HIH Casualty & General Insurance Ltd v AXA Corporate Solutions

Waiver by estoppel requires a clear and unequivocal representation that a party will not insist upon a legal right, together with reliance which makes withdrawal of that representation inequitable. The representor need not know the precise legal right. The representation must nevertheless convey an apparent awareness that a relevant right exists and a willingness to forgo it.

Mere silence or inactivity ordinarily cannot amount to the required representation unless there is a duty to speak or act. Nor is it enough that the representee could have acted differently if the right had been asserted earlier. The representee must attach significance to the representation and act upon it. Estoppel by convention cannot avoid these requirements merely because both parties assumed that contractual cover continued.

The appellant insurer had issued pecuniary loss policies covering financiers of two film slates and obtained 80% quota-share reinsurance from reinsurers including the respondent. An earlier Court of Appeal decision, reported at 2001 2 Lloyds Law Reports 161, determined that terms requiring specified numbers of films were warranties of both the insurance and reinsurance contracts. Fewer films were produced, and the warranties were breached.

The appellant alleged that the respondent had waived the breaches by receiving reports showing the reduced film numbers while continuing the relationship without objection. Jules Sher QC, sitting as a Deputy High Court Judge, summarily dismissed that case under rule 24.2(1)(a)(i) of the Civil Procedure Rules 1998. The appeal concerned whether waiver by estoppel or estoppel by convention had a real prospect of success, whether further evidence should be admitted, and whether another compelling reason required a trial.

1. Appeal and applications dismissed. Tuckey LJ held that the appellant had no real prospect of overcoming the consequences of its breach of warranty. Carnwath LJ agreed, making the decision unanimous.

2. Waiver by estoppel required: (i) a clear and unequivocal representation that the respondent would not insist upon its right to treat the reinsurance cover as discharged; and (ii) reliance making it inequitable for the respondent to withdraw that representation. The representor did not need actual knowledge of the precise legal right. The representation did, however, have to convey some apparent awareness of a right and a willingness to forgo it. Otherwise the representee could not reasonably understand the conduct in that way.

3. The respondent's conduct amounted to silence or inactivity within a continuing contractual relationship. Mere inactivity is ordinarily equivocal and does not amount to a promise that a contractual right will not be enforced. An exception may arise where the law imposes a duty to speak or act, but no such duty was alleged. Calling for risk-management reports, meeting persons involved in the films, or behaving as though the risk remained covered did not constitute a clear and unequivocal representation that relevant rights would be abandoned.

4. The alleged reliance was also insufficient. It was not enough to contend that the appellant could have taken protective steps if the respondent had raised the breach earlier. The appellant had to attach significance to the alleged representation and act upon it. There was no evidence that it had done so.

5. Estoppel by convention did not provide an alternative route. Silence, inactivity or failure to raise a point could not alone establish the necessary convention. Any relevant common assumption would have had to concern the respondent's non-assertion of its right to treat the cover as discharged. Neither party knew of that right, so no such assumption existed. The proposed amendment sought to reopen a construction issue already decided by the Court of Appeal, and the further evidence did not advance the estoppel case.

1. Court of Appeal (Civil Division): In [2002] EWCA Civ 1253, unanimously dismissed the appeal from the summary dismissal and refused the applications to amend the notice of appeal and adduce further evidence.
2. High Court: Jules Sher QC, sitting as a Deputy High Court Judge, summarily dismissed the appellant's waiver and estoppel case under rule 24.2(1)(a)(i) of the Civil Procedure Rules 1998. No citation is stated.
3. Earlier Court of Appeal proceedings: In a decision reported at 2001 2 Lloyds Law Reports 161, the court determined preliminary construction issues and held that the specified film-slate terms were warranties of the insurance and reinsurance contracts.