The Commercial Court (Butcher J)
delivered judgment last week in Allen
& Conti v Rabobank [2020] EWHC 1902 (Comm). The Court dismissed applications
by the Defendant bank for summary judgment of claims brought by two former
employees for damages arising out of their prosecution in the United States in
connection with the LIBOR scandal.
The judgment, which can be found here, contains useful guidance on the scope of general releases entered into in compromise agreements reached following a redundancy and on the question whether an employer can owe a duty to indemnify its employee in respect of “special risks” undertaken by him in the course of his employment.
The claimants are former traders
who were involved in the submission of LIBOR rates on behalf of the Bank during
their employment. They were both made redundant in 2009 following the financial
crisis, and entered into compromise agreements which contained a general
release in materially identical terms which provided that the claimants agreed
to “full and final settlement of all
claims in all jurisdictions that [they] may have…now or in the future arising
out of or in connection with…the employee’s employment with any group company
or its termination in any other respect“.
Some years later, in 2014, the
claimants were indicted by the US Department of Justice on counts of conspiracy
to commit bank fraud and wire fraud in connection with their role in the Bank’s
LIBOR submission process. The claimants denied the counts, were convicted at
first instance but successfully overturned those convictions on appeal. The
claimants paid their own legal costs in those proceedings.
The claimants claim that the Bank
failed in its contractual and common law duty to indemnify them in respect of
their costs arising from the defence of those proceedings. They also claim that
the Bank breached its contractual and common law duties in respect of its training
and supervision of the LIBOR submission process.
The Bank sought summary judgment
on those claims on the basis that they were compromised by the general release
entered into by both claimants in their compromise agreements. It also sought
summary judgment of the claimant’s case that the Bank owed them a duty to
indemnify them in respect of any special risks incurred in the performance of
their duties, on the basis that the claimants had no real prospect of
establishing that the Bank owed them such a duty.
Butcher J rejected both limbs of
the Bank’s summary judgment application. He held that the claimants have a
realistic argument, in light of BCCI v Ali [2002] 1 AC 251, both (i) that the
general releases that they entered into extended only to claims within the
reasonable contemplation of the parties, and (ii) that claims arising from the
claimant’s conduct were not within such contemplation at the time the
compromise agreements were entered into. The factual matrix underpinning the
agreement, and in particular the Bank’s case that the claimants knew at the
time of the agreements that they had placed themselves and the Bank at risk of
regulatory and/or criminal investigation by reason of their conduct in respect
of LIBOR, could not be determined summarily.
On the “special risks
duty”, Butcher J held that the question whether the term fell to be
implied, or whether it arose as a common law duty of care, was not unarguable
but fell to be determined following an investigation of the facts at trial.
Richard Leiper KC and Zac Sammour
acted for the successful claimants, instructed by Michelmores LLP.
