1. 'ZULFIQAR AHMAD KHAN, J.---Through this petition, the petitioner has challenged the order passed by the Insurance Tribunal, Sindh dated 09.10.2014 ("the impugned order"), wherein the petitioner's application filed under Order I, Rule 10 read with section 151, C.P.C., ("011110 application") seeking inclusion of the current respondent No,4 i.e, Swiss Reinsurance Company of Switzerland ("Swiss Re"), as co-defendant before the Insurance Tribunal in order to "effectively adjudicate upon and have the matter decided and have appropriate decree issued against the defendants" was dismissed.
2. 'Facts giving rise to the controversy are that the petitioner, who is a limited liability company, as a part of its business, owns and operates Hotels in Islamabad and Karachi under franchise from Marriott Worldwide Corporation, USA. Its Islamabad Marriott Hotel, on account of a tragic bomb blast of 20.09.2008 suffered extensive damage and the petitioner claims that the said blast caused a loss of more than 1.24 Billion rupees on account of fire. As a part of its usual business, the petitioner obtained six insurance policies from the respondent No,2, namely New Jubilee Insurance Company Limited (the Insurer), while one of the policy was in respect of terrorist acts, another was in respect of fire. The petitioner claims that though the policy in respect of the terrorist attacks in the sum of Rs,50 Million has been settled by the Insurer, however, it has also lodged a claim on account of fire in the sum of Rs, 1,120,072,977, as well as, the petitioner has instituted six different suits against the Insurer for the accumulated recovery of Rs,2,067,308,213. The application made by the petitioner for implicating Swiss Re as a co-defendant before the Insurance Tribunal, per counsel, was summarily and arbitrarily dismissed vide the impugned order. Petitioner's contention is that the cause of fire was independent to the terrorist act of bombing and while the policy in respect of terrorist act has been satisfied, the claim of losses on account of fire is still pending.
3. Since the claim involved billions of rupees, to safeguard its interest, it moved the OtRio application to implead Swiss Re (the Reinsurer), with which the Insurer had entered into a reinsuring treaty under section 41(1) of the Insurance -Ordinance, 2000 ("the Ordinance"). Having denied inclusion of Swiss Re as co-defendant, the petitioner feared that even in the event, its claim of more than a Billion rupees on account of fire is admitted, the Insurer itself may not have the required liquidity to pay such a huge claim, thus unless the Reinsurer (Swiss Re) is made a codefendant (i.e, made obligated to pay money for and on behalf of the insurer), any Decree issued against the insurer wouldn't be enforced, effectively. The learned counsel argued that the petitioner has nexus/link with Swiss Re via the insurer and per the principle of "dominus litis" it is within the domain of the plaintiff to choose defendants in a suit. The learned counsel prayed that petition be allowed and the impugned order be set aside, as well as, orders be passed to join Swiss Re as a co- defendant since the petitioner's claim ultimately resides with the said reinsurer.
4. 'These assertions were vehemently contested by the counsel for the respondents, who argued that in the prayer of the corresponding suit No,04/2009 filed before the Insurance Tribunal, the plaintiff (current petitioner) only prayed for judgment and decree in the sum of Rs,1,120,072,977 from the defendants arrayed in the said suit, which only included New Jubilee Insurance and PICIC Insurance Company, both Pakistan entities and while the said suit was filed in 2009 per the above referred prayer, it was after a lapse of more than three years when in April, 2013, the OiRio application was made as an afterthought, requesting to make Swiss Re as a co-defendant, which was totally misconstrued and contrary to the prayer made in the instant suit. Notwithstanding therewith, the Tribunal vide the impugned order made a very reasoned and speaking decision, refusing the said OIRio application of the petitioner, where detailed deliberations on the non- inclusion of Swiss Re as a proper party have been given. The counsel pointed out that the impugned order has taken cognizance of the fact that the reinsurance treaty was only signed between the respondent No,2 (insurer) and the Swiss Re (the Reinsurer), to which, the petitioner being a policy-holder is an alien. The order recognized the fact that pursuant to section 122(1)(a) of the Ordinance, the Tribunal can only hear claims filed by policy-holders against the insurance company in respect of an insurance policy. Since Swiss Re is not the insurance company with which the petitioner has any contractual relation, so there was no possibility that the said alien (to the petitioner) entity can be dragged into the current litigation.
5. 'While the matter is already pending before the Insurance Tribunal, wherein, per the counsel of the Respondent, eight witnesses have already been examined and amongst the list of witnesses to be examined Mr. Peter Shaw of Crawford and Company, U.K and Dr. Andrew Moncrieff, a forensic scientist, appointed by the Insurer to examine the loss regarding the incident, who have already submitted their report regarding the said incident, titled "Report into the cause of the fire at the Marriot Hotel, Islamabad" are also included, to which, the petitioner has ample opportunity to cross.
6. It was also brought to the attention of the Court that besides these foreign experts, local surveyors, by mutual consent of the parties, were also appointed, which included Joseph Lobo (Pvt.) Limited and Ghafoor Associates. By their unanimous conclusion, the counsel for the petitioner submitted, it was (wrongly) held that the cause of the fire was the bomb blast carried on by the terrorists, which finding, is contrary to the belief of the petitioner, who asserted that the fire was an independent act, not initiated by the terrorists attack.
7. 'In order to understand the reasoning posed in the impugned order, it would be prudent to reproduce appropriate paragraph of the said order in the following: "An Insurer is under an obligation in terms of section 41 of the Ordinance, 2000 read with Rule 25 of the SECP Rules to obtain reinsurance, if the risk is high, in order to protect itself which is what the defendant No,1 did in this instance. Therefore, Swiss Re does not have any role except that the defendant No,1 has fulfilled the requirement under the law by getting the exposure reinsured through Swiss Re, with the privity of contract being solely between the defendant No,1 and Swiss Re.
8. Only in the event of a valid claim being made, which is paid by the defendant No,1, Swiss Reinsurance will indemnify the defendant No,1 and no one else. Accordingly, before any valid claim is raised by the plaintiff against the defendant No,1 and which is paid by the defendant No,1, Swiss Re has, as stated above, no role to pay in the matter. Under no circumstances does Swiss Re have any nexus or link with the plaintiff, so as to justify the plaintiff's seeking to implead Swiss Re in this matter."
9. 'The counsel for the respondent also submitted that under section 124 of the Ordinance, Courts are barred to hear any appeal against the decision of Insurance Tribunal passed on any application.
10. The counsel contended that the Tribunal had ample material on record to decide the claim of the plaintiff against the defendants on merits, and impleading the Reinsurer is unnecessary and only a vexatious attempt. It is pertinent to note that the said Report is produced by the Crawford & Company Group which is the world's largest independent provider of claims-management solutions to the insurance industry, and hence was an obvious choice for carrying out expert investigations of this incident of international cadre, the learned counsel informed the court. It is also pertinent to note, per counsel, that the plaintiff itself and many agencies of the government including the Capital Development Authority, Islamabad appointed experts and investigations to probe the incident and their reports have been on the record also, but the plaintiff has not sought to implead those experts and agencies nor any of the surveyors which were hired with the recommendation and consent of the plaintiff and to whom the plaintiff has subsequently accused of being influenced, only because the Joint Surveyor's Report was not favorable to the Plaintiff, the learned counsel alleged. Neither of the above, like the Reinsurer, are necessary or proper parties as they have submitted their findings and reports which have been exhibited as evidence and the Tribunal can effectively adjudicate all matters on the basis of these findings and reports and hence impleading the Reinsurer is nothing but a pressure tactic to delay proceedings and to harass the defendants, which act will be seriously prejudiced if the international reinsurers leave Pakistan market on account of being subjected to such vexatious and unwarranted litigious attacks. The counsel contended that Pakistan insurance market is not only small but is perceived as a volatile and difficult market by the international reinsurers anyway and as a result, some of the international reinsurers have already left the Pakistan market and the costs of reinsurance for Pakistan are becoming increasingly high. The learned counsel also contended that Swiss Re has no legal relationship with the petitioner all together. The Swiss Re has a relationship with various other insurance companies made through separate and independent agreements, with which the petitioner has no connection. List of these agreements in respect of the present case, the counsel submitted, includes Swiss Reinsurance Company, Switzerland; Allianz Versicherungs - AG, Germany, Dubai; Asia Capital Reinsurance Group Pte. Ltd, Singapore; Trust International Insurance Co. B.S.C.(c), Bahrain; General Insurance Corporation of India, India; Labuan Reinsurance (L) Ltd., Labuan, Malaysia; Korean Reinsurance Company, South Korea and Pakistan Reinsurance Company Ltd. These insurance arrangements between the insurer and the Reinsurer are only relevant and kick-in only upon the acceptance of the claim of the petitioner, which is already pending trial. The counsel concluded his arguments by submitting that the application made by the petitioner is vexatious and if not dismissed, not only the defendant will be seriously prejudiced by suffering irreparable losses, but the whole insurance industry of Pakistan will suffer crises as in that event, no international reinsurance company will be willing to do the business with the insurance companies.
11. The counsel submitted that it is a universal practice of the insurance fraternity that the Reinsurers are not impleaded or involved in insurance disputes between the policy holders and insurers.
12. Notwithstanding therewith, the petitioner approaching the court has an alternate remedy to challenge the final decision of the Tribunal rather than invoking writ jurisdiction of this court by challenging outcome of an application disposed of by the Tribunal.
13. 'Heard the counsel, having reviewed the material on file and the citations made by the respective counsel, and having taken stock of the lengthy averments made. To us, only the following questions need our intervention:
1. Is this court barred under section 124 of the Insurance Ordinance to consider the present constitutional petition against the order of the Insurance Tribunal passed on application of the petitioner?
2. Does the doctrine of private of contract bars petitioner's action to implead the Reinsurer (Swiss Re) as necessary or even a proper party.
1. In order to answer the first question, we wish to consider the text of the relevant portion of section 124 which we reproduce in the following:
124. Appeal.- (1) Subject to the right of appeal conferred by subsection (2) hereof, the decision of the Tribunal on any application shall be final and shall not be questioned in any Court or before any other authority.
(2) Any party aggrieved by a decision of the Tribunal may, if the amount of the claim in dispute or the penalty prescribed, as the case may be, is not less than one hundred thousand rupees, prefer an appeal to the High Court within a period of thirty days from the date of such decision.
14. To start our analysis of subsection (1), we look at its first part which pr6vides that "the decision of the Tribunal on any application shall be final". These words clearly mean on their face that once the Insurance Tribunal has made any decision in respect of any application presented to it, the said decision, immediately upon its delivery, become final and conclusive, namely, not only that the Tribunal becomes functus officio, such decision cannot be challenged under the scheme provided by the Insurance Ordinance. These provisions make it clear that it is the intention of the legislator to confine the decision making in respect of applications agitated before the Tribunal to the Tribunal itself. If the text of the subsection (1) would have ended here, while the intention of the legislature to confine decision making in respect of applications to the Tribunal only would have been clearly finalized, however, we cannot overlook the addition of the words "and shall not be questioned in any Court or before any other authority" in the said sub-section which further cements the finality of the decisions made by the Tribunal in respect of any application(s) agitated before it. Further, if there was no subsection (2), the case of the petitioner would have met its legislative eventuality here. However, when we examine subsection (2), there seems to be provided therein an option of appeal before the High collo (within 30 days for amount of the claim in dispute or the penalty prescribed being no lesser than Rs,100,000) for a person aggrieved by a decision of the Tribunal.
15. The contention of the learned counsel for the respondent was that the word "decision" in subsection (2) does not include the decision made by the Tribunal on an application under subsection (1) and it only refers to appeals against the final decision of the Tribunal, meaning thereby that no appeal lies against the decision of the Tribunal in respect of a Rio application dismissed by the Tribunal through the impugned order, therefore the exercise of power by this court under A Article 199 is also barred.
16. We are not impressed with this contention of the learned counsel. While exercising its supervisory powers under the Constitution, this Court is fully competent in respect of orders passed by subordinate courts or tribunals in violation of the principle of natural justice, as well as, this court is also competent to correct any error of law where no efficacious remedy is available. These powers have been affirmed time and again by a number of judgments including 1998 SCMR 1899, 2011 CLD 931, 1995 CLC 239, 1999 SCMR 1881, 2013 SCMR 1707 and PLD 1997 SC 3. We, therefore do not concur with the contention that this Court is barred by section 124 of the Insurance Ordinance to consider the present constitutional petition against the impugned order of the Tribunal.
17. With regards the learned counsel's contention about 'necessary' and 'proper' party, we observe that while the OiRio application proposes Swiss Re's addition on account of both 'necessary' and 'proper' party (paragraph 3 of the said application dated 15.04.2013), the learned counsel during arguments consented that while Swiss Re may not be a 'necessary party', but for the effective adjudication, Swiss Re qualify be added as it is a 'proper party'.
18. 'In our view, while general rule in regard to impleadment of parties is that the plaintiff, being dominus litis, chooses persons against whom he wishes to litigate, however, this general rule is subject to the provisions of OiRio(2), which provides for impleadment of proper or necessary parties. The said sub-rule is extracted below: 'The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added.
19. 'The above clearly depicts that a court may, at any stage of the proceedings (either upon or even without any application), and on such terms as may appear to it to be just, direct that any of the following persons may be added as a party (a) any person who ought to have been joined (as plaintiff or defendant), but not added; or (b) any person whose presence before the court may be necessary in order to enable the court to effectively and completely adjudicate upon and settle the question involved in the suit. Thus giving court the discretion to add any person who is found to be a 'necessary party' or 'proper party' of part (a) and (b) respectively.
20. A 'necessary party' is held to be the person who ought to have been joined as a party and in whose absence no effective decree could be passed at all by the Court and if a necessary party is not impleaded, the suit itself is liable to be dismissed. It is not very hard to imagine that the dispute between the petitioner and the insurer can effectively be decreed even if Swiss Re is not impleaded as a party - therefore, Swiss Re couldn't be held to be a 'necessary party'.
21. Now we look at Swiss Re from the periscope of 'proper party', which is held to be a party who, though not a necessary party, is a person whose presence would enable the court to completely, effectively and adequately adjudicate upon all matters in disputes in the suit, though he need not be a person in favour of or against whom the decree is to be made. We have already held that the Petitioner has no private of contract with the reinsurer (Swiss Re) and the Petitioner's claim does not even remotely relates with Swiss Re, the apprehension on the basis of which the Petitioner intends to join Swiss Re appears to be that in case its claim is decreed against the Respondent and the Respondent is not in a position to pay it, and further that the Respondents succeed in its reinsurance claim then the money so received by the Respondent might be attached by the Petitioner in garnishee proceedings. In our opinion such claim cannot even be held to be remotely connected with the Petitioner's claim against the Respondent. Courts have time and again held that persons indirectly or remotely interested are neither 'necessary' nor 'proper' parties (1996 SCMR 781, 1996 CLC 678, PLD 1972 Lahore 169, 1996 CLC 456, PLD 1996 Karachi 467).
22. Now we come towards the question as to the doctrine of privity of contract. While the position is very clear in respect of general commercial contracts, where our courts have held that a contract cannot confer rights or impose obligations arising under it on any person or agent except parties to the contract, only who should be able to sue to enforce their rights or claim damages (e.g. In PLD 2015 Sindh 134), however, there is no guidance available in respect of reinsurance contracts, for which we seek assistance from the overseas jurisdictions, which is also of relevance, since most of the reinsurance contracts are done with the foreign company operating globally (as the case of Swiss Re).
23. 'To commence our journey to this unchartered territory, we would like to take benefit from the work of Mr. Larry Schiffer (www.Irmi.Com/biographies/larry-schiffer), who is an expert on the reinsurance contracts. He writes that "in the context of reinsurance, the long standing rule is that there is no privity of contract between a reinsurer and an insured, and the insured generally does not have a direct right of action against the reinsurer if the insured's claim is not paid by its direct insurer".
24. Decisions which have affirmed this rule of thumb include U.S. Fid. & Guar. Co. v. S.B. Phillips Co. Inc., 359 F. Supp. 2d 189 (D. Conn. 2005), where the court stated quite clearly that a contract of reinsurance does not give to a right of action by the insured against the reinsurer. Also of relevance is the case of Executive Risk Indem., Inc. v. Charleston Area Med. Ctr., Inc., 681 F. Supp. 2d 694 (S.D. W.
25. Va. 2009), which restated the concept that an indemnity reinsurance agreement confers no rights on the insured unless the language of the reinsurance contract clearly expresses intent on the part of the reinsurer to be directly liable to the insured. Another decision supporting this contention is given in the case of General Reins. Corp. v. American Bankers Ins. Co. Of Fla., 996 A.2d 26 (Pa.
26. Comm. Ct. 2009,) which explained that the baseline rule is that reinsurance recoveries are general assets of the insolvent insurer estate and held that this notion is based "upon the simple fact that policyholders usually have nothing to do with the insurer's decision on placement of the reinsurance and do not even know of the existence of reinsurance at the time they purchase coverage from the insolvent insurer." The ratio of these decisions is that the insured does not have the right to directly access the funds of the reinsurer.
27. 'As per foregoing reasons, we hold that:
(a) the insured (petitioner) has no direct access to the funds of the reinsurer (Swiss Re) as there is no privity of contract between a reinsurer and the insured and both operate under different contracts (though with the same insurer) giving rise to situations where, while the insured may succeed against the insurer, however, claim of the insurer against the reinsurer may fail, against which remedial actions would be available to the insurer and not to the insured as there are inter se veils between these three players; and
(b) Swiss Re is neither a necessary nor a proper party under OiRio. This petition is thus dismissed on both the counts.