Insurco Intl Ltd v Voluntary Purch Group

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Georges and Collett, JJ.A.)
• Judgment Date: 10 December 1999
• Court: Court of Appeal (Cayman Islands)
• Date: 10 December 1999

Court of Appeal

(Zacca, P., Georges and Collett, JJ.A.)

INSURCO INTERNATIONAL LIMITED (Formerly Agrichem Insurance Co. Ltd.)

and

VOLUNTARY PURCHASING GROUP INCORPORATED and FERTI-LOME DISTRIBUTORS INCORPORATED

R.N.A. Henriques, Q.C. and S.A. Roy for the appellant;

S.G. Hellman for the respondents.

Cases cited:

(1) Amin Rasheed Shipping Corp. v. Kuwait Ins. Co., The Al Wahab, [1984] A.C. 50; [1983] 2 All E.R. 884.

(2) Charman v. W.O.C. Offshore B.V., [1993] 1 Lloyd”s Rep. 378; on appeal, [1993] 2 Lloyd”s Rep. 551, considered.

(3) DuPont de Nemours (E.I.) & Co. v. Agnew, [1987] 2 Lloyd”s Rep. 585, considered.

(4) Guaranty Trust Co. of New York v. Hannay & Co., [1915] 2 K.B. 536; [1914–15] All E.R. Rep. 24, considered.

(5) Halliday v. Shoesmith, [1993] 1 W.L.R. 1; [1992] T.L.R. 342; (1992), 136 Sol. Jo. (L.B.) 206, distinguished.

(6) Henry v. Geoprosco Intl. Ltd., [1976] Q.B. 726; [1975] 2 All E.R. 702, considered.

(7) Insurco Intl. Ltd. v. Gowan Co., 1994–95 CILR 210, considered.

(8) Pick v. Manufacturers” Life Ins. Co., [1958] 2 Lloyd”s Rep. 93.

(9) R. v. International Trustee for Protection of Bondholders A.G., [1937] A.C. 500; [1937] 2 All E.R. 164, dicta of Lord Atkin applied.

(10) Saipem S.p.A. v. Dredging VO2 B.V., The Volvox Hollandia, [1988] 2 Lloyd”s Rep. 361, distinguished.

(11) Sennar (No. 2), The, [1985] 1 W.L.R. 490; [1985] 1 Lloyd”s Rep. 521, considered.

(12) Spiliada Maritime Corp. v. Cansulex Ltd. The Spiliada, [1986] A.C. 460; [1986] 3 All E.R. 843, considered.

Legislation construed:

Companies Law (Revised) (Laws of the Cayman Islands, 1963, cap. 22, revised 1990), s.192: The relevant terms of this section are set out at page 545, lines 35–41.

Civil Procedure-judgments and orders-declaratory judgment-claim for declaration of non-liability by defendant sued in foreign jurisdiction not to be struck out as improper ‘forum shopping’ if accompanied by claim for positive relief and foreign proceedings could have been brought here

Conflict of Laws-jurisdiction-forum conveniens-filing of counterclaim may be acceptance of court”s jurisdiction, even if forum contested in defence

Conflict of Laws-contract-proper law of contract-insurance contract concluded under Class B insurer”s licence authorizing business other than domestic business may be governed by Cayman law-Companies Law (Revised), s.192 allows licensee to conclude contracts in Islands for business abroad

The appellant, a Cayman exempted company, applied for declarations relating to and rescission of insurance contracts issued by it.

The appellant held a Class B insurer”s licence permitting it to carry on insurance business other than domestic business from within the Islands. The respondents, operating in Texas, made claims against the appellant in respect of losses which they alleged were covered by the policies and called on the appellant to defend claims made against them, to which they were entitled to a defence under the policies. The policies covered losses in excess of those covered by underlying policies. None of the policies contained a choice of law clause.

Anticipating that the respondents would commence proceedings in Texas, the appellant served process on the respondents outside the jurisdiction in proceedings seeking (a) a declaration that it was entitled to avoid the policies on the grounds of material non-disclosure and misrepresentation; (b) rescission of the contracts; (c) a declaration that it was not liable to indemnify the respondents for loss under the policies; and (d) a declaration that the respondents were not entitled to be defended against or indemnified in respect of claims against them, due to breaches of the policies.

The respondents filed a defence and counterclaim, alleging, inter alia, that the proceedings should be stayed or dismissed on the ground of forum non conveniens in favour of proceedings it had commenced in Texas. The respondents obtained a default judgment in the Texas court, which was set aside on appeal on the basis of defective service of process. The Cayman proceedings continued. The Grand Court made, and later lifted, an order restraining the respondents from continuing the Texas action, which the appellant failed to have restored on appeal. The respondents filed a voluntary bankruptcy petition in the US Bankruptcy Court. They applied unsuccessfully to the Texas court for the appellant to be restrained from proceeding with the Cayman action. On the day before the date scheduled for the Cayman trial, they applied for the appellant”s claims to be struck out or, in the alternative, for a stay of proceedings.

The Grand Court (Harre, C.J.) ordered a stay of the appellant”s action on the ground of forum non conveniens and struck out its claims as an abuse of process. It ruled that prima facie the proper law of the insurance contracts was Texas and the respondents” counterclaim raised issues which would be best tried there. It stressed the relevance of the ‘negative’ nature of the declarations sought by the appellant in its decision to strike out the claims.

On appeal, the appellant submitted that (a) the court should not have heard the respondents” application at all, since it came at too late a stage in the proceedings, when it had spent much time and incurred considerable costs preparing for trial, including securing the attendance of witnesses from abroad; (b) the striking out of its claims was unjustified, since the remedies it sought (in particular the claims for avoidance and rescission) were not negative declarations, and it was not guilty of ‘forum shopping’; (c) the respondents had, by entering an unconditional appearance and filing a defence and counterclaim, accepted the jurisdiction of the Grand Court as the appropriate forum for the trial of

the action; (d) the Cayman Islands were the forum conveniens, since (i) Cayman law was the proper law of the insurance contracts, (ii) therefore if the case were tried in Texas, expert evidence of Cayman law would need to be led when determining the allegation of misrepresentation, and (iii) the Grand Court would probably refuse to enforce a judgment of the Texas courts; and (e) the Chief Justice had stayed the proceedings under the misapprehension that the US bankruptcy proceedings had effected a stay of the Texas action and that it would be dealt with as part of a bankruptcy settlement.

The respondents submitted that (a) the court had properly agreed to hear their summons immediately before the trial, since the appellant had had prior notice on a number of occasions of their intention to seek a stay of the Cayman proceedings; (b) the appellant had engaged in improper ‘forum shopping’ by seeking negative declarations of law from the Grand Court relating to their claims in the Texas action; (c) the appellant had submitted to the jurisdiction of the Texas court by filing its appeal against the default judgment entered there; (d) the appellant, as a plaintiff seeking service on the defendants outside the jurisdiction, had failed to discharge the burden of showing that the Cayman Islands were the more suitable forum for the trial of the action; and (d) Texas was the forum conveniens for the trial since (i) Texan law was the proper law of the contracts, (ii) the trial of the misrepresentation issue would require the interpretation of Texan documents and the attendance of expert witnesses of law from Texas, and (iii) there was no reason for the Grand Court to refuse to recognize or enforce judgment obtained in Texas.

Held, allowing the appeal:

(1) The Grand Court had properly agreed to hear the respondents” summons for a stay of proceedings or the striking out of the appellant”s claims, since the forum non conveniens issue had been raised in the defence and therefore the respondents would have been entitled to request that it be heard as a preliminary point at trial without the need for a summons. Furthermore, the appellant had unsuccessfully pursued the same issue when seeking to restrain the respondents from continuing the Texas action. Accordingly, the respondents had had adequate notice of the appellant”s intentions (page 539, line 37 – page 540, line 22).

(2) The court had erred in striking out the appellant”s claims on the basis that they were for negative declarations. Whilst it was common for defendants to attempt to avoid the trial of claims against them in an unfavourable jurisdiction by seeking declarations of non-liability unaccompanied by other relief in another jurisdiction, this was not the case here. The appellant”s claims for avoidance and rescission of the contracts were positive and substantive in nature, and if granted, declarations as to contractual liability would be otiose. Furthermore, since the appellant was a Cayman company carrying on business here, the respondents could properly have brought their action in the Grand Court

had they wanted to, and indeed the Texas court had refused to grant them a restraining order to prevent the appellant from pursuing its claims here. Accordingly, this was not improper ‘forum shopping’ and the order striking out the statement of claim would be discharged (page 540, line 31 – page 543, line 12).

(3) Regardless of where the burden of showing forum conveniens lay, the respondents” apparent acceptance of the jurisdiction of the Grand Court by filing a counterclaim was to be taken into account in deciding the issue. Given that they had already commenced proceedings in Texas, they could simply have chosen to file a defence together with an application for a stay of the Cayman action (page 544, lines 23–38).

(4) The Grand Court had wrongly concluded that Texas was the proper law of the insurance contracts. First, it had construed the provisions of the appellant”s licence-to carry on insurance business other than domestic business-as precluding the application of Cayman law to its policies, whereas in fact a saving provision...