Fortisbank SA v Trenwick International Ltd. & Ors [2005] EWHC 399 (Comm)

[2005] EWHC 399 (Comm)Case No 2003 Folio No 673
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 14 th March 2005
Before
MRS JUSTICE GLOSTER, DBE
Between
FORTISBANK SAClaimantTRENWICK INTERNATIONAL LTD & OTHERSDefendant
Bitu Bhalla Esq & Jonathan Miller Esq (instructed by Messrs Hammonds) for ClaimantDavid Turner Esq (instructed by Messrs Kennedys) for DefendantHearing Hearing dates: 29 th October 2004 & 12th January 2005
JudgmentMrs Justice Gloster, DBE:Introduction
[1]This is an application for summary judgment by the defendants, Trenwick International Limited and other underwriters, whom I shall refer to collectively as “Underwriters”. The claimant (“Fortis”) is a major European bank, with its headquarters in Belgium. In common with other large financial institutions, Fortis entered into the field of invoice financing discounting which involves the provision of finance to companies on a regular basis upon notification of invoices. By a written contract dated 20 December 1999 (“The Zye Discounting Agreement”), Fortis agreed to purchase from Zye Technology Limited (“Zye”) all of Zye’s book debts owed to Zye by its customers and all future debts incurred by customers to Zye.[2]By its proceedings originally issued on 23rd July 2003, Fortis claimed £1 million from Underwriters pursuant to the terms of a fraudulent receivables policy (“the Policy”) arranged by Aon Group Limited under a line slip subscribed to by the defendants. The claim arises out of an alleged fraud under the Zye Discounting Agreement.[3]So far as is material for present purposes, Underwriters deny liability on the grounds that Fortis’ present proceedings were brought outside the two year contractual limitation period provided by General Condition 13(b) of the Policy. Under the terms of the Policy, which incepted on 19 May 1999, Underwriters agreed, subject to the terms of the Policy, severally and not jointly, each for its own part and not for any other, to indemnify Fortis for direct financial loss sustained by Fortis by reason of Fortis having in good faith purchased, or made a loan to a customer secured against an account receivable as defined from the customer in circumstances where the account receivable was or proved to be “fraudulent” as defined.[4]The relevant provisions of the policy for present purposes are the following:
“INSURING CLAUSES Subject to the terms, conditions limitation and exclusions of this Policy the Underwriters agree to indemnify the Assured, up to an amount not exceeding the Limit of Liability, for direct financial loss sustained by the Assured subsequent to the Retroactive Date and first discovered by the Assured during the Policy Period as follows: 1. Accounts Receivable By reason of the Assured having in good faith and in the usual course of business: (a) purchased by assignment or otherwise an Account Receivable from a Customer; or (b) made a Loan to a Customer against the security of an Account Receivable; In circumstances in which, in either case, such Account Receivable is or proves to be Fraudulent. … General Definitions ‘Account Receivable’ means any document or other written instrument either purporting to represent or in fact representing or evidencing a sum of money due to a Customer for: (a) Goods sold and delivered; or (b) services rendered; or (c) work done; by the Customer to or for the benefit of a third party. … ‘Fraudulent’ in the context of an Account Receivable means an Account Receivable that has been created dishonestly or with intent to deceive and which proves to be any one or more of the following: (a) non-existent; (b) counterfeit; (c) Forged: (d) fictitious in whole or in part; (e) Invalid; or (f) Worthless. … General Conditions 13. Service of Process … (b) Legal proceedings for the recovery of any loss under the Policy shall not be brought prior to the expiration of 90 days after the original proof of loss is filed with the Underwriters or after the expiration of 24 months from the discovery of such loss, except that any action or proceedings to recover under the Policy on account of any judgement against the Assured in any suit shall be brought within 24 months from the date upon which the judgement in such suit shall become final. … 18. Discovery This Policy applies to loss discovered by the Assured during the Policy Period. Discovery occurs when the Assured becomes aware of facts which would cause a reasonable person to assume that a loss covered by the Policy has been or will be incurred, even though the exact amount or details of loss may not then be known.”
By reason of the Assured having in good faith and in the usual course of business: (a) purchased by assignment or otherwise an Account Receivable from a Customer; or (b) made a Loan to a Customer against the security of an Account Receivable; In circumstances in which, in either case, such Account Receivable is or proves to be Fraudulent. General Definitions ‘Account Receivable’ means any document or other written instrument either purporting to represent or in fact representing or evidencing a sum of money due to a Customer for: (a) Goods sold and delivered; or (b) services rendered; or (c) work done; by the Customer to or for the benefit of a third party. ‘Fraudulent’ in the context of an Account Receivable means an Account Receivable that has been created dishonestly or with intent to deceive and which proves to be any one or more of the following: (a) non-existent; (b) counterfeit; (c) Forged: (d) fictitious in whole or in part; (e) Invalid; or (f) Worthless. General Conditions (b) Legal proceedings for the recovery of any loss under the Policy shall not be brought prior to the expiration of 90 days after the original proof of loss is filed with the Underwriters or after the expiration of 24 months from the discovery of such loss, except that any action or proceedings to recover under the Policy on account of any judgement against the Assured in any suit shall be brought within 24 months from the date upon which the judgement in such suit shall become final. This Policy applies to loss discovered by the Assured during the Policy Period. Discovery occurs when the Assured becomes aware of facts which would cause a reasonable person to assume that a loss covered by the Policy has been or will be incurred, even though the exact amount or details of loss may not then be known.”[5]Underwriters contend that Fortis discovered (within the meaning of that word, as defined in the Policy) the loss in February 2000 and that, accordingly, time for issuing proceedings expired in February 2002, in accordance with General Condition 13(b), because Fortis did not issue proceedings until more than 17 months later, namely on 23 July 2003. By its Reply, Fortis seeks to defeat the argument that the claim is precluded by the limitation provision by asserting first, that there was an express or implied agreement that Underwriters would not rely on General Condition 13(b) and, second, that Underwriters are estopped from relying, or have waived any right to rely, upon a limitation defence.[6]By their Application Notice dated 30th March 2004, Underwriters applied, pursuant to CPR Part 24, for summary judgment on the basis that Fortis has no real prospect of succeeding on the claim because of the limitation period imposed by General Condition 13(b). In addition, Underwriters also seek an order declaring, that, by reason of Fortis’ breach of a consent order made by Langley J on 16 September 2004 (namely Fortis’ failure to file and serve answers, verified by a statement of truth, to the request for information contained in Underwriters’ solicitors’ letter dated 17 February 2004 by 4.00pm on 22 September 2004): i) paragraphs 19 and 20 of Fortis’ Reply have been struck out and; ii) Fortis is debarred from advancing, whether by argument or otherwise the case set out at paragraphs 20.1, 20.2 and 20.3 of its Reply.[7]Underwriters also contended that I should not permit Fortis to rely upon the first witness statement of Robert Stuart Franklin Scott, served at approximately 4.26pm on 28 October 2004 because it was in breach of paragraph 3 of the consent order that, if Fortis did not serve evidence in response to the defendant’s application for summary judgment by 4.00pm on 22 September 2004, then Fortis should be debarred from relying upon any evidence at the hearing of the application.[8]I deal first with the substantive application for summary judgment made by Underwriters.[9]Mr David Turner, counsel on behalf of Underwriters, correctly submits that if, as he contends, the sanctions specified in Langley J’s order have indeed come into force, Underwriters are in any event entitled to an order that paragraphs 19 and 20 of Fortis’ Reply are struck out and further that Fortis is debarred from advancing the case set out at paragraphs 21-23 of the Reply. Logically, he is right. However, in the exercise of my discretion, I considered that I should hear the application for summary judgment first, on the basis that, if I was satisfied as to the merits of that application, it would be unnecessary for me to decide what is in effect a strike-out application on the basis of non-compliance with Langley J’s order.[10]In addition, in the exercise of my discretion I permitted Mr Bitu Bhalla, counsel who appeared with Mr Jonathan Miller on behalf of Fortis, to rely on the first statement of Mr Scott, notwithstanding its late service. Although there was a clear breach of Langley J’s order, and no real justification for late service, I was not prepared to exclude that evidence.

The Summary Judgment Application

[11]The first issue that arises is when, as a matter of fact, the loss was discovered by Fortis. As General Condition 18 provides:
“Discovery occurs when the Assured becomes aware of fact which would cause a reasonable person to assume that a loss covered by the Policy has been or will be incurred, even though the exact amount or details of loss may not then be known.”
[12]Underwriters contend that Fortis discovered the loss in February 2000. It would appear that on 10 February 2000, at a meeting with the Zye directors, and at a subsequent meeting on 11 February, Fortis discovered that Zye had not been administering their sales ledger collateral in accordance with the Zye Invoice Discounting Agreement. By letter dated 11 February 2000, Mr Chisholm of Fortis wrote to Mr Sharrock of Kennedys, Underwriters’ solicitors, in the following terms:
“I would advise you of a potential claim situation which has just arisen on a client of Fortis Bank Commercial Finance. Our client is Zye Technology Limited. This is a client which commenced an Invoice Discounting facility in December [1999]. We have discovered at a meeting with the Directors on Thursday 10th February 2000 and at a subsequent meeting today that the company has not been administering their sales ledger collateral in accordance with their Invoice Discounting Agreement. We will be appointing a Receiver on Monday 14th February 2000. It is evident that the company has sent us invoices for which no goods were delivered and has also not sent us credit notes which had been issued to their debtors. At this time we are aware that the company have been deliberately withholding credit notes for goods which have been returned in order that they could maximise their funds available under the agreement. We are currently have a position whereby the total approved collectable sales ledger totals approximately £1.6m and our client Current Account (funds prepaid to the company) totals approximately £2.3m. In addition at previous meetings the company and its Directors have not disclosed information to us which would have [been] material in our decision to fund the business. At present we are still quantifying our position but under the terms of our fraud insurance policy are hereby advising you of a potential claim. Once we have crystallised out position we will advise you further.”
[13]On 14 February Mr Sharrock spoke to Mr Chisholm who informed him that Zye had been put into receivership, that Fortis was still investigating the position, and that they had definitely found fraudulent activity in one area. Mr Chisholm told Mr Sharrock:
“They have a receivable on their books at 2.9 million and it’s thought that this is overstated to the extent of £600,000 or so. However, the collectability could be as low as 1.6 million. The Assured is still investigating and are not yet in a position to establish the extent of the fraud at the moment.”
[14]On 17 February 2000, Mr Sharrock wrote to Mr Chisholm enclosing an information sheet in relation to fraudulent accounts receivable claims. One of the questions in the sheet, under the heading “Discovery of the fraud” required the Assured to “… provide full details of how the fraud was discovered and what action you have taken to protect your position. Have you appointed receivers, solicitors or forensic accountants to act on your behalf …”[15]When Mr Chisholm, on behalf of Fortis, acknowledged that letter, he said:
“We are compiling the information you have requested on Zye … we expect to have this available for you by 3rd March 2000.”
There was no suggestion in that letter that Fortis had not yet become aware of facts which would have caused it as a reasonable person to assume that a loss covered by the Policy had been or would be incurred. On the contrary, the clear inference from the communications by that date was that Fortis had indeed become aware of facts which would cause a reasonable person to assume that a loss covered by the Policy had been or would be incurred.[16]Indeed, in paragraph 7 of his first witness statement Mr Weekes, a partner at Wildes, the then solicitors of Fortis, specifically said:
“Immediately upon discovery of the fraud and upon preliminary audit, Fortisbank through Wildes (the then solicitors of Fortis) informed the insurers. I myself had conversations with Mr Sharrock of Messrs Kennedys who agreed that the fraud was a considerable one. Our view was the more sustained and we also discovered credit notes which were in themselves bogus but which were obviously used to try and conceal the fraud.”
This demonstrates quite clearly in my judgment that there was no doubt that the fraud had indeed been discovered as early as February 2000, when Underwriters were notified.[17]Subsequently on 16 March 2000, Mr Chisholm wrote to Mr Sharrock again to provide an update on the position in relation to Zye. Mr Sharrock was informed that it was Fortis’ intention to obtain ex parte injunctions against the company and certain directors of it. The first affidavit of Mr Scott sworn on 21 March 2000 in proceedings brought by Fortis against the directors and others, and used in support of an application for freezing orders against certain of the defendants in those proceedings, sets out in considerable detail the nature of the fraud. That included evidence which strongly indicated that large numbers of the underlying invoices had been fraudulently raised by Zye, either because invoices were fabricated on a massive scale or because they were raised in respect of debts which had already been paid, or were otherwise fraudulent. It is quite clear from that affidavit that Fortis knew by March 2000 that a substantial fraud had been perpetrated and the manner in which that had occurred.[18]A further request for completion of the information sheet was made in Mr Sharrock’s letter to Mr Chisholm of 15 May 2000. Again, as already indicated, one of the questions was for the assured to provide full details of “how the fraud was discovered”. If there had been any suggestion that the fraud had not been discovered at such a time, Fortis would have said so. On the contrary, by his letter of 17 May 2000, Mr Chisholm responded as follows:
“[It] is therefore evident that our claim against our Accounts Receivable Insurance Policy will be £1 million with a further loss to be taken in addition to this figure by Fortisbank of between £700,000 and £1 million dependent on the level of the remaining collections. … Having now come to the end of the collection process we should now be in a position to start to furnish with the details of our claim as detailed in your fax. You will appreciate that the process could not start until we had a definitive position on the account.”
[19]By a letter of 22 May 2000, Mr Sharrock on behalf of Underwriters reserved their rights generally. Then, by letter of 14 June 2000, Mr Robert Weekes of Wilde & Partners, solicitors then acting for Fortis, wrote to Mr Sharrock saying that he was “… writing to advise you that the documentation is shortly to be completed to support my client’s fraud insurance claim. There is an enormous volume of documents in support of this claim and I think that all parties would benefit if we could arrange a quick meeting for me to take you through the documents in question. I envisage the answers to your fraud questionnaire being completed by the end of this week together with all the supporting documentation.”[20]Mr Bhalla pointed to clause 15(a)(i) and (ii) of the Policy which makes a distinction between “the discovery of any loss” and, on the other hand “suspicion of loss”. By reference to this distinction, he further submitted that all that occurred here was that there had been “suspicion of loss” and no “discovery”. He submitted that because there were many thousands of invoices involved and that full investigations were necessary to determine whether a particular transaction was true or false, the loss had not been discovered in the true sense as at July 2001, namely two years prior to the issue of proceedings. When pressed by me as to when he said the loss was discovered, he said that either the loss had not yet been discovered, because of Underwriters’ position in their pleading that they formally do not admit that a fraud has occurred, or he says that the loss was discovered within the meaning of the Policy on or about 19 June 2002, when Fortis’ solicitors wrote to Underwriters’ solicitors by way of final demand, setting out the evidence upon which Fortis intended to rely and its rationale regarding its decision to commence action. It is relevant to note that in that letter, Mr Weekes, by then at Hammonds, solicitors for Fortis, said that interest would be sought from the date the claim was initially made, which certainly appears to have been a reference to the letter of 15 February 2000, when the loss was first notified.[21]In my judgment, it is simply unreal for Fortis to contend that the loss had not been discovered as defined in the Policy, prior to July 2001, namely two years prior to the actual institution of proceedings in July 2003. In my judgment the loss had been discovered by 15 February 2000 or at any rate not later than the end of March 2000. Accordingly, in my judgment the contractual time bar of 24 months from discovery of loss had indeed expired by July 2003 when Fortis brought proceedings.[22]In order to get round that limitation period, Fortis have to show either that Underwriters are estopped from relying on Condition 13(b), or that there was an implied agreement that Underwriters would not do so, or that Underwriters have waived their rights in this respect. It is to those issues that I now turn.[23]It was common ground between counsel that in order to defeat an application for summary judgment pursuant to CPR Part 24 it is sufficient for the respondent to the application to show some “prospect”, that is to say some chance of success; that that prospect must be “real”, in other words that the court will disregard prospects which are false, fanciful or imaginary, and that the inclusion of the word “real” means that the respondent has to have a case that is better than merely arguable: see International Finance Corporation -v- Utex African SRPL [2001] CLC 1361 and E D & F Mann Liquid Products Limited -v- Patel [2003] EWCA Civ 472.[24]It is also common ground that a respondent is not required to show that his case will probably succeed at trial. A case may be held to have a real prospect of success even if it is improbable.[25]Mr Bhalla also relied on Rule 24.2(b), namely that there was, in his submission, another compelling reason why the case should be disposed of at a trial, namely the public interest in full ventilation of all issues relating to a fraud. He submitted that, where there is no dispute about the fraud, but merely a process of clarification, it is unconscionable and not straightforward for Underwriters to plead limitation by way of summary judgment; he submitted further that if Underwriters did indeed, for their own strategic reasons, prolong the discussion between Fortis’ solicitors and Underwriters’ solicitors, then that is a matter which ought to be examined in the full glare of publicity, as should Underwriters’ technical reliance on a time limitation clause.[26]Paragraphs 19 and 20 of the Reply and Defence to Counterclaim, in which Fortis sets out its case as to how it overcomes the consequences of the limitation period prescribed by General Condition 13(b), are in the following terms:
“19. The claimant denies that this claim is time-barred by virtue of general condition 13(b) of the policy or at all. At all material times and since the initial notification of this claim, the defendants, via its solicitors have averred (and continue to aver) that the claimant has failed to prove its claim. 20. The claimant has received continuous and numerous requests from the defendants for more and further detailed information in support of these claims. At no stage whatsoever either orally or in writing did the defendants either themselves or through their servants or agents state that any reliance was to be made on clause 13(b) of the policy. At all material times the claimants were encouraged to provide (and did so provide) further and better information and were urged by the defendant’s representatives not to issue proceedings against the defendants but to provide further information. The claimants aver that: 20.1 There was an express, or in the alternative, an implied agreement between the parties that the defendants would not seek to rely upon clause 13(b) of the policy whilst further requests were being made of the claimant for information. 20.2 in the alternative the defendants have waived their rights to rely upon the said clause. 20.3 Further in the alternative that the defendants are estopped from relying on the said clause.”
At all material times and since the initial notification of this claim, the defendants, via its solicitors have averred (and continue to aver) that the claimant has failed to prove its claim. 20.1 There was an express, or in the alternative, an implied agreement between the parties that the defendants would not seek to rely upon clause 13(b) of the policy whilst further requests were being made of the claimant for information. 20.2 in the alternative the defendants have waived their rights to rely upon the said clause. 20.3 Further in the alternative that the defendants are estopped from relying on the said clause.”[27]In essence, Mr Bhalla submits that the correspondence passing between the parties during 2000, 2001 and early 2002 indicates that there was a shared assumption that Fortis had a valid claim that was not time barred and that this “assumption was communicated”. He submits that the correspondence shows that Fortis had suffered an insured loss, that the only issue between the parties was the information to be provided by Fortis to demonstrate this; that it was assumed by both parties that Fortis had a valid claim and that to start litigation for protective reasons or otherwise was unnecessary and was, in fact, actively discouraged by Underwriters’ solicitors.[28]I have been taken through all the contemporaneous correspondence and the witness statements of Mr Weekes, the principal solicitor who was dealing with the matter on behalf of Fortis at the relevant time, as well as the witness statement of Mr Scott, the other partner at Hammonds with conduct of the matter. I will summarise the facts below when dealing with the waiver and estoppel arguments, but put at its highest, and taking the claimant’s evidence of what was discussed as correct, that evidence does not in my judgment disclose the existence of any implied agreement that Underwriters would not rely on General Condition 13(b). Indeed, it is fair to say that Mr Bhalla did not strenuously argue his case on the basis of implied agreement, but rather chose to rely on his waiver and estoppel arguments. I accept Mr Turner’s submission that, as a minimum, in order to establish an implied agreement, Fortis would have had to have demonstrated that there was an appropriate and unequivocal representation by Underwriters that they would not rely on the clause amounting in effect to an offer not to do so, followed by an acceptance and valuable consideration on the part of Fortis. The correspondence is not susceptible to any such analysis.[29]I can deal with waiver and estoppel together since, in this context, it is clear that waiver would refer to a forbearance on Underwriters’ part from exercising their rights to rely on the limitation provision; see The Kanchenjunga [1991] Lloyds Rep 391 at 397. In that sense, it is to be equated with promissory/equitable estoppel: ibid at page 399. Mr Bhalla also relies on estoppel by convention.[30]I accept Mr Turner’s submissions that, in order for a claimant to establish the necessary constituents to demonstrate waiver or promissory estoppel in relation to a limitation clause, the following propositions of law are relevant: i) The claimant must show that “there [is] a clear, unequivocal, unambiguous and unconditional promise by the insurers that they will not raise the defence that the action is statute [or otherwise time-] barred. The focus has to be on whether or not they were giving up that right”; see per Ward LJ in Seechurn -v- Ace [2002] 2 Lloyds Rep 390 at paragraph 26. ii) The claimant must establish that the conduct relied upon is not capable of more than one explanation, since such conduct is indeed equivocal. Mere silence and inaction are of their nature equivocal. As Goff LJ said in Allied Marine Transport Limited -v- Vale do Rio Doce Navegacao SA [1985] 2 Lloyds Rep 18 at page 20:
“It is well settled that the principle [of equitable estoppel] requires that one person should have made an unequivocal representation that the does not intend to enforce his strict legal rights against the other; it is difficult to imagine how silence and inaction can be anything but equivocal … But silence and inaction are of their nature, for the simple reason that there can be more than one reason why the person concerned has been silent or inactive.”
This statement was cited with approval in Seechurn at paragraph 20. iii) It is also necessary for the claimant to establish that, objectively construed, the representation or promise was a promise not to raise a limitation defence. As Ward LJ said in Seechurn at paragraph 26:
“The promise must be construed objectively, not subjectively. The question is whether the correspondence can reasonably be understood to contain that particular promise. It does not matter what Mr Seechurn thought it meant, nor does it matter what a layman might have thought, …. unless of course, that layman is a passenger on the Clapham omnibus.” iv) The mere fact that an insurer has attempted to negotiate with the insured about a claim, both before and after the expiry of the limitation period, cannot per se amount to a waiver or an estoppel; as Ward LJ said in Seechurn (see paragraph 55 and 58) the mere fact insurers said in that case that the door to compromising the claim was still open was not impliedly to promise that a limitation point would not be taken when negotiations failed and the proceedings started out of time. v) Once a representation in unequivocal form has been established, a claimant then has to demonstrate that, relying on such promise or representation, the claimant also altered its position to its detriment or otherwise relied on the promise so that it would be inequitable or unconscionable for insurers not to be held to the promise: see Seechurn at paragraph 26 and also The Kanchenjunga at page 399. The reliance must be positive in the sense that the representee must show that it attached significance to the representation alleged and acted on it; see HIH Casualty and General Insurance Limited -v- AXA Corporate Solutions [2003] 1 Lloyds Rep IR 1 at paragraph 29. vi) A representee who is unaware that the representor had a particular right is unlikely to understand the relevant representation to mean that the representor will abandon any particular right in the absence of an express representation: see HIH Casualty and General Insurance (supra) per Tuckey LJ at paragraph 22. vii) Once a limitation period has expired, in a case such as the present, it is in reality impossible for a claimant to alter its position to its detriment in reliance upon any representation as to limitation made after that date; see per Ward LJ in Seechurn at paragraph 59 where he said: “After the limitation period had expired it is difficult to see how the claimant could have altered his position to his detriment. His claim was doomed. He could not be worse off.”
[31]I turn now to the facts. I ask myself the question whether the correspondence, or anything that was said between the solicitors acting for the respective parties, demonstrates an unequivocal representation by Underwriters that they would not rely on Condition 13(b). As I have said above, I do so on the basis that the limitation period expired at the latest in March 2002, since it is clear from the freezing order proceedings that by March 2000 at the latest the fraud had been discovered. In fact, as I have already held, on the evidence before me, the fraud had been discovered by the time of the notification letter on 11 February 2000. Moreover, there can be absolutely no doubt that at the very latest by the date of Fortis’ letter of 17 May 2000, the fraud had been discovered since a quantified claim was being made in that letter. I have therefore additionally considered whether there is anything that could be said to have amounted to a waiver or estoppel in the period up to 18 May 2002.[32]There is nothing, in my judgment, in the correspondence between May 2000 and April 2002 that could possibly amount to any such unequivocal representation that Underwriters were not taking the limitation point. It is clear that from 23 May 2000 Underwriters conducted their investigation under a reservation of rights; in Kennedys’ letter of 23 May 2000, Mr Sharrock wrote:
“Please note that, until such time as all relevant information and documentation has been provided to your insurers, and they have had a chance to assess your claim for indemnity under the policy, insurers reserve their rights generally.”
[33]As Mr Weekes himself said in his first witness statement:
“At no point thereafter did Underwriters consider that all relevant information and documentation had been provided.”
[34]Thus, the conclusion to be drawn is that the correspondence and negotiations were all conducted on the basis that Underwriters had indeed reserved their rights generally.[35]Between 2000 and 2002 there were discussions between Underwriters and Fortis and their respective solicitors. In particular Mr Weekes’ notes of a meeting that took place in October or November 2001 indicate that Mr Sharrock had said that: “He would recommend interim payment in respect of Micro Buy and Future Store”, two of the claims which were going to be made. There was a dispute on the evidence as to precisely what was said. Mr Sharrock’s recollection was that a recommendation for an interim payment in respect of two claims would only be made as and when Kennedys had been provided with proof of fraud information in respect of four other companies. Even assuming that the recommendation was as Mr Weekes recollected it to be (which I do assume for the purposes of this Part 24 application), the statement by Mr Sharrock in the course of negotiations that he would recommend an interim payment cannot on any basis amount to the necessary unequivocal representation that the time bar would not be relied on. Accordingly, I reject Mr Bhalla’s submission to this effect.[36]The correspondence continued through 2001 up until 2002, with a meeting taking place on 18 December 2001 for the purpose of discussing settlement, compromise and “the way forward”. Again, there is nothing in any of the evidence relating to those or subsequent meetings or the correspondence which could possibly amount to any kind of representation that the limitation provision would not be relied on. Mr Bhalla relies however on passages in the evidence such as paragraph 10 and 11 of Mr Scott’s witness statement that Underwriters, by Mr Sharrock, said that they “did not want to be sued, said so and always expressed the view that the claim could and would be amicably settled”. He relies on an attendance note, probably relating to a meeting in December 2001, where Mr Scott records Mr Sharrock as saying that “proceedings were not needed, will settle, last thing they want”. He also relies on Mr Sharrock’s letter dated 8 May 2002, where he writes “I personally do not think that litigation between our respective clients is the way forward”. In my judgment, in the context where Underwriters were clearly continuing to investigate and settle the claim, none of these statements can be characterised as any sort of assurance or representation, let alone an unequivocal assurance, that Underwriters would not rely upon the limitation provision.[37]The first threat of litigation between the parties was made by Hammonds’ letter of 12 April 2002. The first mention of limitation was made in a without prejudice letter sent by Hammonds on 19 June 2002, when Mr Weekes asked as follows:
“Finally, we still hope to avoid proceedings but are mindful that the two year limit set by the policy (the clause of which are not accepted as enforceable in this scenario) for issue of proceedings is nearly upon us. Can you please extend our time generally for issue of proceedings now, or we shall do so on a protective basis.”
[38]In my judgment both dates were after expiry of the contractual limitation period, but in any event, and irrespective of this point, Kennedys’ response dated 8 July 2002 made it absolutely clear that Underwriters were not “in a position to agree to an extension of time for the issuing of proceedings by your client for the recovery of its alleged loss under the policy. For the avoidance of doubt you should be aware that my client consider that your client is already out of time for the issuing of such proceedings (see General Condition 13(b) of the policy).”[39]Thus, as soon as the point was raised for the first time, Underwriters expressly declined to give any of the assurances sought. Moreover, it is clear from Mr Weekes’ first statement (paragraph 11) that it was only shortly before the sending of the without prejudice letter dated 19 June 2002 that he and Mr Scott “were alerted to the fact that the insurance policy contained General Condition 13(b)”. Accordingly, I accept Mr Turner’s submissions that Fortis has not advanced a coherent case or adduced evidence: i) of any relevant, objectively clear, unequivocal, unambiguous and unconditional promise by Underwriters (before (or after) the expiry of the contractual limitation period) that they would not raise a limitation defence; ii) that Fortis appreciated the existence of a contractual limitation period until immediately before sending the letter of 19 June 2002, which was after the expiry of the limitation period; iii) that Fortis attached any significance to the alleged representation and acted upon it prior to the expiry of the limitation period - given Fortis’ ignorance of the limitation provision until about June 2002, this is hardly surprising.[40]I also accept Mr Turner’s submission that taking Fortis’ evidence at its highest, all it shows is that, prior to expiry of the contractual limitation period, Underwriters were engaged in investigation and consideration of Fortis’ claim under the policy. Such conduct was to be expected in the circumstances. Accordingly, it cannot be described as unequivocal representation of the type or nature necessary to establish a waiver or estoppel.[41]Moreover, the evidence also shows that neither party ostensibly applied its mind to the question of any representation before June 2002. Nor in my judgment is there, nor could there be, any evidence of detrimental reliance after expiry of the contractual limitation period.[42]I emphasise that I come to this conclusion accepting (for the purposes of this application) Mr Weekes’ account of the discussions with Mr Sharrock and also Mr Scott’s, insofar as there is any disagreement between their account and Mr Sharrock’s. As already mentioned above, any differences about what was said in meetings are not relevant for my consideration since (at its highest) all that was offered by Mr Sharrock was an undertaking to make a recommendation that interim payment should be made in respect of certain claims and the expression of his personal view that litigation was not the current way forward. On any basis, those statements cannot amount to an assurance that a contractual limitation period would not be relied upon.[43]In the alternative, Mr Bhalla relied on estoppel by convention. I was referred by Mr Turner to paragraphs 30-32 of the judgment of the Court of Appeal in HIH Casualty and General Insurance Limited (supra) at pages 8-9, where Tuckey LJ quoted the formulations of estoppel by convention as set out in Amalgamated Investment & Property Co Limited -v- Texas Commerce International Bank Limited [1982] QB 84, at 122, and per Dillon LJ in The Amazonia [1991] Lloyds’ Rep 236-251. In my judgment, Mr Bhalla’s argument based on estoppel by convention fails for similar reasons to those which I have already articulated in relation to his arguments based on waiver and promissory estoppel. In my judgment it cannot be said here that Fortis and underwriters proceeded on the basis of an underlying assumption that the contractual limitation provision would not be relied upon. As Tuckey LJ said in HIH Casualty and General Insurance Limited (supra):
“Mere silence, inactivity, or failure to take a point cannot be enough to found an estoppel by convention.”
There was no common assumption that underwriters would not rely on the limitation provision and indeed, as I have already said, Fortis was not aware of this right.[44]In those circumstances, I propose to give judgment for Underwriters on this Part 24 application. In my judgment Fortis has no real prospect of succeeding on the issue that defendant Underwriters are estopped from relying on General Condition 13(b) or have waived their right to do so.[45]I should also say that in my judgment, contrary to Mr Bhalla’s submissions, there is no other compelling reason why the case or issues should be disposed of at a trial. The fact that the underlying claim arises out of fraudulent invoices is no reason whatsoever since the claim is one under the Policy in relation to which no fraud is alleged or involved. Nor is there any reason why the fact that Underwriters wish to take a technical point relating to limitation means that this point should be dealt with at trial in, as Mr Bhalla put it, the full glare of publicity. That is no compelling reason why the matter should go to trial if, as I have held, the limitation defence is clear.[46]In the circumstances it has not been necessary for me to consider Mr Turner’s alternative application (which, as mentioned, I accept logically comes first) that in any event, because of the breach of Langley J’s order, Fortis is precluded from running these points. I should say that had I thought that as a matter of merit there was anything in the waiver, estoppel or implied agreement arguments, I would have permitted such defences to be run irrespective of the fact that there had clearly been a breach of the consent order. In my judgment it would have been disproportionate to have struck out the Reply simply on the basis of procedural non-compliance. Accordingly, there must be judgment for Underwriters on this application. I shall hear from counsel as to the form of the order.

Cited in 3 later judgments