R & V Versicherung AG v Risk Insurance & Reinsurance Solutions SA & Ors

An appellate court considering permission to appeal should not reopen findings of dishonesty absent a real prospect of showing factual or legal error. The trial judge’s first-hand assessment of witnesses carries particular weight. Arguments about ratification, waiver, set-off or net loss cannot be raised for the first time on appeal where they were not pleaded or tried on liability, or used to reopen issues conclusively dealt with in an earlier unappealed decision. A late attempt by co-defendants to withdraw a common position is likewise impermissible where the trial proceeded on the basis of joint liability. In a contempt-related costs application, the court may consider unexplained funding, deliberate non-payment and the effect on the administration of justice. Permission was granted only on an arguable jurisdictional issue concerning alleged foreign interference with a witness.

R+V, a German insurance and reinsurance company, sued four companies in the Risk group arising from reinsurance binders and addenda. The claim concerned an unauthorised 40% commission arrangement and an alleged dishonest conspiracy. Moore-Bick J found liability in [2004] EWHC 2682 Comm. Subsequent Commercial Court judgments addressed quantum, accounts and contempt, including decisions in [2006] EWHC 1705 Comm and [2006] EWHC 3527 Comm. The Court of Appeal considered permission applications concerning dishonesty, ratification, quantum, the late differentiation of defendants, beneficial ownership of premium funds, alleged contempt involving a witness, and failure to pay court-ordered expert costs. The central question was whether any proposed appeal had a real prospect of success.

The Court refused all applications for permission to appeal except the part of application 1707 concerning whether R+V could be subject to the English court’s jurisdiction for alleged criminal contempt relating to Mr Kernbach. Permission was refused as to Dr Hasse.

1. Dishonesty. Moore-Bick J had applied the correct civil standard of proof. His finding of dishonesty was based on a careful assessment of the evidence, including the witnesses’ credibility and the contemporaneous documents. Risk identified no error of fact or logic, reliance on irrelevant material, or failure to consider relevant evidence. There was therefore no real prospect of successfully challenging the finding on appeal. The Court referred to In re H (Minors) [1996] AC 563 on the need for cogent evidence in allegations of dishonesty.
2. Ratification and quantum. Arguments based on ratification of the binders or addenda, waiver, repudiation, set-off and net loss had not been pleaded or advanced for determination at the liability trial. They could not be recast after judgment as an alternative defence. Gloster J had comprehensively dealt with the related liability and quantum arguments in [2006] EWHC 42 (Comm), and the appeal from that judgment had been dismissed after Risk failed to satisfy the imposed conditions. Nothing in the later applications justified reopening those issues.
3. Late challenge by defendants. The liability trial had proceeded on the agreed basis that all four defendants were implicated jointly. Any objection should have been made before judgment and orders were entered, or permission sought promptly. The second and third defendants’ much later attempt to withdraw that position had no real prospect of success.
4. Other applications. The assessment of investigation expenses involved factual matters with no realistic appellate challenge. Risk had only a contractual entitlement to commission, so the funds in the London accounts remained held on trust for R+V. The analogy with the Solicitors’ Accounts Rules discussed in Sheikh v Law Society [2005] EWHC 1409 did not apply. The jurisdictional issue concerning alleged foreign pressure on Mr Kernbach was realistically arguable as against R+V, because it was intended to operate on evidence in English proceedings, but not as against Dr Hasse, who was not before the English court. Finally, the order striking out Risk’s defence to the account claim was a discretionary case-management decision. In the absence of satisfactory evidence of impecuniosity or the source of funding, deliberate refusal to pay court-ordered costs could properly be treated as impeding the course of justice. The application concerning that order was refused.

• Court of Appeal (Civil Division): On 30 July 2007, refused all applications for permission to appeal except the part of application 1707 concerning the jurisdictional question relating to R+V and alleged contempt of court. The question of security for costs and any costs condition was reserved for further consideration.
• Queen’s Bench Division (Commercial Court): Moore-Bick J determined liability in [2004] EWHC 2682 Comm. Gloster J determined quantum principles in [2006] EWHC 42 (Comm); the appeal from that decision was dismissed under [2006] EWCA 1234. Tomlinson J determined further quantum and contempt issues in [2006] EWHC 1705 Comm. David Steel J struck out Risk’s defence to the account claim in [2006] EWHC 3527 Comm. Gloster J later refused the application by the second and third defendants to set aside the judgment in [2007] EWHC 79 (Comm).