Insurco Intl Ltd v Gowan Company

• Jurisdiction: Cayman Islands
• Judge: (Schofield, J.)
• Judgment Date: 06 August 1993
• Court: Grand Court (Cayman Islands)
• Date: 06 August 1993

Grand Court

(Schofield, J.)

INSURCO INTERNATIONAL LIMITED

and

GOWAN COMPANY

AGRICHEM LIMITED and INSURCO INTERNATIONAL LIMITED

and

MUTUAL SERVICE INSURANCE COMPANY and FRIT INDUSTRIES INCORPORATED

R.N.A. Henriques, Q.C. and S. Barrie for the plaintiffs;

P. Lamontagne, Q.C. and Mrs. E. Maierhoffer for Mutual Service Ins. Co.;

N. Hill, Q.C. and M. Parkinson for Frit Industries Inc.;

A. Foster for Gowan Co.

Cases cited:

(1) First National Bank of Boston v. Union Bank of Switzerland, [1990] l Lloyd”s Rep. 32, dicta of Kerr, L.J. applied.

(2) Harrods (Buenos Aires) Ltd. (No. 2), In re, [1992] Ch. 72; [1991] 4 All E.R. 348, applied.

(3) Kuwait Asia Bank E.C. v. National Mutual Life Nominees Ltd., [1991] 1 A.C. 187; [1990] 3 All E.R. 404; [1990] 2 Lloyd”s Rep. 510, observations of Lord Lowry applied.

(4) Pick v. Manufacturers” Life Ins. Co., [1958] 2 Lloyd”s Rep. 93, dicta of Diplock J. applied.

(5) Rossano v. Manufacturers” Life Ins. Co., [1963] 2 Q.B. 352; [1962] 2 All E.R. 214; [1962] 1 Lloyd”s Rep. 187.

(6) Saipem SpA v. Dredging VO2 B.V., The Volvox Hollandia, [1988] 2 Lloyd”s Rep 361, dicta of Kerr, L.J. applied.

(7) Spiliada Maritime Corp. v Cansulex Ltd., The Spiliada, [1987] A.C. 460; [1986] 3 All E.R. 843; [1987] 1 Lloyd”s Rep. 1, dicta of Lord Goff applied.

Civil Procedure-service of process-service out of jurisdiction-applicant for service out of jurisdiction to show Cayman Islands appropriate forum for action-to show real and substantial connection based on e.g. proper law governing transaction, convenience or expense of conducting trial in jurisdiction

Conflict of Laws-contract-proper law of contract-factors to be considered in ascertaining jurisdiction with which contract of insurance has closest connection

Conflict of Laws-jurisdiction-forum conveniens-Cayman Islands not appropriate forum for suit involving Cayman registered insurance companies if policies governed by US law and already much US interpretation, proceedings already far advanced between parties in United States and parties, witnesses and damage principally in United States-administrative processing of policies in Cayman Islands not sufficiently significant to shift balance

Civil Procedure-judgments and orders-declaratory judgments-declaration of non-liability rarely to be granted on interlocutory application and not at all if applicant evidently forum-shopping or hoping to influence or create embarrassment in foreign proceedings

Civil Procedure-appearance-unconditional appearance-foreign defendant entering unconditional appearance not prevented from applying for either or both stay of Cayman proceedings and setting aside leave granted to plaintiff to serve out of jurisdiction-applications concerned with procedural matters not jurisdiction

The plaintiff insurance companies sought declarations of non-liability in respect of the defendant”s claims and were granted leave for service out of the jurisdiction.

The defendant in the first action and the second defendant in the

second action were manufacturers and distributors of agricultural chemicals in the United States and were the defendants in two actions in two US states in respect of alleged fertilizer and water contamination. The first defendant in the second action provided insurance cover to the second defendant but claimed it had no responsibility towards it in the law suits and that instead this was the responsibility of the plaintiff insurance companies, who also provided insurance cover to the two other defendants. These matters were the subject of proceedings between the parties in California and Alabama and in the latter state the court had already ruled in favour of one of the defendants. One of the parties in the California proceedings had also claimed for breach of good faith which was not a concept known to Cayman law.

The plaintiffs were exempt companies incorporated in the Cayman Islands but their owners and associates were all resident in the United States. Most of their paper work was done by a resident agent/manager in the Cayman Islands, including accounting and the settlement of claims but they were not licensed to insure within the Cayman Islands. The insurance arrangements offered made the policyholders shareholders in the insurance companies-the policy was valid under Cayman law and was expressly stated to be governed by that law and was a device used to attract business from the United States. Cover was provided solely to American corporations engaged in the agro-chemical industry in the United States and the individual policies utilized standard forms recommended by a US trade association to which many US insurance companies belonged. The policies were also printed in the United States.

The plaintiffs sought inter alia declarations that, based on the terms of the policies, they were not liable to defend or indemnify the defendants in the US actions and leave was granted for them to serve all the defendants out of the jurisdiction. Two of the defendants entered unconditional appearances and the other a general appearance. They all sought orders for the leave to serve to be discharged. The two defendant chemical companies also sought orders that the writ of summons and service of notice of writ be set aside and the action dismissed, while the defendant insurance company applied for a stay of proceedings.

The defendants submitted inter alia that (a) the basic test for granting leave to serve out of the jurisdiction was that the Cayman Islands should be the most appropriate forum to try the action and this was not so in the present case; and (b) the plaintiffs” action should be struck out as an abuse of the process of the court since the court had no jurisdiction to grant non-liability declarations in the circumstances.

The plaintiffs submitted inter alia that the Cayman Islands was clearly the proper forum since their place of business was there, premiums were paid to and policies issued from the Islands and claims were made to and paid by an agent/manager who was domiciled in the Cayman Islands.

Held, granting the defendants the orders sought:

(1) Where leave to serve out of the jurisdiction was applied for, it was for the applicant to show clearly that the Cayman Islands was the

appropriate forum for the action. That would depend on whether the Cayman Islands was the jurisdiction with the most real and substantial connection with the action and in this respect the court would look for certain connecting factors, namely the law governing the relevant transaction (the proper law) and other factors affecting convenience or expense that were associated with a trial in the jurisdiction (page 451, lines 4–19).

(2) To decide provisionally the proper law applicable to the policies the court had to discern the intention of the parties from the terms of the contracts and the surrounding circumstances in which they were made. The policies being silent on what was the proper law, the court would take into account that the plaintiffs were companies operating solely in the United States and subject to regulation by a central US agency. Their policies were designed to cover US corporations against risk and utilized standard US insurance forms. None of their senior personnel resided in the Cayman Islands and, moreover, none of the defendant companies had any connection whatsoever with the Cayman Islands. On the other hand, the Cayman Islands were the place where most of the administrative work was processed and the shareholders/policyholders agreements were governed by Cayman law, but this was consistent with the operation of a captive insurance scheme whereby the insurers and the policyholders sought to benefit from the tax advantages of the jurisdiction. It was clear from these factors that the jurisdiction with which the policies had the closest connection, and which became the proper law in the absence of any intention expressed to the contrary, was US law and not Cayman law and the court would so rule (page 451, line 26 – page 452, line 30; page 453, lines 11–32;page 454, lines 4–6).

(3) In addition to the proper law there were other factors which together determined the question of the forum conveniens for the actions. These were (a) the importance of all the policies being interpreted in the same way-the wording used had already been the subject of much interpretative litigation in the United States and it would be undesirable for the Cayman court and the California court (in which all the other proceedings had already started) to come to different and irreconcilable conclusions on the interpretation of the policies; (b) the proceedings initiated in another US court by one of the defendants were already far advanced and some of the claims had been determined and it would be inappropriate to relitigate them before a Cayman court; (c) with the possible exception of one witness for the plaintiffs, all the other witnesses resided abroad; (d) the injury and damage which led to the defendants” claims against the plaintiffs had occurred in the United States; and (e) the court was not obliged to consider itself the proper forum simply because it was difficult to decide which of several states of the United States was a more appropriate jurisdiction. For all of these reasons the Cayman Islands was not the proper forum for hearing the substantive issues and the court would grant the defendants the orders

sought to discharge the leave for service out of the jurisdiction (page 453, line 33 – page 454, line 4; page 454, lines 7–15;page 454, line 29 – page 455, line 27).

(4) Although the court possessed a wide jurisdiction over the granting of declarations, it would only grant a declaration of non-liability on an interlocutory application in the most exceptional cases, the preferable approach being to leave the applicant to establish his defence in the substantive action. Although the court would not make...