Groupama Insurance Company Ltd v Overseas Partners Re Ltd & Anor

The result of this case has produced a neat question as to the proper order for costs that the Court should now make. The position in a nutshell is that had AON not altered the relevant draft fax after it had been seen and initialled by the underwriter, these proceedings would never have been started. As originally drafted the fax made it clear that the representation being made about losses was confined to losses reported to Mr Smart. As altered, there was an argument for saying, as OP said, that the losses included those which were reported further up the line. In the end, I decided that the alteration did not change the meaning of the fax, contrary to OP’s position. In the light of OP’s defence to Groupama’s claim it was obviously sensible for Groupama to join the AON [the brokers] as a defendant; and that was done. I also decided that the fax should not have been altered once it had been seen and ‘noted’ by the underwriter, although that decision did not affect the eventual outcome. I will call this issue the ‘alteration’ issue, and the main issue the ‘entitlement’ issue.

Groupama say that AON should pay their costs of the alteration issue; that OP should bear their costs of the entitlement issue. OP accept that they must bear Groupama’s costs; but they say that they should not have to bear any of AON’s costs on the entitlement issue and that OP should not be asked to bear any of the costs of the alteration issue because they were not involved in it. AON say that Groupama should bear AON’s costs as the claim against them has failed but that theorder for costs should be in the form of a Bullock Order so that the Claimant recovers them from OP. The grounds for making this order are that OP is in run-off and resident in Bermuda.

Each party’s submissions has some merit. But at the end of the day, it seems to me that the Court should recognise in the order it makes the fact that this case was brought about by AON’s alteration of a fax without authority and contrary to accepted practice. I think that it is unfair to suggest that Groupama should have been expected to defend the case without joining AON. Once the alteration came to light they were obviously entitled to join AON and cannot be criticised for doing so. Further, I do not accept that there are any sound reasons for making a Bullock Order. There is no evidence to support the fear that enforcement of a costs order in Bermuda would or might present any problem, and I am not prepared to infer that there would be one. The fact that OP are in run-off says nothing adverse about their solvency.

In my view, AON should bear their own costs. It was their fault that there was a case at all and they cannot complain about being joined as a party. In relation to the entitlement issue, Groupama should recover their costs against OP. OP lost the case on that issue and that was a matter which predominantly occupied the court’s time. It also seems to me, although I understand Mr Fletcher’s argument to the contrary, that Groupama should be entitled to recover their costs of the alteration issue against OP. I found that the alteration did not in fact matter and that OP’s claim failed on the case as it stood. The amount of time and ‘energy’ spent on the alteration question occupied a fraction of the court’s time and a split order for costs would not, I think, be justified.

Therefore, the outcome is that OP must bear Groupama’s costs of the action including Groupama’s costs of joining AON into the action; but that AON should bear its own costs. In this way, OP will be saddled with one set of costs only and that reflects the justice of the case.