THE SUPREME COURT

KEANE C.J.
BARRON J.
HARDIMAN J.
78 & 79/99

BETWEEN:

ALLIANZ FRANCE IARDT

PLAINTIFF

AND

THE MINISTER FOR AGRICULTURE AND FOOD

DEFENDANT

AND

MIKE MURPHY BROKERS LIMITED AND DB AGENCIES SA

THIRD PARTIES

NELSON HURST MARINE LIMITED
GP TURNER LIMITED, OFFICE DE SOUSERIPTION
D'ASSURANCES DE TRANSPORT SA AND ALTE LEIPZIGER
VERSICHERUNG ANG

FOURTH PARTIES

AND RELATED PROCEEDINGS (APPEAL RECORD No.78/1999)

JUDGMENT delivered the 23rd day of May 2000 by Keane C.J. (nem. diss.)

[*2] This case is part of a complex of litigation which arose out of the destruction by fire of a quantity of beef of which the defendant ("the Minister") was the owner and which was in storage at the time as part of the intervention procedure associated with the common agricultural policy of the European Union.

In these proceedings and the related proceedings, the plaintiffs, who are all insurance companies based in France, the Netherlands, and Italy, claim inter alia a declaration that they had validly avoided ab initio a contract of insurance with the Minister in respect of the beef because of what was said to be a material non‑disclosure on the part of the Minister. The non‑disclosure relied on was the alleged failure of the Minister to inform the plaintiffs of a clause in the agreement between the Minister and the company which owned the cold storage warehouses where the beef was stored ("UMP") which afforded UMP a measure of relief from liability for losses arising from their lack of due diligence in the performance of their duties under the agreement.

In addition to delivering a defence in the proceedings, the Minister has invoked the third party procedure to claim indemnity in respect of the plaintiffs' claim from each of the third parties on the grounds that each of them acted as brokers to the Minister in arranging the contract of insurance and, in so [*3] far as the Minister's claim was correct, had been guilty of negligence, breach of duty and breach of contract in failing to disclose the allegedly material facts to the plaintiffs. The first named third party ("Mike Murphy”) is an insurance broker based in Ireland who was entrusted by the Minister with the placing of the insurance. The second named third party ("DB") also carries on business as an insurance broker in Paris and Monaco. It was claimed on behalf of the Minister that DB also acted on his behalf in the placing of the insurance.

In turn, Mike Murphy and DB have issued fourth party proceedings in which they claim indemnity from the fourth parties in respect of the Minister's claim against them. The first fourth party (“Hurst”), which at one period used the name Citicorp Insurance Broker (Marine) Limited, is an insurance broker which carries on business on the English insurance market. The second, third and fourth parties are insurance brokers, underwriting agents and insurance underwriters respectively.

On the application of Hurst, the High Court ordered that: -

"A preliminary issue be tried between (Hurst) and (Mike Murphy) as to whether or not (Hurst) at any material time acted as placing brokers in respect of the placing handling management or renewal [*4] of the (Minister's) marine assurance policy, reference number 90. 100 with the plaintiffs."

In the statement of claim delivered on behalf of Mike Murphy, the claim based on breach of contract, negligence etc. is made in respect of 

"the placing, handling, management and renewal of the (Minister's) marine assurance policy reference number 90. 100 with the plaintiffs.”

It will be seen that the issue which was ordered to be determined as a preliminary issue in the High Court reflects that wording exactly.

The case on behalf of Hurst was that they were retained solely to deal with so much of the insurance as was being placed in the English market, that the plaintiffs were insurers on the continental market and that, accordingly, Hurst would have no responsibilities in connection with the placing of the insurance with them, and in the result, no liability to them for negligence, breach of contract or otherwise.

The factual background to the issue, in so far as it is not in dispute, is as follows. Mike Murphy was, at the relevant times, a leading insurance broker [*5] and, in particular, was engaged in the placing of insurance for exports of beef from Ireland. With this in mind, he had dealings with Mr. David Gresty of DB who placed insurance for him on the French market and with Mr. Raymond Cudby of Hurst, who performed a similar role for him on the London market.

A meeting was held in Paris on the 29th January 1990 with a view to putting in place an insurance arrangement on behalf of the Minister and beef exporting companies. This was attended by Mr. Mike Murphy, the principal of Mike Murphy, and Mr. Caprani, a member of his firm, Mr. Gresty and a M. Bastide on behalf of DB and Mr. Cudby and Mr. Allen Bavin on behalf of Hurst. It was agreed that, since the cover involved would be very large, it would be necessary to have a number of insurers and it was also agreed that the lead insurer would be the plaintiff in these proceedings ("Allianz") who are one of the largest, perhaps the largest, insurance company in the world. It was an important feature of the arrangements to be put in place that Allianz, as the lead insurers, would issue the policy and would also take decisions during the currency of the policy as to whether liability would be accepted or repudiated in respect of specific risks. It was also an important feature of the facility that it provided "collective open cover". This would mean in practice that, where a client was exporting a large quantity of produce or storing it somewhere in Ireland, Mike Murphy could arrange for it to be covered for four days before [*6] the appropriate procedures were gone through for the actual cover by the relevant insurer.

At this meeting it was decided that the plaintiffs in these and the related proceedings -described as the insurers on "the French market" ‑ should hold 52.5% of the first layer of the insurance and that the insurers on the British market should hold 47.5%. The amount of the cover involved was £7.5 m. The second layer ‑ amounting to £5 m. cover ‑ was to be held as to 47.5% on the French market and 52.5% on the British market. Mr Murphy's evidence in the High Court was that Hurst and DB were the two experts and were the people who placed the risk on his behalf As to the respective roles of DB and Hurst, his evidence in cross examination was as follows:-

"102 Q.	And I have to suggest to you is that while there were
	anticpations as to the kind of insurers that might as well be
	interested there hadn't, in fact, been put in place the full
	package of shareholders in this arrangement as of the date
	of the Paris meeting?
A.	That could well be, yes.
103Q.	And that the arrangement was that DB Agencies would
	secure sufficient underwriters to cover the 52.5% that was
	required for the French market and that Nelson Hurst would [*7] 
	secure such underwriters in the English market to cover
	47.5%?
A.	That could well be, yes, I agree with that.
104Q.	You agree that was might could well have been the
	arrangement?
A.	Yes."
		[Transcript, Day 1]

What was described as a "Slip" was available to the parties at this meeting which set out the nature of the cover to be provided, which emanated from DB and which was to be furnished to Allianz as the lead insurer. A "slip policy" was then issued by Hurst (under their then name of Citicorp Insurance Brokers (Marine) Limited) which sets out the 47.5% of the total cover and subdivides it between the various British underwriters. That slip policy contained the following provision:-

"It is understood and agreed that the term leading underwriter is deemed to mean the ALLIANZ FRANCE and that underwriters hereon agree to follow the leading underwriter ALLIANZ FRANCE in all respects including but not limited to claim settlements provided such claim settlements are fully recoverable under conditions of insurance detailed herein." [*8]

On foot of these arrangements, what was described as a "basic policy” was issued covering initially the period from l st February 1990 to 28th February 1990 which was stamped by Allianz and the plaintiffs in the related proceedings as the underwriters on the "Marche Francais" and in which the "Marche Britannique" was noted as being represented by Citicorp Limited, i.e. Hurst.

The evidence also established that the procedure in relation to the payment of the commission to the two placing brokers was as follows. Mike Murphy ‑ described as the "producing broker" ‑ was paid an agreed percentage of the total commission due to the three brokers in respect of the premium paid by the customer. DB deducted from the balance of the commission the agreed percentage due to them and remitted the final net balance to Hurst.

The submission made on behalf of Hurst in the High Court and again in this court was that, in those circumstances, they were placing brokers solely in respect of the risk the placing of which they negotiated on the British market, but had no responsibility whatever for the placing or negotiation of the risk on the French market or that they were in any sense “placing brokers” in respect of that market. [*9]

The President rejected that contention. He said that:-

"In my view the correct approach to determine 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 [*10] brought the client, they placed the risk for me jointly as far as I am concerned... ' 

"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...”

The President went on to refer to the evidence of Mr. Cudby that, in the placing of Mike Murphy's business, Hurst regarded DB Agencies as the producing broker, with the result that Hurst was the placing broker for the English part of the business without any responsibility for the French part. The President added:

"In my view, this cannot 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. [*11]

"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 Allianz. 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."

I am satisfied that, in arriving at these conclusions, the President overlooked the evidence to which I have referred of Mr. Murphy himself, in which he agreed that the arrangement was that Hurst would secure underwriters in the English market to cover 47.5% and that DB would secure underwriters to cover the 52.5% required for the French market. It is immaterial, in my view, whether Mr. Cudby was correct in this context in attaching the label of “producing broker" to DB. If one accepts that Mike Murphy was properly described as the "producing broker" in respect of the whole transaction and Hurst and DB as "placing brokers", the fact remains that he was a party to the arrangements entered into at the meeting in Paris and understood clearly the respective roles of the two placing brokers. There cannot be any room for doubt, in my view, that under those arrangements, DB were solely and exclusively responsible for placing the risk on the French market, just as Hurst [*12] were solely and exclusively responsible for placing the risk on the British market. That conclusion is entirely borne out by the terms of the relevant documents to which I have already referred.

It also seems to me that, with respect, the President has misunderstood the effect of Allianz being the lead insurer and the British underwriters being accordingly required to follow their decisions in relation to the settlement of any claims. The arrangements entered into between the three brokers clearly envisaged that Hurst would be responsible for the placing of the 47.5% of the total risk to be covered on the British market and that DB would accept a similar responsibility in relation to the placing of the balance of the risk on the French market. The fact that in respect of both markets Allianz were to be the lead insurer was not a ground for holding that there was effectively one underwriting transaction only in respect of the entire of which Hurst accepted responsibility.

I would allow the appeal and substitute for the order of the High Court an order in the following terms.

"The first named fourth party did not at any material time act as placing brokers in respect of the placing handling management or [*13] renewal of the defendant's marine assurance policy reference number 90. 100 with the plaintiff."