KOREA NATIONAL INSURANCE CORPORATION V ALLIANZ GLOBAL CORPORATE & SPECIALITY AG

[2007] EWCA Civ 1066, Court of Appeal, Lord Justice Buxton, Lord Justice Jacob and Lord Justice Moore-Bick, 30 October 2007

Reinsurance – Direct liability policy against loss arising out of use of aircraft – Helicopter crashing and assured incurring liability – Losses paid by insurers – Judgment obtained by insurers against reinsurers – Action for enforcement – Whether reinsurers entitled to defend enforcement proceedings on basis that the parties had entered into a settlement agreement

This was an appeal against a striking out order made by David Steel J. The claimant, a Korean insurance company, sought to recover sums awarded against it under a liability policy by a judgment of the Pyongyang Court in favour of the assured. The reinsurance was written on a back to back basis and contained a claims control clause. The reinsurers had on two occasions refused an invitation by the reinsured to take over control of the defence of the claim. The claimant obtained an arbitration award against the reinsurers from the Pyongyang Arbitration Committee, but the reinsurers refused to honour it. The claimant then brought enforcement proceedings in Korea and obtained a judgment enforcing the award. The present action was to enforce the Korean judgment. Two main issues were considered by the court. (1) It was argued that the Korean proceedings were flawed in that they were issued against one reinsurer alone on behalf of the other reinsurers but that the court did not have any procedure for a representative action. This argument was dismissed on the facts. (2) The reinsurers argued that there had at a meeting been a settlement agreement between them and the claimant which had compromised the parties’ rights under the reinsurance agreement. David Steel J could find no evidence to support the argument that such an agreement had been entered into. The appeal was on ground (2) only, and the Court of Appeal held that reinsurers had no real prospect of establishing the existence of a settlement agreement: all of the relevant evidence was before the court and there was nothing else likely to emerge at the trial. There was no written record of any agreement, and there was no mention of any compromise in the correspondence between the parties.