2013 Case of Note: Privy Council — Mutual Holdings (Bermuda) Limited and others
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The Privy Council gave judgment this year on an appeal from the decision of the Court of Appeal of Bermuda in Mutual Holdings (Bermuda) Limited and others  UKPC 13 (97 KB PDF). The major issue concerned an allegation of fraud made against three corporate and four personal defendants (who included ex employees of the Mutual Group) in respect of the rent a captive facility operated by the Mutual Reinsurance Management Group. In broad terms, the defendants were alleged of overstating the extent of the plaintiffs’ exposure under a complex programme of insurance and reinsurance, thereby inducing them to order reinsurance which they did not need and to renew the programme for a further year on amended and disadvantageous terms. The trial judge in the Supreme Court of Bermuda rejected this allegation on the facts but the Court of Appeal upheld it and made findings of fraud against two of the corporate and one of the personal defendants.
The Mutual Group appealed this judgment. The Privy Council overturned the Court of Appeal’s judgment and restored the trial judge’s judgment. It held that an appellate court is rarely justified in overturning a finding of fact by a trial judge when the finding of fact is based on the credibility of a witness, especially in fraud cases. In the circumstances of this case, the Privy Council found that the material relied on for the finding of fraud was inadequate. The critical issues were (i) what was said at an informal and undocumented meeting eight years before the trial and (ii) what the four personal defendants believed to be the exposure of the plaintiffs. Any findings about these matters necessarily had to be based on the oral evidence of those defendants. It was the trial judge’s role to assess the character, honesty and candour of their evidence. The plaintiffs relied upon the contemporaneous documentary evidence in emails and letters which supported the fraud allegations, and which the Court of Appeal relied upon in support of its findings, but these were held by the Privy Council to be inconclusive.
This case is a salutary reminder to litigants that the standard of proof required for fraud is high.