NATIONAL UNION OF FIRE INSURANCE CO. OF PITTSBURGH, PA v. GRAND UNION INSURANCE CO. LTD. AND ANOTHER

IN THE COURT OF APPEAL

1993 No. 181
(Civil)

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J U D G M E N T

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Power, V.-P., giving the judgment of the Court:

1. This is an appeal from the decision of Deputy Judge Yeung in an application for summary judgment made by the plaintiff National Union Fire Insurance Company of Pittsburgh, PA. (National Union) against two defendants Grand Union Insurance Company Ltd. (Grand Union) and Mercantile Mutual Holdings Ltd. (Mercantile Mutual) for the sum of 50% of DM690,872.78 or its equivalent in Hong Kong currency. A winding-up order was made against Grand Union on 19th December 1990 and National Union was granted leave on 29th November 1991 to continue its claim against that company. At the hearing before Deputy Judge Yeung Grand Union did not appear and he gave judgment against it on the claim in full.

2. It was the claim of National Union against Mercantile Mutual that, by a contract of reinsurance evidenced by a reinsurance slip confirmed by International Reinsurance Management Property Ltd. of Sydney, Australia (I.R.M.), the authorised agent of Mercantile Mutual made on about the 7th of June 1983, it had agreed to re-insure 50% of the National Union's 80% cover of a construction "all risks" policy held with National Union by the "City of Gelsenkirchen And Arbeitsgemeinschaft and/or J.V. of Holzman Hochjief Polensky and Zollner, Meitkamp and/or Co-Sub-Contractors and/or principals and other interested parties". The subject matter of the policy was the performance of the insurer's contract for the City Railway Bismark Section Lots 5063.0, 5063.1, 5064.0, 5064.1, 5064.6 at Gelsenkirchen Bismark Strasse including all associated and ancillary works connected therewith. The contract of reinsurance included a Full Insurance Clause and a Simultaneous Claims Payment Clause which provided:

"This reinsurance is subject in all respects to the same terms and conditions (excluding rate and retention) as and to follow the settlements of the National Union Fire Insurance Company of Pittsburg, PA and to bear its proportion of any expenses incurred, whether legal or otherwise, in the investigation and defence of any claim hereunder."

"Reinsurers hereunder agree to pay their shares of any loss hereon simultaneously with the re-insured hereunder."

3. If the reinsurance slip bound Mercantile Mutual then it was required by virtue of these clauses to "follow the settlements" of National Union and to indemnify National Union "simultaneously" as regards each share of any amount paid to the original insured. Mercantile Mutual had by a memorandum of agreement made in December 1980 and the subsequent addendum made on 19th June 1981 appointed I.R.M. as an agent to underwrite insurance and re-insurance on its behalf. The memorandum of agreement provided in Article 11:

"Documentation: The company hereby authorises I.R.M. to issue such documentation as is required in the course of business and to sign Brokers slips/collective policies and/or other insurance/reinsurance wordings and documents."

This clearly gave I.R.M. authority to underwrite re-insurance on behalf of Mercantile Mutual and it is of importance to note that the authority was given to I.R.M. without any limitation or qualification other than that specified in Article 11. The vital document in this matter is the reinsurance slip. The material portions of the slip, which is in the form of a chop or stamp, read as follows:

"Mercantile Mutual Ins. Co. Ltd.

Per: I.R.M. (U.K.) Ltd.

U.K. 83/15196

Confirmed HK 944."

A line has been ruled through the "Subject to confirmation" and beside the chop appears an indecipherable signature alongside which is the date 7.6.83. There is no evidence as to the identity of the person who appended the signature.

4. The trial judge, being satisfied that the slip did bind Mercantile Mutual to a contract of reinsurance, held that it had no defence to claim by National Union and gave summary judgment against the company in the sum of DM345,436.39 and ordered it to pay the costs of the application. National Mutual now appeals against that decision.

5. In order to understand the appellant's case it is necessary to set out the full contents of the slip and the wording of two faxes and a telex which came into existence at about the same time as the slip. The slip in full was as follows:

The first fax, dated 2nd May 1983, is from GUICHK to GUICUK. It is common ground that these acronyms refer to Grand Union Insurance Company Hong Kong and Grand Union Insurance Company United Kingdom. It bears the notation "HK944" and is addressed to the attention of Mr. D.J. Parry. It bears the reference "CAR City of Gelsenkirchen N Arbeitsgemeinschaft" and the abbreviated wording when put into normal English reads: "Regarding your fax 840. Agree indicated lines on above. Please send slip when available".

6. The second fax, dated 7th June 1983, is from Grand Union Insurance Co., United Kingdom to Grand Union Insurance Company Australia. It is headed "For the attention of F. Wong" and reads:

"Please telex your confirmation to the following contract."

It then sets out what appears to be the identifying numbers of three contracts: 82/15194, 82/15195 and 83/15196. It concludes "Thanks and Regards, Matthew Pearce".

7. It is common ground that Frances Wong was an officer of I.R.M. It will be noted that "83/15196" is the notation that appears on the slip in the box which refers to Mercantile Mutual.

8. The final document appears to be a telex. It is dated 8.6.83 and is addressed to "GUICL H.X.", (there is no dispute that this refers to Grand Union Hong Kong) for the attention of Mr. R. Ko. It reads:

"Received slips from London."

It then refers, inter alia, to "82/15196" and states, when put into normal English: "Could you please check and confirm on our behalf" and is signed "Regards, Frances Wong".

9. Mr. Ma, who appears for the appellant, relied when arguing his first contention upon the maximum "delegatus non potest delegare". He submits that when the documentation overall is examined it is much too imprecise to allow a conclusion to be drawn that I.R.M. was entering into the contract of reinsurance on behalf of Mercantile Mutual. He contended that the documentation set out above on its face indicates that it was not I.R.M., the authorized agent, who entered into the contract of reinsurance on behalf of Mercantile Mutual but "I.R.M. (U.K.) Ltd." which, whatever the similarity of name, is not the authorized agent of Mercantile Mutual. This submission was, in our view, of no real weight if there was evidence to establish that the contract was, in fact, entered into by an authorized officer of I.R.M.

10. Mr. Ma argued further that even if Frances Wong was an authorized officer of I.R.M., and we shall deal with that matter further later, she did not purport to give any authorization until the 8th of June 1983, one day after the 7th of June which was the date on which the slip was, on its face, completed, that being the date beside the unidentified signature. He argued that as National Union had not relied upon ratification, the belated authorization had no legal effect. He submitted that the significance of the documents is properly understood when they are looked at sequentially. The first fax, dated 2nd June 1988 bears the notation HK944 which notation appears in both of the chops on the slip. He suggests that this fax was, on its face, dealing with both chops. He submits that this indicates at least the possibility that Grand Union, which had no more authority from Mercantile Mutual than did I.R.M. (U.K.) Ltd., was agreeing that Mercantile Mutual would be bound by the contract of reinsurance. We reject this suggestion and are satisfied that this fax must be taken to be what its wording indicates it was, i.e. a communication from Grand Union Hong Kong to Grand Union UK regarding the portion of reinsurance contract in which it was concerned.

11. Mr. Ma argues that even if this be so the unknown signatory had, at latest, confirmed the contract on 7th June 1983, a day before Frances Wong, given that she had authority, confirmed on behalf of I.R.M. He submits, as we have indicated, that ratification not being relied upon, the purported confirmation had no effect. We find no merit in this argument. Whatever was initially agreed at the time the chop came into existence was clearly "Subject to confirmation". That Confirmation was specifically given by Frances Wong on 8th June. The sensible and regular sequence was that those words were only deleted after that confirmation was given. We are satisfied that the documentation on its face indicates a contract of reinsurance properly confirmed by an authorized agent. We are in no way shaken as to the correctness of this finding by the appearance of the letters "I.R.M. (U.K.) Ltd." on the chop.

12. We are satisfied that the documentation, properly construed, does not indicate any wrongful delegation.

13. Mr. Ma argued a further point in this regard submitting that even if the slip was confirmed by Frances Wong and even if she was an officer of I.R.M. she was not an officer who had underwriting authority to accept risks on half of Mercantile Mutual. In this regard he relied upon the statement in an affidavit by Mr. Arthur James Brown, the assistant general manager of Mercantile Mutual in which he said that Miss Wong was not an authorized underwriter and that during 1983 only Mr. Don Baster and later Mr. Ray Gosling were authorized underwriters employed by I.R.M. We find no merit at all in this argument. I.R.M. were authorized to act on behalf of Mercantile Mutual. An officer of I.R.M. acting, on the face of the matter, in a perfectly regular manner authorized a contract of reinsurance. We reject the suggestion, not grounded upon any factual basis, of a possibility that she was acting without authority.

14. The final matter argued by Mr. was that the payments which National Union made pursuant to its liability under the contract were not shown to relate to the risk. Mr. Ma conceded that while the documents exhibited to the affidavits might show that National Union settled claims made by the parties insured, they left it open as to whether those claims were made in respect of the risks described in the contract of re-insurance. We listened with care to his submissions in this regard and examined the documents to which he made reference. Suffice to say that we see nothing to suggest that National Union made payments that were not to the parties insured in respect of the risks described in the contract of re-insurance.

15. We are satisfied that the trial judge was right to hold as he did.

16. We have not arrived at our decision following the route taken by the trial judge. Insofar as he appeared to proceed upon the basis that I.R.M. UK could be properly categorized as the "London office" of I.R.M. his reasoning is open to criticism. However, his eventual conclusion was the correct one and the appeal is dismissed.

17. In handing down this judgment, we make an order nisi that the appellant pay the respondent's costs of appeal to be taxed.