CIGNA Worldwide v ACE Ltd

• Jurisdiction: Cayman Islands
• Judge: (Cresswell, J.)
• Judgment Date: 27 January 2012
• Court: Grand Court (Cayman Islands)
• Date: 27 January 2012

Grand Court, Financial Services Division

(Cresswell, J.)

CIGNA WORLDWIDE INSURANCE COMPANY

and

ACE LIMITED

N. Dunne for the plaintiff;

Lord Goldsmith, P.C., Q.C., and C.D. McKie for the defendant.

Cases cited:

(1) Abraham v. Thompson, [1997] 4 All E.R. 362; [1997] C.L.C. 1370, referred to.

(2) Ahmad Hamad Algosaibi & Bros. Co. v. Saad Invs. Co. Ltd., Grand Ct., Financial Servs. Div., June 25th, 2010, unreported; on appeal, 2010 (2) CILR 289, applied.

(3) Al-Koronky v. Time Life Entertainment Group Ltd., [2005] All E.R. (D.) 457; [2005] EWHC 1688 (QB), referred to.

(4) Arkin v. Borchard Lines Ltd., [2005] 1 W.L.R. 3055; [2005] 3 All E.R. 613; [2005] 2 Lloyd”s Rep. 187; [2005] C.P. Rep. 39; [2005] 4 Costs L.R. 643; [2005] EWCA Civ 655, referred to.

(5) Cowell v. TaylorELR(1885), 31 Ch. D. 34; 55 L.J. Ch. 92, referred to.

(6) Cybervest Fund, In re, 2006 CILR 80, referred to.

(7) Dolphin Quays Devs. Ltd. v. Mills, [2008] 1 W.L.R. 1829; [2008] Bus. L.R. 1520; [2008] 4 All E.R. 58; [2008] C.P. Rep. 29; [2008] 2

BCLC 774; [2008] EWCA Civ 385; sub nom. Mills v. Birchall, [2008] BCC 471; [2008] 4 Costs L.R. 599, applied.

(8) Dymocks Franchise Systems (NSW) Pty Ltd. v. Todd, [2004] 1 W.L.R. 2807; [2005] 4 All E.R. 195; [2005] 1 Costs L.R. 52; [2004] UKPC 39, referred to.

(9) Kilderkin Invs. v. Player, 1984–85 CILR 63, referred to.

(10) Kuenyehia v. International Hospitals Group Ltd., [2007] All E.R. (D.) 353; [2007] EWCA Civ 274, referred to.

(11) Lloyd v. Hathern Station Brick Co. Ltd.UNK(1901), 85 L.T. 158, referred to.

(12) Lubbe v. Cape Plc (No. 2), [2000] 1 W.L.R. 1545; [2000] 4 All E.R. 268; [2000] 2 Lloyd”s Rep. 383, referred to.

(13) M.V. Yorke Motors (a firm) v. Edwards, [1982] 1 W.L.R. 444; [1982] 1 All E.R. 1024, referred to.

(14) Masri v. Consolidated Contractors Intl. Co. SAL, 2010 (1) CILR 265, referred to.

(15) Miller v. Gianne, 2007 CILR 18, referred to.

(16) Porzelack K.G. v. Porzelack (U.K.) Ltd., [1987] 1 W.L.R. 420; [1987] 1 All E.R. 1074; [1987] 2 C.M.L.R. 333; [1987] E.C.C. 407; [1987] F.S.R. 353, referred to.

(17) Reichhold Norway ASA v. Goldman Sachs Intl., [2000] 1 W.L.R. 173; [2000] 2 All E.R. 679; [1999] 2 All E.R. (Comm.) 174; [1999] 2 Lloyd”s Rep. 567; [2000] CLC 11, referred to.

(18) Semler v. Murphy, [1968] Ch. 183; [1967] 2 W.L.R. 1171; [1967] 2 All E.R. 185, referred to.

(19) Spiliada Maritime Corp. v. Cansulex Ltd. (‘The Spiliada’), [1987] A.C. 460; [1986] 3 W.L.R. 972; [1986] 3 All E.R. 843; [1987] 1 Lloyd”s Rep. 1, referred to.

Legislation construed:

Grand Court Rules 1995, Preamble: The relevant terms of the Preamble are set out at para. 55.

O.23, r.1: The relevant terms of this rule are set out at para. 29.

O.41, r.5: The relevant terms of this rule are set out at para. 35.

Civil Procedure-costs-security for costs-receiver bringing proceedings in name of insolvent company under no duty to ensure company has funds to meet costs-defendant”s primary method of protection security for costs-absent such protection, defendant not normally entitled to order for costs payable by receiver personally

Civil Procedure-costs-security for costs-plaintiff relying on lack of funds to adduce evidence that order for security will stifle claim-to show cannot obtain funds from third party

Civil Procedure-costs-security for costs-court to consider all circumstances of case when fixing amount of security-in particular (i) estimated costs of defending action, taking into account possibility of settlement; and (ii) amount plaintiff likely to be able to raise-not to make continuation of claim dependent on impossible condition, onus on plaintiff to put proper and sufficient evidence before court of lack of funds-plaintiff to make full and frank disclosure, but if gives incomplete or misleading account, court may proceed with best estimate of what can afford

Civil Procedure-case management-temporary stay of proceedings-court will only rarely (if at all) exercise case management powers to impose temporary stay on proceedings commenced as of right, to force plaintiff to bring parallel proceedings in foreign jurisdiction-may take into account litigation in other jurisdictions as collaboration between judges highly desirable

The plaintiff brought an indemnity enforcement action against the defendant in respect of two Liberian judgment debts.

The plaintiff (‘CIGNA WW’) was an insurance company, incorporated in Delaware, United States, with insurance operations in Liberia. The defendant (‘ACE’) was an insurance holding company, incorporated in the Cayman Islands, which had acquired the assets, liabilities and obligations of CIGNA WW”s business in Liberia. The parties disagreed on the nature and scope of CIGNA WW”s operations in Liberia and, in particular, on whether it had a Liberian ‘branch.’

In 1991, the Abi Jaoudi & Azar Trading Co. Ltd. (‘AJA’) brought an unsuccessful claim against CIGNA WW in the US District Court, Eastern District of Pennsylvania (‘EDPA’), for breach of certain insurance policies. However, in 1998, the AJA was successful in a Liberian court on the same cause of action and obtained judgment in excess of US$65m. In 2001, the EDPA obtained an anti-suit injunction prohibiting AJA from enforcing the Liberian judgment in any jurisdiction and in 2002, a Liberian court issued an anti-anti-enforcement injunction declaring the AJA Liberian judgment to be enforceable and any action to prohibit its enforcement a contempt of court. In 1999, a consolidated group of 22 claimants (‘G-22’) also made a claim against CIGNA WW in a Liberian court for insurance payments. In 2001, CIGNA WW obtained a declaratory judgment in the District Court for Delaware that it was not liable to the G-22; notwithstanding this, in 2005, a Liberian court entered judgment for G-22 in excess of US$28m.

In 2006, CIGNA WW and ACE received a letter from Mr. Lohman, counsel to AJA and two Nevis companies, demanding payment of the AJA and G-22 judgments. Mr. Lohman alleged that in 2005 title to the right to receive any proceeds under the Liberian judgments had been assigned to the Nevis companies. ACE averred that these were shell companies formed for the sole purpose of receiving and distributing any funds recovered pursuant to the Liberian judgments to unidentified shareholders who, in return, had agreed to advance litigation expenses. In 2007, following an investigation into the manner in which CIGNA WW operated its business in Liberia, entailing alleged breaches of the Liberian Insurance Law, the Liberian Civil Court, on the Attorney General”s application, appointed Mr. Senesie, then Commissioner of Insurance for Liberia, as receiver over the Liberian ‘branch’ of CIGNA WW.

In 2008, Mr. Senesie instituted the present proceedings for indemnification in respect of the AJA and G-22 Liberian judgments. In response, CIGNA WW brought a claim in the EDPA against, inter alia, Mr. Senesie and Mr. Lohman, for contempt of court, submitting that by instituting the Cayman proceedings the respondents had aided and abetted AJA”s violation of the EDPA”s anti-suit injunction. The respondents defended the claim on the ground of, inter alia, statutory foreign sovereign immunity, but were unsuccessful before the EDPA and appealed to the Court of Appeals for the Third Circuit. Meanwhile, CIGNA WW had commenced a further action against Mr. Senesie in the Chancery Court of Delaware for a declaratory judgment that he, as a foreign receiver of a Delaware corporation, had no authority to pursue claims on behalf of CIGNA WW outside Liberia. Mr. Senesie similarly defended this claim on the ground of, inter alia, sovereign immunity. In 2009, consent orders were entered by the Grand Court, the EDPA and the Delaware Chancery Court, staying proceedings in all three jurisdictions pending the final determination of the appeal to the Court of Appeals.

In 2010, the Court of Appeals held that the respondents were not entitled to statutory sovereign immunity, but remanded the case to the

EDPA to consider any entitlement to immunity under common law. The stays of proceedings were automatically lifted by the Court of Appeals” determination. In the Delaware proceedings, however, the Chancery Court (Laster, V.C.) granted a further stay until 45 days after the resolution of the remanded foreign sovereign immunity claim in the EDPA; the court further expressed the hope that the Cayman court would in turn await its judgment.

In 2011, in the EDPA proceedings, the respondents agreed to abandon the indemnity enforcement action against ACE in the Grand Court relating to the AJA Liberian judgment (‘the AJA claim’). In the present proceedings, CIGNA WW filed a purported re-amended writ of summons and amended statement of claim, without leave. The amendments included the reduction of the indemnity sought by reference to the liability under the AJA Liberian judgment and the replacement of Mr. Senesie by his successor as commissioner and receiver, Mr. Sesay. As it was common ground that Mr. Sesay had no ability to satisfy any award for costs, ACE applied for an order that CIGNA WW/Mr. Sesay provide security for its costs; further, it applied for an order that the action be stayed pending the final determination of the Delaware proceedings. ACE had also issued two strike-out summonses, one of which concerned whether Mr. Sesay had authority to bring suit in the name of CIGNA WW in his alleged representative capacity as receiver. The application for security was in respect of proceedings before the end of the hearing of these strike-out summonses.

Abandonment of the AJA claim

CIGNA WW submitted that (i) by the purported amendments to the writ and statement of claim it had done all that was necessary to comply with its agreement with the EDPA to abandon its indemnity enforcement action in respect of the AJA claim; (ii) it would agree to an order that its AJA claim be dismissed with prejudice, but...