Fortisbank SA v Trenwick International Ltd. & Ors

A contractual limitation clause may bar an insurance claim where the insured had discovered the relevant loss more than the permitted period before issuing proceedings. Discovery does not require final quantification or completion of investigations. Waiver or promissory estoppel requires a clear, unequivocal, unambiguous and unconditional promise not to rely on the limitation clause, together with detrimental reliance. Investigation, negotiation, silence, requests for information and statements that litigation is not presently desirable are ordinarily equivocal. Estoppel by convention likewise requires a shared underlying assumption; mere silence or inactivity is insufficient. On a summary judgment application, the claimant need show only a real, rather than fanciful, prospect of success, but a clear limitation defence may properly be determined summarily.

Fortisbank claimed £1 million under a fraudulent receivables insurance policy in respect of losses arising from its invoice-discounting arrangements with Zye Technology Ltd. The policy required proceedings to be brought within 24 months of discovery of the loss.

The Underwriters applied under CPR Part 24 for summary judgment, contending that Fortis had discovered the loss in February or March 2000, whereas proceedings were issued on 23 July 2003. Fortis relied on an alleged implied agreement, waiver, promissory or equitable estoppel, and estoppel by convention. The central issues were when discovery occurred and whether the evidence disclosed a real prospect of defeating the contractual time bar.

1. Summary judgment. Under CPR Part 24, the respondent need show only a real prospect of success, meaning a case better than merely fanciful or imaginary. A case need not probably succeed at trial. The court must also consider whether there is another compelling reason for trial.
2. Discovery of loss. The policy defined discovery by reference to awareness of facts which would cause a reasonable person to assume that a covered loss had been or would be incurred. Fortis knew by February 2000, and in any event no later than March 2000, that fraudulent activity had occurred and that a substantial insured loss was likely. The fact that the precise amount and details remained under investigation did not postpone discovery. The 24-month contractual period had therefore expired before proceedings were issued.
3. Waiver and promissory estoppel. The claimant had to establish a clear, unequivocal, unambiguous and unconditional promise not to rely on the limitation defence, objectively construed, and detrimental reliance or circumstances making it inequitable to resile. Investigation and negotiation, requests for further information, an offer to recommend an interim payment, and statements that litigation was not presently the way forward did not amount to such a promise. The Underwriters had expressly reserved their rights generally and rejected an extension when the limitation issue was eventually raised.
4. Estoppel by convention and implied agreement. The correspondence did not establish either an agreement supported by acceptance and consideration or a shared assumption that the limitation clause would not be relied upon. Fortis was unaware of the clause until after the limitation period had expired, and could not show qualifying detrimental reliance. Mere silence, inactivity or failure to take the point was insufficient.
5. Disposition. Fortis had no real prospect of defeating the limitation defence. There was no other compelling reason for a trial. Judgment was entered for the Underwriters on the Part 24 application. It was unnecessary to determine the alternative procedural application based on breach of the consent order.