Greensill Capital Pty Ltd & Ors v BCC Trade Credit Pty Ltd & Ors

1. [1]

   These proceedings were commenced after hours on 1 March 2021, before me as Commercial List Duty Judge.

2. [2]

   The plaintiffs, Greensill Capital Pty Ltd (a corporation registered in Queensland), Greensill Capital (UK) Limited (a United Kingdom corporation) and Greensill Bank AG (a German corporation) (together, “Greensill”), sought an interlocutory mandatory injunction requiring the third defendant, Insurance Australia Limited (“IAL”) to provide cover under two trade credit insurance policies (“the Policies”) which expired at midnight last night.

3. [3]

   I refused to grant the injunctions. These are my reasons.

4. [4]

   Greensill’s business involves the provision of working capital facilities to clients. Under those arrangements, Greensill acquires accounts receivable from the clients, to be repaid when the clients collect maturity payments from its account debtor customers under the accounts receivable, and pays those collections to Greensill.

5. [5]

   The Policies provide cover to Greensill, and to its funding partners, against non-payment by the account debtors and Greensill’s clients.

6. [6]

   The cover provided to Greensill is in the order of US$4.6 billion, in respect of some 40 clients.

7. [7]

   It was not disputed that the Policies did not provide for automatic renewal.

8. [8]

   Submissions focused on cl 4.2 of the Policies, which provided:

9. [9]

   On 2 July 2020, a representative of the Second Defendant, Tokio Marine Management (Australasia) Pty Ltd (“Tokio”) (evidently the agent that wrote the Policies), wrote to Greensill’s insurance brokers, Marsh Limited, asserting that a named person had “no authority to bind risk” on IAL and that:

10. [10]

    On 29 July 2020, Tokio wrote to Marsh:

11. [11]

    On 4 August 2020, Tokio wrote to Greensill, reserving underwriters’ rights and repeating that investigations were ongoing in relation to the authority of the named person to bind risk.

12. [12]

    On 1 September 2020, Tokio wrote to each of the Greensill companies referring to the investigation into the named person’s authority to write cover and concluded:

13. [13]

    Greensill’s solicitor, Mr Narburgh, deposed that:

14. [14]

    There was no evidence before me as to when those communications took place, although Dr Higgins SC, who appeared with Mr Hochroth for Greensill, informed me that the discussions had taken place since September 2020.

15. [15]

    Mr Narburgh also deposed that:

16. [16]

    The only communication from Greensill to BCC, Tokio or IAL, in evidence before me, was dated 27 February 2021: last Saturday. Mr Hyde, who appeared for IAL, informed me that that letter was sent at around 11.25pm that day.

17. [17]

    In the 27 February 2021 letter, Greensill referred to Tokio’s letter of 1 September 2020, and stated:

18. [18]

    The letter referred to cl 4.2 of the Policies [2] and continued:

19. [19]

    The 27 February 2021 letter raises, evidently for the first time, an argument that Tokio’s letter of 1 September 2020 was not an effective notice under cl 4.2 of the Policies because, having regard to the notice provisions in the Policies, it was not sent “180 days prior to the end of the Policy Period”; but was, rather, a day or two short.

20. [20]

    Mr Narburgh deposed:

21. [21]

    That suggests that, prior to 25 February 2021, Greensill was not aware of any basis on which to impugn the 1 September 2020 notice and understood the Policies would duly expire on 1 March 2021.

22. [22]

    I was notified of Greensill’s proposed application at around 4.15pm yesterday.

23. [23]

    The application was called on for hearing at around 5.00pm. The hearing continued until around 7.00pm.

Serious question to be tried

1. [24]

   Greensill’s case is that, for the reasons set out at [19] above, the insurer did not provide notice under cl 4.2 of the Policies “at least 180 days prior to the end of the Policy Period” and that, accordingly, the first sentence of cl 4.2 of the Policies was not enlivened.

2. [25]

   Greensill’s submissions then focused on the second sentence of cl 4.2.

3. [26]

   Greensill’s argument was that:

   1. (1)

      as the insurer did not give the requisite 180 days’ notice referred to in the first sentence of cl 4.2; and

   2. (2)

      Greensill had, by its letter of 27 February 2021, requested renewal terms as anticipated in the second sentence of cl 4.2; and

   3. (3)

      on the proper construction of the second sentence of cl 4.2, the insurer was thereupon obliged “to provide such renewal terms to [Greensill] promptly after receipt of such request” [3] and “must provide a renewal of each policy on the same terms” and for a “reasonable period” [4] .

4. [27]

   Greensill’s submission was thus that, absent a notice of the kind referred to in the first sentence of cl 4.2, and upon request for renewal terms, the effect of the second sentence was to impose on the Insurers an obligation to renew cover.

5. [28]

   This did not seem to me to be what the second sentence of cl 4.2 says. Rather, it appears only to impose upon the insurer an obligation, if so requested by Greensill, to “provide renewal terms”; that is, to indicate upon what terms it would be prepared to renew cover; as opposed to actually providing such cover. That appears to be recognised in the form of the declaration sought in the Summons; as opposed to Counsels’ more nuanced submission.

6. [29]

   However, for purposes of dealing with Greensill’s interlocutory application, I was prepared to assume that the point was at least arguable, although I do not see the argument as being strong.

Balance of convenience

1. [30]

   There are a number of factors at play concerning the balance of convenience.

2. [31]

   The first, and the one that Dr Higgins emphasised, was the extremely serious, Dr Higgins said “catastrophic”, consequences for Greensill were the Policies not to be renewed.

3. [32]

   Dr Higgins and Mr Hochroth summarised the effect of the evidence in their submissions as follows:

4. [33]

   There is also evidence that Greensill, through its broker Marsh, has endeavoured to find alternative cover to the Policies, but without success.

5. [34]

   These matters obviously weighed heavily in the balance of convenience.

6. [35]

   On the other hand, consequences for IAL, the defendant against whom the interlocutory relief was sought, of being required to provide cover, even for a short time, were also potentially very serious.

7. [36]

   During argument I suggested that the inference would be open, on the evidence, that IAL has since 1 September 2020, been conducting itself upon the basis that that the Policies expired at midnight last night, and in those circumstances, would not have effected reinsurance cover beyond then.

8. [37]

   Mr Hyde informed me that his instructions were that, in fact, IAL has not effected reinsurance cover beyond midnight last night and offered to call a witness to prove that fact. Very properly, Dr Higgins accepted that this would not be necessary and accepted that the inference was open on the evidence that IAL had not effected reinsurance; and that Greensill was not in a position to rebut that inference.

9. [38]

   Thus, the potential prejudice for IAL is to be exposed to claims, potentially in very large amounts, for which it has no reinsurance cover.

10. [39]

    The other factor which, to my mind, weighed in the balance of convenience, was that despite the fact that the underwriters’ position was made clear eight months ago, apparently Greensill only sought legal advice about its position in London last Thursday, 25 February 2021, and in Sydney last Friday, 26 February 2021.

11. [40]

    It is true that the evidence reveals that there have been without prejudice discussions in the meantime. But the evidence does not reveal when and how often those discussions took place (evidence which could have been revealed, notwithstanding the without prejudice nature of whatever was said).

12. [41]

    Further, as I have said, Mr Narburgh’s evidence at [20] above suggests that, until “around 25 February 2021”, Greensill understood that the 1 September 2020 notice was valid and therefore had until then, understood that their policies would expire on 1 March 2021.

13. [42]

    Nonetheless, relief was only sought within hours of cover expiring.

14. [43]

    I found Greensill’s delay in bringing the matter to Court, when it has known of the underwriters’ position since the middle of last year, and by 1 September 2020 at the very latest, to be a factor weighing against granting interlocutory relief.

15. [44]

    In those circumstances, I was not persuaded that I should grant the interlocutory relief sought.