HIH Casualty and General Insurance Limited and others (Respondents) v Chase Manhattan Bank (Appellants) and others HIH Casualty and General Insurance Limited and others (Appellants) v Chase Manhattan Bank (Respondents) and others (First Appeal) HIH Casualty and General Insurance Limited and others (Appellants) v Chase Manhattan Bank (Respondents) and others (Second Appeal) (Conjoined appeals)
124. Does phrase 7 of the Truth of Statement clause make it clear that fraudulent misrepresentation by Heaths, by PML or by any other agents of Chase would be covered? Does phrase 8 make it clear that dishonest nondisclosure by Heaths or anyone else with a duty to disclose would be covered? The language is certainly wide enough for the purpose. Why should it not be given its literal meaning? No coherent reason has, in my opinion, been given once the proposed rule of law, barring, on public policy grounds, the efficacy of such contractual provisions, has been discounted.
125. The proposition that fraud unravels all and vitiates all contracts and transactions (see paragraph 15 of the opinion of my noble and learned friend Lord Bingham of Cornhill) expresses not a rule of construction but the rule of public policy to which I have referred. And it begs the question "whose fraud?" If it is accepted that it is open to a contracting party by express language in a contract to exclude his responsibility for fraudulent misrepresentations or non-disclosures made without his authority or knowledge by an agent, then it must be accepted also that the "fraud unravels all" proposition does not necessarily apply where the fraud is that of an agent. And if responsibility for the fraud of an agent can be contractually excluded by express language, then in principle it must be possible for the same result to be reached as a matter of construction of general language in a contract. Accordingly, the issue in the present case, in my opinion, is whether, as a matter of construction, the general words in phrases 7 and 8 should be given the all-inclusive width of their natural meaning or should be construed so as not to cover fraud or dishonesty.
126. It is said that if, at the time of contracting, someone had asked whether phrases 7 and 8 were intended to cover fraudulent misrepresentation or dishonest non-disclosure by Heaths, the insurers would have recoiled in horror and answered "Of course not". They might have done. But, equally, I think Chase would have answered "Of course they do". It has to be kept in mind, in my opinion, that Heaths' relationship with Chase was not the normal relationship of a broker with a would-be insured. Chase had no reason at all to expect to bear the risk of Heaths' dishonesty in dealing with the insurers. On the footing that the commercial purpose of the phrases 6, 7 and 8 was to insulate Chase from the broking process, and the evidence at trial may well confirm that to be so, that purpose is as much undermined by making Chase responsible for Heaths' dishonesty as it would be undermined by making Chase responsible for Heaths' negligence. There is, in my opinion, no logic in the distinction proposed to be drawn between Heaths' dishonesty and Heaths' negligence in the bringing into being of the insurance contract. The contractual words should, as a matter of principle, be given their normal meaning if the normal meaning is consistent with the commercial purpose of the Truth of Statement clause, objectively ascertained. The court has no right, in my opinion, to make a different contract for the parties, allocating the risk of misfeasance or non-feasance by Heaths in a manner different from the allocation of that risk that the clause in its natural meaning envisages.
127. In particular, the answers given to the questions posed by the preliminary issue should not prejudge the conclusion reached at trial by the court of construction as to the commercial purpose of phrases 7 and 8 of the Truth of Statement clause. So, in my opinion, the questions should be answered by stating that: