XL Insurance Company SE v IPORS Underwriting Limited & Ors.

The Parties

The Claimant in this action is the insurance company XL Insurance Company SE (“XL”). XL underwrites various types of insurance business, including property insurance in both the United Kingdom and the Republic of Ireland.

The First Defendant was incorporated on 13 October 2011 and was originally known as IPORS Real Estate Limited. It is now known as IPORS Underwriting Limited (“IPORS”). It carries (or at least it carried) on business as a coverholder, underwriting business for a number of years as agent for XL.

The Second Defendant, Paul Corcoran (“Mr Corcoran”), was and remains IPORS’ sole director and shareholder. He was and is also the sole director and shareholder of the Third Defendant, Cheshire Prestigious Cars Limited (“CPC”), a company incorporated on 25 June 2016.

The Fourth Defendant is Her Majesty’s Revenue and Customs (“HMRC”). The Fifth and Sixth Defendants are Tracey Louise Deakin and Margaret Davies, respectively Mr Corcoran’s ex-wife and former mother-in-law. The Fourth to Sixth Defendants took no part in the trial before me, which proceeded only in relation to the claims made against the First to Third Defendants.

The Binding Authority Agreements

On 26 March 2012 XL entered into the first of a number of binding authority agreements with IPORS (the “Binders”) under the terms of which XL authorised IPORS to bind insurance, to issue documents and to receive premiums on its behalf in relation to property insurance risks in the United Kingdom and the Republic of Ireland.

The first Binder was in force for the period from 26 March 2012 to 31 March 2013 (“the 2012 Binder”). Subsequent Binders were in force for the following periods:

Each Binder comprised a standard form wording and a schedule, cross-referenced to the wording, which contained details specific to the agreement between XL and IPORS. In the case of some of the Binders there were also appendices or endorsements. Each Binder also included pages dealing with broker remuneration and other administrative details which are irrelevant to the matters that I have to decide.

The terms of the wordings changed slightly over time, although the substance of the provisions remained essentially the same. The wordings imposed obligations upon IPORS in relation to bordereaux, accounts and settlements; there were also provisions that obliged IPORS to hold premiums and other funds received on behalf of XL in a fiduciary capacity in separate bank accounts.

The 2012 Binder, for example, provided in sections 4, 24, 25 and 32 as follows:

“SECTION 4

GRANT OF AUTHORITY

4.1

The Insurers hereby authorise the Coverholder to:-

4.1.1

bind insurances and amendments thereto for the Insurers’ account;

4.1.2

act as the Insurers’ agent in accordance with Section 27 for the purpose of receiving premiums from insureds, settling refunds and receiving claims monies prior to onward transmission to insureds;

…

4.4

In respect of every insurance bound under the Agreement, the Coverholder shall:-

4.4.1

issue contract documentation, endorsements or such other documents evidencing cover as may be agreed in writing by the Insurers;

4.4.2

collect and process premiums and return premiums on the Insurers’ behalf promptly or where applicable in accordance with such terms as agreed with the Insurers;

…

SECTION 24

BORDEREAUX, ACCOUNTS AND SETTLEMENTS

24.1

All premiums, paid claims, outstanding claims and expenses relating to insurances bound shall be allocated and declared to the Agreement;

24.2

The Coverholder shall prepare premium bordereaux at the interval stated in the Schedule until every insurance bound has expired or has otherwise been cancelled or terminated;

…

24.4

The Coverholder shall produce premium bordereaux and, if due from the Coverholder, claims bordereaux in a format(s) agreed in advance by the Underwriters;

24.5

All bordereaux due from the Coverholder shall be sent to the London Broker within the number of days of the end of such bordereaux interval(s), as stated in the Schedule. In the event of there being no activity during a particular bordereau interval, the Coverholder shall advise the London Broker accordingly within the number of days of the end of such bordereaux interval(s) as stated in the Schedule;

…

24.7

Settlements shall be remitted via the London Broker within the maximum number of days of the end of each such bordereaux interval(s) as stated in the Schedule;

24.8

Any fees or charges that are agreed to be reimbursed by the Underwriters to the Coverholder as a deduction from the premium shall be deducted from the premium bordereaux. Such deductions are as stated in the Schedule.

SECTION 25

COMMISSION(S)

25.1

The Coverholder’s Commission shall be as stated in the Schedule;

25.2

Contingent or Profit Commission shall be as stated in the Schedule.

…

SECTION 32

SEPARATE BANK ACCOUNTS

All monies received by the Coverholder, from or on behalf of the Underwriters, shall be received by the Coverholder in a fiduciary capacity on behalf of the Underwriters and shall be:-

32.1

deposited immediately into an account separate from the Coverholder’s general or operating account for onward transmission for the purposes set out in 32.3 and shall not be otherwise held or retained;

32.2

identified in the Coverholder’s book of account, separately from other funds similarly held by the Coverholder for other insurers;

32.3

used solely for the purpose of settling accounts with the Underwriters or the payment of the commissions, premium refunds, claims or any other transaction authorised by the Underwriters.”

The equivalent provisions in the 2016 Binder were contained in sections 4, 16, 24 and 27 (as amended by Appendix D):

“SECTION 4

GRANT OF AUTHORITY

4.1

The Insurers hereby authorise the Coverholder to:-

4.1.1

bind insurances and amendments thereto for the Insurers’ account;

4.1.2

act as the Insurers’ agent in accordance with Section 27 for the purpose of receiving premiums from insureds, settling refunds and receiving claims monies prior to onward transmission to insureds;

…

4.4

In respect of every insurance bound under the Agreement, the Coverholder shall:-

4.2.1

issue contract documentation, endorsements or such other documents evidencing cover as may be agreed in writing by the Insurers;

4.2.2

collect and process premiums and return premiums on the Insurers’ behalf promptly or where applicable in accordance with such terms as agreed with the Insurers;

…

SECTION 16

COMMISSION(S)

16.1

The Coverholder’s Commission shall be as stated in 16.1 of the Schedule;

16.2

Any Profit Commission shall be calculated in accordance with the formula as stated in 16.2 of the Schedule.

…

SECTION 24

ACCOUNTING BORDEREAU(X)/REPORTING AND SETTLEMENTS

24.1

All premiums, paid claims, outstanding claims and expenses relating to insurances bound shall be allocated and declared to the Agreement;

24.2

The Coverholder shall report the paid premiums to the Insurers by:

24.2.1

preparing premium bordereaux in a manner or format(s) agreed by the Insurers; or

24.2.2

making the accounting information available to Insurers in an alternative manner agreed in advance by the Insurers;

The accounting information shall be reported at the interval stated in 24.2 of the Schedule until every insurance bound has expired or has otherwise been cancelled or terminated;

…

24.4

All paid premium and, if applicable, claims information due from the Coverholder shall be sent, or made available, to the Insurers within the number of days of the end of each reporting interval as stated in 24.4 of the Schedule;

24.5

The Coverholder shall produce and send, or make available, to the Insurers a summary account showing:

24.5.1

the paid premium declared for the period in question, gross and net of commission, taxes and any other deductions; and

…

24.6

Settlements shall be remitted to the Insurers within the maximum number of days of the end of each reporting interval as stated in 24.6 of the Schedule;

24.7

Any fees or charges that are agreed to be reimbursed by the Insurers to the Coverholder as a deduction from the premium are as stated in 24.7 of the Schedule and shall be shown as part of the paid premium reporting.

…

SECTION 27

SEPARATE BANK ACCOUNTS

All monies received by the Coverholder under this Agreement, in respect of premium from insureds, reinsureds or their brokers or from the Underwriters in respect of claims and premium refunds shall be deemed to be received by the Coverholder on behalf of and at the risk of the Underwriters and:

27.1

shall be received by the Coverholder as assets of the Insurers and

27.2

shall on receipt be deposited immediately into a bank account held by the Coverholder on the statutory trust or the non-statutory trust in accordance with CASS 5.3 or CASS 5.4 respectively of the FCA’s Client Assets Sourcebook for the purposes there set out and on the basis that the Insurers are to be treated by the Coverholder as its clients for purposes of CASS 5.3 to CASS 5.6 and that their interests under the trusts in CASS 5.3.2 R or CASS 5.4.7 R are to be subordinated to the Coverholder’s clients who are not insurance undertakings;

27.3

This Section provides authority from the Insurers for the Coverholder to retain for its own use and benefit any interest which shall accrue, in accordance with the terms of the Agreement, to the account described in 27.2 above.”

The terms of the 2013, 2014 and 2015 Binders were, insofar as material, similar to those of the 2012 and/or 2016 Binders.

The schedules to the Binders required IPORS to send monthly premium bordereaux either to the brokers or to XL within 15 days after the end of each month. As apparent from section 24.1 of the 2016 Binder, IPORS was expressly required to allocate and declare all premiums relating to insurance bound to the Binders. The period allowed for settlement varied across the Binders with sums due to XL to be paid within 30 days, 60 days or sometimes 90 days of the end of the month.

IPORS was required to account to XL for premiums net of commission. This was to be agreed on each declaration but, depending on the particular Binder, was not to exceed 35% or 37.5% of gross premium, including brokerage payable to the placing broker which would be deducted at source. Brokerage was, on average, 17.5%; thus, from the premium received by IPORS it was entitled to deduct its own commission of between 17.5% and 20% before remitting the balance to XL.

The Dispute

The dispute between the parties first arose in the middle of 2016 and concerned the operation of the 2016 Binder.

As explained by Neel Robb, an Associate General Counsel employed by XL Catlin Services SE (“XLCSE”), in his First Affidavit, during the first half of 2016 IPORS submitted premium bordereaux to XL on a monthly basis as required. XL issued invoices for the amounts shown to be due, but these invoices (and also an invoice issued in respect of the month of December 2015 under the prior 2015 Binder) remained unpaid.

On 28 July 2016 XL emailed Mr Corcoran to request an update on payment of invoices for January, February and March 2016. A chaser was sent on 9 September 2016. Mr Corcoran replied on 13 September 2016, referring to difficulties he said IPORS had experienced reconciling transactions but acknowledging that premiums totalling around €2.2 million plus smaller amounts in £Sterling were outstanding. Mr Corcoran said that they would be paid on a staged basis between September 2016 and March 2017.

IPORS failed to make the first promised payment in September 2016. XL insisted on the entire outstanding amount being paid by the end of October 2016, threatening to give notice of cancellation, although in the event IPORS gave notice of cancellation itself effective 30 November 2016. On 2 November 2016 Mr Corcoran wrote saying that, in light of unspecified credits in favour of IPORS, only €263,143.15 was due, and IPORS remitted this sum to XL.

In 2015 XL had conducted an audit of IPORS. The audit report dated 28 August 2015 revealed that various aspects of IPORS’ procedures and controls were unsatisfactory. A further audit was carried out on behalf of XL in 2016 by Deloitte LLP, which also indicated problems. On 24 January 2017 XL informed Mr Corcoran that external auditors would attend its offices to conduct a further audit, but Mr Corcoran refused to co-operate and the audit did not go ahead.

On 1 February 2017 XL sent IPORS a Letter before Claim notifying IPORS that, unless the outstanding sums were paid, proceedings would be commenced. Payment was not forthcoming and so on 13 March 2017 XL commenced these proceedings. At that stage, XL’s claim was confined to sums due in accordance with the bordereaux rendered by IPORS under the 2016 Binder: €4,365,504.28 and £40,309.74. IPORS was the only defendant.

Procedural History

On 9 June 2017, in an application supported by Mr Robb’s First Affidavit, XL applied for permission to amend its Particulars of Claim to include a proprietary claim against IPORS. It also sought a freezing and/or a proprietary injunction. No Acknowledgment of Service had at that stage been served on XL, which prompted XL to request a default judgment, although it subsequently emerged that an Acknowledgment of Service and a Defence had, in fact, been filed.

The basis for the application by XL to introduce a proprietary claim was IPORS’ obligation under the terms of section 27 of the 2016 Binder to hold premiums received on trust as assets of XL in a separate premium bank account. In support of XL’s case that there was a risk of dissipation for the purpose of its application for a freezing injunction, Mr Robb pointed to the fact that there was evidence that IPORS’ business and assets were being moved to a different company in Ireland.

The applications were heard by HHJ Waksman, QC (sitting as a Judge of the High Court) and were granted. So far as the application for injunctive relief was concerned, in his Order dated 16 June 2017:

On the 30 June 2017 return date, which IPORS did not attend, HHJ Waksman, QC extended his earlier order, stipulating that the freezing injunction should operate world-wide. He also made an order against NatWest requiring it to provide statements for any IPORS bank accounts. On 24 July 2017, it having emerged that IPORS also held a Euro premium account at Ulster Bank Ireland DAC (“Ulster Bank”), the Irish High Court made an order requiring similar disclosure.

IPORS failed to provide disclosure of its assets as required by HHJ Waksman, QC’s 16 June and 30 June 2017 orders. The bank statements provided by NatWest and by Ulster Bank, however, revealed that:

In light of these developments, XL applied in September 2017 to re-amend the Particulars of Claim to add Mr Corcoran as a Second Defendant, to advance claims of knowing receipt and dishonest assistance against him, and to extend the terms of the world-wide freezing order and proprietary relief originally granted to include Mr Corcoran and his assets.

An order to this effect was made by HHJ Waksman, QC on 20 September 2017 (continued on 6 October 2017), together with an order requiring NatWest to disclose copies of bank statements for the PC Personal Account. The statements were analysed by XL’s forensic accountants, BTVK Advisory LLP (trading as Baker Tilly US) (“Baker Tilly”). Their work revealed that:

This revelation prompted XL on 6 November 2017 to apply to add CPC as Third Defendant, advancing a claim in knowing receipt against it, and to extend the scope of the injunctive relief and the disclosure sought from NatWest to embrace CPC. HHJ Waksman, QC made orders to this effect on 10 November 2017 (in the case of the injunction continued on 24 November 2017).

Further orders were subsequently made against other parties, either seeking disclosure or adding them as defendants. It is not necessary for me to deal with all of these orders, but they included the following:

The claim brought by XL against HMRC was settled in April 2022 by XL’s acceptance of a CPR Part 36 offer. Very shortly before the trial, I was told that a settlement in principle had been agreed between XL and the Fifth and Sixth Defendants, and I was asked, and I agreed, to make an order staying the claims against these two defendants to allow the settlement to be finalized.

In the meantime, Mr Corcoran having failed to comply with his disclosure and other obligations under the freezing and proprietary injunctions, an application was made to commit him to prison for contempt of court. On 26 May 2021 Cockerill J handed down a judgment in which she found Mr Corcoran guilty of some 20 acts (or counts) of contempt for which she imposed a custodial sentence of 24 months.

In paragraphs [99] and [102], in the course of deciding the appropriate sentence, Cockerill J made the following findings:

“99.

In terms of culpability I find it hard to see how I can avoid arriving at the conclusion that these breaches were very serious and persistent (to use the wording used in the recent “Breach Offences” sentencing guideline). They were also, like the breaches in Otkritie, breaches which were deliberate, contumacious and involved funds that were subject to a proprietary injunction. Mr Corcoran has taken deliberate steps to put the funds out of XL’s reach, and entirely failed to provide even basic disclosure. The breaches appear to continue; since the application, XL has discovered Mr Corcoran using other accounts in breach of the Injunctions, for example under an alias at Monzo Bank, and receiving rent from a property specified in the list of assets in the Injunctions (which he had also been trying to sell).

…

100.

On the harm front again I cannot help reaching the conclusion that the harm is very serious. In essence Mr Corcoran's breaches have almost entirely undercut the relief which the Court granted. The harm caused to XL by the disclosure breaches and his expenditure is clear from the fact of the breaches, which dissipated assets which should have been frozen. Because of the breaches, including the breach as to disclosure, XL has been able to locate or freeze very little of the c.£10 million of proprietary funds or other assets which are the subject of the Injunctions. That is in circumstances where Mr Corcoran is the person who can give the most important information. He has caused XL considerable expense and delay in having to trace its funds via other sources and numerous Court applications, often finding (in the case of non-party disclosure from banks) that the monies had already been depleted, e.g. in the cases of the Nationwide and Coutts accounts to which this contempt application relates.”

A warrant was issued for Mr Corcoran’s arrest, but at the time of the hearing it had not been executed. Mr Corcoran had apparently fled to Portugal, where he continued to set up and spend money from various online banks using an alias. I was informed after the hearing, however, that on 3 July 2022 Mr Corcoran was arrested at Bournemouth Airport. He has since been sent to HMP Winchester to serve his sentence.

The Trial

As I indicated earlier, the claims made by XL against the Fourth to Sixth Defendants have been settled, or at least settled in principle. The only claims pursued at the trial before me were the claims against the First to Third Defendants, IPORS, Mr Corcoran and CPC.

The Claim Form and Particulars of Claim originally issued in March 2017 claimed unpaid premium under the 2016 Binder of €4,628,647.43 and £40,309.74, less the amount of €263,143.15 paid by IPORS in November 2016. This claim was based on the figures that IPORS had produced itself in the monthly bordereaux. It emerged from work carried out by Baker Tilly, however, that XL had a rather larger claim.

I set out some of the terms of the Binders in paragraphs 9 and 10 above. These included provisions which obliged IPORS to allocate and declare, and to provide monthly bordereaux listing, all premiums for insurance bound to the Binders. When Baker Tilly analysed the bank statements provided by NatWest and Ulster Bank in conjunction with information obtained from third parties, however, it emerged that IPORS had substantially under-declared the premium it had received.

The result was that:

In the Re-Re-Re-Re-Re-Amended Particulars of Claim (I refer to this hereafter simply as the “Particulars of Claim”), these two claims were shown separately:

In addition to its claims against IPORS in contract and for breach of trust, XL pursued personal claims against IPORS and CPC in knowing receipt, based on the transfer and receipt of XL’s premium funds into their accounts and the imputation to them of the knowledge of Mr Corcoran, their sole director and shareholder, of IPORS’ breach of trust, and claims against Mr Corcoran both for knowing receipt and for dishonest assistance in a breach of trust.

XL also sought proprietary relief in the form of declarations that any sums remaining in certain bank accounts held by IPORS, Mr Corcoran and CPC represented the traceable proceeds of XL’s premium funds and were held on trust for XL and/or subject to an equitable lien in XL’s favour together with orders that these sums should be paid over to XL. XL also sought to trace its premium funds into Mr Corcoran’s property at 14 Moseley Road.

In April 2017 IPORS filed with the court (but did not serve on XL) a manuscript Defence signed on its behalf by Mr Corcoran. The Defence comprised six numbered paragraphs. Paragraphs 2 – 5 read as follows:

“2.

WE AGREE WE HAD A BINDING AUTHORITY AGREEMENT AND PAY ANY PREMIUM DUE.

3.

WE HAVE TOLD THE CLAIMANT THAT THERE ARE CREDITS DUE TO US SINCE 2012 THAT EXCEED THE AMOUNTS OWED.

4.

WE DO NOT ACCEPT INTEREST CHARGES AS NO MONEY IS OWED.

5.

WE ARE IN DISPUTE WITH THE CLAIMANT ON OTHER MATTERS (EMAIL ATTACHED).”

In the five years between the commencement of the action and the trial, no details, documentation or witness evidence have been provided by IPORS to support the credits alleged in paragraph 3 of the Defence to be due to IPORS. Mr Hogan’s evidence in his reports was that he had seen no such evidence. As I will explain, I have also seen no evidence or explanation of any credits due to IPORS.

The “dispute … on other matters” referred to in paragraph 5 of the Defence appears to relate to a miscellany of issues that have arisen in the course of parties’ business relationship, but again these were not particularized or evidenced and the matters relied upon do not appear to provide an answer to the claim for non-payment of premiums. The Form N9D indicated that IPORS wished to make a counterclaim, but no counterclaim fee was ever paid.

IPORS’ Defence was filed in response to XL’s originally pleaded claim for payment of the sums shown to be due in the bordereaux under the 2016 Binder. No Defence has been filed by IPORS in respect of the additional claims added by XL for proprietary relief and in relation to the under-declaration of premium. These claims have not been responded to by IPORS in any way.

Whilst IPORS did at least file this manuscript Defence, no Defence has ever been filed by Mr Corcoran or by CPC. As reflected in Cockerill J’s 26 May 2021 judgment, none of the First to Third Defendants has ever appeared to defend the claims, and there has been wide-scale non-compliance with the court’s injunctions and disclosure orders. None of the First to Third Defendants appeared or was represented at the trial before me.

CPR Part 39.3 (1) provides that the court may proceed with a trial in the absence of a party. In light of their non-attendance, I considered at the start of the trial whether it was appropriate for me to proceed against the First to Third Defendants, or whether (although no such application had been made by them), I should adjourn the trial to give them a further opportunity to appear. As I said at the time, I was satisfied that I should proceed. My reasons were these.

First, there was no doubt that the First, Second and Third Defendants had been served with the proceedings and had been notified and were aware of the trial date:

Secondly, against that background, and given the interlocutory history of the matter as I have described it in the paragraphs above, it was obvious that the First to Third Defendants were aware that this hearing was taking place but that, consistent with the approach they had taken during the preceding five years (and, in the case of Mr Corcoran, mindful, no doubt, that there was an outstanding warrant for his arrest), they had deliberately decided not to appear at and not to participate in the trial.

It was, of course, necessary notwithstanding the First to Third Defendants’ non-attendance for XL to prove its claim and to prove that it was entitled to the relief that it sought. To that end, over the course of a day and a half:

Mr Hogan of Baker Tilly, whose analysis underlay many of XL’s claims, was called to give oral evidence. He confirmed the truth of his four expert reports, subject to two minor corrections which he dealt with orally.

I had the opportunity to ask Mr Hogan questions and I did so, in particular asking him about the extent to which his calculations took into account the commission that IPORS was entitled to charge and to deduct from premiums remitted to XL on the premium allegedly under-declared. Mr Hogan produced a revised Schedule 1 to his Fourth Report to deal with this shortly after the hearing. I attach this as Appendix 1 to this judgment.

During the course of his submissions, consistent with the practice commended by Field J in Habib Bank Ltd v Central Bank of Sudan [2006] EWHC 1767 (Comm), [2006] 2 Lloyd’s Rep. 412 at [9] and referred to with approval in subsequent authorities, Mr England drew to my attention any points, factual or legal, that might be to the benefit of the First to Third Defendants. I am grateful to him, and to those instructing him, for their assistance.

In the sections that follow, I deal with the claims against each of the First to Third Defendants in turn. I leave the relief sought by XL in relation to 14 Moseley Road to the end. As will be apparent, in general terms, having read the documents and listened to the evidence, and having carefully considered Mr England’s submissions, I am satisfied that XL is entitled to the relief that it seeks.

The Claims against IPORS

XL’s primary claim against IPORS is for breach of contract, namely for breach of the terms of the Binders which obliged it to declare all premiums to the Binders and to pay over those premiums to XL less permissible deductions. (Footnote: ¹)

As IPORS was appointed to act as XL’s agent in respect of the receipt and onwards transmission of premiums, and as it was expressly required to hold premiums in separate trust accounts (see, e.g., section 27 of the 2016 Binder), IPORS’ failure to hold premiums in the Premium Accounts, its transfer of premiums (beyond any entitlement to commission) to the IPORS Business Account, and its failure to pay premiums to XL were also alleged to involve a breach of trust and/or fiduciary duty.

So far as these claims are concerned, I have set out the pertinent terms of the Binders in paragraphs 9 and 10 above. There can be no dispute about the nature of IPORS’ status or about its contractual obligations: the fact that IPORS was appointed as XL’s agent under the Binding Authority Agreements, that it agreed to hold premiums in separate bank accounts on trust, that it was obliged to pay premiums over to, XL, and that it owed duties as a fiduciary and as a trustee.

As for the amounts of premiums received by IPORS, the deductions that IPORS was entitled to make from them, and the amounts of premium which should have been, but which were not, remitted to XL but were transferred elsewhere, these were the subject of Mr Hogan’s analysis, which he conducted based on his review of:

The results of Mr Hogan’s analysis were summarised in Schedule 1 to his Fourth Report, as amended by the revised Schedule 1 provided to me shortly after the hearing, which appears as Appendix 1 to this judgment.

As can be seen, Mr Hogan’s Schedule 1 divided IPORS’ business into two segments:

In relation to each section, Mr Hogan’s Schedule 1 showed the position for the individual years 2013, 2014, 2015, 2016, 2017 and 2018 (in each case ending 31 March) and the cumulative total position over all the years as follows:

The result of the whole exercise, taking into account the under-declared premium and IPORS’ entitlement to commission, was that the cumulative figures across all years for the amount of premiums which ought to have been received into and held by IPORS in the Premium Accounts as trustee and which ought to have been, but had not been, paid over to XL were as follows:

Mr Hogan explained that he had not seen any evidence of credits due to IPORS, and I have similarly seen no evidence that there are any credits that fall to be deducted from these amounts.

There is, in my judgment, no defence to XL’s claim against IPORS for non-payment of these sums. I accordingly find IPORS liable to XL in debt and/or in damages for breach of contract, and as equitable compensation for breach of trust and fiduciary duty, in the amounts of £296,589 and €7,360,909.

XL also claimed equitable compensation from IPORS for knowing receipt based upon the premium funds that had been transferred out of the Premium Accounts into the IPORS Business Account. Mr Hogan’s analysis of the bank statements, reflected in Annex C to the Particulars of Claim, showed that between May 2012 and May 2017 £9,909,791 had been transferred into the IPORS Business Account.

Some part of those transfers might have been legitimate commission, but the bulk of the sums transferred could not have been – for the transfers to have been legitimate, the gross premium written by IPORS would have had to have been substantially higher. The evidence was that the only year in which legitimate commission would have covered IPORS’ office expenses was the first year in which the Binders were in operation, 2012/13.

As explained in Civil Fraud, Law, Practice & Procedure at paragraph 12-001, English law recognises two claims that may lie in equity against a third party who comes to be mixed up in a breach of trust or fiduciary duty, the first of which is a claim for knowing (or, as it is also known, unconscionable) receipt. The essential requirements of a claim in knowing receipt are summarised in paragraph 12-003; a claimant must show:

A claim in knowing receipt lies against a third party – a stranger to a trust - who comes to be mixed up in a breach of trust or fiduciary duty on the part of another. Here, however, IPORS is not a third party – it is the primary wrongdoer. Even if (as Mr England’s submissions suggested) a claim in knowing receipt based on the transfer of funds into the IPORS Business Account is technically possible, it adds nothing to IPORS’ primary liability as trustee.

The sums remaining in the NatWest Euro and Sterling premium accounts were either nil or negligible but, as explained in Mr Hall’s Ninth Witness Statement, at the time it was frozen there remained an amount of €160,075.94 in the Ulster Bank premium account. XL seeks to trace its funds into that account, but the reality is that these are sums that IPORS has expressly agreed to hold on trust for XL pursuant to the terms of the Binders.

There has been no allegation that XL’s funds in this account have been mixed with funds that are beneficially owned by IPORS – and, because the account was a designated premium account, there should have been no mixing – but, if there had been, Mr England is correct that XL would be entitled to rely upon the principle in In Re Hallett’s Estate (1880) 13 Ch. D 696 to say that IPORS should be treated as having spent its own money first.

XL seeks a declaration that the amount of €160,075.94 held in the Ulster Bank Euro premium account is held by IPORS on trust for XL and an order that it should be paid over to XL. XL is, in my judgment, entitled to that relief.

The Claims against Mr Corcoran

Mr Corcoran was and is the sole shareholder and director of IPORS. Some of the Binders in my bundles were unsigned copies (although there was no doubt that the relevant Binders had been concluded), but where there were signed copies the Binders had been signed on behalf of IPORS by Mr Corcoran. Mr Corcoran was obviously aware of the terms of the Binders, including the requirement for premiums to be held on trust for XL in separate accounts.

Two claims were made against Mr Corcoran.

The first was a claim in knowing receipt based on the transfer of premiums from the Premium Accounts via the IPORS Business Account into the PC Personal Account. Mr Hogan’s analysis, reflected in Annex C to the Particulars of Claim, showed that over the period May 2012 to May 2017 some £9,909,791 had been transferred from the Premium Accounts to the IPORS Business Account with £7,298,968 then being transferred from the IPORS Business Account to the PC Personal Account.

I referred to the essential ingredients for a claim in knowing receipt in paragraph 64 above. The first is receipt by the defendant of the claimant’s assets or their traceable proceeds. So far as that is concerned, Mr England reminded me in paragraph 49 of his skeleton argument and orally of a number of general principles concerning equitable tracing including the following:

On the issue of whether the £7,298,968 transferred to the PC Personal Account was attributable to XL’s premiums, transferred by IPORS in breach of trust and/or fiduciary duty, Mr England relied upon a number of matters.

First, he relied upon the absence of any Defence from Mr Corcoran, the fact that Mr Corcoran had never sought to explain the payments made to him, and Mr Corcoran’s non-compliance with the orders for proprietary disclosure including as to what assets had been acquired in whole or in part from XL’s premium funds, the purpose of any transfers, and what had become of any funds transferred from the Premium Accounts.

Secondly, he said that, even though transfers did not need to be in strict chronological order (see paragraph 72 v) above), on the evidence there was a straightforward temporal link between the transfer of monies from the Premium Accounts into the IPORS Business Account and the onwards transfer of sums to the PC Personal Account, which were routinely made either the same day or within a matter of a few days.

The detail in this regard was contained in Annex C to the Particulars of Claim. This showed the history of transfers between the IPORS Business Account and the PC Personal Account between 11 May 2012 to 22 May 2017. I was taken to the bank statements for a number of entries and was able to confirm its accuracy. The annex amply demonstrated the close timing of payments. Simply by way of example:

Thirdly, Mr England submitted that there was no evidence that Mr Corcoran had any source of income, other than monies transferred from IPORS (and improperly transferred from the Premium Accounts), which could potentially have been the source of the funds in his accounts. The principal analysis in this regard was contained in paragraphs 4.05 – 4.09 of and Schedule 1 to Mr Hogan’s Third Expert Report. For example, and as Mr Hogan explained: (Footnote: ⁴)

The position shown by Mr Corcoran’s bank statements was confirmed by the disclosure from his accountants and from HMRC. This included Mr Corcoran’s personal tax computations and his tax returns for the years ending 5 April 2013 through to 5 April 2017. These showed very small amounts of income from another company, but the overwhelming bulk of Mr Corcoran’s income was identified as “cash dividends” from IPORS (although there was no evidence that dividends had lawfully been declared).

Fourthly, the amounts transferred to the IPORS Business Account and then onwards to the PC Personal Account could not represent legitimate commission because, as the analysis in Annex E to the Particulars of Claim showed, the levels of gross premium written by IPORS simply did not justify it. For the 2013/14 year, for example, the gross written premium was some £3.7 million lower than would have been necessary to generate sufficient commission to finance IPORS’ expenditure in that year.

The last transfer from the IPORS Business Account to the PC Personal Account was a transfer of £60,000 on 22 May 2017. The credit balance on the PC Personal Account immediately after that transfer was £343,364. At the time the PC Personal Account was frozen in September 2017 the balance had reduced to £217,345; I was told it had reduced slightly since then. There have been no substantial deposits from other sources.

Taking all this evidence together, I am satisfied that the overwhelming part of the £7,298,968 transferred from the IPORS Business Account to the PC Personal Account - and certainly amounts well in excess of the current balance on the PC Personal Account - was traceable to XL’s premium funds. The transfers could only have been made because of the prior transfers from the Premium Accounts to the IPORS Business Account, which involved a breach of fiduciary duty and/or trust on IPORS’ part.

Given that Mr Corcoran was the sole director and shareholder of IPORS, there can be no doubt that he must have been aware that the sums transferred to him were traceable to IPORS’ breach of fiduciary duty and breach of trust. In these circumstances, and in the absence of any contrary evidence, I infer that it was Mr Corcoran himself who instigated these transfers. It would be unconscionable for Mr Corcoran to retain the sums he received, and I am satisfied that Mr Corcoran is liable in knowing receipt.

XL also brings a claim against Mr Corcoran for dishonest assistance in IPORS’ breach of trust, seeking equitable compensation for the amounts of £296,589 and €7,360,909 referred to in paragraph 61 above which has been disposed of by IPORS and/or not remitted to XL in breach of trust. The ingredients of such a claim are well-known; as summarised in Civil Fraud at paragraph 13-003, such a claim requires:

For the reasons set out above, there can be no dispute that the first two ingredients are satisfied: IPORS had acted in breach of trust and/or fiduciary duty in disposing of and/or in not remitting premiums received by it on behalf XL; those breaches were procured and/or assisted by Mr Corcoran, who was IPORS sole director and shareholder and the person who controlled the Premium Accounts.

As for the third ingredient, the standard is objective: a defendant is to be judged according to the standards of an ordinary, honest person who has the same knowledge of the circumstances as he does; it is not necessary that the defendant appreciates that his conduct is dishonest by those standards: Group Seven Ltd v Nasir [2019] EWCA Civ 614, [2020] Ch. 129 at [58]. Again, on the evidence, I have no hesitation in concluding that Mr Corcoran’s conduct, which involved the wholesale looting of XL’s premium funds, was dishonest. XL’s claim is, therefore, well-founded.

In addition to the personal claims against Mr Corcoran in knowing receipt and dishonest assistance, XL sought to trace its premium funds into the remaining credit balance in the PC Personal Account. As I indicated in paragraph 80 above, the account had a credit balance of £217,345 at the time it was frozen; the latest bank statement I was shown indicated a credit balance of £210,647 as at 3 December 2019.

I summarised the relevant principles in paragraph 72 above. Mr England submitted that:

I accept these submissions. XL is entitled to trace into the remaining balance on the PC Personal Account, which is held on constructive trust for XL and/or over which XL has an equitable lien, and which I order should be paid over to XL. I note that NatWest was contacted by XL and on 4 February 2022 it confirmed that it would comply with such an order when made, raising no objection.

The Claim against CPC

XL’s claim against CPC is a claim in knowing receipt in respect of the £378,500 that was transferred to it from the PC Personal Account.

CPC was incorporated on 25 June 2016, around the time that the dispute between IPORS and XL arose. As the name of the company suggests, it had nothing to do with insurance; it appears to reflect that one of Mr Corcoran’s hobbies was prestige cars. The description of its principal activity in its Companies House filing is “renting and leasing of cars and light motor vehicles”.

Annex D to the Particulars of Claim set out details of the 25 transfers made from the PC Personal Account to CPC’s account with NatWest (the “CPC Account”) between 6 September 2016 and 19 September 2017 shortly before the date on which the account was frozen. The transfers were for round sums varying between £5,000 and £40,000 and totalled £378,500.

The evidence demonstrated that there was a close temporal relationship between transfers from the Premium Accounts into the IPORS Office Account and onwards to the PC Personal Account and the transfers from the PC Personal Account to the CPC Account. Simply by way of example:

In support of his submission that I should conclude that these transfers into the CPC Account were traceable to XL’s premium funds, Mr England relied upon the principles set out in paragraph 72 and upon similar points to those he had made in relation to Mr Corcoran set out in paragraphs 73 to 80 above, in particular:

I am satisfied that the £378,500 transferred to the CPC Account was traceable to XL’s premium funds. The transfers were only possible because of the prior transfers from the Premium Accounts, which involved a breach of fiduciary duty and a breach of trust on the part of IPORS, of which Mr Corcoran, the sole director and shareholder of both IPORS and CPC, was plainly aware. It would be unconscionable for CPC to retain the sums received. It is liable to XL in the amount of £378,500.00 for knowing receipt.

At the time the CPC Account was frozen in November 2017 the credit balance remaining in the account was £92,973. In my judgment, for essentially the same reasons as I gave in paragraphs 86 to 88 in relation to the PC Personal Account, XL is entitled to trace into this balance, which is held on constructive trust for XL and/or over which XL has an equitable lien, and which I order should be paid over to XL.

14 Moseley Road

An extract from HM Land Register showed that Mr Corcoran is the Registered Owner of 14 Moseley Road which was purchased by him on 1 October 2014 for £840,000.00. The extract records a charge over the property held by NatWest of the same date, which indicates that NatWest had provided mortgage finance for the purchase, subsequently amended by deed on 29 February 2016 to reflect a further mortgage.

I will deal with the circumstances in which Mr Corcoran purchased, mortgaged and then remortgaged 14 Moseley Road in a moment, but it is convenient to deal first with the current status of the property. On 20 February 2020, by an order of the Stockport County Court, 14 Moseley Road was repossessed by NatWest. The order entered judgment for Nat West for £853,354, the then outstanding balance of the mortgage.

It emerged during the course of XL’s asset tracing exercise that in September 2020, after his assets had been frozen and so in breach of the injunction, Mr Corcoran had managed to rent out the property through an agent to an overseas tenant using an alias, Paul Clarke, directing that the rent be paid into an account in the name of Paul Clarke at Monzo Bank. NatWest has now secured vacant possession.

The current valuation of 14 Moseley Road, I was told, is in the region of £1.3 million. Allowing for NatWest’s charge, which XL does not dispute or challenge, and the likely costs of sale, it is thought that there may be in the region of £400,000 by way of surplus sales proceeds. Cockerill J’s 4 April 2022 order records that NatWest has agreed to pay the surplus proceeds of sale into court.

XL seeks a declaration that it has a beneficial interest in 14 Moseley Road to the value of at least £551,000, and therefore in excess of the likely net proceeds of sale. It does so on the basis that XL’s premium funds have been used either to fund or contribute to the purchase or the property, or to discharge a debt incurred by Mr Corcoran for the purpose of acquiring the property and intended to be repaid, and actually repaid, using XL’s premium funds; specifically to:

The three sources of funds for the purchase of 14 Moseley Road – the deposit, the mortgage finance provided by NatWest (the original mortgage) and the proceeds of sale of Quarrymans View - are shown in a Matter Account Report prepared by Mr Corcoran’s solicitors, Nicholls Solicitors (“Nicholls”). Mr Hogan summarised the source of funds in paragraph 3.02.17 of his Fourth Expert Report in the following table:

The deposit

The first item is the deposit. Mr Hogan analysed the source of funds for this deposit in paragraphs 3.11 to 3.13 of his Third Expert Report (he corrected a mistake in relation to a date in those paragraphs in his oral evidence). As his analysis, supported by the bank statements I was shown, demonstrated:

Prior to 19 September 2014, when the payments referred to in paragraph 102 above were made, the IPORS Business Account had received transfers from the Premium Accounts totalling £1,642,702 without which the IPORS Business Account would have been overdrawn by £2,623,606. As I have already explained, the transfers from the Premium Accounts to the IPORS Business Account cannot be justified on the basis that they involved legitimate transfers of commission.

Indeed, as at 19 September 2014, the cumulative variance, i.e., the shortfall in premiums paid to XL, taking into account both the sums shown as due on the bordereaux prepared by IPORS and the under-declared premium, as shown in Mr Hogan’s Schedule 1 was between £1,975,245 (the figure as at 31 March 2014) and £3,579,500 (the figure as at 31 March 2015).

Mr England invited me to conclude against this background, and bearing in mind the other matters that I have previously referred to, including the absence of any Defence from Mr Corcoran and his refusal to comply with the court’s orders requiring disclosure of the purpose of the transfers from the Premium Accounts, that the deposit had been effectively funded by sums wrongfully paid out of the Premium Accounts, and I do.

The mortgage repayments

The second and third items both concern mortgage payments. I propose to take these in chronological order, starting with the mortgage relating to the property at Quarrymans View.

Mr England’s point in relation to both mortgages was, however, the same: that the mortgages were taken out by Mr Corcoran in anticipation of receipt of funds; that the only source of funds that Mr Corcoran had throughout the relevant period was IPORS, a very substantial part of whose monies were acquired by misappropriation of XL’s premium funds, and the mortgages were intended to be repaid using these funds; and that the pattern of transfers across the various accounts supported the conclusion that the mortgages were in fact repaid with XL’s premium funds.

So far as the law is concerned, Mr England relied upon three passages in Lewin on Trusts (20th ed.):

An extract from HM Land Register showed that Mr Corcoran purchased a leasehold interest in the property at Quarrymans View on 14 March 2008. The purchase price is not recorded in the entry, nor is it apparent whether Mr Corcoran obtained mortgage finance for the initial purchase. Obviously, as Mr Corcoran’s relationship with XL only commenced in 2012, there is no question of the property being purchased using XL’s funds.

An Annual Mortgage Statement issued by NatWest dated 12 March 2013 shows, however, that on 23 March 2012, some five years after the purchase of Quarrymans View, Mr Corcoran raised £458,441 by taking out a 20-year mortgage on the property. As Mr England pointed out, this was very close in time to the conclusion of the 2012 Binder on 26 March 2012.

Mr England submitted that, whilst IPORS may not have received enough premium in the early days to allow Mr Corcoran to draw a large lump sum for his use from these funds, once the first Binder had been concluded Mr Corcoran knew that there would be a premium stream which would allow him to make monthly repayments, and so he could raise a lump sum by mortgage in that way in anticipation of being able to pay it off using XL’s premium funds.

The same Mortgage Statement shows that monthly mortgage repayments of around £1,500 per month were made from 12 April 2012 through to 28 February 2013 in all cases from the PC Personal Account. A subsequent statement shows further repayments were made up to September 2014. In all, some 30 repayments were made totalling £220,734. On 2 October 2014 Mr Corcoran repaid the full outstanding balance of £278,706, at which point the mortgage account was closed.

In paragraph 55 of his First Witness Statement dated 30 June 2021 Mr Koh included a table (Table B), prepared by reference to the disclosed bank statements, which demonstrated that:

As to whether these repayments were made using XL’s premium funds, Mr England also relied upon the fact that between 29 March 2012, when the mortgage on Quarrymans View was taken out, and 1 September 2014, when the last repayment was made, total receipts into the IPORS Business Account amounted to £2,621,178 with £2,577,564 (98.3%) funded by transfers from the Premium Accounts, the amount of these transfers far exceeding any legitimate commission.

Patently, without the receipts from the Premium Account, the IPORS Business Account would have been substantially overdrawn and would not have been able to make the transfers to the PC Personal Account that invariably preceded these mortgage payments. There is no evidence that Mr Corcoran had any source of funds. Mr Hogan’s calculation was that, without the transfers from the IPORS Business Account, by 30 September 2014 the PC Personal Account would have been overdrawn by £1,898,999.

The closure of the NatWest mortgage account in relation to Quarrymans View coincided with Mr Corcoran’s sale of that property and his purchase of 14 Moseley Road:

The table in Mr Hogan’s Third Expert Report shows that, in addition to the deposit of £50,128, some £245,403 of the purchase price of 14 Moseley Road was paid by using the net sale proceeds of Quarrymans View. Mr England made clear in his submissions that he was not seeking to trace into the sale proceeds as such, simply into the mortgage repayments made using XL’s premium funds insofar as their value was now reflected in 14 Moseley Road.

The third element of the purchase price of 14 Moseley Road was paid by way of a new mortgage taken out by Mr Corcoran with NatWest at the time of its purchase for £588,000.00 which was initially due to run for 11 years and 5 months. Annual Mortgage Statements for that mortgage show 17 monthly repayments being made of £5,141 during the period from 3 November 2014 to 1 March 2016 totalling £87,400 at which point Mr Corcoran paid off the entire outstanding balance of £529,278.

The pattern in relation to the repayments made in relation to this first mortgage of 14 Moseley Road was similar to that described in relation to Quarrymans View at paragraph 113 above. The mortgage payments were made from the PC Personal Account and almost every payment was preceded, commonly on the same day or a few days earlier, by a transfer into the PC Personal Account from the IPORS Business Account or on one occasion from Mr Corcoran’s e-savings account.

In support of his case that it could be inferred that these payments were made using XL’s premium funds wrongfully transferred from the Premium Accounts, Mr England relied upon the facts that:

The cumulative variance as shown in Mr Hogan’s Schedule 1 during the period of these mortgage repayments was £1,975,245 (31 March 2014), £3,579,500 (31 March 2015) and £4,164,175 (31 March 2016). Very substantial sums were thus being received by IPORS in terms of premium, but instead of being paid over to XL were being transferred to the IPORS Business Account and onwards to Mr Corcoran where they were being used by him to make mortgage payments.

As I explained earlier, there is no evidence that Mr Corcoran had any source of income other than from IPORS from which he could make these mortgage payments. It is notable that once the Binders ended (and subject to receipt of premiums during a run-off period thereafter), the bank statements for Mr Corcoran’s various accounts show nothing like the level of income he would need to make these mortgage payments.

On 11 March 2016 Mr Corcoran remortgaged 14 Moseley Road using a mortgage offset account. The statement for that account shows an initial draw-down on £529,278 to pay off the first mortgage followed a few days later by a further drawdown of £390,000 (which was paid immediately to HMRC) – the total borrowing was thus around £900,000, which appears likely to be the full value of the property at that time.

Some 18 monthly repayments of £6,907 were made between 1 April 2016 and 1 September 2017 totalling £124,326. As before, these payments from the PC Personal Account were preceded by transfers from the IPORS Business Account, save for the 1 August and 1 September 2017 payments which were made after the IPORS Business Account had been frozen and which were preceded by transfers from CPC.

By the time the first repayment was made on 1 April 2016 Mr Corcoran had received £4,634,039 into the PC Personal Account from the IPORS Business Account without which the PC Personal Account would have been overdrawn by £4,594,872. The cumulative variance as at 31 March 2016 was £4,164,175.

Mr Corcoran then continued between 25 October 2017 to 25 July 2018 to make some 10 further mortgage payments totalling £69,268, but these were not made from the PC Personal Account, which had by this stage been frozen, but from a sterling account he had set up at Coutts. The payments made from the Coutts account were funded either from:

Other than by way of transfers from the premium accounts, there is no evidence of Mr Corcoran having any sources of income to make these mortgage payments. I note the sake of completeness that when Mr Corcoran opened the Monzo account under the name of Paul Clarke into which the rental income from 14 Moseley Road was paid he declared his income as only £60,000 per annum. The Monzo account was frozen in April 2021 and at the time had a credit balance of only £11,084.

A further account has been identified in the name of Paul Clarke with another online bank, Revolut, which seems to have been active from around 30 March 2020 until 25 August 2020 when it was frozen. It currently has a zero balance. The credit balances on the account were invariably very low, indicating once again that, once the wrongful transfers of premium funds from XL had been stopped, Mr Corcoran had no real income.

I am satisfied on the evidence that these three mortgages – the mortgage on Quarrymans View and the mortgage and remortgage on 14 Moseley Road - were taken out by Mr Corcoran in anticipation of him being able to pay them off using XL’s premium funds, and that he did so.

Conclusions in relation to 14 Moseley Road

I set out the principles applicable to tracing in paragraphs 72 and 108 above, including that:

Applying these principles to the evidence, I am satisfied that XL is able to trace its premium funds into 14 Moseley Road through the deposit, the mortgage payments paid in relation to Quarrymans View which also contributed to the payment of the purchase price, and through the mortgage payments on the initial mortgage and the remortgage on that property.

The total value of these payments is £551,879: the individual figures are set out in the paragraphs above. I am satisfied that XL is entitled to a declaration that it has a beneficial interest in the property and/or in the proceeds of sale in that amount, subject to satisfaction of NatWest’s prior charge, and to consequential orders that properly reflect that interest.

Disposition

For the reasons set out above, XL is entitled to judgment against the First to Third Defendants and to the relief I have identified.

I will hear counsel in relation to the order(s) that should be made to reflect the terms of this judgment and in relation to any other consequential matters, including costs.