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Court of Appeal judgment on construction and estoppel in ABN Amro v RSA

8th Dec 2021

ABN Amro Bank NV v Royal & Sun Alliance Insurance and others [2021] EWCA Civ 1789

The Court of Appeal has given judgment in two appeals against specific issues arising out of the decision of Mr Justice Jacobs in ABN Amro Bank NV v Royal & Sun Alliance Insurance and others [2021] EWHC 442 (Comm). A previous news release relating to that judgment, much of which was unchallenged on appeal, is available here. All of the parties involved in the appeal were represented by Members of 7KBW.

The first appeal concerned the construction of a term in a marine cargo insurance policy called the Transaction Premium Clause (TPC). All of the Insurers appealed against the Judge’s finding that the TPC provided credit risk/financial default insurance to the insured Bank. This appeal was opposed by the Bank and the broker (Edge). The Master of the Rolls held that the Judge’s approach to construction of the TPC had been sound and comprehensive [68] and would have dismissed the appeal on construction (had it not been settled shortly after the appeal hearing).

The second appeal concerned the Judge’s finding that the Bank was estopped by convention from relying upon the TPC against two of the 14 insurers, Ark and Advent. That finding was based upon a misrepresentation by Edge to two underwriters during renewal discussions that the renewal policy was “as expiry”. The broker believed that the TPC had been introduced to the insurance during the expiring year, so to him the renewal policy was indeed “as expiry”. However, Ark and Advent’s underwriters did not know that the TPC had been introduced during the expiring year, so they believed “as expiry” meant the policy was the same as when they last saw it – i.e. without the TPC. The parties were subjectively at cross purposes.

Mr Justice Jacobs had rejected an avoidance case based upon the “as expiry” misrepresentation, in part because the policy contained a Non-Avoidance Clause which prohibited avoidance save in a case of fraud. He nonetheless found that the “as expiry” representation created an estoppel by convention, because Edge acquiesced in the underwriters’ assumption that the policy was “as expiry”. Consequently, Edge was liable to the Bank for the shares of those two insurers.

Edge appealed against the estoppel finding on the basis (inter alia) that the Non-Avoidance Clause not only prohibited avoidance, but also the rejection of a claim on the grounds of any non-fraudulent misrepresentation. The finding of estoppel by convention was therefore prohibited under the policy. The Court of Appeal allowed the appeal on that basis (see [95]), which was also an answer to Ark and Advent’s case (in their respondent’s notice) on estoppel by representation.

The case is important in that it deals with estoppel by convention based on acquiescence, a topic seldom considered by the courts in the past (see [87]-[88]).

The Bank was represented by Rebecca Sabben-Clare QC and Benjamin Parker, who were instructed by Margaret Campbell and Laura-May Scott of Reed Smith.

The Insurers were represented by Peter MacDonald Eggers QC and Will Mitchell (of Quadrant Chambers), who were instructed by Chris Dunn, Craig Boyle-Smith and Freddie Mehlig of Kennedys.

Edge was represented by Siobán Healy QC and Harry Wright, who were instructed by Tim Bull, Matthew Wood and Elizabeth Singleton of RPC.

The Judgment of the Court of Appeal is available here.