Overseas Union Insurance Ltd v Turegum Insurance Co

JudgeJudith Prakash J
Judgment Date22 June 2001
Neutral Citation[2001] SGHC 147
Docket NumberSuit No 1664 of 1999
Date22 June 2001
Published date19 September 2003
Plaintiff CounselLiew Teck Huat (Niru & Co)
Citation[2001] SGHC 147
Defendant CounselJeya Putra and Wendy Leong (Joseph Tan Jude Benny Anne Choo)
CourtHigh Court (Singapore)
Subject MatterConflict of Laws,Applicable tests,Protracted documentary negotiations with modification of terms,Whether contracts contained arbitration clause,Contract,Revocation of offer by counter-offer,Implied from intention of parties,Choice of law,Contractual terms,Whether binding agreement existing between parties,Whether English or Singapore law the governing law,Arbitration clause,System of law with which contract has the most real and close connection,Offer and acceptance,Formation,Governing law of contract,Express provision


Cur Adv Vult


1. The parties are both in the insurance business. The plaintiff company, Overseas Union Insurance Ltd (OUI), is incorporated in Singapore and carries on business as general insurers and reinsurers. The defendant, Turegum Insurance Co (Turegum), is incorporated in the Canton of Zurich but also has an office in London from where it carries on business in the English insurance market.

2. OUI entered the London reinsurance market as a reinsurer sometime in the 1960s. Doing business through underwriting agents in London, Winchester Fox & Co Ltd (Winchester Fox), OUI entered into reinsurance contracts with various insurers, including Turegum, over many years. OUI was not, however, successful as a reinsurer in the London market and by 1985, it had ceased to accept new business due to the tremendous losses it had sustained. It then commenced run-off of all its business.

3. In 1995, OUI received certain claims relating to the reinsurance contracts which it had written with Turegum. Subsequently it wrote to Turegum to open negotiations on commutation of OUI’s liability to Turegum under these contracts. Correspondence ensued but progressed in a rather desultory fashion and it was not until late 1998 that the negotiations really heated up. In March 1999, Turegum made an offer to accept a sum of US$220,000 from OUI to commute OUI’s outstanding liability. On 21 October 1999, OUI purported to accept this offer. Turegum then denied that the offer was still available for acceptance and insisted that OUI should go to arbitration with it to establish the outstanding amount due to it.

4. This action was commenced by OUI in November 1999 for the following relief:

(1) a declaration that the reinsurance contracts between OUI and Turegum contained no agreement for parties to refer any disputes to arbitration whether in London or anywhere else;

(2) a declaration that OUI and Turegum entered into a binding and conclusive commutation agreement on 21 October 1999 under which OUI agreed to pay US$220,000 as full commutation of all business transacted under the reinsurance contracts;

(3) a declaration that pursuant to the commutation agreement, the full liability of OUI to Turegum does not exceed US$220,000; and

(4) an injunction to restrain Turegum from commencing or continuing with arbitration proceedings under the reinsurance contracts.

5. Turegum denied that its claims have been commuted. Additionally, it has filed a counterclaim in which it sets out the details of the five reinsurance contracts that Turegum contends exist between itself and OUI and states that, pursuant to these contracts, OUI owed it US$225,590.61 as of May 2000. Among the reliefs Turegum has asked for are:

(1) a declaration that the five reinsurance contracts are valid and subsisting; and

(2) a declaration that each of the five reinsurance contracts contains a valid and binding arbitration clause for arbitration in London.

6. At the time OUI commenced this action, it also filed an application to obtain an injunction to restrain Turegum from proceeding with arbitration proceedings in London. In January 2000, Turegum filed an application for stay of the action on the ground that the parties had agreed to refer all disputes to arbitration in London. Both applications were heard by me in April 2000. I dismissed them and ordered instead that this action proceed on an expedited basis and that two issues be tried first. These were:

(a) whether the parties have reached a commutation settlement under which OUI is to pay Turegum US$220,000; and

(b) whether the parties have agreed to refer all disputes to arbitration in London.

First issue: Was there a commutation agreement?

The facts

7. On the part of OUI, the commutation negotiations were carried on by Mr Yeo Tian Chu, an assistant general manager, and Mr Andrew Tang Ming Leung, a deputy manager. Mr Peter Yap Kim Kee, OUI’s general manager, was not directly involved but he did attend a meeting with Turegum in October 1999.

8. As far as its run-off business is concerned, Turegum has placed this in the hands of Claims Management Corporation Ltd (CMCL), a subsidiary of Zurich Financial Services. All matters relating to Turegum’s reinsurance contracts with OUI were, at the material times, handled by CMCL. From time to time, CMCL corresponded with OUI using the letterhead of St James Claims Management (St James), one of its trading divisions. The persons involved were Mr Colin Francis Johnson who is employed as a broker accounts manager by CMCL and his assistant, Ms Tracy Gard. Later, in August 1999, one Mr Diarmuid Brennan, then a solicitor whose firm was handling claims on behalf of Turegum, also became involved in the negotiations with OUI.

9. In following the account of the negotiations hereunder, it is important to be aware that there were two claims made by Turegum that were in issue. The first was Turegum’s claim for reimbursement under the reinsurance contracts of amounts which it had paid to its own insureds. As these claims came in and were settled, Turegum entered the amounts which OUI should reimburse it in its ledgers as OUI’s outstanding indebtedness. The total outstanding from time to time was referred to as the ledger debt. Paying the ledger debt would not release OUI from future claims arising under the same reinsurance contracts. For that reason, OUI wanted a settlement of all outstanding and potential liabilities and that is what was meant by commutation.

10. The commutation negotiations started with a letter sent by OUI to Turegum on 30 March 1995 in which OUI indicated that it was ‘interested to commute all our past assumed business accepted from Turegum’. No figure was mentioned. Mr Johnson sent a neutral reply on behalf of Turegum indicating that correspondence was being reviewed. There were a couple of meetings and some correspondence over the subsequent two years but matters did not progress very far until 27 November 1998 when OUI made the first move towards reaching a commutation by making an offer to commute at US$100,000. On 1 December 1998, Turegum replied stating that it was unable to accept OUI’s proposal due to the substantial amount of the balances involved.

11. Further negotiations followed. On 8 February 1999, OUI put forward a figure of US$160,000. Turegum’s response, given on 23 February, was that it was ‘unable to accept your offer of US$160,000’ and to put to OUI its proposal of US$220,000 for a complete commutation. This was the first time that the figure of US$220,000 was mentioned. No time limit was put on this offer. On 10 March, OUI sent Turegum a short fax that referred to the immediately preceding letters and stated ‘We can only ask you (sic) kindly reconsider our offer to commute at US$160,000’.

12. On 15 March, St James wrote to OUI confirming that the latter’s offer of US$160,000 for ‘a complete cut-off of all past business between Overseas Union and Turegum’ was not acceptable. The letter went on to refer to the offer of US$220,000 which Turegum had put forward earlier and stated that this was an extremely generous offer. It was further stated that as OUI was currently able to afford only US$160,000, that amount would be accepted in settlement of the existing ledger debt but not for future liabilities. The last sentence of the letter read ‘We await your response on our offer of US$220,000 as a full and final settlement to Overseas Union’s liabilities on all Turegum policies or the settlement of US$160,000 for the ledger debt’.

13. OUI replied on 17 March. Its letter mentioned the economic difficulties facing the region and ended as follows:

‘Although we have genuine intention to commute our liabilities as indicated by our earlier efforts, there is no guarantee that we can hold on to our present offer to you in the weeks ahead as there is no sight of the recession in Singapore and economic crisis in the region ending anytime soon.

Under the present circumstances, we trust you will re-consider our latest offer without delay. If you choose to arbitrate, you also need to consider that your arbitral award would be valueless after spending lengthy time and huge costs over the action in London and enforcement in Singapore.’

14. Turegum’s response was immediate. It reiterated its stand that the offers it had received from OUI were not acceptable as the value was not enough for full release. It stated that its willingness to accept US$160,000 in full payment of the ledger debt was a sign of its understanding of the economic crisis since Turegum did not normally allow discounts on paid loss balances. If that payment was made, the question of finality could be revisited when the effects of the economic crisis were known. As an alternative, the parties could continue with the current discussions to see if they could ‘complete a commutation that is acceptable to the both parties’. The letter ended by asking OUI to re-examine the recent correspondence to see if it could forward to Turegum ‘an offer that will bridge the difference’.

15. OUI wrote again on 23 March. Its letter recapitulated the various offers made by OUI ending with its offer of US$160,000 made on 8 February and stated that OUI generally wanted to settle the issue amicably. The letter did not contain any increased offer.

16. Little happened for the next few months. There was apparently a telephone conversation on the matter between Mr Yeo and the Singapore employee of a company associated with Turegum. Nothing, however, came of that. The next development was a telephone conversation between Mr Johnson and Mr Yeo. Mr Johnson originally stated that this conversation had taken place in early September 1999 but later, after discovering an e-mail which he had written, he revised the date of the conversation to 26 August 1999.

17. The parties give varying accounts of this conversation. According to Mr Johnson who placed the...

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