ABN Amro Bank N.v v. Royal & Sun Alliance Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 26 February 2021 |
| Neutral Citation | [2021] EWHC 442 (Comm) |
| Date | 26 February 2021 |
| Docket Number | Case No: CL-2018-000771 |
| Court | Queen's Bench Division (Commercial Court) |
Mr Justice Jacobs
Case No: CL-2018-000771
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Rebecca Sabben-Clare QC, Benjamin Parker and Julia Gibbon (instructed by Reed Smith LLP) for the Claimant
Luke Parsons QC, Stewart Buckingham QC and Will Mitchell (instructed by Kennedys Law LLP) for the 1 st – 14 th Defendants
Siobán Healy QC and Harry Wright (instructed by Reynolds Porter Chamberlain LLP) for the 15 th Defendant
Hearing dates: 9–12, 16–19, 23–26, 30 November, 1–2, 8–10, 14–15 December 2020
Index
| Section | Para. Number |
| A: Introduction | 1 |
| A1: The parties and the claim | 1 |
| A2: The issues | 12 |
| A3: The Trial | 19 |
| B: The Factual Background | 29 |
| Section C: The Policy terms and GUA | 168 |
| C1: The policy subscribed by the market between 25 and 29 January 2016 | 168 |
| C2: The policy subscribed by Mr. Beattie on 29 January 2016, and by Prosight and Swiss Re in February 2016 | 169 |
| C3: General Underwriters Agreement | 173 |
| D: Construction of the policies | 175 |
| D1: Legal principles | 175 |
| D2: The parties' arguments | 189 |
| D3: Discussion | 206 |
| E: Rectification/estoppel/collateral contract | 315 |
| E1: Legal principles | 316 |
| E2: The witness evidence | 332 |
| E3: The Parties' arguments | 366 |
| E4: Discussion | 382 |
| F: Non-disclosure and misrepresentation | 448 |
| F1: Introduction to the issues | 448 |
| F2: The Non-Avoidance clause | 463 |
| F3: Affirmation | 485 |
| F4: The misrepresentations and non-disclosure relied upon: general matters | 567 |
| F5: Purpose/intention of the TPC | 585 |
| F6: Non-disclosure of the NAC | 634 |
| F7: Non-disclosure of the 2015 endorsement | 641 |
| F8: As expiry misrepresentation | 647 |
| F9: Only PLOD representation to Standard | 683 |
| F10: The misrepresentation as the foundation for an estoppel | 692 |
| G: Clause 3 and lack of quality checks carried out by the Bank | 706 |
| G1: The issues | 706 |
| G2: The construction of the policy | 720 |
| G3: Was the Bank reckless in relation to the quality of the collateral? | 742 |
| H: Sue and Labour | 764 |
| H1: The issues | 764 |
| H2: Legal principles | 781 |
| H3: The facts relating to the Bank's conduct | 792 |
| H4: The expert evidence | 813 |
| H5: Is the applicable standard “good faith”? | 819 |
| H6: The Bank's conduct | 825 |
| Section I: Quantum of the claim against underwriters | 854 |
| J: The claim against Edge | 861 |
| J1: The issues | 861 |
| J2: The broking of the TPC | 876 |
| J3: Causation and Quantum Issues | 941 |
| J4: The Bank's residual claim against Edge for irrecoverable costs | 1021 |
| J5: Edge's liability in respect of Clause 3 defence | 1030 |
| K: CONCLUSION | 1034 |
A: Introduction
A1: The parties and the claim
In these proceedings the Claimant (“the Bank”) claims an indemnity of approximately £33.5 million under a policy of insurance subscribed to by the 1 st – 14 th Defendants as underwriters (collectively, “the underwriters”). Whilst there is no dispute that each of the underwriters did subscribe to a relevant policy of insurance, the precise identification of the relevant policy document is one of the many issues in the case.
The policy was led by the 1 st Defendant, Royal & Sun Alliance Insurance plc (“RSA”). It was placed by the 15 th Defendant, Edge Brokers (London) Limited (“Edge”). The policy covered the period of one year commencing on 1 February 2016. The underwriters deny liability on various grounds, and the Bank's claim against Edge arises, principally, if the underwriters' main grounds of defence are successful.
The dispute has arisen because the policy was placed in the marine market in London with subscribing underwriters who were specialists in insuring cargo in warehouses and in transit, and in particular the risk of physical loss and damage to that cargo. However, the policy contained an unusual clause which, as the Bank and Edge contend, was intended to and did widen the cover so as to include risks which were not dependent on physical loss and damage. The clause in question was known as the “Transaction Premium Clause” or “TPC”. The Bank and Edge contend that its effect is to cover certain losses suffered by the Bank arising from the default of its customers, even if there was no physical loss and damage to the cargo.
The underwriters deny that this is the effect of the clause on its true construction. They rely upon the fact, which is clear from the evidence at trial, that cover for the risk arising from the default of customers would ordinarily be placed with underwriters who specialised in providing insurance known as trade credit insurance. It is not usually provided by underwriters who provide cargo insurance. They therefore contend that the TPC should not be construed so as to provide, in effect, trade credit insurance and must be read as being only applicable where physical loss and damage is caused to the cargo.
If their argument on construction fails, then they advance a case based upon conversations which took place between the leading underwriter, Mr. Brian Beattie of RSA and Mr. David Mullen who was the broker at Edge with primary responsibility for the placement of the insurance. The effect of those conversations, on the underwriters' case, is to prevent (via rectification, or estoppel or related principles) the Bank from relying on the terms of the policy on their true construction. The underwriters also contend that they are entitled to avoid the policy for non-disclosure or misrepresentation. The inevitable result of the case based on the conversations, and avoidance, is that the court has received a very large volume of evidence which would not ordinarily be admissible on an issue of construction.
The claim arises out of the business of a special purpose vehicle, or SPV, of the Bank called Icestar B.V. (“Icestar”). The business of Icestar involved the provision of structured commodities finance to clients of the Bank. These clients were in the business of buying and selling commodities. The finance provided by Icestar comprised transactions known colloquially as “repo” transactions. They involved the provision by Icestar of working capital by purchasing the client's commodity for a defined period of time. At the end of that period the client was contractually obliged to buy the commodity back from Icestar. During the course of the trial, the parties and the witnesses sometimes referred to Icestar specifically, but usually simply referred to “the Bank” as being synonymous with or at least encompassing Icestar. In this judgment, I will usually refer simply to “the Bank” since it is generally not necessary to draw any distinction between the Bank and Icestar. From time to time, however, I will refer to “Icestar”, either because there are some occasions on which it is appropriate to draw a distinction, but usually because a witness referred to Icestar rather than simply the Bank.
The commodities giving rise to the present claim are various cocoa products such as cocoa butter, cocoa cake, cocoa liquor and cocoa powder. These products are derived from cocoa beans, and are ultimately purchased by end-users such as major chocolate manufacturers. Both cocoa beans and cocoa products are traded by commodity traders, with the volume of transactions in cocoa beans substantially...
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