ABN Amro Bank N.v v. Royal & Sun Alliance Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lord Justice Edis,Lady Justice Andrews |
| Judgment Date | 02 December 2021 |
| Neutral Citation | [2021] EWCA Civ 1789 |
| Docket Number | Appeal No. A4/2021/0671 and A4/2021/0739 |
| Year | 2021 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1789
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lady Justice Andrews
and
Lord Justice Edis
Appeal No. A4/2021/0671 and A4/2021/0739
Case No: CL-2018-000771
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Mr Justice Jacobs
Royal Courts of Justice
Strand
London WC2A 2LL
Siobán Healy QC and Harry Wright (instructed by Reynolds Porter Chamberlain LLP) for the 15 th defendant/ appellant in appeal 0671/ the broker (“ Edge”).
Rebecca Sabben-Clare QC and Benjamin Parker (instructed by Reed Smith LLP) for the claimant/ respondent to appeal 0739/ the bank (“ ABN Amro”).
Peter MacDonald Eggers QC and William Mitchell (instructed by Kennedys Law LLP) for the underwriter defendants ( “the Underwriters”)/ the 1 st to 7 th, 9 th,11 th to 14 th Defendants (the “Appellant Underwriters”) as appellants in appeal 0739/ the 8 th ( “Ark”) and 10 th ( “Advent”) defendants as respondents to appeal 0671 (together the “Respondent Underwriters”).
Hearing dates: 2 and 3 November 2021
Approved Judgment
Sir Geoffrey Vos, Master of the Rolls:
Introduction
In these proceedings, a claimant bank (ABN Amro) sued its insurers (the 1 st to 14 th defendants – altogether “the Underwriters”) and its insurance broker (the 15 th defendant – “Edge”). The claim against the Underwriters was for some £31.3 million allegedly due under a policy of marine cargo and storage insurance (the Policy). The claim against the broker, Edge, was brought on the basis of breach of contract and negligence by Edge in placing the Policy, in the alternative, in case all or part of the claim against the Underwriters failed (as in the event it did against the 8 th defendant (Ark) and the 10 th defendant (Advent)).
Mr Justice Jacobs (the judge) decided many issues in his 1,036 paragraph judgment after a 20-day trial. Significantly for these appeals, he decided (i) that the Appellant Underwriters (all excepting Ark and Advent) were liable to indemnify ABN Amro for the financial loss that it had sustained under the Transaction Premium Clause (the TPC) contained in the Policy, and (ii) that Ark and Advent were not liable under the Policy, because ABN Amro was estopped by convention from relying on the TPC as against them, and Edge was, in consequence liable to ABN Amro for the shares of the indemnity of Ark and Advent, which amounted to some £3.3 million.
The factual context was that ABN Amro had advanced working capital by way of structured commodities financing to Transmar and Euromar through a special purpose vehicle (Icestar) to finance their trade in cocoa beans and cocoa products (the Goods). In general terms, the “repo” transactions comprised Transmar and Euromar selling the Goods to Icestar/ABN Amro. Transmar and Euromar then had an obligation to repurchase the Goods from Icestar/ABN Amro at a specified time and (higher) price. Transmar and Euromar defaulted in doing so in 2016. The Goods were of poor quality and Icestar/ABN Amro sustained consequent financial losses when the Goods were sold. ABN Amro sought indemnity against those losses under the TPC which provided as follows:
Underwriters note and agree that, in respect of any Transaction, it is hereby confirmed that the Insured is covered under this contract for the Transaction Premium that the Insured would otherwise have received and/or earned in the absence of a Default on the part of the Insured's client.
‘Actual Sale Price’ means the sum received by the Insured upon the sale of the Subject Matter Insured to the applicable Exchange or to a third party on the open market.
‘Default’ means a failure, refusal or non-exercise of an option, on the part of the Insured's client (for whatever reason) to purchase (or repurchase) the Subject Matter Insured from the Insured at the Pre-agreed Price.
‘Pre-agreed Price’ mean the amount for which the Insured's client had agreed to purchase (or repurchase) the Subject Matter Insured from the Insured as specified on the relevant invoice or in the relevant transaction documents, comprising the principal together with any premium or profit element payable to the Insured.
‘Transaction’ means any transaction where, following a Default on the part of the Insured's client, the Insured sells the Subject Matter Insured to the applicable Exchange or to a third party on the open market.
‘Transaction Premium’ means an amount that is equal to the difference in value between the Pre-Agreed Price and the Actual Sale Price.
The Underwriters had contended before the judge that, on its true interpretation and in the light of the admissible factual matrix, the TPC did not cover financial losses of the kind that ABN Amro had sustained. It is fair to say that the TPC is a non-standard clause in the marine market. The TPC was found within a marine cargo policy that insured the Goods that Icestar/ABN Amro bought as part of the repo transactions. The Policy covered mostly physical loss and damage, but also (as the judge found at [234] to be common ground) wider cover in the absence of physical loss and damage, namely Business Contingency Cover, CEND cover 1 and Fraudulent Documentation cover. ABN Amro had suffered only financial, not physical, loss.
The factual background to Edge's appeal is more complex. In brief, the story starts with the policy year preceding the Policy. In July 2015, during that previous policy year, Edge (through a Mr Mullen) broked a policy variation to the lead underwriter, Royal and Sun Alliance Insurance plc (RSA) (through a Mr Beattie). Mr Mullen of Edge told Mr Beattie of RSA that the amendments, which included the bespoke TPC and a non-avoidance clause (the NAC), had been drafted by ABN Amro's lawyers. Mr Beattie of RSA scratched the amendment (the July Endorsement), but did not instruct Edge to circulate it to the following market, which included Ark and Advent. Accordingly, Ark and Advent did not know about the TPC and NAC. Mr Mullen and his colleague Mr Lockyer of Edge honestly believed that Mr Beattie of RSA had agreed the TPC on behalf of the entire following market, including Ark and Advent, under a Policy provision allowing the lead underwriter to agree contract changes.
The judge held, however, that only RSA, and not the following market, was bound by the TPC and the NAC contained in the July Endorsement.
When the prior year's policy was renewed to become the Policy, each of the Underwriters, including Ark and Advent, scratched or signed, and was given a copy of, the Policy wording including the TPC and the NAC. The judge found that when Mr Mullen or Mr Lockyer of Edge broked the renewal to Mr Blewett of Ark, and when Mr Lockyer of Edge broked the renewal to Mr Cooke of Advent, those Respondent Underwriters were told by Edge that the renewal Policy was “as expiry”. Edge, of course, believed that the Policy was the same as the expiring one. Neither Mr Blewett of Ark nor Mr Cooke of Advent read the wording of the Policy. As a result, the judge found that Edge on the one hand, and Ark and Advent on the other hand, were at cross purposes about the meaning of “as expiry”. Edge understood “as expiry” to include the
TPC and the NAC. Ark and Advent understood “as expiry” as not including the TPC and NACArk and Advent (amongst others of the Underwriters) contended at trial that they could avoid the Policy on the basis of the “as expiry” misrepresentation. The judge, however, held that the NAC prevented avoidance. Underwriters had affirmed...
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