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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> HIH Casualty and General Insurance Ltd. v Axa Corporate Solutions & Anor [2001] EWHC 464 (QB) (21 December 2001) URL: http://www.bailii.org/ew/cases/EWHC/QB/2001/464.html Cite as: [2001] EWHC 464 (QB), [2002] Lloyd's Rep IR 325

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		21 December 2001

Introduction

I have before me two actions the references to which are 2000 Folio 40 and 2000 Folio 268. In each action HIH Casualty and General Insurance Limited ("HIH") is the claimant. In 2000 Folio 40 Axa Corporate Solutions (formerly Axa Reassurance SA) ("Axa") is the sole defendant. In 2000 Folio 268 Axa is the defendant alongside New Hampshire Insurance Company and another insurance company. In each action HIH as reinsured claims against Axa as reinsurer. In each action HIH was the sole insurer under a film finance insurance contract by which HIH agreed to pay to the financiers of a slate of films an amount by which the aggregate of the revenues of the films fell short by a certain date of the sum insured. This insurance policy formed a crucial part of the security for the finance raised by the film producers. Such was the underlying primary insurance in each of the two cases before me. In 2000 Folio 40 the co-producers of the slate of films were a company called 7.23 Productions LCC and Flashpoint Limited. That case has conveniently been referred to as "7.23" and the slate of films involved in it the "7.23 slate". In 2000 Folio 268 the co-producers were Rojak Films Inc. and Flashpoint Limited and the case and the slate has been referred to as "Rojak" and the "Rojak slate". In the case of both primary insurances Axa and other companies reinsured HIH under a quota share reinsurance covering 80% of the underlying cover. Axa's share was 30% of the 80% in each case. I am concerned in these applications solely with Axa and not the other participants in the quota share reinsurance. Some of the other reinsurers were sued, so far as the 7.23 slate was concerned, in a separate action altogether. So far as the Rojak slate was concerned, as I have already indicated, two of the other reinsurers on the Rojak slate were included as defendants in the Rojak action.

HIH has paid the insured financiers over $31 million under the primary cover and sues Axa and other reinsurers for their respective shares of the 80 percent reinsurance cover.

Axa's application before me in each case is for summary judgment which would result in the dismissal of each action as against Axa on the ground that under Part 24.2 of the Civil Procedure Rules HIH has no real prospect of succeeding at trial. As I say, I am only concerned with Axa. Other similar applications by other reinsurers are apparently waiting in the wings on the outcome of these two applications.

These two cases have been before this Court and the Court of Appeal in respect of various preliminary issues and the background facts have been fully set out in the reports of those cases under the reference HIH Casualty and General Insurance Limited v New Hampshire Insurance Company Limited and others [2001] 1 Lloyd's Rep 378 and [2001] 2 Lloyd's Rep 161.

The underlying policy in each case (contained in part in an insurance slip and in part in a more fully worded policy) included words to the effect that 7.23 Productions (and Rojak Productions) would make 6 (and 10) made-for-TV films (respectively). The central preliminary issue disposed of by this Court and the Court of Appeal involved the true construction of the reference in the underlying policy and the reinsurance to those producers making a certain number of films. The issue was whether that reference was or was not a term of the underlying policy (and, in turn, of the reinsurance) and whether, if so, it was a warranty. The reinsurance was effected under a quota share reinsurance slip subject to all terms clauses and conditions "as original". The preliminary issue I have mentioned was, as ordered by Mr Justice Thomas on 22^nd August 2000, as follows:

"1. Are the terms (of both the insurance contract and reinsurance contracts) alleged by the Reinsurers to be warranties in fact such?"

This court answered this question as follows:

"1. Of the terms alleged to be warranties:

(1) There was a warranty in both the insurance and reinsurance contract(s) as to the number of films to be made."

This decision was upheld by the Court of Appeal who answered the question raised by the order of Mr Justice Thomas as follows:

"Yes. The six film (or ten film) slate terms were terms of both insurance and reinsurance and were warranties."

There were other preliminary issues decided by this Court and the Court of Appeal. For example, HIH pleaded that Axa was precluded from relying on its breach of warranty defence by clause 8 of the insurance contract. This point was also decided against HIH and I need say no more about it here. I shall have occasion later to refer briefly to one other preliminary issue decided by this Court and the Court of Appeal. The main preliminary issue I am concerned with, however, is the one mentioned above.

It is not necessary in order to identify the issues before me to record again the entire background which is fully set out in the reported judgments of this Court and the Court of Appeal. I shall, of course, highlight (and add to) such of the facts there reported as are critical to the issues before me.

In relation to the 7.23 slate the insurance and reinsurance were placed in about August 1997 with an end date of 22^nd July 1999 (by which date the revenues generated by the films had to be compared with the insured sum). On 12^th August 1999 HIH paid the insured financiers 100% of the insured shortfall. By the end date only five films (out of the six mentioned in the policies) were produced in the 7.23 slate. Apparently, a sixth called Lured Innocence was originally intended to be produced but it was withdrawn and not replaced by another film.

In relation to the Rojak slate the insurance and reinsurance was placed in December 1997 with an end date of 8^th November 1999. On 11^th February 2000 HIH paid the claim of the insured financiers. By the end date only seven films (out of the ten mentioned in the policies) were produced in the Rojak slate.

I should add that in each case, before payment by HIH, Axa began to raise questions about the failure to produce the requisite number of films, but it was not until the Defence in each case which, in the case of Rojak, was dated 24^th May 2001 and, in the case of 7.23, 23^rd June 2000, that Axa took the point that the failure to produce the requisite number of films was a warranty which was breached in each case and which resulted in the discharge of the cover.

The questions that were raised in this regard by Axa before payment by HIH under the underlying cover were as follows. On 10^th August 1999 Axa sent a fax to HIH's brokers saying: "The cover was returned for a slate of 6 films and it seems only 5 films have been declared. Please advise who has agreed on this amendment reducing the number of films and forward endorsement we cannot find in our files." That concerned the 7.23 slate. In the case of Rojak, on 26^th November 1999 Axa sent a fax to HIH saying: "We were informed that Flashpoint would be acting as a risk manager for Underwriters. Would you please let us have copies of all the risk management reports prepared by Flashpoint as we are concerned about production delays and the apparent reduction in the films from the slate of ten to eight."

Of course, by this time Axa were naturally focusing on a claim under the reinsurance. It had received Risk Management Reports every month from September 1998 onwards in respect of both slates. At some stage it became apparent from these reports that the requisite number of films in each slate was not going to be produced. In the case of Rojak, for example, the Report, which I am told was sent in February l999, expressly recorded "….this slate has reduced from a 10 to an 8 film slate ". In the case of 7.23, from the first Risk Management Report sent in September l998 right through to the end there were merely five films which appeared to be in the slate.

So Axa knew, in the case of Rojak at least by February l999, that it was not intended to produce more than 8 films, and in the case of 7.23, Axa knew that only five films were actually being produced at all material times. By the end dates of the insurances, I think I am right in saying , seven films were produced in the Rojak slate and five in the 7.23 slate.

The Law

Accordingly, it is quite plain and it is common ground before me that there was a breach of warranty (with regard to the number of films) in the case of each primary insurance contract as well as each reinsurance contract. It is also common ground before me that the effect of the breach of warranty in the case of each insurance and reinsurance contract was to discharge the liability of the insurer (or reinsurer) under that policy. The warranty relating to the number of films to be produced was in the nature of a promissory warranty which, in accordance with the Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Limited (The "Good Luck") [1991] 2 Lloyd's Rep 191, is to be treated as a condition precedent to liability under the policy. The breach of warranty will have occurred at the latest at the end date in respect of each slate, that being the date at which the comparison has to be made under the policy between the aggregate revenues generated by the slate and the insured sum in order to determine the shortfall, if any. The moment that breach occurred the insurance cover was automatically discharged without any action or election by the insurer (or reinsurer) to accept the breach as a repudiatory breach discharging the contract of insurance (or reinsurance). This is the effect of the decision in the House of Lords in the "Good Luck". That of course was a decision based upon the Marine Insurance Act 1906. It is, however, common ground before me that this principle of automatic cessation of cover on breach of a promissory warranty in an insurance or reinsurance contract is not restricted to policies in the field of marine insurance and applies in the instant case to the insurances the subject of this litigation.

The Marine Insurance Act, however, provides that a breach of warranty may be waived by the insurer. It is common ground before me that the automatic discharge of the cover under the insurances and reinsurances in these cases could be waived by the insurer or reinsurer concerned. The allegation, put forward by HIH in its Reply, is indeed that the breach of warranty has been waived. After the determination of the preliminary issues by this Court and the Court of Appeal this issue of waiver is the only remaining issue in these actions. Mr Nicholas Hamblen QC for Axa submits that there is no real prospect of HIH succeeding on this issue and that summary judgment should be given in Axa's favour with the consequence that the actions against it would be dismissed.

On the pleadings in each action, at the time the order for the hearing of the preliminary issues was made, this issue of waiver was not raised at all. The issue was pleaded by HIH after the order for the hearing of those preliminary issues was made. It was in fact HIH who asked the court to make that order, contending, in support, that the preliminary issues might be determinative of the whole action. In the event, the determination of the preliminary issues by this Court and the Court of Appeal would, but for the new plea of waiver, have been determinative of these actions. The waiver issue accordingly needs careful assessment: if it has a real prospect of success these cases must go to trial; but real means real and is to be contrasted with "fanciful": see Swain v Hillman and another [2001] 1 All ER 90.

The evidence before me comes from the solicitors on each side. There is no evidence from the representatives of HIH and Axa who were involved at the relevant times. Despite this it is quite apparent from the correspondence between the parties that neither side realised that the failure to produce six films in the 7.23 slate and ten in the Rojak slate might have the consequence that cover was wholly and automatically discharged on the grounds of breach of warranty. That realisation came, it seems, at or about the time of the defences in each action and the point is taken in the defences filed in each case. The important point to make, however, is that HIH do not assert that Axa (or, indeed, HIH themselves) were aware that the reinsurance (and insurance) cover had (or even might have) been discharged as a result of breach of warranty in relation to the number of films produced in each slate. That realisation, as I say, came much later, at the time the original defences were pleaded in May and June of 2001. It is worth quoting from the skeleton argument before me of Counsel who appear for HIH on these applications. They are Mr Julian Flaux QC and Mr Simon Picken. I quote from paragraph 11 of their skeleton.

"Moreover, the commercial reality is that there was never going to be an express statement on the part of Axa to the effect that, despite the breaches of warranty, it was treating itself as still being on risk, for the simple reason that it clearly never occurred to anyone at Axa at the time that the reductions in the numbers of films meant that there were breaches of warranty. The warranty point was a lawyer's point, taken much later after solicitors had been instructed. It follows that Axa's conduct was (and could only have been) consistent with it remaining on risk."

Accordingly, and quite plainly, Mr Flaux is not putting forward now, nor intending to put forward at trial, any case that Axa were aware that the reinsurance cover had been discharged and, with that awareness, waived the breach of warranty. Nor indeed is it said that HIH had the impression at any relevant time that Axa were so aware, and with that awareness, waived the breach of warranty. The case for waiver is put forward on the basis that it is not a necessary ingredient in establishing the waiver to establish either such awareness on the part of Axa or such impression that Axa were so aware on the part of HIH.

There is nothing in the evidence before me that suggests that at trial there is any prospect that such awareness on the part of Axa or impression on the part of HIH might be proved to support the waiver. As I say the case that is being made on behalf of HIH does not suggest that any attempt is going to be made to establish such awareness or impression, even if there were some evidential basis for it which, so far as I can see, there is not.

I therefore turn to analyse the nature of the allegation of waiver. It would be convenient, for clarity, to take just one of the slates. I take slate 7.23. The plea of waiver was included in the pleadings by HIH by amendment on 9^th October 2000 in the following terms (leaving out aspects of the plea which have now been wholly overtaken by the determination of the preliminary issues).

"Further or alternatively, the Claimants will say that, in any event, the Defendants have affirmed the Reinsurance Contract and/or have waived any right to contend and/or are estopped from contending that such breach of warranty ... discharged them from liability to the Claimants under the Reinsurance Contract ... by virtue of the fact that the Defendants have known since September 1998 (when they received the first Risk Management Report produced by Flashpoint) and/or each month thereafter (up until the date when the claim was made under the Insurance Contract) that only 5 films (not 6) were being and/or had been made and that it was not intended to make a sixth and/or that the film "LURED INNOCENCE" had not been and/or was not being made and/or was not intended to be made as part of the 7.23 slate, but it was not until service of their Defence and Counterclaim that the Defendants purported to treat themselves as being discharged from liability under the Reinsurance Contract".

This plea, it will be noticed, was restricted to waiver in relation to Axa's liability to HIH under the reinsurance. It is to be appreciated that to eliminate liability under the reinsurance, HIH had also to establish that the primary cover (which, in accordance with the decisions on the preliminary issues, had also been automatically discharged by the breach of warranty) had been reinstated by waiver. Accordingly, a plea of waiver to deal with the primary insurance has (only recently) been added to the pleadings by yet a further amendment. At the same time there was included an assertion of reliance in relation to the waiver plea in the primary insurance and reinsurance.

The plea is put in terms of waiver or estoppel. It is necessary to distinguish two, quite different, concepts that lie behind these words. The first is waiver by election. The second is waiver by estoppel. The traditional common law concept of waiver by election involves a choice by the waiving party between two inconsistent courses of action. Outside the insurance sphere, when there has been a repudiatory breach of a promissory warranty by one party the other has a choice whether to accept the breach as discharging the contract or to waive it and affirm the contract. If he does not accept it the contract continues in force. That is an example of a true election between two inconsistent courses. In the case of an insurance contract, on the other hand, breach of the promissory warranty discharges the cover (though not, technically, the entire contract) automatically, without any action or election on the part of the insurer. There is no choice involved at all. There is no election to be made. So much comes out of the "Good Luck" and is not disputed before me as applicable to the insurances and reinsurances here. It follows that waiver by election can have no application in such a case and the waiver, therefore, referred to in section 34(3) of the Marine Insurance Act 1906 must encompass waiver by estoppel, the second of the two concepts above-mentioned, rather than waiver by election: see J Kirkaldy & Sons Limited v Walker [1999] Lloyd's Rep 410 at 422/423; Brownsville Holdings Limited and another v Adamjee Insurance Company Limited ("The Milasan") [2000] 2 Lloyd's Rep 458 at 467; Clarke, the Law of Insurance Contracts, paragraph 20-7A; MacGillivray & Parkington on Insurance Law (9^th ed. 1997) paragraphs 10-98 and 10-99.

Waiver by estoppel or promissory estoppel, as it is more commonly described, involves a clear and unequivocal representation that the reinsurer (or insurer) will not stand on its right to treat the cover as having been discharged on which the insurer (or insured) has relied in circumstances in which it would be inequitable to allow the reinsurer (or insurer) to resile from its representation. In my judgment it is of the essence of this plea that the representation must go to the willingness of the representor to forego its rights. If all that appears to the representee is that the representor believes that the cover continues in place, without the slightest indication that the representor is aware that it could take the point that cover had been discharged (but was not going to take the point) there would be no inequity in permitting the representor to stand on its rights. Otherwise rights will be lost in total ignorance that they ever existed and, more to the point, the representee will be in a position to deny the representor those rights in circumstances in which it never had any inkling that the representor was prepared to waive those rights. It is of the essence of the doctrine of promissory estoppel that one side is reasonably seen by the other to be foregoing its rights. There is nothing improbable in such a foregoing of rights. It might, for example, be prompted by considerations as to the preservation of future goodwill.

I am greatly assisted in the conclusions I have come to on this point by the decision in Youell and others v Bland Welch & Co. Ltd. ("the Superhulls Cover") (case No.2) [1990] 2 Lloyd's Rep 431 where, at 450, Philips J said this:

"A party can represent that he will not enforce a specific legal right by words or conduct. He can say so expressly - this of course he can only do if he is aware of the right. Alternatively he can adopt a course of conduct which is inconsistent with the exercise of that right. Such a course of conduct will only constitute a representation that he will not exercise the right if the circumstances are such as to suggest either that he was aware of the right when he embarked on a course of conduct inconsistent with it or that he was content to abandon any rights that he might enjoy which were inconsistent with that course of conduct."

Mr Flaux defends these applications for summary judgment by contending that I should not follow Kirkaldy v Walker (supra) and should hold that the waiver that gets him home is indeed a waiver by election. I reject that submission for the reasons already expressed in this judgment and the reasons mentioned in that case.

Mr Flaux's second point is that it is only necessary to show that the reinsurer was aware of the relevant facts which constitute the breach of warranty (here, that the number of films stated in the contract has not been or was not being made). It is not necessary to go on to show that the reinsurer knew that, as a matter of law, the failure to make the number of films stated in the contract constituted a breach of warranty. It must always be remembered in this case that Mr Flaux's task is not only to show a real prospect of waiver in respect of the reinsurance but also a waiver in respect of the primary cover. In relation to the primary cover, his submission is that it is not necessary to show that the insurer (i.e., his client, HIH) knew that, as a matter of law, the failure to make the number of films stated in the contract constituted a breach of warranty. He leads, of course, no evidence, and does not suggest that there is or will be any evidence, that HIH were so aware. This underlines the point that the issue before me turns on an issue of law rather than fact. If Mr Flaux is wrong in law, the awareness of Axa and HIH as to their respective rights is relevant and it is plain that he cannot establish that awareness now and nor does he have a real prospect of establishing it at trial.

I should add that, so far as the reinsurance is concerned, the point is not so much the awareness of Axa as to its rights to treat the cover as discharged but whether it appeared to a reasonable person in the position of HIH that Axa was so aware and was prepared to forego its rights. That is a gloss that is important and can easily be overlooked in this analysis. I should add that, in turn, so far as the primary cover is concerned, the issue is whether it appeared to the insured financiers that HIH was prepared to forego its rights. There is, of course, nothing before me to suggest that it reasonably appeared to HIH that Axa was prepared to forego its rights and nothing to suggest that it appeared to the financiers that HIH was prepared to forego its rights.

At all events, Mr Flaux contends that his position is supported by Motor Oil Hellas Corinth Refineries S.A. v Shipping Corporation of India ("The Kanchenjunga") [1990] 2 Lloyd's Rep 391 at 399 where Lord Goff in contrasting waiver by election with equitable estoppel said this:-

"Election is to be contrasted with equitable estoppel, a principle associated with the leading case of Hughes v Metropolitan Railway Co., (1877) 2 App.Cas. 439. Equitable estoppel occurs where a person, having legal rights against another, unequivocally represents (by words or conduct) that he does not intend to enforce those legal rights; if in such circumstances the other party acts, or desists from acting, in reliance upon that representation, with the effect that it would be inequitable for the representor thereafter to enforce his legal rights inconsistently with his representation, he will to that extent be precluded from doing so.

There is an important similarity between the two principles, election and equitable estoppel, in that each requires an unequivocal representation, perhaps because each may involve a loss, permanent or temporary, of the relevant party's rights. But there are important differences as well. In the context of a contract, the principle of election applies when a state of affairs comes into existence in which one party becomes entitled to exercise a right, and has to choose whether to exercise the right or not. His election has generally to be an informed choice, made with knowledge of the facts giving rise to the right. His election once made is final; it is not dependent upon reliance on it by the other party. On the other hand, equitable estoppel requires an unequivocal representation by one party that he will not insist upon his legal rights against the other party, and such reliance by the representee as will render it inequitable for the representor to go back upon his representation. No question arises of any particular knowledge on the part of the representor, and the estoppel may be suspensory only. Furthermore, the representation itself is different in character in the two cases. The party making his election is communicating his choice whether or not to exercise a right which has become available to him. The party to an equitable estoppel is representing that he will not in future enforce his legal rights. His representation is therefore in the nature of a promise which, though unsupported by consideration, can have legal consequences; hence it is sometimes referred to as promissory estoppel."

The emphasis has been added by me, as it has by Mr Flaux, to identify the point he is making, which is that he does not have to show any particular knowledge on the part of Axa (and the insured financier would not have to show any particular knowledge on the part of HIH). I cannot accept Mr Flaux's submission. It appears to me that all Lord Goff is doing in the sentence underlined is emphasising that in the case of equitable estoppel what matters is how the representation appeared to the representee, as opposed to election where the concentration is upon the knowledge of the representor. It is plain from the passage cited from Lord Goff that the representation, in the case of equitable estoppel, must be that the representor "will not insist upon his legal rights against the other party". It seems to me that this sentence makes it clear that the representation must be that the representor is prepared to forego his legal rights. This is particularly so when this language is compared with Lord Goff's reference a few lines before to the case of election in which the representor has to make an informed choice "made with knowledge of the facts giving rise to the rights". At any rate, in my judgment, Mr Flaux can gain no comfort from the passage he cited from Lord Goff's speech in The Kanchenjunga.

Mr Flaux goes on to submit that, properly read, Kirkaldy v Walker and The Superhulls Cover (supra) support his submission on this part of the case. It seems to me that precisely the opposite is the case in relation to both of those decisions.

In the light of my rejection of Mr Flaux's submissions so far it is probably unnecessary to address in detail two further features on which issue has been joined between Axa and HIH on these applications. The first is that, as Axa contends, and I accept, it is difficult to see how HIH can, on the evidence, establish an unequivocal representation for the purposes of the promissory estoppel. It is not alleged that Axa did anything positive from which an unequivocal representation can be inferred. In its pleaded case HIH asserts that Axa has known of the breach of warranty since September l998 because of their receipt of the Risk Management Reports throughout the insurance periods and that Axa never raised any objection.

HIH further pleads and relies upon a hand written note on a letter from the brokers, who were HIH's agents, to Axa dated 12^th March 1999 in relation to the Rojak slate in which the brokers informed Axa that there were eight films in the slate and that the sales agent was very optimistic about exceeding full recoupment over time. The hand-written note (in translation from the French) read "OK seen – waiting for the next reports". The note, however, was internal to Axa and was never seen by HIH until disclosure in these proceedings. So in any event it cannot found a representation for the purposes of estoppel. All it does is show that, so far as Axa was concerned, it expected the Risk Management Reports to keep on coming and thus regarded itself as still on risk. But that is no more and no less than I derive from all the other evidence. The realisation that the cover may have been discharged came much later, at or about the time of the filing of the defence. The other pieces of evidence relied upon by Mr Flaux tell the same story. It does appear that HIH is relying more on inaction by Axa than positive representation. I accept Mr Hamblen's submission that mere inaction founds a representation, if at all, only in circumstances required for an estoppel by silence and silence can only amount to a representation where there is a duty to speak. No such duty is alleged here and there are no special facts alleged which could create such a duty.

However, whether the representation is sought to be derived from positive action or inaction, what matters is that the representation did not in any event amount to a representation by Axa that it would not enforce its rights.

The second feature on which issue was joined relates to the requirement of reliance on the representation for purposes of the estoppel. HIH pleads that it relied on Axa's conduct in that if Axa had raised the objections which it now raises when it received the Risk Management Reports, HIH would have made similar objections rather than pay the insured amount. I do not doubt that that would have happened. But it is not the evidence of reliance which is required, i.e. that HIH relied upon a representation by Axa that it would not enforce its right to treat the cover as discharged. There is no evidence of such reliance nor any evidence of reliance by the insured financiers on any representation by HIH. Nor is there any evidence to show that alternative insurance would have been available.

Miscellaneous

I would have wanted to look at the evidence very carefully if the case had been put that the underlying insurance contract and the reinsurance contract had in effect been amended by tacit agreement or by the operation of promissory estoppel so as to preclude a breach of warranty ever occurring in the first place. Mr Flaux, however, did not put the case this way. It is common ground that a breach of warranty has occurred. The only question is whether that breach has been waived. Nonetheless, I have considered the evidence with a view to seeing whether some promissory estoppel might have operated prior to the occurrence of what would otherwise have been a breach of warranty. It is not clear precisely when the breach of warranty occurred. Certainly, it occurred at the latest by the end date of the primary insurance periods. By then, consistent with the Court of Appeal's ruling on the preliminary issues, the requisite number of films had to have been produced. It is possible however that there came a time before the end date when it was impossible to produce the requisite number of films by the end date, and in that event the breach of warranty would have occurred by that earlier time. It is possible that the knowledge of Axa that less than the requisite number of films had been, or were intended to be, produced was gained at an even earlier point in time. However, I find nothing in all the evidence put before me that begins to make a case for saying that, at any of those times, it reasonably appeared to HIH that Axa was aware of its rights to insist upon six films being produced and was prepared to forego such insistence. It will be appreciated that it took a visit to this Court and the Court of Appeal to finally determine that the requirement as to the number of films was indeed a term of the underlying insurance and a term that had the status of a warranty.

What Mr Flaux does rely upon is the evidence of Mr David Henry Forrest, a shareholder in Flashpoint Ltd. His witness statement records that in the course of these film financing transactions he met with the reinsurers of HIH, including Axa, and it was under these circumstances that he met Mr Jean Michel Guillot, who was a representative of Axa, in connection with the 7.23 and Rojak slates. He says that he met Mr Guillot on several occasions and that Mr Guillot was permitted to visit the production companies with which he was involved. At no time, he says, did Mr Guillot ever suggest that Axa might not be on risk and at no time did Mr Guillot raise any questions concerning the number of films in those two slates. That is, I hope, a fair summary of Mr Forrest's evidence. I am afraid that this evidence does not add anything to the prospects of success of HIH in these cases.

I mentioned early on in this judgment that I would have occasion to refer again to the preliminary points decided by this Court and the Court of Appeal. This was merely to note one further preliminary point. Under the reinsurance contract the reinsured agreed to consult and obtain the reinsurer's agreement to all amendments and alterations to the terms clauses and conditions of the underlying insurance. This Court and the Court of Appeal decided that this term was a warranty. It is submitted by Mr Hamblen that if HIH established that it was precluded from relying on the breach of warranty in the underlying policy in relation to the number of films made, this would have effected an alteration of the terms of that underlying insurance and this would put HIH in breach of that further warranty. That may well be the case but if, at the same time, Axa was similarly precluded from relying on the breach of warranty as to the number of films in the reinsurance contract, it would seem unjust to conclude that Axa could nonetheless avoid the cover. Certainly, this is not a point I would decide summarily, without evidence, and I do not do so.

I notice on re-reading through Mr Flaux's skeleton argument that tucked away towards the end is a suggestion that an alternative way of putting his client's case is on the basis of estoppel by convention precluding reliance by Axa on the reduction in the number of films in each slate. Mr Flaux did not support this argument from the bar and Mr Hamblen did not therefore deal with it in reply, but in case it is still put forward I note here that I reject it. Even accepting that Axa knew of the reduction of films being produced in each slate (and Mr Hamblen accepts this for the purposes of these applications), I do not think that the failure to establish promissory estoppel can be side-stepped in this way. The essential assumption which might ground relief would have to relate to the future conduct of Axa in not asserting its rights to treat itself as discharged from cover. Consistent with what I have held so far, that assumption was not made at any material time for the simple reason that neither side was aware of those rights at any material time. It would not be right to side-step this weakness by removing the focus from the future exercise of rights and concentrating solely upon what Mr Flaux refers to as an "assumed state of facts". The point was not pleaded, nor even mentioned at the hearing, and I say no more about it.

The very last point taken by Mr Flaux in his skeleton argument was that the trial of the preliminary issues proceeded on the basis of assumed facts and that only at trial would the actual facts come to be fully investigated. Mr Flaux scarcely supported this point at the hearing. This Court and the Court of Appeal decided the preliminary points. It had never been suggested that further factual material was necessary to do so. The questions were questions of pure construction and I cannot see what further facts need to be investigated at trial. The pleadings do not identify any, nor has Mr Flaux suggested any.

Conclusion

In conclusion it seems to me that HIH's claim had no real prospect of success. I bear in mind Mr Flaux's complaint that HIH have not had the opportunity of cross-examining Mr Guillot who was the main representative of Axa in relation to this reinsurance and that, given time, HIH might elicit more evidence from the brokers, who have now been joined by HIH into the actions. However, none of that is a reason why the Court should let these proceedings linger on. There is no reason to believe that any further evidence from those sources is going to cure the fundamental weakness in HIH's case as I have analysed it. It is not appropriate that the Court should keep the actions alive just in case something might turn up at trial. Accordingly, I shall dismiss both actions against Axa.