prevent this court from being entitled to look at the evidence and to make up its own mind as to affirmation. The difficulty remains, however, that Mr Lancaster-Smith was prepared to accept that he may have misunderstood the position at both the meetings which led to his communications to GIR about the notice of cancellation. Mr Kealey, on the other hand, submits that this evidence should be regarded as that of a totally credible witness (as indeed the judge found Mr Lancaster-Smith to be), who acknowledges the possibility of error, especially in the face of such apparent certainty on the part of Mr Bennett, an old business friend with whom he had had a successful business relationship over many years.
- There is an added difficulty. The meeting of 20 April took place only two days after Mr Lancaster-Smith notified WISE of the claim. The initial point taken by the reinsurers was one of coverage, not material non-disclosure with its remedy in avoidance. The only evidence that an avoidance point was taken prior to WISE's letter of 28 June 2001 is Mr Bennett's own evidence, originating in his witness statement but repeated in his oral evidence, that when he was told of the claim, he felt strongly that the risk had not been fairly presented and that the reinsurers would be justified in avoiding. However, he agreed that he did not mention this to Mr Lancaster-Smith when they met on 20 April. It may be that when the judge said that he was unable to accept that Mr Bennett had made "an informed choice to affirm the contract", one of the things he had in mind was the possibility that the avoidance point had not yet occurred to Mr Bennett, despite his evidence that it had. That is certainly a possibility which I have had in mind.
- I also have in mind the further possible scenario. There was clearly a conversation between Mr Lancaster-Smith and Mr Bennett on 20 April in which Mr Bennett spoke of his concern about the claim and the coverage question. No doubt the two business friends were equally embarrassed about the matter. Mr Lancaster-Smith left the meeting and related a notice of cancellation to GIR. It is impossible not to think that something must have been said by Mr Bennett about cancellation to explain that e-mail, even if that e-mail was in its terms in truth a product of Mr Lancaster-Smith's misunderstanding. But what was said? Should Mr Bennett's evidence ("You will have to ask Mr Lancaster Smith. All I know is that I did not give 60 days' notice") be interpreted as "You will have to ask Mr Lancaster Smith. I only know that I did not give 60 days' notice"? That might suggest that there was a lot more that could be said, that Mr Bennett was leaving it to his friend Mr Lancaster-Smith to say it, perhaps out of fairness to him, but that the one thing that he, Mr Bennett, would wish to make clear was that he did not give an effective 60 days notice. But that would still leave the question of what was said, and hardly explains why Mr Bennett could not be more forthcoming. For instance, could Mr Bennett have given notice, but without prejudice to a possibility of avoidance? Not according to Mr Bennett, who maintains that non-disclosure and avoidance were not mentioned. Could a notice have been discussed as a mere future possibility? Not at any rate if reliance is to be put on the strong terms of the e-mail itself, which says "effective today". Can the reinsurers rely on the fact that, while coverage and the loss itself were examined, a surveyor was appointed without prejudice to liability. That, however, would not amount to a general reservation of rights.
- These questions have caused me considerable heart-searching, and my mind has fluctuated. Longmore LJ's conclusions on this issue reflect an alternative view of the matter. I have reminded myself that the burden of proof is on GNP and that a witness who accepts that he may have misunderstood the situation is perhaps a weak instrument with which to seek to meet that burden. In the end, however, I do not see why Mr Bennett, whose credibility the judge found to be in question in a number of respects, should repeatedly have the benefit of the doubt. He insists that he did have non-disclosure and avoidance firmly in mind ("I felt strongly that the risk had not been fairly presented") from the beginning, even though he did not raise it with Mr Lancaster-Smith on 20 April. I do not see, therefore, why, in circumstances where he was fully alive to his rights to avoid, he could not be said to have affirmed if he then gave a notice of cancellation. Moreover, since he did not mention avoidance to Mr Lancaster-Smith, I do not see why any mention of cancellation should have been qualified by reference to ultimate avoidance. Again, Mr Bennett's evidence regarding the meeting of 20 April is not that there was some inconclusive discussion of the possibility of cancellation, but that "All I know" is that no notice was given. Thirdly, there is no satisfactory explanation of his failure to repudiate such a notice when he saw Mr Lancaster-Smith's e-mail at a later date. He took it into his own file, thereby indicating to my mind that he was accepting that he had given that notice "effective today" on 20 April. No doubt, since his evidence was that he had never intended to cover watches at all, he was comforted by the thought that he would soon be rid of the contract. Indeed, why not give a notice of cancellation in such circumstances? Only if it would prejudice a right to avoid. But until trial it had been the reinsurers' case that the giving of the notice of cancellation would not have affirmed the contract.
- The documents support the giving of the notice. It is true that a notice to cancel is usually given in writing, but Mr Bennett did not even sign the slip; and once the e-mail was taken into Mr Bennett's file the notice was in writing or rather evidenced in writing and acknowledged by Mr Bennett.
- The inherent probabilities are in favour of a notice being given. Mr Bennett would have wished to be rid of the contract at the first available opportunity. Mr Lancaster-Smith would not have written either e-mail unless he genuinely believed that they were accurate. He had no reason to misrepresent the position, even in genuine error, and would have been subject to considerable criticism for any mistake. It is true that one might have expected some reference to cancellation in the reinsurers' disclosure – apart from the copy of the e-mail itself – but the fact remains that the e-mail was on their files.
- Finally, I have to make up my mind about the nature of Mr Lancaster-Smith's evidence. His credibility was unquestioned by the judge ("in contrast an engagingly frank witness"). What then of his acknowledgment of fallibility? In the light of the above considerations as a whole, I conclude that I am justified in regarding it as an accurate acceptance of the possibility of human error, rather than as something prompted by his personal lack of faith in his own evidence. After all, he remembered asking for the notice to be withdrawn but being refused. I think it is unlikely that he would have "misunderstood" twice.
- In the end, therefore, I am satisfied that a contractual notice of cancellation was given. I am still somewhat sceptical that Mr Bennett did take an avoidance point (internally to the reinsurers' camp) from the very beginning, but since that is his evidence, I do not see why the reinsurers should not be stuck with it.
- In the circumstances, the issue of inducement is not critical. Mr Bennett had given evidence at trial that had he known that the risk he was being asked to cover included the carriage of watches, he would not have written the risk. The judge considered GNP's submission that Mr Bennett was not a credible witness, that he wrote the risk without careful consideration, that he was prepared to underwrite other thief attractive goods such as jewellery, and that what attracted him to the business was the loss record (12 years without loss). The judge accepted nearly all of that, but still saw no reason to doubt his evidence that he had never covered watches and would not have done so.
- On this appeal, GNP submit that the judge was in this last respect too kind to Mr Bennett's evidence. In their skeleton argument they detail all the respects in which Mr Bennett's evidence was either not accepted or shown to be wanting at trial, beginning with his case on misrepresentation, and his evidence that he was a very careful underwriter who had gone through the slip line by line. On the other side, it is submitted that the very fact that the judge clearly approached Mr Bennett's evidence with a cynical eye only lent support to his careful consideration that he could accept his evidence as to inducement.
- I acknowledge that the absence of any exclusion of watches and Mr Bennett's inadequate explanation for that absence lend support to GNP's submission that he overstated his aversion to watches. Nonetheless, on the hypothesis that the reinsurance was underwritten in the absence of an appreciation of the importance of watches to the risk, it is easy to understand that this may have affected the rating of the risk or the decision to undertake it at all. The test of inducement is not a heavy one, and I am content to say that I do not see that in the light of the judge's clear-eyed acceptance of at any rate this aspect of Mr Bennett's evidence it is easy for this court to take a different line. I would therefore reject this ground of GNP's appeal.
- In sum, I would allow GNP's appeal on the issues of waiver and affirmation.
- The judge made the following important findings:-
- On the basis of these findings the judge held that the intended carriage of high value brand name watches was a material fact which it was necessary to disclose and of which reinsurers had not waived their right to have disclosure. He further held that the reinsurers had been induced to write the risk by the non-disclosure and had not affirmed the contract at a later date. He therefore gave judgment for the reinsurer claimants.
- GNP appealed the judge's decision on materiality, waiver, inducement and affirmation. Before oral argument began Mr Kealey QC for GNP caused the court to be informed that materiality was no longer to be appealed but that all the other grounds of appeal remained in play. For reasons of his own, in his oral argument he presented first the ground of affirmation, then waiver and then inducement. One understands this forensic course but it is, in fact, more logical to consider waiver first since it chronologically precedes the other grounds.
- One starts with the now uncontested fact that it was material for reinsurers to be informed that high value brand name watches were to be carried as part of the cargo to be insured. Nevertheless it is said that reinsurers waived the disclosure of this material fact. Mr Kealey, relying on the statement of law set out in MacGillivray, Law of Insurance, 10th ed paras 17-83, submitted:-
- Mr Cooper did not expressly take issue with the law as stated in MacGillivray but referred us to Iron Trades Mutual v Compania de Seguros [1991] 1 ReLR 213, 224 where Hobhouse J said that waiver can only arise very rarely. He submitted that this was not that rare case.
- The judge held that a focussed enquiry by an underwriter, more alert than Mr Bennett was, would have eventually elicited the fact that high value brand name watches were being carried from Miami to Cancun but that that was not enough to establish waiver of the need to disclose. Mr Kealey attacked this conclusion by pointing out the inquiry was both simple and obvious.
- Although we had no extensive submissions made to us on the law it is perhaps worth pointing out that the concept of waiver has a somewhat special sense in the context of an insured's objections to disclose material facts. It pre-dates but is enshrined in the Marine Insurance Act 1906 which provides in section 18(3):-
- These are, of course, all ordinary incidents of the particular contract being insured and judges have naturally used expressions invoking the concept of what would be obvious or apparent to a prudent underwriter. The doctrine of waiver in this context has therefore come to be invoked in cases where it can be said that, if an insurer does not ask an obvious question, he will have waived disclosure of any material fact which would have been revealed by the answer. That in turn lets in the concept of a prudent insurer since, if such a question would have been obvious to such insurer, the actual insurer cannot be heard to say that such question would not have been obvious to him. In this way the doctrine of waiver becomes somewhat similar to that of constructive notice which may not have been quite what the draftsmen of the 1906 Act had in mind.
- The most recent case in this court to have considered waiver under section 18(3)(b) of the Act is Container Transport International Inc v Oceanus [1984] 1 Lloyds Rep 476, a case about non-disclosure of the insured's previous loss experience. A difference of approach emerged. Kerr LJ having emphasised the need for a fair presentation (page 496) criticised the trial judge for failing to appreciate that the fairness of the broker's presentation in summary form must necessarily be assessed before the underwriter's reaction to such presentation can properly be taken into account; Kerr LJ then (page 497) set out his views of the law:-
- While Parker and Stephenson LJJ agreed that there must be a fair presentation of the risk, they adopted a somewhat different approach to waiver. The critical passages from the judgment of Parker LJ were cited by the judge but bear repeating (page 511-2):-
- So the question becomes (a) was there a fair presentation of the risk? And (b) was the insurer in the course of that presentation in the words of Parker LJ
- Question (a) answers itself since it is now conceded that the intention to ship high value brand name watches was material and should have been disclosed.
- One starts, therefore, with a potentially unfair presentation and then asks whether the facts which were disclosed would raise in the mind of the reasonable insurer "at least the suspicion" that high value brand name watches might be shipped. Conflicting expert evidence was led on this issue but quickly degenerated into an account by each expert of how he would have written the risk. The judge appears not to have found this evidence of particular value; I agree with Rix LJ that reference to it is not very profitable.
- The fact that an insurer or reinsurer is entitled to assume that the presentation of the risk to him is a fair presentation means that he must be entitled to take at face value what is said on the slip. Where cargo cover is given in wide terms as "property of any kind", the broker will often give to the underwriter some indication of the property to be shipped and, perhaps, its maximum value. Here the broker did just that under the head of "Information". This is information which is volunteered by the broker; it does not become a warranty in the insurance contract but is part of the performance of the duty of disclosure. It is information which the underwriter receives in good faith and is entitled to assume is correct although a careful underwriter may indeed ask for further information. In the present case the underwriter was entitled to assume that he was being told what the particularly valuable items to be carried were; if anything this method of presentation would, in my judgment, put an insurer off enquiry rather than on enquiry, just as the selection of particular loss experience figures would put a prudent insurer off inquiry about other possible loss experience figures in CTI v Oceanus as per the example given by Parker LJ at page 512.
- The judge held that the use of the word "clocks" in the slip should not have raised suspicion in the mind of the reasonable insurer that there were other circumstances which would or might vitiate the presentation. For such a suspicion to be aroused he would have to have known or suspected:-
- The judge said (para. 37) that in the normal case an underwriter on the London market dealing with a London broker should be able to accept at face value a description of the goods to be insured. I agree. Rix LJ says that we are not concerned with the normal case but with this case. That is, of course, right. But there was no reason for Mr Bennett to have considered that he was not dealing with a normal but an exceptional case. Rix LJ also says that a single question could (and should) have been asked in response to a obvious problem. But, again, there was no reason for Mr Bennett to think he was dealing with a problem. A problem only arises if the underwriter knows Cancun is not the sort of place where clocks are sold and that something might have gone wrong in translation. While respecting Rix LJ's views I regret I cannot share them.
- Mr Kealey's argument in the present case has more than an echo of the submissions he made in Marc Rich v Portman [1996] 1 Lloyds Rep 430, 442. He there submitted that the insurer could and should have asked an (obvious) question about the loss experience of the assured; now he submits the insurer could and should have asked an (obvious) question about the unlikelihood of clocks being shipped to Cancun. I rejected the argument then and the Court of Appeal held I was right to have done so [1997] 1 Lloyds Rep 225, 234. For my part I would reject it again.
- I see no reason to interfere with the judge's conclusion that if Mr Bennett had been informed that high value brand name watches were going to be shipped from Miami to Cancun he would not have agreed to the insurance. This is a pure finding of fact, after the judge saw the witness not all of whose evidence he accepted. This court should not reverse that finding without the best of reasons.
- The consequence of this finding is that Mr Bennett did not, in his capacity as the actual underwriter, in fact waive the disclosure of the relevant information. A decision that s. 18(3)(c) of the 1906 Act applied would then have to be based purely on the basis that, because a prudent insurer would have asked the appropriate question and so discovered the relevant information, the actual insurer must be presumed to have done so. We are, of course, bound by the majority of this court in CTI v Oceanus to accept that this is possible but it is a considerable gloss upon the statute. It must be a question whether, one day, the views of Kerr LJ and Hobhouse J may prevail.
- Mr Kealey on behalf of the reinsurers attacked the judge's conclusion that no unequivocal notice of cancellation had been given. He submitted:-
- These are formidable submissions. Mr Bennett, throughout the case, denied that he had given any notice of cancellation, in terms which on any view of the matter indicated that there had been no discussion of any kind about such notice. The judge must have rejected this since, for Mr Lancaster-Smith to have misunderstood what Mr Bennett said, Mr Bennett must have said something for Mr Lancaster-Smith to misunderstand; yet the judge makes no finding as to what was said which was misunderstood. In these circumstances it could be said to be unfortunate that the judge makes no allusion at all to the fact that Mr Bennett decided to make a copy of the e-mail of 20th April without saying that Mr Lancaster-Smith had indeed misunderstood the position. It is all rather puzzling.
- Nevertheless Mr Kealey has to attack the finding of primary fact that Mr Bennett did not give a notice of cancellation. In my view the attack fails.
- An appellate court must always remember, when invited to reverse a finding of primary fact made after the judge has seen the witnesses, the inestimable advantage which the judge has. The mere fact that there are unanswered questions or that the judge might have expressed himself more fully than he did does not mean that the judge has failed to make use of his advantageous position. It seems clear that the judge was satisfied (although he did not say so in terms) that some discussion, in which some reference perhaps was made to the possibility of cancellation, must have occurred. He must, therefore, be taken to have rejected Mr Bennett's evidence to the extent that he was asserting that no such conversation occurred. He may have accepted that Mr Lancaster-Smith thought that notice of cancellation had been given; this conclusion is consistent with the contents of the e-mails. He concluded, however, that Mr Lancaster-Smith was right when he said that he may have misunderstood the situation.
- In this context the evidence that Mr Bennett took a copy of Mr Lancaster-Smith's e-mail of 20th April to GIR without pointing out that he had given no notice of cancellation is not as surprising as it seems. The judge made no findings on the contents of the earlier discussion between Mr Bennett and Mr Lancaster-Smith of 20th April and it would be inappropriate for this court to speculate when the trial judge did not. But there must at least have been some reference to the possibility of cancellation for the misunderstanding, found by the judge, to have occurred. In those circumstances Mr Bennett may well have thought it sensible to keep on file whatever it was that Mr Lancaster-Smith was telling his clients. He probably assumed that as between himself and Mr Lancaster-Smith the position was clear and needed no elaboration let alone any positive contradiction of what Mr Lancaster-Smith chose to say to GIR. It is clear that the possibility of avoidance was present to Mr Bennett's mind, since he said so in terms in his evidence. Nevertheless it was only 2 days after he had learnt of the loss on 18th April that the relevant conversation with Mr Lancaster-Smith took place. It was too soon for any definitive position to be adopted and it would, as the judge perceived, be surprising for any unequivocal notice (whether of avoidance or affirmation) to be contemplated quite so soon after learning of the loss.
- In this situation it is not correct to say that there was a second misunderstanding in or about 21st May. It may be that in the conversation which took place at that time (a time shortly before Mr Lancaster-Smith was leaving Collards, see Day 2 page 150 line 8) the original misunderstanding persisted. But it is not a situation in which Mr Lancaster-Smith can have been "mistaken twice". There can be no doubt that Mr Lancaster-Smith was much less certain in his oral evidence about the notice of cancellation than he had been in his written evidence. I have in mind the passages at pages 145, lines 10-12, 146 line 12, 147 line 8, 151 lines 2-5 and his final answer on this topic at page 152 line 13
- The judge was thus faced with a confident assertion by Mr Bennett that he did not give a notice of cancellation and an assertion by Mr Lancaster-Smith in his written evidence that Mr Bennett had given an oral notice together with a considerably more hesitant account of the matter in his oral evidence. There was nothing in writing from the reinsurer in relation to what everyone agreed at trial would be an important matter. The judge reminded himself of the fourth and fifth requirements for affirmation as set out by Mance J in Insurance Corporation of the Channel Islands v Royal Hotel Ltd [1998] 1 Lloyds Insce and Reinsce Rep 151 at 161 viz:-
- I can detect no error in this reasoning. The onus of showing affirmation was on the insured and here he has failed to discharge it. It is not a case of falling into the trap of wrongly taking a palpably honest witness at his word when he expresses natural uncertainty. It is a case where there truly was too much uncertainty to enable a court to be satisfied on a balance of probabilities that an unequivocal oral notice of cancellation was given, affirming the reinsurance contract. I would myself have reached the same conclusion as the judge.
- In these circumstances, while I acknowledge the force of Mr Kealey's submissions, and the views of my Lords, I cannot accept them. I would dismiss the appeal.
- The divergent views expressed by my Lords, each of whom has such a wealth of knowledge of insurance law, on the issues of waiver and affirmation leave me in the invidious position of having the casting vote on the outcome of this appeal. I have reached the conclusion that it is with Longmore L.J. that I agree on the waiver issue but that it is with Rix L.J. that I agree on the affirmation issue, for reasons which I will explain briefly. It is right, however, that I should acknowledge, as I do most readily, the considerable force of the arguments of counsel and the views of my Lords to the contrary.
- The issue of waiver is based on s. 18(3)(c) Marine Insurance Act 1906, GNP's claim being that there was a waiver by implication. I take the law to be correctly summarised in para. 17-83 of MacGillvray on Insurance Law (10th ed.) which the judge cited in para. 34 of his judgment. That required the court to consider (1) whether GNP had performed its fundamental duty of making a fair presentation to the reinsurers, WISE, of the risk and (2) whether reasonably careful reinsurers would have been put on inquiry in the circumstances. If there was a fair presentation of the risk and the reasonably careful reinsurers would have been put on inquiry but failed to make an inquiry which they could have made easily, they will be treated as having waived disclosure of what they would have discovered had they made that inquiry. However the court should not subvert the duty of the assured to make a fair presentation of the risk by finding that the reinsurers were put on inquiry and failed to discover for themselves the material information save in a clear case.
- It is not now in dispute that the fact that Rolex watches were being shipped was a material fact. That leads me to conclude that there was no fair presentation of the risk. Like the judge, I do not believe that the present case is a clear case of waiver. It is a striking feature of this case that, at the time the risk was being placed with the reinsurers, GNP's agents GIR, whom GNP had asked to arrange the cancellation of the previous reinsurance with other reinsurers and its replacement, knew that Rolex watches would be shipped and that the Spanish version of the Slip Presentation contained specific terms relating to the packaging of Rolex watches but in the English version omitted those specific terms, and mistranslated the Spanish word "relojes" as "clocks". The judge found that on 28 June 2000 GIR was specifically asked by GNP to pass on the packaging section to the previous reinsurers. Yet, GIR did not pass that section on to GNP's placing brokers, Collards, through whom the replacement reinsurance was to be effected with WISE.
- The judge was, in my opinion, plainly right to say that in the normal case an underwriter on the London market dealing with a London broker should be able to accept at face value a description of the goods to be insured. It was open to the judge to find that the use of the word "clocks", in the context of the slip, should not have raised a suspicion in the mind of the reasonable insurer that there were other circumstances which would or might vitiate the presentation to him. Whilst I accept that the test is an objective one of looking at the matter through the eyes of the reasonably careful insurer, it is of interest that Collards' experienced broker, Mr. Lancaster-Smith, thought that he had enough information on the slip to present it to the underwriter, Mr. Bennett, and did not think that there was anything to put Mr. Bennett on inquiry. I am not able to discern anything in the circumstances of this case to falsify the judge's acceptance that this was a normal case. In particular I do not accept that the fact that "clocks" of an average value of $1,500, the highest value being $18,000, were being shipped from Miami to Cancun would itself take the case out of the normal and put the reinsurers on inquiry as to whether the "clocks" were not clocks but watches. As Cancun is described (in the judge's summary of GNP's submissions) as a "high class resort with a duty free area", why should the reasonable reinsurers query what clocks were put on sale there for wealthy American and other tourists going to the resort to buy?
- For these as well as the reasons given by Longmore L.J. in paras. 104 –117 of his judgment I too would uphold the judge on waiver.
- It is common ground between the parties that if the reinsurers, pursuant to the contract of reinsurance, gave notice of cancellation, that would be an affirmation of the contract, provided that there was an unequivocal communication of that notice and that the insurer made an informed choice to affirm the contract.
- If the facts were limited to those set out by the judge, I might have been compelled to agree with his conclusion that the reinsurers had not affirmed the contract of reinsurance, surprising though it is that the reinsurers by para. 9 of their Reply did not deny that they had given notice of cancellation.
- However, the judge omits any mention of a further relevant fact, viz. that a copy of the email dated 20 April 2001 from Mr. Lancaster-Smith to GIR was in Mr. Bennett's file. Mr. Bennett was cross-examined about this. His answer to a question from Mr. Davies (then appearing alone for GNP) whether Mr. Bennett was saying that Mr. Lancaster-Smith had made up the statement that Collards had received 60 days' notice that day effective to cancel the cover, to which the judge added "Or [Mr. Lancaster-Smith] is in error?", was:
- The fact that Mr. Bennett was not only shown a copy of the email but made a copy which he retained in his file and yet said nothing to protest against what Mr. Lancaster-Smith was telling GIR had been said by WISE, presumably by Mr. Bennett, is surely a fact of high significance in determining whether notice of cancellation was given by Mr. Bennett, because not only does the contemporary documentation support Mr. Lancaster-Smith's account, but also Mr. Bennett, when shown the email and when taking a copy of it, had the opportunity to say that no such notice had been given and yet had chosen to say nothing. If he is right, he must have decided to leave Mr. Lancaster-Smith, with whom he had done business for 10-15 years and who was his friend, in ignorance of the fact that he was labouring under at least a serious misunderstanding which Mr. Lancaster-Smith had passed on to GIR. That seems implausible in the extreme. Moreover, Mr. Bennett gives no real explanation of his extraordinary conduct.
- The further evidence that Mr. Lancaster-Smith had been asked by GIR to go back to Mr. Bennett to see if he could get the notice of cancellation withdrawn but that Mr. Bennett had refused must be weighed against that additional evidence relating to the email of 20 April 2001. Mr. Lancaster-Smith said that he remembered the meeting. Mr. Bennett's evidence was that he did not recall it. The existence of the email of 17 May 2001 and its contents, being contemporaneous evidence of what occurred, strongly support Mr. Lancaster-Smith's evidence that notice of cancellation was given and that Mr. Bennett 4 weeks later was invited to, but refused, to withdraw it.
- The judge found Mr. Bennett's evidence not to be satisfactory in a number of respects. Certainly the obdurate denials by him that he gave any notice of cancellation coupled with the absence of any attempt to give proper explanations of his conduct do not read well, though I am of course well aware that this court does not have the advantage of having seen Mr. Bennett in the witness-box. In contrast Mr. Lancaster-Smith was found to be an engagingly frank witness, one who was prepared to admit the possibility of having misunderstood Mr. Bennett. But there is nothing in the judge's assessment of the witnesses to cast doubt on Mr. Lancaster-Smith's evidence, despite Mr. Bennett's denials.
- Reluctant though I am to interfere with a finding of fact made by a trial judge, the omission by the judge to take any account of the evidence that Mr. Bennett saw and took a copy of the email of 20 April 2001 but said nothing to Mr. Lancaster-Smith in my judgment undermines the validity of the judge's conclusion. In the light of the contemporaneous documents and that evidence it seems to me that there can in truth have been no misunderstanding and that notice of termination was in fact given.
- For these as well as the reasons given by Rix L.J. in paras. 82-96 of his judgment, I would allow the appeal on the affirmation issue.
- I agree with my Lords for the reasons which they give that GNP's appeal on inducement should be rejected.
- In the result GNP's appeal will be allowed on the affirmation issue, the judge's order will be set aside, WISE's claim will be dismissed and judgment will be given for GNP on its Part 20 counterclaim.
Lord Justice Rix:
The reinsurance contract
"Cedant: Grupo Nacional Provincial, S.A.
Insured: Perfumeria Ultra S.A. De C.V.
Locations: 1) Classical Gift Inc
9431 S.W. 65 Street
Miami…
2) Fragrances of the Word [sic] Inc.
10840 S.W. Street
Miami
3) Jewelry Time Inc
13228 N.W. Street
Miami…
Period: From December 31st, 2000 to December 31st, 2001
Type: Facultative cargo reinsurance. With monthly declarations
Interest: All real and personal property of any kind and description, including property but not limited to property of other in care, custody or control of the insured or for which the insured has assumed responsibility. All the shipments done by the insured consistent in but not limited to, cosmetics, perfumery, gifts, jewelery, lladró, (kind of porcelain) accessories, and in general on any type of supplies related to the Insured's activity and in which it has an insurable interest.
Coverage:
Activity: Commercialisation of Perfumes, gifts lladro, and jewelery.
Transportation: Any kind of usual transportation, terrestrial, maritime and air.
Geographic Limit: From Miami Flo. US to Cancun Q.R. Mexico
From warehouse to any store in Cancun city.
Maximum Limit of US$ 1,500,000.00 per shipment
Responsibility: US$ 50,000.00 per vehicle inside Cancun
Annual Estimated: US$ 17,000,000.00.
of Shipments:
Conditions: …
"Information: Loss Record:
Nil for the last 12 Twelve years
Maximum amount and rate of the merchandise:
- Perfumes and cosmetics: US$700,000 US$250,000
- Gifts (crystals, porcelain, leather bags, clothes, silverware): US$250,000 US$150,000
- Clocks: US$1,000,000 US$200,000
- Jewelry (gold, diamonds, stones, precious pearls and semiprecious and over and lose [sic]: US$350,000 US$200,000.
- Clocks: less expensive piece: US$40. Most expensive piece US$18,000 and average cost US$1,500.
- Jewelry: more expensive piece (rare circulation); more expensive piece: US$30,000; Most expensive set US$50,000 average cost
- Maximum Transport: US$1,500,000 (high season).
- Average: US$500,000
- Average Transport US$500,000 per trip
- During the month: Three trips…"
The parties, and the placing of the reinsurance
"Packaging:
A safety container is consolidated in Miami, which is not opened until it reaches the shop of the insured in Cancun. Subject to inspection by the authorities.
There is no way of identifying the type of goods; there are no tags, only the form of handling and form of stowage. The packages comply with the manufacturer's indications.
"Watches:
Packed in two types of packing as follows:
a.1) Special cases made in the factory
a.2) Watches in collective cases protected on an average of 10 in each pack. The packaging hold approximately 120 watches.
a.3) Rolex, each watch comes with its case and each packaging holds approximately 48 watches in packs of 16 rows, 3 rows high."
"9. Two points should be noted. In the Spanish version of the Slip Presentation sent to GNP the word Relojes is always used. It seems that in Spanish Relojes can mean either watches or clocks. The Interpreter in the action before me distinguished the meaning by using reloj de pulsera for 'watch' and reloj de pared for 'clock'. In the Spanish version what was intended by the word Relojes would have been resolved by the specific reference to 'Rolex' in Clause a.3). However, as already noted, that Clause was omitted from the English version. In the English version the word 'clocks' was used throughout. One of the issues in the case is whether the word 'clocks' in the English version should have been understood to cover 'watches', and whether the use of the word 'clocks' was such as to put the Reinsurers on enquiry."
The judge was not able to determine why there was this difference between the Spanish and the English versions. He did not accept a possible explanation, given by an employee of GIR, that an employee of GNP had asked for the packing information not to be included out of concern that it would not be complied with. However, he did accept that the translation of relojes as clocks instead of watches (or perhaps clocks and watches as one translation had it) appeared to be a mistake, compounded by the omission of the packing sections which revealed that Rolex watches were being transported (at para 24). Since this was accepted as being a mistake in translation, nothing more sinister was ascribed to it either by the judge or in argument on this appeal.
The loss and its aftermath
"I felt strongly that the risk had not been fairly presented to me and that underwriters would therefore be justified in avoiding cover" (para 23).
"He came into the office and I said: "I am rather disturbed, Vic, because watches is not an interest that I believed I was covering or would I cover. "
"Q…Why did you not say that to him?
A. I do not know.
Q. Is it perhaps because at that stage, you did not really consider watches any different to the type of things that were within that Cession?
A. No, I was waiting for answers to the questions that had been asked by Mark Landymore before making a final decision."
"Owing to this very recent loss of US$ 800,000 approx. we have received 60 days notice effective today to cancel this cover…"
"Also attached you would find the security measures taken by the assured as a consequence of the loss, hope that with this new security measures you can eliminate the clause of cancellation or try to substitute that is canceling [sic] the account as requested in our mail dated April 20th."
"Unfortunately with the claim of this size outstanding and this underwriter only being on the account for 5 months he will not withdraw his notice under any circumstances unless of course there is a full recovery."
"Q…So, you are saying that Mr Lancaster Smith has made that up, is that right?
MR JUSTICE SIMON: Or he is in error?
MR DAVIES: Or he is in error.
A. You will have to ask Mr Lancaster Smith. All I know is that I did not give 60 days' notice."
"Q. Why is there a copy of this email on your file?
A. He simply brought it in to me and showed it to me…
Q. There is no reference to this in your witness statement. What did you say to him when he brought it in?
A. I said nothing. I simply took a copy of it.
Q. You said nothing?
A. No. Because at that stage, I had not decided what I was going to do.
Q. So you did not say: hang on a minute, Vic, I did not give you 60 days' notice of cancellation.
A. I did not say that.
Q. Would that have been because you had given him a notice?
A. I had not."
"A. I did not decline the cancellation because there was not one.
Q…Again, are you saying that Mr Lancaster Smith has either made that up or he is in error?
A. You will have to ask Mr Lancaster Smith.
MR JUSTICE SIMON: Or I think you are saying that he has misunderstood the position.
A. Then he must have done, yes, my Lord."
"As to paragraph 15, it is denied that by giving 60 days notice of cancellation of the Cession, the Claimants were thereby electing to affirm the Cession or waived any entitlement to avoid the Cession for non-disclosure. Without prejudice to the generality of the foregoing, the [reinsurers] will aver that an expression of an intention to cancel the Cession is by its nature not an act affirming the contract of reinsurance."
"I did not agree to the cancellation of cover, as noted by Vic Lancaster-Smith in his e-mail to the producing brokers, GIR, on 20th April 2001. I did not issue a Notice of Cancellation in respect of this cover. My usual practice prior to issuing such a Notice is to seek guidance from the claims department on the ramifications of the issuance of such a Notice. In all instances, I would ensure that any Notice is issued in written form to the broker. The purpose of issuing a written Notice would be to ensure certainty and to provide confirmation of cancellation of the cover to both our internal and external auditors."
"Although I cannot recall the exact detail of my conversation with him I would never give notice of cancellation of cover without Insurers instructing me to do so. I must have spoken with Roger Bennett on or before 20.4.01. I refer to my emails to GIR on 20.04.01 and 21.5.01. The 20.04.01 email states "we have received". I would not have written an email in these terms if I had not obtained authorisation from Roger Bennett to give notice of cancellation. My follow up email on 21.5.01 suggests that I went back to Roger Bennett requesting that the reinsurance be accepted on new terms, when other security arrangements had been put in place. When I again spoke with Roger Bennett sometime before my email to GIR of 21.05.01, it was clear that Reinsurers would not accept any new terms unless a full recovery of the April 2001 loss was made. My email of 21.05.01 advises GIR of Reinsurers' position."
"Q. But Mr Bennett is quite certain that he did not give you notice of cancellation on that date [20 April]. Are you sure you did not misunderstand?
A. No, I am not sure. I may have done…
Q…it is quite conceivable that you are simply conveying to GIR information that you had misunderstood?
A. There is a possibility of that, yes…
Q. Again, your recollection of your [c 21 May] meeting with Mr Bennett is rather less certain there [in your supplementary witness statement], is it not?
A. Strangely enough, that particular part there I recall a lot more because I remember going back and talking to him. I do recall that…
Q. Are you sure you have not misunderstood the position again, Mr Bennett did not actually give you a formal notice of cancellation?
A. Well, I do remember the second conversation reasonably well. I do not remember clearly the initial one with the notice of cancellation…On the second one he wanted the notice to stand because the loss was still there, he would look at it again if the loss diminished or went away…
Q. Mr Bennett is certain that he did not say to you that he was not prepared to retract a notice of cancellation because he had not given one?
A. He had not. He had not given me a written notice of cancellation.
Q. So is it right then that again in this e-mail you had misunderstood Mr Bennett's position?
A. There is a possibility that that happened but I do recall part of the conversation with Mr Bennett and I am sure I would have put it in similar terms that he had given me…
Q. Notices of cancellation are normally in writing?
A. Yes, they are…We operated this book of business between Mr Bennett and myself very closely. Yes, you are right, you would normally have a written notice…
Q. You see, again, I am going to suggest to you that Mr Bennett may have expressed his concern about the loss, may have expressed his belief that it ought to be further investigated but that he did not go so far as to cancel this account?
A. I do not know."
"1. Non-disclosure/Coverage
Our Underwriter is quite adamant that he would not have agreed to write this cover if he had been told that it was intended to cover watches. Watches are a high value risk goods, and alter the assessment of the risk. We would point out that jewellers block was specifically excluded under the open cover. We are considering under the circumstances whether to avoid the policy ab initio.
We are, however, reluctant to take this step at this moment, as it does not in fact appear to us that our reinsured intended to reinsure watches either. They are not, for instance, included in the terms set out in the information section of the reinsurance…"
"1. That the insured would be transporting Rolex watches.
2. That the insured was the only authorised Rolex dealer in the State."
It is not clear when GNP stopped passing on declarations from Perfumeria concerning shipments under the reinsurance.
The litigation
The trial
The structure of the judgment below
"as a matter of common sense, the fact that a contractual document refers to 'clocks' does not mean that it is to be understood to be referring to 'watches'…it is not in my view for the underwriter to guess that the subject of the insurance is something other than what it is stated to be."
Waiver
"I am satisfied that a focussed enquiry by a more alert underwriter would have eventually elicited the fact that the high-value brand name watches were being carried; but this is not sufficient to establish waiver. GNP's case on waiver is not a 'clear case' [a reference to Parker LJ in CTI at 511]; it is a case that proceeds by the accumulation of a number of factors, many of which are of peripheral relevance to this issue; however, I do not accept the submission that the underwriter's knowledge that the Slip Presentation was drafted by someone whose first language was not English is a significant factor here. In the normal case an underwriter on the London market dealing with a London Broker should be able to accept at face value a description of the goods to be insured at face value. The use of the word 'clocks' in the present context, in my view, should not have raised a suspicion in the mind of the reasonable insurer that there were other circumstances which would or might vitiate the presentation to him."
The law on waiver
"(1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured…
(3) In the absence of inquiry the following circumstances need not be disclosed, namely:-
(a) Any circumstance which diminishes the risk;
(b) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know;
(c) Any circumstance as to which information is waived by the insurer;
(d) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty."
"The underwriter, here, knowing the governor to be acquainted with the state of the place; knowing that he apprehended danger, and must have some ground for his apprehension; being told nothing of either; signed this policy, without asking a question. If the objection 'that he was not told' is sufficient to vacate it, he took the premium, knowing the policy to be void; in order to gain, if the alternative turned out one way; and to make no satisfaction, if it turned out the other: he drew the governor into a false confidence…If he thought that omission an objection at the time, he ought not to have signed the policy with a secret reserve in his own mind to make it void; if he dispensed with the information, and did not think this silence an objection then; he cannot take it up now, after the event."
Lord Mansfield's decision on the facts has been criticised, but this case remains a leading exponent of the logic of waiver in the overall scheme of fairness between assured and insurer.
"The courts have consistently set their face against allowing the assured's duty of good faith to be used by the insurer as an instrument for enabling the insurer himself to act in bad faith."
See also Drake Insurance plc v. Provident Insurance plc [2004] 2 WLR 530 at paras 85/89, 93, 143.
"It follows that when ss 17 to 20 of the Act are read together, one way of formulating the test as to the duty of disclosure and representation to cases such as the present…is simply to ask oneself: "Having regard to all the circumstances known or deemed to be known to the insured and to his broker, and ignoring those which are expressly excepted from the duty of disclosure, was the presentation in summary form to the underwriter a fair and substantially accurate presentation of the risk proposed for insurance, so that a prudent insurer could form a proper judgment – either on the presentation alone or by asking questions if he was sufficiently put on enquiry and wanted to know further details – whether or not to accept the proposal, and, if so, on what terms?"" [emphasis added]
"The principle is that if a certain fact is material for the purposes of ss. 18(2) and 20(2), so that a failure to draw the underwriter's attention to it distorts the fairness of the broker's presentation of the risk, then it is not sufficient that this fact could have been extracted by the underwriter from material to which he had access or which was cursorily shown to him. On the other hand, if the disclosed facts give a fair presentation of the risk, then the underwriter must enquire if he wishes to have more information. This is borne out by the authorities."
"But it is not necessary to disclose minutely every material fact; assuming that there is a material fact which he is bound to disclose, the rule is satisfied if he discloses sufficient to call the attention of the underwriters in such a manner that they can see that if they require further information they should ask for it."
"The doctrine of waiver cannot be applied to undisclosed facts which are unusual or special, so that their non-disclosure distorts the presentation of the risk. In such cases the underwriter is not put on enquiry about the existence of any such facts. Greenhill v. Federal Insurance Co. Ltd. (1926) 24 Ll.L.Rep.383; [1927] 1 K.B. 65, is a classic example where the same contention was raised and Lord Justice Scrutton said at pp. 391 and 85:
The argument as to waiver was put before us in a way which would, if sound, have entirely destroyed the obligation to disclose at all…""
"The argument as to waiver was put before us in a way which would, if sound, have entirely destroyed the obligation to disclose at all; because it was said: "It is a possibility that this cargo which you were asked to insure may have suffered certain damage, and as there is a possibility, and you are told of this cargo, and you do not ask the question, you are bound by any possibility which might happen to the cargo." That line of argument would entirely destroy the obligation to disclose at all, because, if you insure a ship, of course it is a possibility that anything may have happened to her. If you come to insure a cargo, it is a possibility that anything may have happened to it. I have always understood the proper line that an underwriter should take, except in matters that he is bound to know, is absolutely to abstain from asking any questions, and to leave the assured to fulfil his duty of good faith, and make full disclosure of all material facts, without being asked. And it seems to me to be of great importance to the general duty of disclosure that that position of the underwriter should be maintained, and not whittled away by alleged waiver.
"Now, of course, waiver rests upon the classical judgment of Lord Mansfield in Carter v. Boehm…
"But it seems to me to be a very long step from that passage to the conclusion that, if an underwriter is told that there is to be an insurance on some subject-matter, he is to be taken to know every possibility that may have happened to that subject-matter which the assured knows, and which he does not in fact know, because he does not proceed by questions to explore all the possibilities that may have happened to such a subject-matter. Such an argument, such a view of waiver, would, as I have said, entirely destroy, in my view, the obligation to disclose; and while I pressed counsel to tell me exactly upon what, in the case of cargo which had been exposed to a quite unusual incident, the idea of waiver was rested, I was unable to obtain any satisfactory answer, except – and I do not say that that was satisfactory – that you were taken to know of every possible thing which might have happened to the cargo."
"If the assured seeks to rely on waiver he must in my view show a clear case…In order to establish waiver by implication from non-inquiry the insured must be put on enquiry by the disclosure of facts which would raise in the mind of a reasonable insurer at least a suspicion that there were other circumstances which would or might vitiate the presentation made to him."
"This is not a branch of insurance where the insurer shows what he regards as material by submitting questions in a proposal form to the insured. The marine underwriter may of course indicate what particular matters he wants to know, and he may be put on enquiry by what he is told and through negligence or stupidity or inexperience or pigheadedness not pursue enquiries which a prudent underwriter would have pursued…He cannot expect to be told everything, every minute detail; he cannot shut his eyes to obvious incompleteness and then complain of his bargain made in ignorance of the full story. He can expect to be given a fair summary and can assume that placing files which he has an opportunity of examining contain nothing exceptional or unusual; for a summary which excludes such matters is not a fair summary…I agree that Mr Lee did not get a fair summary of the previous claims experience in this case. There were most material features of it which were misstated or concealed…A detective might have discovered them, but an underwriter is not a detective…"
"he appears to have failed to appreciate that, due to the overriding nature of the duty to disclose material facts, the fairness of the broker's presentation in summary form must necessarily be assessed before the underwriter's reaction to such presentation can properly be taken into account."
"It is possible for an insurer to waive information…However it will only be very rarely that such a situation arises. If a proposer has made a fair presentation of the risk, he has discharged his duty; if he has not, then a failure by an insurer to inquire will not relieve the proposer of his duty to make proper disclosure."
"The test appears to be as follows: The assured must perform his duty of disclosure properly by making a fair presentation of the risk proposed for insurance. If the insurers thereby receive information from the assured or his agent which, taken on its own or in conjunction with other facts known to them or which they are presumed to know, would naturally prompt a reasonably careful insurer to make further inquiries, then, if they omit to make the appropriate check or inquiry, assuming it can be made simply, they would be held to have waived disclosure of the material fact which that inquiry would necessarily have revealed. Waiver is not established by showing merely that the insurers were aware of the possibility of the existence of other material facts; they must be put fairly on inquiry about them."
The law applied in this case
"Q. If you had no experience of watches, why would they be of concern to you?
A. Because I am aware of the claims situation with regard to watches through the market information, talking to underwriters, the Lloyd's Agency Department, the Lloyd's Market Associations that publish figures. I am aware of these things, it does not mean to say that I have personal experience."
"I personally do not speak Spanish, but as I said, based on when you are an underwriter, you are looked upon as having a certain amount of general knowledge and my reaction straightaway would be: I cannot see why they would be taking clocks to Mexico."
However, he also said that "No, I do not think so" in reply to the question whether he "would not say that another underwriter who took this Cession at face value was being unreasonable" (Day 3, page 78).
"Q…but is it the sort of market where you are expecting a major consignment of clocks to be shipped?
A. I would say it is a duty-free area, it is an area where a lot of American tourists go, who knows what the American tourists might want to buy or not."
Q…All the goods we are talking about here are consistent only with watches, are they not, not clocks of the type you are describing?
A. I disagree. I think the underwriter would accept at face value that you were insuring clocks unless you were told otherwise.
Mr JUSTICE SIMON: If you go into a gift shop, let us assume in Cancun, what would you expect to see? Perfumes and cosmetics?
A. I think, my Lord, it would depend on the kind of gift shop one would enter.
MR JUSTICE SIMON: Say, a duty-free shop? Perfumes and cosmetics? Gifts?
A. Perfumes and cosmetics, general gifts, tea towels, sort of golf balls.
MR JUSTICE SIMON: Some jewellery?
A. Some limited jewellery.
MR JUSTICE SIMON: Some watches?
A. Cheaper range watches, Swatches maybe.
MR JUSTICE SIMON: Clocks?
A. Clocks, yes.
MR DAVIES: What type of clocks?
A. I suppose travel clocks, carriage clocks."
"Where the application of a legal standard such as negligence or obviousness involves no question of principle but is simply a matter of degree, an appellate court should be very cautious in differing from the judge's evaluation."
I have therefore reminded myself of the need for caution throughout this appeal. Nevertheless, at the end of the day, I remain concerned about the judge's solution and dissatisfied by his reasons. I do not think that it or they do justice to the need for the duty of good faith to be mutual, which may raise a real problem on issues of waiver, as Lord Mansfield pointed out and more recently Lord Lloyd and Lord Hobhouse have reminded us. I think that the judge's solution does not reflect the demands of commercial common-sense and fairness on these particular facts.
Affirmation
"49. The difficulty GNP face is that Mr Bennett emphatically denied that he had ever communicated a cancellation to Mr Lancaster-Smith; and, in cross-examination, Mr Lancaster-Smith accepted that he might have misunderstood what Mr Bennett had said…
"51. Despite the persuasive submissions of Mr Davies, I am unable to accept that there was an unequivocal communication by Mr Bennett that he had made an informed choice to affirm the contract. It is not simply the lack of formality (neither side communicated in writing with the other), there is also Mr Lancaster-Smith's frank acceptance that he may have misunderstood what Mr Bennett had said. This makes it difficult to conclude that a reasonable person in the position of the insured would have interpreted Mr Bennett's words or conduct as an affirmation of the contract."
"You will have to ask Mr Lancaster Smith. All I know is that I did not give 60 days' notice."
Inducement
Conclusion
Lord Justice Longmore:
(1) the reinsured ("GNP") (to the knowledge of the producing broker ("GIR")) was only prepared to cover the original insured, Perfumeria Ultra, for loss or damage to their property in transit from Miami to Cancun on terms that Rolex watches were each packed in their own case with 48 watches to the package;
(2) the Spanish language slip presented to GNP with what may be called the Rolex condition used the word "RELOJES" to describe the subject-matter of the insurance relevant in the present case. This word can mean either watches or clocks; since the Rolex condition was on the face of the slip presented to GNP it was clear that Rolex watches were to be insured, even though the Information Section of the slip which set out the maximum value and average value of, among other things, "RELOJES" could, in the absence of the Rolex condition, be said to have referred to clocks or watches or both;
(3) the English language slip sent by GIR to the placing broker ("Collards") for presentation to reinsurers had no special Rolex condition and, in the information section, gave the maximum and average value of "Clocks";
(4) this was mistranslation from Spanish to English since a contractual document referring to "clocks" would not, as a matter of English language, be understood as referring to, or including, "watches";
(5) the mistranslation was compounded by the omission of the packaging provision which would have revealed that Rolex and, indeed, other watches were going to be transported;
(6) the intended carriage of high value brand name watches (such as Rolex watches) was a fact which was not disclosed by the reinsured to the reinsurer;
(7) the review of the slip by Mr Bennett, reinsurers' cargo underwriter, was "casual"; he was prepared to underwrite high value goods such as jewellery but asked no questions about the kind of jewellery or indeed the kind of clocks he was insuring; he was strongly attracted by the fact that no losses had occurred in the previous 12 years;
(8) between 3rd and 5th April 2001 a container including 8 boxes of (mostly) Rolex watches was stolen from Perfumeria's warehouse near Cancun;
(9) on 20th April Mr Lancaster-Smith of Collards, the placing brokers, e-mailed GIR saying that, owing to the recent loss, Collards had received a 60-day cancellation notice;
(10) on 21st May 2001 Mr Lancaster-Smith again e-mailed GIR saying that reinsurers would not withdraw their notice of cancellation unless there was a full recovery of the items lost;
(11) despite these communications to GIR Mr Bennett had never actually given any unequivocal notice of cancellation in such a manner as to affirm the contract of reinsurance which was subsequently and unequivocally avoided at a later date. As the judge put it (para. 51):-
"It is not simply the lack of formality (neither side communicated in writing with the other), there is also Mr Lancaster-Smith's frank acceptance that he may have misunderstood what Mr Bennett had said."
The appeal
Waiver
(1) it was important to appreciate that watches were included in the interest covered by the words of the slip "any actual property of any kind nature or description";
(2) it was common ground between the experts that Cancun was a beach resort of a kind that would hardly ever (let alone as regularly as contemplated by 3 shipments per month of an average value of $200,000 per shipment) sell to tourists clocks of which the least expensive could be $40 and the most expensive could be $18,000;
(3) the slip was obviously a translation (or was at least drafted by someone unfamiliar with the English language) and there was an obvious risk that clocks might not be intended literally but might mean or include watches;
(4) this called for a simple inquiry which reinsurers never made, viz. 'what are these clocks with such high values and such regular shipments'.
The law
"In the absence of inquiry the following circumstances need not be disclosed . . . .
(b) any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know;
(c) any circumstance as to which information is waived by the insurer."
The famous examples of circumstances as to which information has been held in the decided cases to have been waived are:-
(1) the circumstances in which a private man-at-war is likely to attack or be attacked by an enemy, disclosure of the vessel's nature being enough, see Carter v Boehm (1776) 3 Burr 1905;
(2) the nature of a freight contract for goods when it was known that the goods were going to be shipped pursuant to a voyage charter, see Asfar v Blundell [1896] 1 QB 123;
(3) the absence of strengthening of a floating dock to be towed from Avonmouth to Brindisi when the insurer had expressly admitted its seaworthiness in the policy, see Cantiere Meccanico Brindisino v Janson [1912] 3 KB 452;
and
(4) the nature of cargo intended to be or likely to be shipped in the course of the duration of a hull policy, see Mann Macneal & Steeves Ltd v Capital & Counties Insurance Co Ltd [1921] 2 KB 300.
"The principle is that if a certain fact is material for the purposes of ss. 18 (2) and 20 (2), so that a failure to draw the underwriter's attention to it distorts the fairness of the broker's presentation of the risk, then it is not sufficient that this fact could have been extracted by the underwriter from material to which he had access or which was cursorily shown to him. On the other hand, if the disclosed facts give a fair presentation of the risk, then the underwriter must enquire if he wishes to have more information."
Slightly later he said (page 498):-
"The doctrine of waiver cannot be applied to undisclosed facts which are unusual or special, so that their non-disclosure distorts the presentation of the risk. In such cases the underwriter is not put on enquiry about the existence of any such facts."
These are the passages relied on by Hobhouse J in the Iron Trades case (page 224), cited by Mr Cooper for reinsurers, as justification for the conclusion that waiver only "very rarely" arises:-
"If a proposer has made a fair presentation of the risk, he has discharged his duty; if he has not, then a failure by an insurer to inquire will not relieve the proposer of his duty to make proper disclosure."
On this basis one merely inquires whether there has been a fair presentation. If the answer is no, that is the end of the matter; the assured cannot assert that if only the underwriter had asked an obvious question he would have discovered something which should have been disclosed. If the answer is that there was a fair presentation, that is also the end of the matter; the underwriter cannot say that he ought to have been told more because his remedy was to make further enquiry of the assured or his broker about anything about which he wanted to know more. There will be no room for expert evidence on the question whether a prudent underwriter would have asked further questions so as to achieve the result that the actual underwriter who did not ask such questions will be deemed to have waived disclosure of any material fact revealed by the answers to the questions. That, as Kerr LJ pointed out on page 497, would be akin to the doctrine of constructive notice.
"If the assured seeks to rely on waiver he must in my view show a clear case. What he seeks to show is that the insurer dispensed with information which would influence the judgment of a prudent underwriter albeit he, the insurer, was unaware of the existence of such information …. In order to establish waiver by implication from non-enquiry the insured (sic: this should presumably be "insurer") must be put on enquiry by the disclosure of facts which would raise in the mind of a reasonable insurer at least a suspicion that there were other circumstances which would or might vitiate the presentation made to him."
Stephenson LJ (at pages 529-530) agreed with this:-
"There can, in my opinion, be no waiver of material information unless it would and should have been disclosed by an inquiry by the underwriter which common prudence demanded."
It is these passages that are the foundation of paragraph 17-83 in MacGillivray which is in these terms:-
"The assured must perform his duty of disclosure properly by making a fair presentation of the risk proposed for insurance. If the insurers thereby receive information from the assured or his agent which, taken on its own or in conjunction with other facts known or presumed to be known to them or which they are presumed to know, would naturally prompt a reasonably careful insurer to make further inquiries, then, if they omit to make the appropriate check or inquiry, assuming it can be made simply, they will be held to have waived disclosure of the material fact which that inquiry would necessarily have revealed."
This presupposes a test which is perhaps closer to constructive notice than Kerr LJ and Hobhouse J would approve but is a fair summary of the law as laid down by Parker and Stephenson LJJ and, being the view of the majority, binds this court. It is no doubt sufficient if the actual underwriter actually waives; but waiver will also be established by proving that a prudent underwriter would by enquiry have elicited the fact said now to be material.
"put on inquiry by the disclosure of facts which would raise in the mind of the reasonable insurer at least the suspicion that there were other circumstances which would or might vitiate the presentation?"
Application of Law to the Facts
(1) that the slip was itself a translation from the Spanish;
(2) that the relevant Spanish word included watches as well as clocks;
(3) that Cancun was not the sort of place which would be likely to sell clocks but rather a place where high value watches would commonly be sold.
If the expert evidence as to what a prudent underwriter would suspect on seeing a slip in the form it was in this case is in conflict, the judge is entitled to come to his own conclusion on this matter and this court should be slow to intervene. Commercial judges are more in tune with the commercial realities of underwriting than this court can ever be. Simon J has effectively held that the insured has not proved that the insurer waived disclosure of what is now admitted to be a material fact. I am not convinced the judge was wrong. Still less am I persuaded that, to use the words of Parker LJ, it is "a clear case", see page 511 of CTI v Oceanus.
Inducement
Affirmation
(1) the conclusion flew in the face of the contemporary documentation in the form of the e-mails of 20 April and 21 May;
(2) it was unfair of the judge to rely on the palpably honest Mr Lancaster-Smith's "frank acceptance that he may have misunderstood what Mr Bennett had said"; a notice of cancellation is not something one misunderstands or about which one makes a mistake if one is a competent insurance broker; there was no evidence that Mr Lancaster-Smith was not a competent insurance broker
(3) the judge failed even to allude to the most important part of the evidence about the notice of cancellation; this was that at a third meeting between Mr Lancaster-Smith and Mr Bennett, sometime between 20 April and 21 May, Mr Lancaster-Smith had shown Mr Bennett a copy of his e-mail of 20th April to GIR and Mr Bennett had taken it away and made a copy for his own file which had been duly disclosed by reinsurers at the appropriate stage of the litigation. At no stage did Mr Bennett say that Mr Lancaster-Smith had misunderstood him or say that he had not given the notice of cancellation referred to in the e-mail to GIR;
(4) it was impossible to suppose that Mr Lancaster-Smith would again have misunderstood the position or, as the judge put the reinsured's argument, "been mistaken twice" when he informed GIR on 21st May that Mr Bennett refused to withdraw his notice of cancellation unless there was a full recovery;
(5) in a situation in which a reinsurer knows or considers that he is entitled to avoid a contract for non-disclosure, a decision to give a notice of cancellation pursuant to a provision in that contract is to affirm the contract.
"I do not know".
"4. There must be an unequivocal communication to the assured by words or conduct that the insurer has made an informed choice to affirm the contract,
5. Whether such a communication is found depends upon how a reasonable person in the position of the assured would interpret the insurer's words or conduct."
The judge then relied partly on the absence of any written communication and partly on Mr Lancaster-Smith's frank acceptance that he may have misunderstood what Mr Bennett had said as difficulties in the way of his concluding that a reasonable person in the position of the insured would have interpreted Mr Bennett's words or conduct as an affirmation of the contract.
Lord Justice Peter Gibson:
Waiver
Affirmation
"You will have to ask Mr. Lancaster-Smith. All I know is that I did not give 60 days' notice."
The cross-examination continued:
"Q. Why is there a copy of this email on your file?
A. He simply brought it to me and showed it to me.
Q. He brought it to you and showed it to you?
A. Yes.
Q. When did he do that?
A. Some time after that, I do not recollect the date.
Q. There is no reference to this in your witness statement. What did you say to him when he brought it in?
A. I said nothing. I just took a copy of it.
Q. You said nothing?
A. No. Because at that stage, I had not decided what was going to be done.
Q. So do you not say: hang on a minute, Vic, I did not give you 60 days' notice of cancellation?
A. I did not say that.
Q. Would that have been because you had given him notice?
A. I had not."
Inducement
Conclusion