Fuji Finance Inc v Aetna Life Insurance Co Ltd and another
[1996] 4 All ER 608Between: Fuji Finance Inc
And: Aetna Life Insurance Co Ltd and another
Judges:
Hobhouse LJ
Morritt LJ
Sir Ralph Gibson
Subject References:
Insurance
Contract of insurance
Nature of contract
Capital investment bond
Policy benefits on surrender or on death of life insured
Whether policy an 'insurance on the life of any person'
Whether contract a policy of life insurance
Legislative References:
- Life Assurance Act 1774
Case References:
Archbolds (Freightage) Ltd v S Spanglett Ltd (Randall, third party) - [1961] 1 All ER 417; [1961] 1 QB 374; [1961] 2 WLR 170, CA
Bedford Insurance Co Ltd v Instituto de Resseguros do Brasil - [1984] 3 All ER 766; [1985] QB 966; [1984] 3 WLR 726
Cope v Rowlands - (1836) 2 M & W 149; 150 ER 707
Cornelius v Phillips - [1918] AC 199; [1916-17] All ER Rep 685, HL
Flood v Irish Provident Assurance Co Ltd - [1912] 2 Ch 597, Ir CA
Gould v Curtis - [1913] 3 KB 84, CA
Jones v AMP Perpetual Trustee Co NZ Ltd - [1994] 1 NZLR 690, NZ HC
Joseph v Law Integrity Insurance Co Ltd - [1912] 2 Ch 581, CA
Mahmoud and Ispahani, Re an arbitration between - [1921] All ER Rep 217, CA; [1921] 2 KB 716
Marac Life Assurance Ltd v IR Comr - [1986] 1 NZLR 694, NZ CA; affg (1985) 9 TRNZ 201, NZ HC
National Standard Life Assurance Corp, Re - [1918] 1 Ch 427
NM Superannuation Pty Ltd v Young - (1993) 113 ALR 39, Aust Fed Ct
Phoenix General Insurance Co of Greece SA v Administratia Asigurarilor de Stat - [1987] 2 All ER 152; [1988] QB 216; [1987] 2 WLR 512, CA
Prudential Insurance Co v IRC - [1904] 2 KB 658
Judgment date: 4 July 1996
In 1986 the plaintiff, a Panamanian investment company, took out a policy variously described as a life assurance policy or a capital investment bond, with the defendant insurance company and paid a single premium of £50,000. Under the policy, sums were payable on the death of the life assured, T (the prime mover behind the plaintiff's operations), or the early surrender of the policy and, either way, the sums payable were calculated by reference to the value of the units then allocated to the policy. If, however, the policyholder chose to surrender the policy within the first five years, the amount payable would be subject to a small discontinuance charge. A central feature of the policy was the 'switch' option, which entitled the policyholder to direct the insurer to convert units of an internal fund allocated to the policy to units of another fund. Within six years the policy had soared in value to over £1m due to T's astute use of the switch option. However, in 1991 the insurers altered the procedures of the switch option and thereafter T's return was negligible. The plaintiff claimed that the alteration of the policy terms constituted a repudiatory breach of contract and surrendered the policy. The insurers paid out surrender proceeds of £1,110,758·50, but the plaintiff, being dissatisfied, commenced proceedings for damages against them. On a trial of preliminary issues, the judge held that the policy was not an 'insurance on the life' of T within the meaning of s 1 [F1] of the Life Assurance Act 1774, but that it was not rendered unenforceable by virtue of s 16 [F2] of the Insurance Companies Act 1982, which restricted insurance companies to the business of insurance. The insurers appealed.
Held
The fact that the measure of the benefit payable on the surrender of a life assurance policy was the same as that payable on the death of the life assured did not prevent the contract from being recognised as 'insurance ... made ... on the life ... of any person' within s 1 of the 1774 Act, if the event on which the benefit was payable was sufficiently life or death related. Since the policy came to an end on the death of T, so that, subject to notification in the prescribed manner, the benefits then crystallised, the right to surrender was related to the continuance of life, for it could not be exercised by the plaintiff after T's death. It followed that the policy was a policy of life insurance within the 1774 Act and the appeal would accordingly be allowed on that ground (see p 618 e g to j, p 619 f, p 623 j and p 626 j, post).
Marac Life Assurance Ltd v IR Comr [1986] 1 NZLR 694, NM Superannuation Pty Ltd v Young (1993) 113 ALR 39 and Jones v AMP Perpetual Trustee Co NZ Ltd [1994] 1 NZLR 690 considered.
Decision of Nicholls V-C [1994] 4 All ER 1025 reversed.
Notes
For principles common to all insurances, see 25 Halsbury's Laws (4th edn reissue) para 2.
For the basis of a contract for life insurance, see ibid, paras 525-528, and for cases on the subject, see 29(2) Digest (2nd reissue) 172-177, 4163-4171.
For the Life Assurance Act 1774, s 1, see 22 Halsbury's Statutes (4th edn) (1995 reissue) 8.
For the Insurance Companies Act 1982, s 16, see ibid 251.
Appeal
The defendants, Aetna Life Insurance Co Ltd and Windsor Life Assurance Co Ltd (to which Aetna had transferred its long-term business), appealed with leave from the decision of Nicholls V-C ([1994] 4 All ER 1025, [1995] Ch 122) given on 7 July 1994 whereby he determined on a trial of two preliminary issues in an action brought by the plaintiff, Fuji Finance Inc (Fuji), against the defendants for damages for breach of contract, that a policy issued to Fuji on 24 October 1986 by Tyndall Assurance Ltd (which had subsequently transferred its undertakings and liabilities to Aetna) was not a policy of insurance within the meaning of s 1 of the Life Assurance Act 1774 and was not rendered unenforceable by s 16 of the Insurance Companies Act 1982. By order of the Court of Appeal dated 12 March 1996 the Secretary of State for Trade and Industry was given leave to intervene in the proceedings. The facts are set out in the judgment of Morritt LJ.
Anthony Grabiner QC and Daniel Toledano (instructed by White & Case) for the defendants.
ORDER
Appeal allowed. Leave to appeal to House of Lords refused.