AXA S.A. v Genworth Financial International Holdings, Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 01 November 2018 |
| Neutral Citation | [2018] EWHC 2898 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000795 |
| Date | 01 November 2018 |
Neutral Citation Number: [2018] EWHC 2898 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fleet Street, London, EC4A 1NL
THE HONOURABLE Mr Justice Andrew Baker
Case No: CL-2017-000795
and
Andrew Green QC and Fraser Campbell for the Claimant and 1 st Part 20 Defendant (instructed by Clifford Chance LLP) and for the 2 nd and 3 rd Part 20 Defendants (instructed by Pinsent Masons LLP)
Jonathan Nash QC and Miriam Schmelzer (instructed by Sidley Austin LLP) for the Defendants / Part 20 Claimants
Adam Zellick QC and David Murray (instructed by Reed Smith LLP) for the 4 th and 5 th Part 20 Defendants
Hearing dates: 17 th & 18 th October 2018
Judgment Approved
Introduction
By a share purchase agreement dated 17 September 2015 (‘the SPA’), the claimant (‘AXA’) acquired a number of Companies (as defined in the SPA) from the first defendant. The first defendant's payment obligations under the SPA were guaranteed by the second defendant. I shall refer to the defendants together as ‘Genworth’. There will be no need to differentiate between them in this judgment.
The acquisition of the Companies made AXA the ultimate parent of inter alia Financial Insurance Co Ltd (‘FICL’) and Financial Assurance Co Ltd (‘FACL’). Between 1988 and 2011, FICL and FACL underwrote payment protection insurance (‘PPI’) marketed and sold by companies now in the Santander Banking Group, Santander Cards UK Ltd and Santander Insurance Services UK Ltd. I shall refer to them together as ‘Santander’ as, again, there will be no need to differentiate between them for present purposes.
By these proceedings, AXA pursues Genworth for 90% of Relevant Distributor Mis-selling Losses, as defined in the SPA, pursuant to clause 10.8(a) thereof. Those Losses are defined by the SPA to include “ any PPI Mis-selling Losses which arise out of or directly relate to PPI Selling Activity undertaken by [Santander] or its agents or its appointed representatives (as the case may be) prior to 1 January 2005”. In turn, PPI Mis-selling Losses are defined to include “ all damages, losses, liabilities, penalties, fines, costs, interest and expenses, including for the avoidance of doubt costs and liabilities relating to FOS fees, claim administration, complaints handling, customer notifications and redress amounts” incurred by FICL/FACL in respect of PPI consumer complaints, and PPI Selling Activity is defined to include “ any activity undertaken by [Santander] or their agents or appointed representatives (as the case may be) in relation to the sales, marketing or administration of PPI products underwritten by [FICL/FACL]”.
By a Part 20 Claim, Genworth sue all of AXA, FICL/FACL and Santander for declaratory relief. By Application Notices in the Part 20 Claim, all of the Part 20 defendants seek to have the Part 20 Claim struck out under CPR 3.4(2)(a)/(b) or dismissed by way of summary judgment under CPR 24.2, alternatively stayed pursuant to the court's inherent jurisdiction.
Separate Application Notices were issued respectively by AXA, FICL/FACL and Santander, each of whom have separate solicitors of record in the Part 20 Claim. However, AXA and FICL/FACL made entirely common cause in their applications, and in particular AXA supported the striking out, dismissal or staying of the Part 20 Claim against FICL/FACL even if different considerations applied to it as claimant in the proceedings such that some or all of the Part 20 Claim against it might proceed. As a result, there have been three sets of representation before me, Mr Green QC leading a team for AXA and FICL/FACL, Mr Zellick QC leading a team for Santander, and Mr Nash QC leading a team for Genworth. I am very grateful to all of them for the efficiency and clarity of their arguments. As part of that, Mr Green QC took the lead in presenting the argument in support of the applications, allowing Mr Zellick QC in the main to adopt his arguments and focus on submissions of specific interest to Santander.
The Claim
By its Claim Form and paragraphs 1 to 16 of its Particulars of Claim, AXA sets out the basis upon which, as it says, Genworth were liable under clause 10.8(a) of the SPA to pay c.£28.5m, demanded before proceedings were commenced in December 2017.
Paragraph 17 of the Particulars of Claim then asserts that FICL and FACL were incurring Relevant Distributor Mis-selling Losses on an ongoing basis, and would continue to do so, and states that further sums would therefore be demanded in due course under clause 10.8. It indicated that AXA would seek to amend the Particulars of Claim if such further demands were not met with payment by Genworth. No such amendment has yet been made, or provided by AXA in draft, although it was common ground on the evidence before me that a further £173.6m or so has been demanded pursuant to clause 10.8 and not paid since the date of the Particulars of Claim and that yet further, very substantial, demands are likely to be made as PPI customer complaints continue to flood in.
Finally, paragraph 18 of the Particulars of Claim threatens but does not make a possible claim, against the second defendant only, in respect of loss and damage it is suggested AXA may suffer as a result of non-payment by the first defendant under clause 10.8. I was told by Mr Green QC that this may well become an actual claim in the anticipated Amended Particulars of Claim and on that basis I do not pursue now the possibility of striking out paragraph 18 as a non-claim.
By their Defence and Counterclaim, Genworth admit the provisions of the SPA pursuant to which AXA claims, and the original demand for c.£28.5m thereunder, but require AXA to prove whether that sum, or any sum, fell due for payment as demanded. A disguised positive defence is also raised, by paragraph 9(c) of the Defence which purportedly puts AXA to proof of whether in respect of each cost, payment or loss within the total sum claimed, AXA and/or FICL/FACL “ has asserted all defences reasonably available to them so as to establish the necessary causative link between PPI Misselling Activity and the liability of AXA and/or [FICL/FACL] for the purposes of the indemnity” (the ‘indemnity’ being Genworth's label, contentious between the parties, for their payment obligations).
The Defence and Counterclaim continues thus:
i) At paragraph 10, paragraph 17 of the Particulars of Claim is ‘noted’. Paragraph 10 then makes reference to aspects of the Part 20 Claim and states that Genworth seek thereby “ the determination of all questions of liability arising in respect of the Relevant Distributor Misselling Losses and the PPI Misselling Losses as between AXA and FICL and FACL, [Genworth] and [Santander]”. None of that has any place in the Defence. It neither purports to nor does disclose any basis for defending AXA's claims. The sentences in question should be struck out.
ii) At paragraph 11, Genworth make further reference to the Part 20 Claim. A suggestion by Santander in correspondence, that it would not have responsibility to FICL/FACL in respect of PPI consumer complaints where the PPI products contained ‘fundamental flaws’, is mentioned. That suggestion is denied by Genworth who then plead that if, contrary to that denial, there is some such limit upon Santander's responsibility, associated losses do not fall within clause 10.8 of the SPA. In my judgment, that likewise has no place in the Defence and does not disclose any basis for defending any of AXA's claims. Paragraph 11 of the Defence should also be struck out.
iii) At paragraph 14, Genworth refer to a Complaints Handling Agreement and Standstill Agreement concluded between FICL/FACL and Santander. (Strictly, the pleaded reference is contingent, Genworth not having known when the Defence and Counterclaim was settled whether those Agreements had been concluded. Nothing turns on that, however, as it is now clear and common ground that they had been.) Genworth then plead that concluding those Agreements prejudices the future pursuit by Genworth (by way of subrogation or otherwise) of claims against Santander in respect of losses for which AXA makes claim under clause 10.8. That premise, if established, is said to give rise to a partial defence or a claim by Genworth for breach of paragraph 7.2 of Schedule 5 to the SPA (a provision concerning the conduct by AXA or FICL/FACL of Third Party Claims, as defined by the SPA).
iv) At paragraph 15, Genworth assert in hypothetical terms a suggested defence or claim under paragraph 7.2 of Schedule 5 to the SPA, “ if and in so far as AXA and/or FICL and/or FACL has settled any claims made against them including, for the avoidance of doubt, claims for compensation made by purchasers of PPI”, on the basis that any such settlement will have been made without the prior written consent of Genworth.
v) The lines of defence or cross-claim suggested by paragraphs 14 and 15 are developed further in the Counterclaim.
In its Reply and Defence to Counterclaim:
i) As regards paragraph 9(c) of the Defence, AXA denies any burden of proving the assertion of all defences reasonably available to PPI complaints.
ii) As regards paragraph 14 of the Defence, AXA asserts that Genworth could only acquire any rights to pursue claims against Santander by way of subrogation upon and to the extent of making payment under clause 10.8. Genworth join issue as to that in their Reply to Defence to Counterclaim, but Mr...
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