In Mutual Holdings (Bermuda) Limited and others (“the Mutual Group”) v Diane Hendricks and others (“Mr and Mrs Hendricks”) [2013] UKPC 13, the Privy Council found that the Court of Appeal of Bermuda was not justified in making findings of fraud and overturning the judgment of the trial judge.


In Mutual Holdings, Mr and Mrs Hendricks participated in a complex “rent-a-captive” insurance scheme managed by the Mutual Group. After renewing the scheme, two ex-employees of the Mutual Group advised Mr and Mrs Hendricks that the renewal had been procured by fraud. It was alleged that the Mutual Group had overstated the extent of Mr and Mrs Hendricks’ exposure, in order to induce them to purchase unnecessary reinsurance and to renew the scheme.


The trial judge rejected the allegation of fraud as Mr and Mrs Hendricks failed to prove that the Mutual Group did not genuinely believe the advice it gave Mr and Mrs Hendricks. The trial judge also did not believe that the ex-employees were reliable witnesses as there were inconsistencies in their evidence.

Subsequently, the Court of Appeal of Bermuda overturned the trial judge’s judgment as it believed the judge’s findings were incomplete, and made its own finding that the evidence given by the ex-employees should have been accepted. The Mutual Group appealed this judgment, and the matter was referred to the Privy Council (which is the court of final appeal for Bermuda).The Council set aside the Court of Appeal’s judgment and restored the trial judge’s judgment. The Council’s reasons were 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 as the standard of proof required is higher;
  • the material relied on for the finding of fraud was wholly inadequate, and the reasons given for accepting the ex-employees’ evidence were unsatisfactory; and
  • the Court of Appeal chose to believe the ex-employees, without addressing the trial judge’s criticisms of their evidence.

The case is a reminder to litigants that the standard of proof for fraud is high, and a finding of fact by a trial judge, based on the credibility of a witness, should rarely be overturned.