A reinsurance contact provided for an excess and limit of liability to be calculated on the basis of ‘each and every loss and/or series of losses arising out of one event.’ It also provided that ‘The Reassured shall be the sole judge as to what constitutes each and every loss and/or one event’.
Held: Where an excess loss re-insurance contract gives one party discretion acting as a ‘sole judge’ to decide mixed issues of fact and law, courts will not normally intervene.
Chadwick LJ stated: ‘The real question, as it seems to me, is not whether the parties intended that the plaintiff should be left to decide these matters; but whether that is a bargain which the law permits them to make. I start from the position that the courts should be slow to strike down a sensible commercial bargain, made between parties experienced in their field, unless there is some clearly identifiable element of public policy which requires that to be done.
I am satisfied that there is no rule of public policy which prevents parties from agreeing to submit to the final and conclusive decision of a third party some issue which involves questions of construction or of mixed fact and law . . It is necessary, therefore, to go on to consider whether different considerations must apply where the effect of their bargain is that the parties have sought to entrust the decision to one or other of themselves rather than to an independent expert. I can see no reason, in principle, why a different approach is required.
It is, of course, necessary to keep in mind that there are some questions of law which it would be repugnant to the very existence of a legally enforceable contract to leave to the exclusive determination of one party. An obvious example would be a decision as to the existence or otherwise of contractual liability in given circumstances. It must also be kept in mind that in many, if not most, situations it will be inherently unlikely that one party will intend to leave a question of law to be decided by the other party. Further an agreement wholly to oust the jurisdiction of the courts is against public policy and is void. But I can see no objection in principle to a bargain in which one party is left to decide (i) what the facts are in relation to some matter which is to arise in the future and which is plainly intended to have some contractual consequence under a provision of the agreement which they have made and (ii) whether or not that combination of facts does fall within that provision. The jurisdiction of the court is not ousted in those circumstances; provided that the agreement which the parties have reached on that matter allows the court to interfere if the decision-making party has acted unreasonably, perversely or in bad faith. It seems to me that the court will be ready (in the absence of express words to the contrary) to construe the agreement, if necessary by implying an appropriate term, so as to impose on the decision-making party an obligation to act reasonably and in good faith. An agreement which did not permit of such a construction would, I think, be void; but that is not an issue in the present case.’
Judges:
Chadwick LJ
Citations:
Times 18-Feb-1998, Gazette 05-Mar-1998, [1998] EWCA Civ 177, [1998] Lloyd’s Rep IR 201, [1998] CLC 650
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – Skidmore v Dartford and Gravesham NHS Trust HL 22-May-2003
The disciplinary code for doctors employed by the NHS provides different procedures cases involving allegations of ‘professional conduct’ or ‘personal conduct.’ The first would involve a more judicial process, and the second a more informal . .
Cited – Charles Stanley and Co Ltd v Adams QBD 19-Jul-2013
The claimant stock broking firm sought to recover its uninsured losses after having paid out for what was said to have been negligent advice by the respondent, a self-employed broker working for them.
Held: The power to recover such losses . .
Lists of cited by and citing cases may be incomplete.
Insurance, Contract
Updated: 29 May 2022; Ref: scu.143655