The continuing duty of utmost good faith - Post-Contract Fraud

(K/S Merc-Skandia in the court of appeal)

The Court of Appeal has now handed down its judgment in the appeal in K/S Merc-Skandia XXXXII v Certain Lloyd’s Underwriters , to be reported in the November [2001 issue of Lloyd’s Rep IR. This is the first decision of the English courts on the continuing duty of utmost good faith in the light of The Star Sea [2001] Lloyd’s Rep IR 493 , and the Court of Appeal – the leading judgment in which was given by Longmore LJ – has attempted to rationalise the law in the light of the House of Lords’ ruling. The Star Sea did not deliver the final death blow to the continuing duty, although their Lordships were plainly unhappy with the concept. The Court of Appeal in K/S Merc-Skandia has also failed to take that step, but it is now clear that there is very little left of the continuing duty. This was an appeal from the decision of Aikens J, [2000] Lloyd’s Rep IR 694 (see the October 2000 issue of Insurance Law Monthly), which was handed down shortly before the speeches in The Star Sea. As will be seen, the decision of Aikens J in favour of the assured – but not the reasoning – was upheld.