Proof of fraud

US Trading Ltd v Axa Insurance Co Ltd, 17 March 2008, a decision of HHJ Simon Brown QC in the Birmingham District Mercantile Court, involved allegations by the insurers that the assured had made false statements to the insurers while making claims, attempting to disguise a breach of warranty (ie, the class of fraud which consists of suppressing a known defence). As a result of the insurers’ suspicions, they refused to make payment: the assured was unable to restart its business and subsequently went into liquidation. There was also an issue as to whether the warranty, in respect of which the false statements had been allegedly made, had ever been incorporated into the policy. The editor is grateful to Ben Elkington of 4 New Square for bringing this case to his attention.

US Trading: the facts

The claimant, US Trading, was the assignee of Brandhouse Marketing, a food processing company that had gone into liquidation in January 2002. The relevant events all concerned Brandhouse, which had obtained an insurance policy from Axa’s predecessors in title, Guardian Insurance, on its premises in the West Midlands. Brandhouse was managed by KS, and his two sons – SS and PS – were directors. The policy contained a fraudulent claims clause in more or less standard form:‘ If a claim is fraudulent in any respect or if fraudulent means are used by the Insured or by anyone acting on their behalf to obtain any benefit under this Policy … all benefit under the Policy shall be forfeited. ’