Superwood Holdings Plc v Sun Alliance & London Insurance Plc

• Jurisdiction: Ireland
• Judge: Mrs. Justice Denham,BLAYNEY J.
• Judgment Date: 27 June 1995
• Neutral Citation: 1995 WJSC-SC 3385
• Court: Supreme Court
• Docket Number: [S.C. No. 348 of 1991]
• Date: 27 June 1995

SUPERWOOD HOLDINGS PLC v. SUN ALLIANCE & LONDON INSURANCE PLC

BETWEEN/

SUPERWOOD HOLDINGS PLC, SUPERWOOD LIMITED, SUPERWOODEXPORTS LIMITED, SUPERCHIP LIMITED, SUPERWOOD INTERNATIONAL LIMITED,SUPERWOOD (U.K.) LIMITED

Plaintiffs/Appellants

and

SUN ALLIANCE AND LONDON ASSURANCE PLC TRADING AS SUNALLIANCE INSURANCE GROUP, PRUDENTIAL ASSURANCE COMPANY LIMITED CHURCHAND GENERAL INSURANCE COMPANY LIMITED AND RAYMOND P. McGOVERN AS LLOYDSUNDERWRITERS SOLE GENERAL REPRESENTATIVE, REPUBLIC OFIRELAND

Defendants/Respondents

1995 WJSC-SC 3385

Hamilton C.J.

Blayney J.

Denham J.

349/91

THE SUPREME COURT

Synopsis:

COMPANY

Representation

Falsity - Proof - Failure - Insurance - Policy - Alleged fraudulent claim made by company - Liability repudiated by insurers - Necessity to identify person making representation on behalf of company - (348/91 - Supreme Court - 27/6/95) - [1995] 3 I.R. 303

|Superwood Holdings Plc. v. Sun Alliance and London Insurance Plc.|

EVIDENCE

Estoppel

Insurance - Policy - Insured - Obligations - Conduct of insurer - Repudiation of liability on ground of fraud - Repudiation un justified - Insurer cannot rely on clause in a policy which he has repudiated - Insurer estopped from invoking insured's obligations under policy - (348/91 - Supreme Court - 27/6/95)1995 3 IR 303

|Superwood Holdings Plc. v. Sun Alliance and London Insurance Plc. |

EVIDENCE

Fraud

Representation - Falsity - Proof - Failure - Fire - Policy of insurance - Company's claim to indemnity against loss of profits - Repudiation of liability by insurers on ground of fraud - Necessity to identify person making representation on behalf of company - (348/91 - Supreme Court - 27/6/95) - [1995] 3 I.R. 303

|Superwood Holdings Plc. v. Sun Alliance and London Insurance Plc.|

FRAUD

Proof

Failure - Company - Fire - Loss - Representation - Insured company's claim to indemnity against consequential loss of profits - Insurer's repudiation of liability on ground of fraud - Identification of mind of plaintiff company - Identification of person who made impugned representation - Insurer cannot rely on clause in a policy which he has repudiated - Insurer estopped from invoking insured's obligations under policy not rendered void by fraud - Inferences drawn by appellate court from facts found by trial judge - Arbitration Act, 1954, s. 39 - (348/91 - Supreme Court - 27/6/95) - [1995] 3 I.R. 303

|Superwood Holdings Plc. v. Sun Alliance and London Insurance Plc.|

INSURANCE

Insurer

Liability - Repudiation - Grounds - Fraud - Repudiation unjustified - Insurer cannot rely on clause in a policy which he has repudiated - Insurer estopped from invoking insured's obligations under policy - (348/91 - Supreme Court - 27/6/95) [1995] 3 I.R. 303

|Superwood Holdings Plc. v. Sun Alliance and London Insurance Plc.|

SUPREME COURT

Appeal

Facts - Judge - Findings - Inferences - Different inferences drawn by appellate court - (348/91 - Supreme Court - 27/6/95)

|Superwood Holdings Plc. v. Sun Alliance and London Insurance Plc.|

Citations:

LONDON ASSURANCE V CLARE 57 LLR 254

BALLASTY V ARMY NAVY & GENERAL ASSURANCE ASSOCIATION LTD 50 ILTR 114

FUREY V EAGLE STAR & BRITISH DOMINIONS INSURANCE CO LTD 56 ILTR 23

COEN V EMPLOYERS LIABILITY ASSURANCE CORPORATION LTD 1962 IR 314

JUREIDINI V NATIONAL BRITISH & IRISH MILLERS INSURANCE CO LTD 1915 AC 499

WELCH V ROYAL EXCHANGE ASSURANCE 1939 1 KB 294

HAY V O'GRADY 1992 1 IR 210 1992 ILRM 689

GAIRLOCH, THE 1899 2 IR 1

DPP, PEOPLE V MADDEN 1977 IR 336

KERR ON FRAUD & MISTAKE 7ED 644

BIRDS MODERN INSURANCE LAW 2ED 78

DERRY V PEEK 1889 14 AC 337

EL AJOU V DOLLAR LAND HOLDINGS PLC 1994 2 AER 685

LENNARDS CARRYING CO LTD V ASIATIC PETROLEUM CO LTD 1915 AC 705

GOWER PRINCIPLES OF MODERN COMPANY LAW 5ED 194

SCHOLZ COMMENTARY ON THE GMBH LAW 7ED

POWLES V PAGE 1846 3 CB 15, 136 ER 7

CAREWS ESTATE ACT (NO 2), IN RE 1862 31 BEAV 39, 54 ER 1054

TAYLOR V SMITH 1991 1 IR 142

USSHER COMPANY LAW IN IRELAND (1986) 38

BANCO AMBROSIANO V ANSBACHER & CO 1987 ILRM 669

ARBITRATION ACT 1954 S39

1 JUDGMENT delivered on the 27th day of June 1995by BLAYNEY J.

2 I agree with Mrs. Justice Denham that this appeal should beallowed.

3 While the case was 116 days at hearing, the issue of liability was concerned solely with whether there had been a breach by the appellants of two of the conditions contained in the policy of insurance issued by the Sun Life Assurance Company. The learned trial judge held that there had been a breach of both conditions and dismissed the appellants"claim.

4 The facts of the case have been set out in great detail in the judgment of Mrs. Justice Denham and it is not necessary for me to repeat them. I propose to confine my judgment to expressing my reasons for agreeing with Mrs. Justice Denham on the conclusions she reached in regard to both conditions.

CONDITION NO. 5

5 This condition is in the following terms.

"If the claim be in any respect fraudulent or if any fraudulent means or devices be used by the insured or anyone acting on his behalf to obtain any benefit under this policy or if any damage be occasioned by the wilful act or withthe connivance of the insured, all benefit under this policy shall beforfeited."

6 In the light of how matters developed, the only part of this condition which is relevant is the first phrase - "If the claim be in any respect fraudulent", and the final phrase, "all benefits under this policy shall be forfeited."

7 On the 20th March 1989 the Sun Alliance wrote to the first-named appellant stating that the insurance companies must repudiate liability under the policy on the ground that the appellants" claim made on the 24th November 1988 was totally unfounded "in that it grossly overstates and exaggerates the true value of loss of profits resulting from reduced turnover and increased cost of working of the business of the insured during the indemnity period."

8 This was followed by two letters from the respondents" solicitors of the 11th and 13th April 1989 in which they stated that for the avoidance of doubttheir clients repudiated liability on the grounds that the claim wasfraudulent.

9 The appellants then instituted the present proceedings and the respondents, in their defence, pleaded that the appellants did make and deliver on the 24th November 1988 "a fraudulent claim or a claim exaggerated so excessively as to lead to the inference that it could not have been made honestly." The respondents pleaded in addition that in the premises the policies became and were void or alternatively became voidable and had been avoided by the respondents by their letters dated the 20th March 1989.

10 The learned trial judge's finding in favour of the respondents on this issue was expressed as follows:

"In my judgment the findings of fact which I have already made lead on inexorably to a finding of fraud against the plaintiffs. A claim for compensation under the relevant policies was put forward which was, in my opinion, far in excess of the real loss sustained by the plaintiffs for which they wereentitled to claim under their consequential loss policies."

11 His finding in effect was that the amount claimed by the appellants was so exaggerated that this, coupled with the other findings of fact he had made, entitled him to draw the inference that the claim wasfraudulent.

12 But exaggeration is not conclusive evidence of fraud. In LondonAssurance v. Clare 57 L1 LR 254 Goddard J., in his charge to the jury, said:

"Mere exaggeration was not conclusive evidence of fraud for a man might honestly have an exaggerated idea of the value of the stock, or suggest a high figure as a bargaining price."

13 Similarly, in the present case, there could have been a genuine belief on the part of the appellants that the entire of the loss which they had sustained during the indemnity period had been caused by the fire.

14 In their submissions to the Court, the respondents recognised that this question of whether the appellants believed that the entire loss had been caused by the firewas the core issue on the question of fraud. They submitted that the essential fraud on the part of the appellants was that they claimed that all the loss that they had sustained during the indemnity period was due to the fire. In other words, they submitted that the appellants had been guilty of fraud because they submitted a claim in which they had no honest belief.

15 In my opinion the respondents were correct in putting this forward as a possible ground on which a finding of fraud might have been made - I say a possible ground because there must remain a doubt as to whether the making of a claim amounts to a representation of fact and so, if false to the knowledge of the maker, can constitute a fraud - but the submission must be rejected as the learned trial judge did not make the findings of fact which would have been necessary to support a finding of fraud on this ground. His finding of fraud was against the appellants, which are six companies, and which, accordingly, could only have been guilty of fraudthrough some individual who was the directing mind and will of the company, or a servant or agent acting within the scope of his authority. The omission to make a finding against any individual might be considered of no importance as it seems clear from the rest of the judgment that all the decisions relating to the appellants were taken by Mr. Richard Bunyan, and accordingly, a finding against the appellants could be treated as a finding against Mr. Bunyan, but in my opinion the absence of any finding that Mr. Bunyan had no honest belief in the claim that the entire of the loss during the indemnity period was due to the fire means that the finding of fraud made by the learned trial judge cannot be allowed to stand.

16 There was no dispute as to the mathematical accuracy of the claim which had been prepared by Mr. Davies of Messrs Grant Thornton,...