HIH Casualty and General Insurance Ltd. et al. v. Chase Manhattan Bank et al., (2003) 303 N.R. 116 (HL)

• Case Date: February 20, 2003
• Jurisdiction: Canada (Federal)
• Citations: (2003), 303 N.R. 116 (HL)

HIH Casualty v. Chase Manhattan Bk. (2003), 303 N.R. 116 (HL)

MLB headnote and full text

Temp. Cite: [2003] N.R. TBEd. AP.053

HIH Casualty and General Insurance Limited and others (respondents) v. Chase Manhattan Bank (appellants) and others

HIH Casualty and General Insurance Limited and others (appellants) v. Chase Manhattan Bank (respondents) and others (first appeal)

HIH Casualty and General Insurance Limited and others (appellants) v. Chase Manhattan Bank (respondents) and others (second appeal) (Conjoined appeals)

([2003] UKHL 6)

Indexed As: HIH Casualty and General Insurance Ltd. et al. v. Chase Manhattan Bank et al.

House of Lords

London, England

Lord Bingham of Cornhill, Lord Steyn, Lord Hoffmann, Lord Hobhouse of Woodborough and Lord Scott of Foscote

February 20, 2003.

Summary:

Chase Manhattan Bank was loaning sub­stantial sums of money to finance future film productions. As a condition precedent to the lending transaction, Chase was to be covered by insurance policies under which it could collect if the revenue stream from the film productions fell short of the sums advanced (i.e., time variable contingency insurance). Policies were issued by a group of insurers, naming Chase as insured. Heaths acted as Chase's agent/broker. The policies contained a "truth of statement" clause which provided that the insured did not have any duty to make any representation, warranty or disclosure (such duty and obligation being ex­pres­sly waived by the insurers), the insured had no liability of any nature to the insurers for any information provided by any other parties and any information or nondisclosure provided by other parties (incl. Heaths) would not be a ground for avoidance or can­cellation by the insurer. There were substan­tial shortfalls on five films and Chase claimed under the poli­cies. The insurers claimed that they were entitled to rescind the insurance contracts because of misrepresenta­tion and nondisclosure by Heaths and sought dam­ages from Chase. Chase claimed that upon the true construction of the policies, the insurers were not entitled to repudiate liability or claim damages against Chase based on misrepresentations by the broker/agent Heaths.

The House of Lords interpreted the "truth of statement" clause. The court rejected the argument that the insurers' waiver of Chase's duty of disclosure relieved Heaths also and thus operated to relieve Chase of any liability as principal. The court held that on a true construction of the insurance con­tracts, the insurers were entitled in law: "(a) to avoid and/or rescind the contracts of or for insurance against Chase on the grounds, but only on the grounds, of fraudulent mis­representation or as regards the contracts of insurance fraudulent non-disclosure by Heaths as agent of Chase; (b) to damages from Chase for, but only for, fraudulent misrepresentation by Heaths as agent of Chase and fraudulent non-disclosure by Heaths as agent of Chase if, but only if, such fraudulent non-disclosure by Heaths amounts to fraudulent misrepresentation." The con­tracts could not be avoided or damages awarded against Chase for innocent or negli­gent misrepresentations, if any, by Heaths.

Agency - Topic 4168

Relations between principal and third parties - Principal's liability for torts by agent - Fraud by agent (incl. negligent misrepresentation) - The House of Lords raised but did not decide the issue of whether there was a rule of law that a party could contract that he should not be liable for his agent's fraud - See para­graphs 16, 17, 76 to 82, 98 and 121 to 125.

Agency - Topic 4168

Relations between principal and third parties - Principal's liability for torts by agent - Fraud by agent (incl. negligent misrepresentation) - [See Insurance - Topic 9971 ].

Insurance - Topic 1008

The insurance contract - General - Con­tractual waiver of insured's duty of dis­closure (incl. truth of statement clause) -[See Insurance - Topic 9971 ].

Insurance - Topic 9971

Loan insurance - Contingency insurance - General - Chase Manhattan Bank was loaning substantial sums of money to finance future film productions - Insurance policies were issued by HIH et al. (the insurers) under which Chase could recover if the revenue stream from the film pro­ductions fell short of the sums advanced - Heaths acted as Chase's agent/broker - The policies contained a "truth of statement" clause which purported to waive Chase's duties of disclosure and Chase's liability for any nondisclosure by other parties (incl. Heath) - Chase claimed under the policies - The insurers claimed that they were entitled to rescind the insurance contracts because of misrepresentation and nondisclosure by Heaths and sought dam­ages from Chase - The House of Lords interpreted the "truth of statement" clause -The court rejected the argument that the insurers' waiver of Chase's duty relieved Heaths also and thus operated to relieve Chase of any liability as principal - The court held that the insurers could not avoid the policies or be awarded damages on the ground of innocent or negligent misrepre­sentation by Heath and Chase - However, the clause did not operate to protect Chase against any liability for damages or any risk of avoidance if the insurers were induced to enter into the contract by any fraudulent misrepresentation of Heaths acting as agent of Chase.

Cases Noticed:

Société Anonyme d'Intermediaries Luxem­bourgeois v. Farex Gie, [1995] L.R.L.R. 116, refd to. [paras. 8, 50].

Canada Steamship Lines Ltd. v. R., [1952] A.C. 192 (P.C.), refd to. [para. 11].

Lazarus Estates Ltd. v. Beasley, [1956] 1 Q.B. 702 (C.A.), refd to. [para. 15].

Weir v. Bell (1878), 3 Exch. D. 238, refd to. [para. 15].

Pearson (S.) & Son Ltd. v. Dublin Corp., [1907] A.C. 351 (H.L.), refd to. [paras. 16, 68, 119].

Brownlie v. Campbell (1880), 5 App. Cas. 925 (H.L.), refd to. [paras. 21, 72].

Banque Keyser Ullmann S.A. v. Skandia (U.K.) Insurance Co., [1990] 1 Q.B. 665 (C.A.), refd to. [para. 21].

Pan Atlantic Insurance Co. et al. v. Pine Top Insurance Co., [1995] 1 A.C. 501; 171 N.R. 81 (H.L.), refd to. [para. 22].

PCW Syndicates v. PCW Reinsurers, [1996] 1 W.L.R. 1136, refd to. [para. 42].

Carter v. Boehm (1766), 3 Burr. 1905; 97 E.R. 1162, refd to. [para. 48].

Blackburn, Low & Co. v. Vigors, [1887] 12 App. Cas. 531 (H.L.), refd to. [paras. 50, 111].

National Westminster Bank v. Utrecht-America Finance, [2001] 3 All E.R. 733, refd to. [paras. 51, 65].

Smith v. South Wales Switchgear Co., [1978] 1 W.L.R. 165 (H.L.), refd to. [para. 61].

Hollier v. Rambler Motors (A.M.C.) Ltd., [1972] 2 Q.B. 71 (C.A.), refd to. [para. 62].

Gillespie Brothers & Co. v. Bowles (Roy) Transport Ltd., [1973] 1 Q.B. 400 (C.A.), refd to. [para. 62].

Ailsa Craig Fishing Co. v. Malvern Fishing Co., [1983] 1 All E.R. 101; [1983] 1 W.L.R. 964 (H.L.), refd to. [para. 63].

George Mitchell (Chesterhall) Ltd. v. Fin­ney Lock Seeds Ltd., [1983] Q.B. 284, affd. [1983] 2 A.C. 803 (H.L.), refd to. [para. 63].

HIH Casualty and General Insurance Ltd. v. New Hampshire Insurance Co., [2001] 2 Lloyd's Rep. 161, refd to. [para. 65].

Toomey v. Eagle Star Insurance Co. (No. 2), [1995] 2 Lloyd's Rep. 88, refd to. [paras. 65, 116].

Gluckstein v. Barnes, [1900] A.C. 240 (H.L.), refd to. [para. 71].

Lee v. Jones (1864), 17 C.B.N.S. 482, refd to. [para. 71].

Rivaz v. Gerussi Brothers & Co. (1880), 6 Q.B.D. 222, refd to. [para. 73].

Banque Keyser Ullmann S.A. v. Skandia (U.K.) Insurance Co., [1990] 1 Q.B. 665 (C.A.), affd. [1991] 2 A.C. 249; 199 N.R. 382 (H.L.), refd to. [para. 75].

Wells v. South African Alumenite Co., [1927] A.D. 69, refd to. [para. 78].

Heyman v. Darwins Ltd., [1942] A.C. 356 (H.L.), refd to. [para. 98].

Mackender v. Feldia AG, [1967] 2 Q.B. 590 (C.A.), refd to. [para. 98].

Reardon Smith Line v. Hansen-Tangen, [1976] 1 W.L.R. 989; [1976] 3 All E.R. 570 (H.L.), refd to. [para. 103].

Authors and Works Noticed:

Arnould, Law of Marine Insurance and Average (16th Ed. 1981), vol. 1, p. 104, para. 161 [para. 104].

Spencer-Bower, G., Turner, A.K., and Sutton, The Law Relating to Actionable Non-Disclosure (2nd Ed. 1990), pp. 249, 250 [para. 21].

Counsel:

Not disclosed.

Agents:

Not disclosed.

This appeal was heard before Lord Bing­ham of Cornhill, Lord Steyn, Lord Hoffmann, Lord Hobhouse of Woodborough and Lord Scott of Foscote, of the House of Lords. The decision of the House of Lords was given on February 20, 2003, when the following speeches were delivered:

Lord Bingham of Cornhill - see para­graphs 1 to 23;

Lord Steyn - see paragraph 24;

Lord Hoffmann - see paragraphs 25 to 84;

Lord Hobhouse of Woodborough - see paragraphs 85 to 99;

Lord Scott of Foscote - see paragraphs 100 to 128.