High Court of Ireland Decisions

1. This matter comes before the Court as the trial of a preliminary issue pursuant to Order of the 16 February 1998 (McCracken J) whereby it was ordered that a preliminary issue be tried between the First Named Fourth Party and the First Named Third Party "whether or not the First Named Fourth Party at any material time acted as placing broker in respect of the placing handling management or renewal of the Defendant's marine assurance policy reference number 90.100 with the Plaintiff"

I have been advised by Counsel that the action listed before me, from which this issue arises, is one of a series of actions which are all inter related and accordingly I am conscious of the care that should be taken when setting out the facts which give rise to this issue in case it should later be suggested that in so doing I have made findings of fact which preclude the determination of these issues at some future date and accordingly in order to avoid any misunderstanding I am dividing my statement of facts into two parts which I have identified as "Background" and "Findings of Fact". The first part is intended as no more than a statement of what I gather is the background of the case, to assist in understanding the circumstances in which the case comes before the Court. The latter, "Findings of Fact", are the facts as I find them in determining this issue.

Background

The Plaintiff in this action is arguably the largest insurance company world wide. The Defendant is the Minister for Agriculture and Food ("The Minister") and he was at the relevant time the owner of a quantity of meat which was destroyed in a fire. The Minister has made a claim on foot of an insurance policy which the Plaintiffs claim to be entitled to repudiate because there had been a failure on the part of the Minister to disclose a material fact. The First Third Party Mike Murphy Insurance Brokers Limited ("Mike Murphy") is an insurance broker entrusted by the Minister with the placing of the insurance. The Second Named Third Party is, it is claimed, the placing broker which Mike Murphy used for the placing of the insurance. The First Named Fourth Party, Nelson Hurst Marine Limited (sometimes known as Citicorp Insurance Broker (Marine) Limited being a name which they used for a period of time before they changed back to their original name) is an insurance broker who carries on business on the English insurance market.

The Minister claims that if there was a failure on the part of anybody to make disclosure of a material fact to the Plaintiffs then that responsibility was that of Mike Murphy or DB Agencies SA. Those third parties seek to make the case that Nelson Hurst Marine Limited, the First Named Fourth Parties carry the same or similar responsibility to make disclosure as they may have done and on that basis have joined them as fourth parties.

The significance of the issue that now arises before me is as follows:

Nelson Hurst Marine Limited (Nelson Hurst) claim that they were never placing brokers, insofar as the placement of insurance on the French market is concerned. They accept that they were "placing brokers" insofar as the placing of the English share of the risk was concerned but deny any responsibility for the French share. If it is found that they were Placing Brokers for the French market then it is possible that they may be found to have the same or similar responsibilities as DB Agencies SA.

Findings of Fact

Mike Murphy was at all relevant times one of the largest insurance brokers in Ireland and specialised in placing insurance for beef exports from this country. In the early 1980s Mr Murphy had transacted insurance business with Mr David Gresty of DB Agencies SA who placed business for him on the French market and with Mr Raymond Cudby of Nelson Hurst who placed business with him on the London market.

In the 1980s Mr Murphy anticipated that his business would expand as he hoped to become the producing broker for the Minister for Agriculture. He found that he had difficulty in placing his business on the London market because it was not discreet and competitors were able to become aware of his rates and so, as he put it, "feed off his work." He also found that any single market, be it the London market or the French market, was not sufficiently large for the business that he had or contemplated. A further difficulty which he experienced was that he required a facility whereby he, as the producing broker, would have authority to cover a risk over a period of four days so that if a cargo of meat was presented to him, for insurance on, say, a Friday afternoon he would be able to hold it covered on his own authority until after the weekend when the appropriate procedures could be gone through with the placing broker.

Confronted with these difficulties Mr Murphy consulted both Mr Gresty and Mr Cudby. I am satisfied that Mr Gresty and Mr Cudby between them composed a slip which it was hoped would be acceptable on both the Continental and London market and after preliminary communications a meeting was arranged for the 29 January 1990 to be held in Paris at which all relevant parties attended to put in place what has been variously described as a "collective open policy" or a "binder" or a "facility".

I am satisfied that while Mr Murphy and his in house advisor, Mr Caprani attended the meeting Mr Murphy regarded himself as in the hands of two experts in the insurance field namely Mr Cudby and Mr Gresty.

This meeting had as its objective the creation of a facility which is known in these proceedings as "policy 90.100". This is a policy issued by Allianz, the Plaintiff in the action.

Insofar as is relevant to the issue that I have to try this policy or facility possess the following features:

(1) The facility would enable Mike Murphy to hold cover on a shipment of meat for a period of four days (no issue arises on this element).

(2) An arrangement was come to whereby the French market would cover 52.5% of the first layer of any risk and the British market 47.5% of the first layer, up to £7.5m thereafter for the next £5m the shares would be undertaken in the opposite way. That is to say the British market held cover up to 52.5% and the French market up to 47.5%.

I am satisfied that these percentages were arrived at in discussion between the two experts, Mr Gresty and Mr Cudby as each knew how much each of their respective potential markets would bear.

(3) It was agreed that the lead insurance company would be Allianz.

I am satisfied that in any arrangement of this nature a decision is taken that one company will dictate policy which will bind all other companies participating in the risk. Since Allianz is a major prestigious company it was agreed that it would assume the role of leader.

(4) It was agreed that the handling of the day to day workings of the cover would be done through DB Agencies and they would communicate with Allianz, Nelson Hurst, Mike Murphy and other interested parties.

The facility contained a variety of additional terms which in my view are not material to the present issue.

It is of significance and I am satisfied that having entered into this arrangement Mr David Gresty set about identifying insurance companies who were prepared to assume a percentage of the 52.5% to be covered by the French market but that he did not confine himself to French companies. He successfully sought a company in Italy and a company in Holland prepared to underwrite a percentage of the risk. For his part Mr Raymond Cudby set about placing his risk on the market with which he was fully familiar namely the London market.

In due course the risk was underwritten in full and the facility commenced to operate and did operate by the issuing of 16 policies of insurance for various shipments of meat.

The submission is made on behalf of Nelson Hurst that the role that they played was no more than that of an agent acting for DB Agencies in the placing of a share of the risk on the English market. They are prepared to accept that this role identified them as "placing brokers" in respect of the risk that they negotiated on the English market but they say that they had no input or duty towards the French market and they deny that they were "placing brokers" in respect of that market.

In my view the correct approach to determining the issue that arises is that one should properly look not at the way in which Nelson Hurst and DB Agencies conducted the business during the existence of the facility but rather at the agreement which they had with one another and with Mike Murphy as reached at the Paris meeting. In this regard I find myself in no doubt that the account of the transaction given by Mr Mike Murphy is correct. I am satisfied that confronted with the difficulties which he had in placing his business, he put himself in the hands of two placing brokers who he correctly regarded as experts who I am satisfied, saw significant business opportunities available to them by the creation of the facility and I believe that they were perfectly prepared to use their expertise to satisfy Mike Murphy's requirements. It was no part of the arrangement which was agreed between Mike Murphy and his two placing brokers as to the way in which they placed the risks or the underwriters which they chose. I accept his evidence when he said "as far as I am concerned they were the two experts. And they were the placing brokers and they were the people who placed the risk for me. I brought the client, they placed the risk for me jointly as far as I am concerned."

On behalf of Nelson Hurst it is submitted that the continental insurance companies would be strangers to them since their expertise lies on the British market and while they are experts in dealing with Lloyds of London, they would not profess an expertise on the continental market. I accept that that may well be the case but I find no evidence that either of these companies was confined to any particular market for the placing of the risk insofar as Mr Murphy was concerned. Again I accept his evidence that while he would not have wanted his business to have been placed with a South African Insurance Company, they were free to place the business wherever they wished. I accept his evidence that while there was a discussion as to the percentage to be placed by each broker there was no discussion at the meeting in Paris as to where it was going to be placed. It was up to the two placing brokers where they placed the business providing they produced a product for Mr Murphy which at the end of the day would stand up. Each of them assumed that they would place the percentage risk on the market with which they were familiar.

While I accept that the agreement envisaged that DB Agencies would be responsible for the day to day management of the policies issued under the facility, in my view this situation came about because Allianz, being the lead underwriter who was assuming 20% of the risk, required this as part of the arrangement and I do not regard it as material in the determination of the responsibilities between the two placing brokers.

It was suggested by Mr Cudby during the course of his evidence that in the placing of Mike Murphy's business, Nelson Hurst regarded DB Agencies as the producing broker and that Nelson Hurst was therefore the placing broker for the English part of the business without any responsibility for the French part.

In my view this can not be a correct description of the arrangement since it fails to take account of Mike Murphy's role in the transaction. Mike Murphy was clearly the producing broker for all the business having acquired it from the Minister and other clients in Ireland. This business he then entrusted to the two placing brokers to place it appropriately. In my view Mr Cudby is not correct in this part of his evidence.

Nor do I accept that one can validly draw a distinction between the business placed on the English market and that placed on the French market since the entire transaction was governed by the decision of the lead broker Alianz. Their decision would bind not only the French part of the business but also the English part. Therefore to regard this transaction as having two separate and distinct parts is in my view erroneous.

Accordingly I answer the preliminary issue Order to be tried in the Order of the 16 February 1998 as follows:

"The First Named Fourth Party did act as placing broker in respect of the placing, handling, management or renewal of the Defendant's marine assurance policy reference no 90.100 with the Plaintiff".