ABN Amro Bank N.v v. Royal & Sun Alliance Insurance Plc

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Jacobs
Judgment Date26 February 2021
Neutral Citation[2021] EWHC 442 (Comm)
Docket NumberCase No: CL-2018-000771

[2021] EWHC 442 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Jacobs

Case No: CL-2018-000771

Between:
ABN Amro Bank N.V.
Claimant
and
(1) Royal & Sun Alliance Insurance Plc
(2) Navigators Underwriting Agency Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 1221 at Lloyd's of London for the 2016 Year of Account
(3) Talbot Underwriting Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 1183 at Lloyd's of London for the 2016 Year of Account
(4) Brit Syndicates Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 2987 at Lloyd's of London for the 2016 Year of Account
(5) Hardy (underwriting Agencies) Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 382 at Lloyd's of London for the 2016 Year of Account
(6) Aegis Managing Agency Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 1225 at Lloyd's of London for the 2016 Year of Account
(7) Markel Syndicate Management Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 3000 at Lloyd's of London for the 2016 Year of Account
(8) ARK Syndicate Management Limited, on its Own Behalf and on Behalf of all Subscribing Members of Syndicate No. 3902 at Lloyd's of London for the 2016 Year of Account
(9) The Channel Managing Agency Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 2015 at Lloyd's of London for the 2016 Year Of account
(10) Advent Capital (Holdings) Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 780 at Lloyd's of London for the 2016 Year of Account
(11) Assicurazioni Generali S.p.A.
(12) Charles Taylor Managing Agency Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 1884 (The Standard Syndicate) at Lloyd's of London for the 2016 Year of Account
(13) Coverys Managing Agency Limited, on its Own Behalf and on Behalf of All Subscribing Members of Syndicate No. 1110 at Lloyd's of London for the 2016 Year of Account
(14) Swiss Re Limited
(15) Edge Brokers (London) Limited
Defendants

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

1

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.

2

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.

3

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.

4

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.

5

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.

6

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.

7

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...

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2 firm's commentaries
  • All Round Protection For Brokers: How Protecting The Underwriter Can Protect Your Client And Protect You!
    • United Kingdom
    • Mondaq UK
    • 27 May 2021
    ...Amro Bank N.V. -v- Royal & Sun Alliance Insurance plc and others [2021] EWHC 442 (Comm) ('ABN Our March 2021 article 'Insurers bound by the small print? I should cocoa!' briefly noted that the judgment in ABN Amro considered the scope of a broker's duty to procure cover that meets the i......
  • Insurers Bound By The Small Print? I Should Cocoa!
    • United Kingdom
    • Mondaq UK
    • 26 May 2021
    ...Amro Bank N.V. -v- Royal & Sun Alliance Insurance plc and others [2021] EWHC 442 (Comm) In the latest in a line of policyholder-friendly judgments, this recent ruling from the Commercial Court confirms that underwriters will be bound by the terms of policies they enter into whether they......

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