Allied Irish Banks Plc v AIG Euope Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 29 November 2018
• Neutral Citation: [2018] IEHC 677
• Court: High Court
• Docket Number: [2017 No. 2795 P.],[2017 No. 2795 P]
• Date: 29 November 2018

BETWEEN

ALLIED IRISH BANKS PLC

PLAINTIFF

AND

AIG EUROPE LIMITED, AIG EUROPE (UK) LIMITED, AIG EUROPE (SERVICES) LIMITED, CHUBB INSURANCE COMPANY OF EUROPE S.A., CHUBB INSURANCE COMPANY OF EUROPE S.E., LLOYD'S UNDERWRITERS SUBSCRIBING TO LLOYD'S POLICY NO. 509/QA469401, WURTTEMBERGISCHE VERSICHUNG A.G., ANTARES UNDERWRITINGS SERVICES LIMITED, ANTARES MANAGING AGENCY LIMITED, CNA INSURANCE COMPANY LIMITED, CNA INSURANCE, LLOYD'S SYNDICATE 1211, ALL MEMBERS OF LLOYD'S SYNDICATE 1211 FOR THE LLOYD'S 2001, 2002 AND 2003 YEARS OF ACCOUNT, LLOYD'S SYNDICATE 1411, ALL MEMBERS OF LLOYD'S SYNDICATE 1411 FOR THE LLOYD'S 2001, 2002 AND 2003 YEARS OF ACCOUNT, TRAVELLERS SYNDICATE MANAGEMENT LIMITED, ASHLEY PALMER LIMITED, TRAVELLERS INSURANCE COMPANY LIMITED, LLOYD'S SYNDICATE 1218, ALL MEMBERS OF LLOYD'S SYNDICATE 1218 FOR THE LLOYD'S 2001, 2002 AND 2003 YEARS OF ACCOUNT, NEWLINE UNDERWRITING MANAGEMENT LIMITED, NEWLINE CORPORATE NAME LIMITED, LLOYD'S SYNDICATE 1400, ALL MEMBERS OF LLOYD'S SYNDICATE 1400 FOR THE LLOYD'S 2001, 2002, 2003 YEARS OF ACCOUNT, MARKET SYNDICATE MANAGEMENT LIMITED, LLOYD'S SYNDICATE 1221, ALL MEMBERS OF LLOYD'S SYNDICATE 1211 FOR THE LLOYD'S 2001, 2002, 2003 YEARS OF ACCOUNT, NAVIGATORS UNDERWRITING AGENCY LIMITED, LIBERTY MUTUAL INSURANCE COMPANY (UK) LIMITED

AND

LIBERTY MUTUAL INSURANCE EUROPE LIMITED

DEFENDANTS

[2018] IEHC 677

[2017 No. 2795 P.]

THE HIGH COURT

COMMERCIAL

Particulars – Defence – Traverse – Plaintiff seeking further particulars arising out of the defence delivered on behalf of the defendants – Whether the defendants were obliged to set out the material facts on which they relied in support of their defence

Facts: The plaintiff, Allied Irish Banks Plc, applied to the High Court seeking further particulars arising out of the defence delivered on behalf of the defendants. The application was brought prior to delivery of the plaintiff’s reply to the defence. The plaintiff contended that the defendants were obliged to set out the material facts on which they relied in support of their defence. The position of the defendants was that their defence comprised, in substance, a denial of the claim asserted by the plaintiff and that it would be inappropriate to direct them to furnish particulars of a traverse. This contention was advanced against a background where the defendants said that the burden of proof in this case lies on the plaintiff and where, in any event, the defendants had no knowledge of the events giving rise to the claim advanced by the plaintiff (whereas they said that the plaintiff had spent many years investigating the underlying facts in significant detail). The defendants also said that the particulars sought were not necessary to enable the plaintiff to plead to the defence. In response, the plaintiff made the case that the defence did, in fact, make positive assertions which entitled the plaintiff to raise particulars. In addition, the plaintiff contended that, in commercial proceedings, a party is not entitled to simply traverse the plaintiff’s claim and that, accordingly, even if it could be said that the defence was no more than a traverse, the defendants were not entitled to rely on the well-established principle that the court will not order particulars of a denial. The claim of the plaintiff related to a policy of insurance issued by the predecessors of the defendants on 10th May, 2002. The plaintiff contended that it was entitled to be indemnified by the defendants under the policy in respect of the fraudulent activity of Mr Rusnak, a former employee of AllFirst, a subsidiary company of the plaintiff in the United States.

Held by McDonald J that he would make an order requiring the defendants to furnish the particulars sought in para. 8.4 of the notice for particulars dated 5 March 2018; the particulars to be furnished must include the further particulars sought at paras. 8.4.1-8.4.4 of the Rejoinders dated 23 April 2018. McDonald J held that the order would also record the confirmation given by counsel for the defendants in the course of the hearing on 3 October 2018 that no plea was made against the plaintiff in para. 8 of the defence. Save to that extent, McDonald J refused the relief sought in the plaintiff’s notice of motion dated 13 June 2018.

McDonald J held that this judgment was intended to apply not only to the above entitled proceedings but also the related proceedings record numbers 2014 no 2794p, 2017 no 2796p and 2017 no 2797p in which identical issues arose.

Relief refused in part.

JUDGMENT of Mr. Justice Denis McDonald delivered on the 29th day of November, 2018

1 This is an application in which the plaintiff seeks further particulars arising out of the defence delivered on behalf of the defendants. The application is brought prior to delivery of the plaintiff's reply to the defence. In broad terms, the plaintiff contends that the defendant is obliged to set out the material facts on which it relies in support of its defence. Again, in very broad terms, the position of the defendants is that their defence comprises, in substance, a denial of the claim asserted by the plaintiff and that it would be inappropriate to direct them to furnish particulars of a traverse. This contention of the part of the defendants is advanced against a background where the defendants say that the burden of proof in this case lies on the plaintiff and where, in any event, the defendants have no knowledge of the events giving rise to the claim advanced by the plaintiff (whereas they say that the plaintiff has spent many years investigating the underlying facts in significant detail). The defendants also say that the particulars sought are not necessary to enable the plaintiff to plead to the defence.

2 In response, the plaintiff makes the case that the defence does, in fact, make positive assertions which entitle the plaintiff to raise particulars. In addition, the plaintiff contends that, in commercial proceedings, a party is not entitled to simply traverse the plaintiff's claim and that, accordingly, even if it could be said that the defence is no more than a traverse, the defendants are not entitled to rely on the well-established principle that the court will not order particulars of a denial.

Background

3 The claim of the plaintiff relates to a policy of insurance issued by the predecessors of the defendant on 10th May, 2002. The plaintiff contends that it is entitled to be indemnified by the defendants under the policy in respect of the fraudulent activity of Mr. John Rusnak, a former employee of AllFirst, a subsidiary company of the plaintiff in the United States. Mr. Rusnak was a proprietary currency/foreign exchange trader at AllFirst who was hired in July 1993. According to the statement of claim, from a date in the 1990s Mr. Rusnak was engaged in a fraudulent scheme which involved carrying on unauthorised foreign exchange trading; concealing the significant losses which that trading engendered thereby preserving his employment with AllFirst and enabling him to continue to make financial gains from his position. It is alleged that Mr. Rusnak entered into transactions which involved the manipulation of trading risk limits to allow him to engage in trading far beyond his authorised limits and that these dishonest activities caused very significant loss and damage to AllFirst and to the AIB Group generally. The case made by the plaintiff is that these losses are insured (subject to the limits of cover) under Clause 1 of s. 1 of the Policy of Insurance.

4 The plaintiff says that the fraudulent activities of Mr. Rusnak did not come to its attention until 2002. The plaintiff says that the defendants were notified of the loss in accordance with the policies at that time. Subsequently, the plaintiff submitted an initial proof of loss in early February 2003. Thereafter, in December 2003 the plaintiff and the defendants agreed to a standstill arrangement in order to permit proceedings to be brought in the United States by the plaintiff against two of Mr. Rusnak's principal counterparties, Bank of America and CitiBank.

5 In the United States proceedings, the plaintiff sought to recover damages for fraud and fraudulent concealment, aiding and abetting the fraud and also aiding and abetting Mr. Rusnak's breach of fiduciary duty. Ultimately a settlement was reached in the US proceedings with Bank of America in January 2012 and afterwards a resolution was reached with CitiBank on 7th January, 2016. From the papers before the court it appears that the plaintiff has spent a considerable amount of the settlement on its costs in the US proceedings. It is clear that the settlement did not generate full compensation for the plaintiff in respect of the losses sustained as a consequence of Mr. Rusnak's activities.

6 Following the settlement, proof of loss was submitted to insurers in July and August 2016. The proof of loss was not placed before the court during the course of the present application. However, my understanding is that in the proof of loss, the plaintiffs maintained that the losses fell within para. 1 of Clause 1 of s. 1 of the policy. I also understand that the plaintiffs argued that the losses did not fall within para. 2 of the same clause (albeit that they also advanced an alternative argument that, even if the losses did not fall within para.1, they are nonetheless covered under para.2).

7 By letter of 30th November, 2016, the defendants declined cover under the policy. In these proceedings, the plaintiff alleges that the declinature of cover was wrongful and in breach of the policy.

8 It is unnecessary in this judgment to set out the full terms of the letter of 30th November, 2016 (which was made available to the court). It is sufficient to record that, in that letter, the defendants rejected the contention that the claim fell within para. 1 of Clause 1 of the policy. Para. 1 of Clause 1...