Markel International Insurance Company Ltd v Higgins

A civil allegation of fraud remains subject to the balance of probabilities, but requires evidence whose cogency is commensurate with the gravity and inherent improbability of the allegation. An appellate court will not disturb a trial judge’s evaluative findings of dishonesty unless the judge made a critical error or the conclusion was plainly wrong, particularly where the finding depended on oral evidence.

A degenerative condition causing intermittent memory impairment does not prevent a finding of dishonesty where the trial judge has fairly assessed the medical and collateral evidence, and the systematic conduct and the person’s own positive explanation are inconsistent with innocent forgetfulness.

Two insurers gave an underwriting agency authority to bind them to issue surety bonds subject to financial limits. The agency issued numerous bonds beyond those limits, submitted bordereaux which misstated the bonds and premiums, and transferred unaccounted-for premium to an offshore company in which the appellant and two colleagues had beneficial interests.

Teare J found that the appellant had conspired with two colleagues to defraud the insurers. The appellant accepted most factual findings but contended that his Alzheimer’s disease explained his conduct, memory difficulties and evidence at trial. He also challenged findings concerning the false bordereaux and the diversion of premium. The central issue was whether the judge had erred in finding dishonesty despite the appellant’s illness.

1. Appeal dismissed. The Court of Appeal upheld Teare J’s finding that the appellant had conspired to defraud the insurers and was liable also on the basis of dishonest assistance in breach of fiduciary duty.
2. The applicable standard for civil fraud was the balance of probabilities, with cogent evidence required because of the gravity and inherent improbability of dishonesty. The trial judge had correctly directed himself and had expressly applied that standard.
3. An appellate court should not interfere with a trial judge’s assessment of witnesses and facts unless there was a critical error or the conclusion was plainly wrong. This was especially so where the judge had heard the appellant over three days, assessed the medical evidence and tested it against the evidence of those who knew him.
4. The judge had fairly allowed for the appellant’s Alzheimer’s disease. The evidence supported the finding that, although he was in the early stages of the disease when the relevant events occurred, he understood and remembered the underwriting limits. Intermittent forgetfulness could not plausibly explain the repeated and systematic writing of out-of-limit bonds. The appellant’s own case that he knowingly exceeded limits under a supposed silent co-surety arrangement was inconsistent with an innocent mistake caused by illness.
5. The judge was entitled to find that the appellant was involved in the preparation and review of false bordereaux. He was the underwriting expert, had discussed the bordereaux with colleagues and the insurer’s representative, and could not explain their false content. He was also entitled to infer dishonesty from the diversion of unaccounted-for premium to a company beneficially owned by the three conspirators. The cumulative evidence made the inference of dishonesty overwhelming.

• Court of Appeal (Civil Division) — Dismissed the appellant’s challenge to Teare J’s findings of conspiracy to defraud and dishonest assistance.
• High Court of Justice, Queen’s Bench Division, Commercial Court — Teare J tried the two actions together, found the appellant and two others liable for conspiracy to defraud, and directed quantum proceedings.