ABN Amro Bank N.V. v Royal & Sun Alliance Insurance Plc & Ors.

Clear insurance wording which confirms cover for a transaction premium following a client default is not confined to physical loss or damage merely because it appears in a marine cargo policy. The factual matrix may require clear words for unusual cover, but cannot override words that clearly provide it.

A non-avoidance clause which prevents an underwriter from rejecting a claim on the ground of non-fraudulent misrepresentation also bars an estoppel defence founded on that same misrepresentation. The clause applies according to its terms even if the defence is framed as estoppel by convention or estoppel by representation.

ABN Amro financed commodity transactions in which its clients were to repurchase cocoa goods at a pre-agreed price. Following default and sale of goods of poor quality, ABN Amro claimed under a transaction premium clause in a marine cargo and storage policy.

Jacobs J held that the clause covered ABN Amro’s financial loss. He held that two following underwriters, Ark and Advent, could rely on estoppel by convention arising from their broker’s representation that the renewal was “as expiry”. Edge, the broker, was consequently liable for their shares of the indemnity.

The underwriters appealed on construction of the transaction premium clause. Edge appealed the estoppel finding. The central issues were whether the clause required physical loss or damage, and whether the non-avoidance clause barred the estoppel defences.

1. The Appellant Underwriters’ appeal was dismissed. The transaction premium clause was clear wording of cover, not merely a basis of valuation applicable after physical loss or damage. Its defined concepts of transaction, default and transaction premium were independent of physical loss and damage. Although the marine-market context made clear wording necessary for this unusual financial-default cover, the clause supplied that clarity. The policy’s other non-physical-loss add-ons and the clause’s separate appearance in section 4 reinforced that conclusion. Sections 1, 3, 5 and 26 of the Marine Insurance Act 1906 could not override the parties’ clear agreement.

2. Edge’s appeal was allowed. Ark and Advent founded both estoppel by convention and estoppel by representation on the non-fraudulent “as expiry” representations. The non-avoidance clause prevented underwriters from rejecting a claim for loss on the grounds of non-fraudulent misrepresentation. On its strict but clear construction, that prohibition extended to an estoppel defence deployed to reject ABN Amro’s claim. The judge had overlooked the clause’s separate prohibition on rejecting a claim, rather than merely avoiding or repudiating the policy.

3. The court additionally held that estoppel by convention based on acquiescence requires subjective agreement. A party cannot acquiesce in another’s assumption without knowing it. Here Edge and the two underwriters were at cross-purposes. That point did not determine the result because estoppel by representation was also advanced and, in either form, the estoppel was barred by the non-avoidance clause.

4. The court approved the agreed order dismissing the first appeal, notwithstanding its post-hearing compromise, and would in any event have dismissed it. The effect of allowing Edge’s appeal was to displace the estoppel finding in favour of Ark and Advent.

• Court of Appeal (Civil Division): In [2021] EWCA Civ 1789, the court dismissed the Appellant Underwriters’ appeal on construction of the transaction premium clause and allowed Edge’s appeal against the estoppel finding for Ark and Advent.
• High Court, Commercial Court: Jacobs J held that the transaction premium clause covered ABN Amro’s financial loss. He held that Ark and Advent could rely on estoppel by convention and that Edge was liable to ABN Amro for their shares of the indemnity.