Fountain Court Chambers

London & Singapore

Adam Zellick QC and David Murray defeat attempt to bring subrogated claims over PPI mis-selling losses

The Commercial Court has rejected an attempt by Genworth, the American insurer, to obtain declarations that it is entitled to bring subrogated claims against companies in the Santander group in order to try to pass on substantial liabilities in connection with PPI mis-selling losses.

The issue arose in the context of a claim by AXA, the French insurer, which had acquired from Genworth companies that underwrote PPI policies and which had significant liabilities arising out of historical PPI mis-selling.  The relevant policies had been marketed by companies which were not at the time but are now in the Santander group.  Under the terms of the contract between AXA and Genworth, Genworth was obliged to reimburse AXA in respect of the mis-selling losses incurred by the companies acquired by AXA.  AXA made demand on Genworth in respect of the losses incurred by those companies.  Genworth refused to pay, so AXA brought proceedings to recover under the contract.  Faced with AXA’s claim, Genworth raised a number of defences and also brought a counterclaim against the relevant Santander entities, by which it sought a declaration that, if it was found liable to pay AXA, it would be entitled to be subrogated to any potential claims that the relevant underwriting entities might have against Santander.

At a trial which took place in November 2019, the Commercial Court (Bryan J) had to resolve a number of points of principle (mainly issues of construction) which were relevant to the defences that Genworth had raised to AXA’s claim, and also the issue of whether payment by Genworth to AXA would give rise to rights of subrogation in favour of Genworth and if so what such rights entailed.  In a judgment handed down on 6 December 2019, Bryan J held that Genworth would not be entitled to subrogation rights against Santander following payment to AXA.  The Judge agreed with Santander’s submissions that the contract between AXA and Genworth was not a contract of indemnity capable of conferring rights of subrogation, and also that subrogation rights were in any event inconsistent with the express terms of the contract.  The judgment contains valuable discussions of the juridical basis of the subrogation doctrine, the circumstances in which subrogation rights may be impliedly excluded by the terms of a contract, and the nature and extent of the rights that a subrogated party may exercise against third parties.

Adam Zellick QC and David Murray acted for the Santander entities, instructed by Reed Smith LLP.

They also previously acted for Santander in striking out claims brought by Genworth seeking declaratory relief against Santander (judgment of 1 November 2018).