Two teams of 7KBW barristers appeared in this Commercial Court litigation. Following a 5-week trial in autumn 2020, Mr Justice Jacobs has handed down a 263-page judgment which provides illuminating guidance in relation to numerous areas of the law of insurance and professional negligence.
The case concerned losses of £35 million suffered by the Bank when two of its customers, Transmar and Euromar, defaulted under a series of “repo” financing deals over cocoa and cocoa products. Senior executives of both Transmar and Euromar were convicted and imprisoned in the US for fraud. Following their defaults the Bank was left holding large quantities of cocoa worth only a fraction of the loan repayments due. The Bank claimed an indemnity for the shortfall under an “all risks” policy of marine cargo insurance placed with 14 Cargo Underwriters in the London market by Edge Brokers.
The Bank relied on a bespoke clause in the policy (“the Transaction Premium clause”) which provided that the Bank was covered for amounts “that the Insured would otherwise have received and/or earned in the absence of a Default” by a customer. The Bank and Edge contended that the effect of this clause was to add a form of credit risk / financial default insurance to the cargo policy. By contrast, Underwriters argued that they would never have agreed to underwrite credit risks, and that the clause was only concerned with the basis of valuation in circumstances where the insured goods were affected by physical loss or damage (PLOD); they also argued that the policy had been induced by misrepresentation or non-disclosure, and purported to have avoided it by an amendment to their Defence.
The Bank and Edge were successful in the vast majority of the issues in dispute. Mr Justice Jacobs accepted their submissions on the meaning and effect of the Transaction Premium clause, and entirely rejected the Underwriters’ attempts to avoid the policy. His detailed judgment clarifies and elucidates many areas of law and will be required reading for insurance practitioners.
Particularly worthy of note are the passages in the judgment concerning:
The Bank was represented by Rebecca Sabben-Clare QC, Benjamin Parker, and Julia Gibbon of 7KBW, who were instructed by Margaret Campbell and Laura-May Scott of Reed Smith.
Edge were represented by Siobán Healy QC and Harry Wright of 7KBW, who were instructed by Tim Bull and Matthew Wood of RPC.
A copy of the judgment is available here.