HT-2022-000022 - [2025] EWHC 2011 (TCC)

Fecha: 31-Jul-2025

The ATE Policy

Fraud

The principal issue of substance dividing the parties was how the policy dealt with the potential avoidance for fraud. Following a review of the relevant authorities, it was previously held that “by reason of the generality of wording, there is (at a minimum) a realistic risk of the insurer properly arguing that as a matter of construction it would be under no liability in the case of fraud by the Claimant (or its principal or agents) in placing the policy, whether or not the insurance was placed in the name of the Claimant or the litigation funder.”

The original terms of the AAE did not include any specific reference to honouring the policy irrespective of fraud at clause 3(b), set out at paragraph 18 of the previous judgment. In response to the determination above, Lloyds proposed a policy in which the Insurer confirmed that ‘any claim made against this Policy will be honoured in full irrespective of:

iii)

any fraud, dishonesty, deceit, duress, inducement or undue influence whatsoever by the Policyholder and/or the Claimant including, without limitation, in making or failing to make any representation or disclosure or giving or offering any bribe or benefit.’

Accor pointed out that no reference was made to ‘principals or agents’. This remained the case in all revisions up to a version served on the eve of the Second Hearing, following the service of skeleton arguments. Accor’s point went further: it considered that it was both appropriate and straight forward for Insurers to include an express wording reflecting the fact that fraud by any person would not provide a basis upon which Insurers could refuse to honour the policy.

The Defendant sought to rely upon HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6 in which Lord Bingham of Cornhill stated at [16]:

“For it is in my opinion plain beyond argument that if a party to a written contract seeks to exclude the ordinary consequences of fraudulent or dishonest misrepresentation or deceit by his agent, acting as such, inducing the making of the contract, such intention must be expressed in clear and unmistakable terms on the face of the contract. The decision of the House in Pearson v Dublin Corporation does at least make plain that general language will not be construed to relieve a principal of liability for the fraud of an agent: see in particular the speeches of Lord Loreburn LC at page 354, Lord Ashbourne at page 360 and Lord Atkinson at page 365. General words, however comprehensive the legal analyst might find them to be, will not serve: the language used must be such as will alert a commercial party to the extraordinary bargain he is invited to make.”

On the basis of this passage, Mr Blackett contended that the case law is clear that any exclusion of liability for fraud by one’s agent has to be set out in terms. This, as a proposition of law, is undoubtedly correct. Mr Webb KC relied upon the same passage however, to contend that Lord Bingham was concerned about a party avoiding for their own fraud (which would be ‘an extraordinary bargain’) and the wording provided (without reference to principals or agents) makes clear that the policy cannot be avoided even for the party’s own fraud. In other words, there is no lacuna requiring further wording because either the alleged fraud is one which can be attributed to the policyholder or claimant, in which case it is covered by the clause (each being bound by the acts of their principals or agents), or the alleged fraud is not one which can be attributed to the Policyholder of Claimant, in which case it does not need any special wording.

Whilst there is a logic to Mr Webb KC’s analysis from which one could conclude that the risk of the insurer successfully arguing that there was a basis to refuse cover was, at most, negligible, I consider that Accor’s position in relation to the express inclusion of ‘principals or agents’ was plainly justified, particularly in light of the express terms of my previous judgment. Insofar as Accor has maintained the need for yet wider wording covering, expressly, any fraud by any person, Mr Webb KC’s logic applies equally. Nevertheless,

(1)

the argument has to be set against the purpose intended to be fulfilled by the ATE policy: it is in lieu of a payment into court which, if ordered, provides Accor with zero uncertainty as to the risks attendant upon, or difficulty involved in, securing a payment out;

(2)

this is not a case in which (ultimately) an argument that an order to make a payment in would stifle a genuine claim was advanced by Lloyds. As such, security by way of ATE insurance was therefore, in the circumstances of this case, a preference rather than a necessity;

(3)

Mr Webb KC fell short of submitting that the wider wording sought by Accor meant, if ordered by the Court, that the insurer would refuse to incept the policy. Put another way, however fanciful the risk Mr Blackett posited, it was not suggested that dealing with that actual or perceived risk by adopting the language proposed by Accor would prevent, for some reason, Lloyds’ ability to provide security by way of ATE policy. There is no suggestion, for example, that the inclusion of Accor’s proposed wording is in any way prejudicial to insurers, by, for example, providing some rights to the ultimate beneficiary which are inappropriate or creating some other problematic infelicity of drafting.

10.

As such, it may well be that the concerns raised by Mr Blackett are unrealistic both factually and legally, but equally there is little rational basis for the exclusion of wording which puts the matter beyond doubt, even if that wording is, upon a strict analysis, unnecessary. I therefore conclude that it is appropriate that the policy expresses, in the clearest possible terms, namely those sought by Accor, the inability of insurers to refuse to honour the policy by reason of any sort of fraud. The wording of clause 3b as approved by the Court reads as follows:

“any fraud, dishonesty, deceit, duress, inducement or undue influence whatsoever by or affecting any person including, without limitation, in making or failing to make any representation or disclosure or giving or offering any bribe or benefit”.