Fortisbank Sa and Trenwick International Ltd and Others
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE |
| Judgment Date | 14 March 2005 |
| Neutral Citation | [2005] EWHC 399 (Comm) |
| Docket Number | Case No: 2003 Folio No 673 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 March 2005 |
[2005] EWHC 399 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mrs Justice Gloster, DBE
Case No: 2003 Folio No 673
Bitu Bhalla Esq & Jonathan Miller Esq (instructed by Messrs Hammonds) for the Claimant
David Turner Esq (instructed by Messrs Kennedys) for the Defendant
Hearing dates: 29 th October 2004 & 12th January 2005
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application for summary judgment by the defendants, Trenwick International Limited and other underwriters, whom I shall refer to collectively as "Underwriters". The claimant ("Fortis") is a major European bank, with its headquarters in Belgium. In common with other large financial institutions, Fortis entered into the field of invoice financing discounting which involves the provision of finance to companies on a regular basis upon notification of invoices. By a written contract dated 20 December 1999 ("The Zye Discounting Agreement"), Fortis agreed to purchase from Zye Technology Limited ("Zye") all of Zye's book debts owed to Zye by its customers and all future debts incurred by customers to Zye.
By its proceedings originally issued on 23 rd July 2003, Fortis claimed £1 million from Underwriters pursuant to the terms of a fraudulent receivables policy ("the Policy") arranged by Aon Group Limited under a line slip subscribed to by the defendants. The claim arises out of an alleged fraud under the Zye Discounting Agreement.
So far as is material for present purposes, Underwriters deny liability on the grounds that Fortis' present proceedings were brought outside the two year contractual limitation period provided by General Condition 13(b) of the Policy. Under the terms of the Policy, which incepted on 19 May 1999, Underwriters agreed, subject to the terms of the Policy, severally and not jointly, each for its own part and not for any other, to indemnify Fortis for direct financial loss sustained by Fortis by reason of Fortis having in good faith purchased, or made a loan to a customer secured against an account receivable as defined from the customer in circumstances where the account receivable was or proved to be "fraudulent" as defined.
The relevant provisions of the policy for present purposes are the following:
" INSURING CLAUSES
Subject to the terms, conditions limitation and exclusions of this Policy the Underwriters agree to indemnify the Assured, up to an amount not exceeding the Limit of Liability, for direct financial loss sustained by the Assured subsequent to the Retroactive Date and first discovered by the Assured during the Policy Period as follows:
1. Accounts Receivable
By reason of the Assured having in good faith and in the usual course of business:
(a) purchased by assignment or otherwise an Account Receivable from a Customer; or
(b) made a Loan to a Customer against the security of an Account Receivable;
In circumstances in which, in either case, such Account Receivable is or proves to be Fraudulent.
…
General Definitions
' Account Receivable' means any document or other written instrument either purporting to represent or in fact representing or evidencing a sum of money due to a Customer for:
(a) Goods sold and delivered; or
(b) services rendered; or
(c) work done;
by the Customer to or for the benefit of a third party.
…
'Fraudulent' in the context of an Account Receivable means an Account Receivable that has been created dishonestly or with intent to deceive and which proves to be any one or more of the following:
(a) non-existent;
(b) counterfeit;
(c) Forged:
(d) fictitious in whole or in part;
(e) Invalid; or
(f) Worthless.
…
General Conditions
13. Service of Process
…
(b) Legal proceedings for the recovery of any loss under the Policy shall not be brought prior to the expiration of 90 days after the original proof of loss is filed with the Underwriters or after the expiration of 24 months from the discovery of such loss, except that any action or proceedings to recover under the Policy on account of any judgement against the Assured in any suit shall be brought within 24 months from the date upon which the judgement in such suit shall become final.
…
18. Discovery
This Policy applies to loss discovered by the Assured during the Policy Period. Discovery occurs when the Assured becomes aware of facts which would cause a reasonable person to assume that a loss covered by the Policy has been or will be incurred, even though the exact amount or details of loss may not then be known."
Underwriters contend that Fortis discovered (within the meaning of that word, as defined in the Policy) the loss in February 2000 and that, accordingly, time for issuing proceedings expired in February 2002, in accordance with General Condition 13(b), because Fortis did not issue proceedings until more than 17 months later, namely on 23 July 2003. By its Reply, Fortis seeks to defeat the argument that the claim is precluded by the limitation provision by asserting first, that there was an express or implied agreement that Underwriters would not rely on General Condition 13(b) and, second, that Underwriters are estopped from relying, or have waived any right to rely, upon a limitation defence.
By their Application Notice dated 30 th March 2004, Underwriters applied, pursuant to CPR Part 24, for summary judgment on the basis that Fortis has no real prospect of succeeding on the claim because of the limitation period imposed by General Condition 13(b). In addition, Underwriters also seek an order declaring, that, by reason of Fortis' breach of a consent order made by Langley J on 16 September 2004 (namely Fortis' failure to file and serve answers, verified by a statement of truth, to the request for information contained in Underwriters' solicitors' letter dated 17 February 2004 by 4.00pm on 22 September 2004):
i) paragraphs 19 and 20 of Fortis' Reply have been struck out and;
ii) Fortis is debarred from advancing, whether by argument or otherwise the case set out at paragraphs 20.1, 20.2 and 20.3 of its Reply.
Underwriters also contended that I should not permit Fortis to rely upon the first witness statement of Robert Stuart Franklin Scott, served at approximately 4.26pm on 28 October 2004 because it was in breach of paragraph 3 of the consent order that, if Fortis did not serve evidence in response to the defendant's application for summary judgment by 4.00pm on 22 September 2004, then Fortis should be debarred from relying upon any evidence at the hearing of the application.
I deal first with the substantive application for summary judgment made by Underwriters.
Mr David Turner, counsel on behalf of Underwriters, correctly submits that if, as he contends, the sanctions specified in Langley J's order have indeed come into force, Underwriters are in any event entitled to an order that paragraphs 19 and 20 of Fortis' Reply are struck out and further that Fortis is debarred from advancing the case set out at paragraphs 21–23 of the Reply. Logically, he is right. However, in the exercise of my discretion, I considered that I should hear the application for summary judgment first, on the basis that, if I was satisfied as to the merits of that application, it would be unnecessary for me to decide what is in effect a strike-out application on the basis of non-compliance with Langley J's order.
In addition, in the exercise of my discretion I permitted Mr Bitu Bhalla, counsel who appeared with Mr Jonathan Miller on behalf of Fortis, to rely on the first statement of Mr Scott, notwithstanding its late service. Although there was a clear breach of Langley J's order, and no real justification for late service, I was not prepared to exclude that evidence.
The Summary Judgment Application
The first issue that arises is when, as a matter of fact, the loss was discovered by Fortis. As General Condition 18 provides:
"Discovery occurs when the Assured becomes aware of fact which would cause a reasonable person to assume that a loss covered by the Policy has been or will be incurred, even though the exact amount or details of loss may not then be known."
Underwriters contend that Fortis discovered the loss in February 2000. It would appear that on 10 February 2000, at a meeting with the Zye directors, and at a subsequent meeting on 11 February, Fortis discovered that Zye had not been administering their sales ledger collateral in accordance with the Zye Invoice Discounting Agreement. By letter dated 11 February 2000, Mr Chisholm of Fortis wrote to Mr Sharrock of Kennedys, Underwriters' solicitors, in the following terms:
"I would advise you of a potential claim situation which has just arisen on a client of Fortis Bank Commercial Finance. Our client is Zye Technology Limited. This is a client which commenced an Invoice Discounting facility in December [1999]. We have discovered at a meeting with the Directors on Thursday 10 th February 2000 and at a subsequent meeting today that the company has not been administering their sales ledger collateral in accordance with their Invoice Discounting Agreement. We will be appointing a Receiver on Monday 14 th February 2000. It is evident that the company has sent us invoices for which no goods were delivered and has also not sent us credit notes which had been issued to their debtors. At this time we are aware that the company have been deliberately withholding credit notes for goods which have been returned in order that they could maximise their funds available under the...
To continue reading
Request your trial
-
Costain Ltd v Tarmac Holdings Ltd
...that therefore they were entitled to rely on their accrued limitation defence. 107 In Fortisbank SA v Trenwick International Limited [2005] EWHC 399 (Comm), Gloster J (as she then was), reached a similar conclusion in a limitation case. The relevant passage in her judgment is paragraph 30 w......
-
Harrison Jalla and Others v Royal Dutch Shell Plc
...to the existence of an estoppel by convention. This was made clear in Fortisbank SA v Trenwick International Ltd v Others [2005] EWHC 399 (Comm) at [30] per Gloster J: “i) The claimant must show that “there [is] a clear, unequivocal, unambiguous and unconditional promise by the insurers th......
-
Brown (Adolph) v West Indies Alliance Insurance Company Ltd
...a real "prospect" of success is also to be distinguished from a real "likelihood" of success. Mrs. Justice Gloster in Fortisbank SA v. Trenwick International Ltd. [2005] E.W.H.C. 399, a case cited by W.I.A's Attorneys, at paragraph 24, expresses the requirements this way: "It is also common......