Gallagher vs Ardonagh: Insurance heavyweights in opening day court battle

Two of the biggest players in the insurance broking market today crossed swords at the High Court amid accusations of staff poaching motivated by revenge.

Gallagher is accusing bitter industry rivals, the Ardonagh Group, of mounting a concerted conspiracy to harm its business.

And Ardonagh’s chief executive David Ross - formerly a senior Gallagher employee for 25 years - faces claims that he was “bitter and intent on revenge.”

He vehemently denies the accusations and the Ardonagh Group, along with subsidiaries Bishopsgate and Price Forbes, insist that they have done nothing wrong.

David Craig QC, for Ardonagh, says that the group’s recruitment practices are “commonplace” in the insurance broking sector’s fluid jobs market.

And arguments that there was a “conspiracy to injure” Gallagher by recruiting one of its lynchpin teams hold no water, the barrister argues.

The case hinges on the departure of four key personnel from Gallagher subsidiary, Alesco Risk Management, to Ardonagh in the summer of 2017.

Brokers, Peter Burton, James Brewin, Nawaf Hasan and Gerard Maginn, joined either Bishopsgate or Price Forbes.

Two members of Gallagher’s support staff, Nicholas Game and Tarrent Cohen, resigned in September 2017 and also joined the Ardonagh Group.

Gavin Mansfield QC, for three Gallagher subsidiaries, this morning opened the case in court 38 at the Royal Courts of Justice.

He told Mr Justice Freedman: “The claim concerns an unlawful team move of employees between rival firms of insurance brokers.

“This dispute concerns the employment of specialist energy insurance brokers within the London market.”

“Rivals with a particular history”

Sketching in the background to the dispute, he said Gallagher and Ardonagh are “commercial rivals with a particular history”.

He added: “Ardonagh’s CEO, Mr Ross, worked for Gallagher for 25 years, latterly as CEO of its international business.”

In 2015, he moved to Ardonagh subsidiary, Towergate, along with a number of other Gallagher employees.

“Mr Ross and two others were sued by Gallagher, alleging an unlawful team move. These proceedings were compromised with a substantial payment to Gallagher,” said Mr Mansfield.

“That experience, we contend, left Mr Ross bitter and intent on revenge by taking employees, and with them clients, to harm Gallagher.”

Mr Mansfield went on: “In 2017, Alesco suffered a spate of resignations from its energy division.  Four senior experienced brokers resigned within a short period of time.”

More junior employees, Mr Game and Mr Cohen, who worked closely with Mr Hasan and Mr Maginn, resigned within 11 days of each other in September.

“Each of the departing employees told Alesco essentially the same thing when they resigned and maintain the same position now.

“They say that they resigned before they had made a decision as to what they were going to do next.

“They did not leave as part of a team; they left on their own and did not know the others were going to (Ardonagh).”

Bishopsgate, Price Forbes and the Ardonagh Group (the corporate defendants) “similarly maintain that they did not recruit a team”, said Mr Mansfield.

Conspiracy

They insist that they recruited the brokers as “a number of indivuals” on their own independent merits.

But the QC told the judge, “the reality is far from this.”

The men’s move to Ardonagh “was the product of a carefully planned conspiracy” between Ardonagh, Mr Hasan and Mr Burton, he alleged.

“It involved unlawful means, namely breaches by the departing employees of their contractual duties, their equitable duties of confidence and, in the case of Mr Hasan and Mr Burton, their fiduciary duties.

“Those breaches were colluded in, and encouraged by, the corporate defendants.

“Further, given Mr Ross’s desire for revenge against the claimants following the 2015 litigation, the predominant purpose of the planned recruitment was to injure the claimants by taking away successful employees in a manner designed to cause maximum disruption.”

Mr Mansfield said Gallagher has evidence “that the departing employees must have known of each other’s intentions and their account now is false.”

And he told the court: “It is to be inferred that their false accounts were intended to conceal their collaboration in planning the move with the corporate defendants and encouraging each other and more junior employees to move.

“As a result of the defendants’ unlawful actions, the claimants have suffered substantial damage.  The departures, the way in which they were timed and the concealment of the departing employees’ plans destabilised the Alesco team.

“The claimants were forced to make substantial retention payments to a number of employees to avoid further departures and have incurred costs and wasted management time in seeking to recover the position. The claimants seek damages in respect of those costs.”

The barrister added: “The claimants have lost clients and suffered a loss of profits as a result of the unlawful actions.”

Competitive 

David Craig QC, representing the corporate defendants, Mr Hasan and Mr Burton, has yet to address the judge.

However, in his written submissions, he argues: “Recruitment is commonplace in the insurance broking sector. The market for employees is competitive and fluid.

“Successful brokers are in high demand. Competitors are entitled to recruit and employees are entitled to move from one employer to another.

“Many move repeatedly in the course of thier careers. They may be unhappy, they may be restless, they may be offered a more senior role, they may simply be offered a better deal elsewhere.

“Messrs Burton and Hasan have worked for more than nine different broking firms between them.  Mr Maginn has moved firm so often he has spent literally years of his life on garden leave.  There is nothing surprising or sinister in a move from one competitor to another.”

Mr Craig added: “The departing employees were amongst nearly 90 individuals recruited by Bishopsgate and Price Forbes in 2017 from rival broking firms across the market.”

And he claimed that Gallagher itself “approached at least 60 Ardonagh employees that year.”

The QC said it was Gallagher’s case that “the recruitment of the departing employees entailed a conspiracy to injure, an unlawful means conspiracy, dishonest assistance and more - a team move unlawfully ‘orchestrated’ by the defendants.”

But he told the judge: “That case is without proper foundation.”

“The departing employees were not, and are not, a ‘team’…they did not all work together. They did not operate in the same fields, whether by geography or sub-sector,

“Mr Burton and Mr Hasan did not get along.  It was for that reason that Ardonagh used the code names Edison and Tesla, who famously disliked each other, in respect of their recruitment.

“As David Ross says, it would have been positively damaging for Mr Burton to know that Ardonagh was looking to recruit Mr Hasan, and vice versa.

“The departing employees were widely known to be unhappy at Alesco, albeit for different reasons.

“Mr Ross learnt of the opportunity to recruit them because they were already being courted by another broking firm.”

Recruited separately

Mr Craig adds: “There is nothing surprising or unlawful as to this recruitment. There was no ‘conspiracy’ and no unlawful purpose.

“The employees were recruited separately, through negotiations and discussions over a period of months.

“Each had multiple options and each had his reasons for leaving.”

And the QC told the court: “It is an unfortunate feature of this litigation that the claimants have been, and remain, prepared to make serious allegations against regulated professionals without any proper basis.”

Of Gallagher’s claims that the men were recruited “for the predominant purpose” of injuring Gallagher’s business, he said: “Those allegations are remarkable in their scope and ambition.”

“The claimants make wide-ranging allegations of dishonesty, including dishonest assistance, against all the defendants. Every relevant act taken over many months is said to have been ‘dishonest’ and ‘unconscionable’.

“The claimants’ witnesses go further, with loose and unpleaded intimations of ‘bribery and corruption’.”

Mr Craig told the judge: “The claimants view this sort of litigation, including the pursuit of unmeritorious and exaggerated claims against former employees and their new employers, as part of the cost of doing business.

“It is designed to, and does, disrupt competitors, discourage employees from leaving, and discourage competitors from recruiting from Gallagher’s ranks.

“As Mr Ross candidly sets out, the effect of the litigation brought by Gallagher against him when he left the business in 2015 was so bruising, personally, that Ardonagh has, in the past, deliberately avoided recruiting from Gallagher even when it had the opportunity to do so.

Denying that there is any truth in the accusations against the corporate defendants, the departing employees and Mr Ross, the QC added: “The claimants appear to view anyone who leaves to join a competitor as the enemy.”

The hearing continues.