Hamishmar Insurance Agency Ltd & Anor v Firstcity Partnership Ltd

The scope of an expert determination is determined by the agreement recorded in the parties’ joint letter of instruction. Earlier negotiations cannot be used to construe that agreement. A counterclaim pleaded as funded premium payments may, in context, encompass an accounting claim for claims-float movements, including sums advanced by failure to make contractual adjustments. Funding may be understood in a broad sense where the broker’s accounting treatment results in higher payments being made than would otherwise have been due. The court may decline declaratory or procedural relief where the expert’s proposed determination falls within the reference and the applicant identifies no practical substantive benefit.

The claimants, an insurance agent and its parent insurance company, referred accounting issues concerning binding authority agreements to an expert accountant. The defendant counterclaimed for sums said to represent funded premium payments. The expert’s draft determination treated the disputed amount as an outstanding claims-float balance and concluded that credit was due to the defendant.

The claimants sought declarations that the expert had also been instructed to determine whether the defendant had paid premiums from its own resources and whether those payments had been recouped. They alternatively sought directions, permission to amend their Defence to Counterclaim, and strike-out or summary judgment. The central issue was the proper scope of the expert reference.

1. The applications were dismissed. The expert’s proposed determination of the Counterclaim was within the scope of his instructions. The applications for declarations, permission to amend the Defence to Counterclaim and strike-out therefore failed.
2. The scope of the reference was found in the jointly agreed letter of instruction. The earlier correspondence consisted of negotiating positions and was inadmissible as an aid to construing the resulting agreement.
3. The Counterclaim was not confined to a claim based exclusively on the defendant’s use of its own money to pay premiums. Read in context, it encompassed a claim to bring into account the relevant claims-float movements, namely the retained premium less the amount which the claimants were entitled to retain.
4. The failure to adjust payments for claims-float movements could properly be described as funding in a broad sense. The court accepted that the expert was entitled to determine the accounting consequences without separately deciding whether the defendant had advanced money from its own resources or whether the sums had been recouped from claims receipts.
5. Even if the expert had been obliged to decide those additional issues, the court would have refused the declarations in its discretion. The claimants accepted that, following the draft determination, they would have to credit the defendant with the relevant sum. The defendant had abandoned its claim for interest, and the remaining concern related only to possible expert-determination costs, which the expert could take into account.