Allied Irish Banks Plc v AIG Euope Ltd

Factual and Procedural Background

The Plaintiff initiated proceedings against multiple Defendants concerning an insurance policy issued on 10th May 2002. The Plaintiff claims entitlement to indemnification under the policy for losses arising from fraudulent activities by a former employee of the Plaintiff's subsidiary in the United States. This employee engaged in unauthorized foreign exchange trading and concealed significant losses, causing substantial damage to the Plaintiff's group.

The Plaintiff notified the Defendants of the loss in 2002 and submitted proofs of loss in 2003 and subsequently in 2016. The Defendants declined coverage by letter dated 30th November 2016, disputing that the losses fell within the relevant insuring clauses of the policy. The Plaintiff alleges wrongful declinature of cover in breach of the policy.

The Defendants' defence admits the policy and certain criminal convictions of the employee but denies knowledge of the detailed facts and disputes coverage under the policy. The Plaintiff sought further particulars of the defence, which the Defendants resisted, contending their defence is essentially a denial of the Plaintiff’s claim and that particulars of such denials are not required.

This application concerns the Plaintiff's request for further particulars arising from the Defendants' defence, brought before the Plaintiff's reply to the defence.

Legal Issues Presented

1. Whether the Defendants are obliged to provide further particulars of their defence when their pleading is, in substance, a denial or non-admission.
2. Whether the principle that particulars will not be ordered of a denial applies in the context of Commercial Court proceedings.
3. Whether the Defendants' reservation of rights under General Condition 11(ii) of the policy, without detailed pleading, is permissible.
4. Whether the Defendants must specify the precise parts of the Ludwig Report on which they rely.

Arguments of the Parties

Plaintiff's Arguments

• The Defendants' defence contains positive assertions entitling the Plaintiff to particulars.
• In commercial proceedings, a party cannot simply rely on a blanket traverse or denial.
• Particulars are necessary to enable the Plaintiff to properly plead to the defence and prepare for trial.
• The Defendants' reservation of rights under General Condition 11(ii) is impermissible without particulars and amounts to impermissible fishing for evidence.
• The Defendants must identify specific parts of the Ludwig Report relied upon to provide clarity and fairness in the proceedings.

Defendants' Arguments

• The defence is fundamentally a denial of the Plaintiff’s claims and thus no particulars are required.
• The burden of proof lies on the Plaintiff to establish coverage under the policy.
• The Defendants have no direct knowledge of the underlying facts and cannot be compelled to provide particulars of a traverse.
• The reservation of rights under General Condition 11(ii) is a legitimate procedural position given the current lack of evidence.
• The Defendants intend to rely on the Ludwig Report in its entirety and have provided some examples of control deficiencies identified therein.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court carefully examined the Plaintiff's application for further particulars against the backdrop of established principles governing particulars in pleadings, especially in the Commercial Court context. It acknowledged the well-established rule that particulars will not be ordered of a mere denial or traverse, as such denials put the opposing party on proof of the claim.

The Court recognized that while the Commercial Court demands focused pleadings and discourages blanket denials, this does not extinguish the right of a party to defend by denial where the burden of proof lies on the Plaintiff. The Court relied heavily on the rationale from Weinberger v. Inglis, which explains that a party is not obliged to provide particulars of a denial when the opposing party bears the onus of proof.

Applying these principles, the Court found that many paragraphs of the Defendants' defence, including para. 7, 23.3, 49.2, and 9.3 to 9.5, are, in substance, denials or traverses that place the burden on the Plaintiff to prove coverage under the policy. Accordingly, the Plaintiff is not entitled to particulars of these denials prior to trial.

Regarding para. 8 of the defence, which reserves the Defendants' rights under General Condition 11(ii) pending discovery, the Court found that this is not a positive plea but a reservation of rights. The Defendants cannot presently plead or particularise this case due to lack of evidence but may seek to amend the defence later if discovery reveals relevant facts. The Court declined to order particulars of this reservation at this stage.

Concerning the Defendants' reliance on the Ludwig Report without specifying the precise parts relied upon, the Court held that such a broad reference is inadequate. Given the report's length and detail, the Defendants must identify specific passages to enable the Plaintiff to properly plead and prepare for trial. This requirement aligns with the principle that pleadings must clearly define the issues.

On the issue of notification of loss (para. 16 of the defence), the Court noted conflicting authorities on the burden of proof but concluded that it is not necessary to resolve this at this stage. The Court declined to order particulars of the Defendants' non-admission of compliance with the notification condition.

Holding and Implications

The Court's final decision was to GRANT IN PART AND REFUSE IN PART the Plaintiff's application for further particulars.

The Defendants are ordered to provide particulars specifically identifying the precise aspects of the Ludwig Report on which they rely, including the further particulars sought in the Plaintiff's rejoinder. The Defendants confirmed that para. 8 of their defence does not currently constitute a positive plea against the Plaintiff.

All other requests for particulars relating to denials or traverses in the Defendants' defence are refused, consistent with the principle that particulars are not required of denials where the Plaintiff bears the burden of proof.

This decision clarifies the application of principles regarding particulars in Commercial Court proceedings, affirming that while blanket denials are discouraged, denials remain a valid defence where the burden of proof rests on the Plaintiff. It also reinforces that vague or broad reliance on lengthy documents without specification is insufficient and must be particularised.

The direct effect of this ruling is to limit the scope of particulars the Defendants must provide at this stage, while requiring specificity regarding reliance on the Ludwig Report. No new precedent is established beyond the application of existing principles to the facts before the Court.