Supreme Court of Ireland Decisions

1. In these proceedings and the related proceedings, the plaintiffs, who are all insurance companies based in France, the Netherlands, and Italy, claim inter alia a declaration that they had validly avoided ab initio a contract of insurance with the Minister in respect of the beef because of what was said to be a material non-disclosure on the part of the Minister. The non-disclosure relied on was the alleged failure of the Minister to inform the plaintiffs of a clause in the agreement between the Minister and the company which owned the cold storage warehouses where the beef was stored ("UMP") which afforded UMP a measure of relief from liability for losses arising from their lack of due diligence in the performance of their duties under the agreement.

2. In addition to delivering a defence in the proceedings, the Minister has invoked the third party procedure to claim indemnity in respect of the plaintiffs' claim from each of the third parties on the grounds that each of them acted as brokers to the Minister in arranging the contract of insurance and, in so [*3] far as the Minister's claim was correct, had been guilty of negligence, breach of duty and breach of contract in failing to disclose the allegedly material facts to the plaintiffs. The first named third party ("Mike Murphy”) is an insurance broker based in Ireland who was entrusted by the Minister with the placing of the insurance. The second named third party (" DB") also carries on business as an insurance broker in Paris and Monaco. It was claimed on behalf of the Minister that DB also acted on his behalf in the placing of the insurance.

3. In turn, Mike Murphy and DB have issued fourth party proceedings in which they claim indemnity from the fourth parties in respect of the Minister's claim against them. The first fourth party (“Hurst” ), which at one period used the name Citicorp Insurance Broker (Marine) Limited, is an insurance broker which carries on business on the English insurance market. The second, third and fourth parties are insurance brokers, underwriting agents and insurance underwriters respectively.

4. On the application of Hurst, the High Court ordered that: -

5. In the statement of claim delivered on behalf of Mike Murphy, the claim based on breach of contract, negligence etc. is made in respect of

6. It will be seen that the issue which was ordered to be determined as a preliminary issue in the High Court reflects that wording exactly.

7. The case on behalf of Hurst was that they were retained solely to deal with so much of the insurance as was being placed in the English market, that the plaintiffs were insurers on the continental market and that, accordingly, Hurst would have no responsibilities in connection with the placing of the insurance with them, and in the result, no liability to them for negligence, breach of contract or otherwise.

8. The factual background to the issue, in so far as it is not in dispute, is as follows. Mike Murphy was, at the relevant times, a leading insurance broker [*5] and, in particular, was engaged in the placing of insurance for exports of beef from Ireland. With this in mind, he had dealings with Mr. David Gresty of DB who placed insurance for him on the French market and with Mr. Raymond Cudby of Hurst, who performed a similar role for him on the London market.

9. A meeting was held in Paris on the 29th January 1990 with a view to putting in place an insurance arrangement on behalf of the Minister and beef exporting companies. This was attended by Mr. Mike Murphy, the principal of Mike Murphy, and Mr. Caprani, a member of his firm, Mr. Gresty and a M. Bastide on behalf of DB and Mr. Cudby and Mr. Allen Bavin on behalf of Hurst. It was agreed that, since the cover involved would be very large, it would be necessary to have a number of insurers and it was also agreed that the lead insurer would be the plaintiff in these proceedings (" Allianz") who are one of the largest, perhaps the largest, insurance company in the world. It was an important feature of the arrangements to be put in place that Allianz, as the lead insurers, would issue the policy and would also take decisions during the currency of the policy as to whether liability would be accepted or repudiated in respect of specific risks. It was also an important feature of the facility that it provided "collective open cover". This would mean in practice that, where a client was exporting a large quantity of produce or storing it somewhere in Ireland, Mike Murphy could arrange for it to be covered for four days before [*6] the appropriate procedures were gone through for the actual cover by the relevant insurer.

10. At this meeting it was decided that the plaintiffs in these and the related proceedings -described as the insurers on "the French market" - should hold 52.5% of the first layer of the insurance and that the insurers on the British market should hold 47.5%. The amount of the cover involved was £7.5 m. The second layer - amounting to £5 m. cover - was to be held as to 47.5% on the French market and 52.5% on the British market. Mr Murphy's evidence in the High Court was that Hurst and DB were the two experts and were the people who placed the risk on his behalf As to the respective roles of DB and Hurst, his evidence in cross examination was as follows:-

11. What was described as a " Slip" was available to the parties at this meeting which set out the nature of the cover to be provided, which emanated from DB and which was to be furnished to Allianz as the lead insurer. A " slip policy " was then issued by Hurst (under their then name of Citicorp Insurance Brokers (Marine) Limited) which sets out the 47.5% of the total cover and subdivides it between the various British underwriters. That slip policy contained the following provision:-

12. On foot of these arrangements, what was described as a "basic policy” was issued covering initially the period from l st February 1990 to 28th February 1990 which was stamped by Allianz and the plaintiffs in the related proceedings as the underwriters on the "Marche Francais" and in which the "Marche Britannique" was noted as being represented by Citicorp Limited, i.e. Hurst.

13. The evidence also established that the procedure in relation to the payment of the commission to the two placing brokers was as follows. Mike Murphy - described as the " producing broker" - was paid an agreed percentage of the total commission due to the three brokers in respect of the premium paid by the customer. DB deducted from the balance of the commission the agreed percentage due to them and remitted the final net balance to Hurst.

14. The submission made on behalf of Hurst in the High Court and again in this court was that, in those circumstances, they were placing brokers solely in respect of the risk the placing of which they negotiated on the British market, but had no responsibility whatever for the placing or negotiation of the risk on the French market or that they were in any sense “ placing brokers” in respect of that market. [*9]

15. The President rejected that contention. He said that:-

16. The President went on to refer to the evidence of Mr. Cudby that, in the placing of Mike Murphy's business, Hurst regarded DB Agencies as the producing broker, with the result that Hurst was the placing broker for the English part of the business without any responsibility for the French part. The President added:

17. I am satisfied that, in arriving at these conclusions, the President overlooked the evidence to which I have referred of Mr. Murphy himself, in which he agreed that the arrangement was that Hurst would secure underwriters in the English market to cover 47.5% and that DB would secure underwriters to cover the 52.5% required for the French market. It is immaterial, in my view, whether Mr. Cudby was correct in this context in attaching the label of “p roducing broker" to DB. If one accepts that Mike Murphy was properly described as the "producing broker" in respect of the whole transaction and Hurst and DB as " placing brokers", the fact remains that he was a party to the arrangements entered into at the meeting in Paris and understood clearly the respective roles of the two placing brokers. There cannot be any room for doubt, in my view, that under those arrangements, DB were solely and exclusively responsible for placing the risk on the French market, just as Hurst [*12] were solely and exclusively responsible for placing the risk on the British market. That conclusion is entirely borne out by the terms of the relevant documents to which I have already referred.

18. It also seems to me that, with respect, the President has misunderstood the effect of Allianz being the lead insurer and the British underwriters being accordingly required to follow their decisions in relation to the settlement of any claims. The arrangements entered into between the three brokers clearly envisaged that Hurst would be responsible for the placing of the 47.5% of the total risk to be covered on the British market and that DB would accept a similar responsibility in relation to the placing of the balance of the risk on the French market. The fact that in respect of both markets Allianz were to be the lead insurer was not a ground for holding that there was effectively one underwriting transaction only in respect of the entire of which Hurst accepted responsibility.

19. I would allow the appeal and substitute for the order of the High Court an order in the following terms.