Summary judgment applications dismissed by Commercial Court in LIBOR indemnity claim

Cases

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 QC and Zac Sammour acted for the successful claimants, instructed by Michelmores LLP.