Travelers Insurance Company Ltd & Anor v Advani

In civil proceedings alleging dishonesty, the standard remains the balance of probabilities. Because dishonesty may be inherently unlikely, the evidence must be sufficiently cogent to overcome that improbability. A claimant seeking reimbursement of defence costs under an insurance policy may establish the relevant coverage dispute within the reimbursement proceedings themselves. Where the insured’s dishonest conduct is closely related to the employer’s business, it may breach an express contractual obligation to act honestly even if it falls outside the course of employment. A claimant need not prove every detail of the alleged conduct if the evidence establishes the insured’s knowledge of, and involvement in, the dishonest transaction.

The claimants were Travelers Insurance Company Limited, the insurer of Denton Wilde Sapte, and the firm itself. The defendant, Gauri Advani, had been employed by the firm and had become involved in a proposed Air India general sales agency transaction. In earlier proceedings brought by the prospective agency applicants, Hamblen J found that she had acted as a deal broker in a transaction involving money intended as a bribe, although the claim against the firm and Ms Advani failed on illegality grounds.

Travelers sought reimbursement of defence costs paid for Ms Advani under the policy. Denton Wilde Sapte claimed damages for breach of her contractual duty to act honestly. The central issues were whether Ms Advani had knowingly participated in the payment of a bribe, whether the policy permitted reimbursement, and whether her conduct breached her employment contract.

1. Dishonesty. The allegations were serious, but the applicable standard remained the balance of probabilities. The court applied the requirement for cogent evidence where the alleged conduct was inherently unlikely, citing [1996] AC 563. The documentary evidence, telephone records, correspondence, concealment from the firm and Ms Advani’s evidence established her involvement.
2. It was unnecessary to decide whether Ms Advani had acted in every respect exactly as found in the earlier proceedings. It was sufficient to establish that she knew the money was to be paid as a bribe and was involved in the discussions leading to payment. The court found that she acted as the intermediary between the prospective agency applicants and Mr Yadav and arranged for the bribe to be paid.
3. Insurance reimbursement. Clause 7.10 of the policy required reimbursement after resolution of a coverage dispute of sums paid which the insurer was not ultimately liable to pay. The coverage dispute was defined by the pleadings in the present action and was resolved in Travelers’ favour. Travelers was therefore entitled to reimbursement of £501,398.71.
4. Employer’s claim. Ms Advani’s contract required her to act honestly. That obligation extended to conduct closely related to the firm’s business, even though the dishonest conduct was outside the course of her employment. Her dishonesty caused the firm to become involved in the earlier proceedings, which was wholly foreseeable. Denton Wilde Sapte therefore recovered the agreed sum of £87,075.29.

• Court of Appeal: Permission to appeal the earlier judgment was granted, but an application by Ms Advani to adduce further evidence and obtain a fresh trial was refused. The appeal did not proceed.
• High Court (Queen’s Bench Division): The present claims succeeded.