Insurco Intl Ltd v Gowan Company

JurisdictionCayman Islands
CourtCourt of Appeal
Judge(Zacca, P., Henry and Kerr, JJ.A.)
Judgment Date10 Aug 1994
Court of Appeal

(Zacca, P., Henry and Kerr, JJ.A.)

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.J. Barrie for the plaintiffs;

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

M. Parkinson for Frit Industries Inc.;

A.J.E. Foster and A. Turner for Gowan Co.

Cases cited:

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

(2) Assunzione, The, [1954] 1 All E.R. 278; [1953] 2 Lloyd”s Rep. 716.

(3) Brinkibon Ltd. v. Stahag Stahl und Stahlwarenhandels G.m.b.H., [1982] 1 All E.R. 293; [1982] 1 Lloyd”s Rep. 217, applied.

(4) Camilla Cotton Oil Co. v. Grandex S.A., [1975] 1 Lloyd”s Rep. 470, dictum of Lord Wilberforce applied.

(5) Du Pont de Nemours (E.I.) & Co. v. Agnew, [1987] 2 Lloyd”s Rep. 585, distinguished.

(6) Entores Ltd. v. Miles Far East Corp., [1955] 2 Q.B. 327; [1955] 2 All E.R. 493; [1955] 1 Lloyd”s Rep. 511, applied.

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

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

(9) Rawson Trust Co. Ltd. v. G.C.T.C. Ltd., 1980–83 CILR 214, considered.

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

(11) Saipem S.p.A. v. Dredging VO2 B.V., The Volvox Hollandia, [1988] 2 Lloyd”s Rep. 361, dictum of Kerr, L.J. applied.

(12) Sfeir & Co. v. National Ins. Co. of N.Z. Ltd., [1964] 1 Lloyd”s Rep. 330.

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

(14) United General Comm. Ins. Corp. Ltd., In re, [1927] 2 Ch. 51; [1927] All E.R. Rep. 380, dictum of Lord Hanworth, M.R. applied.

Legislation construed:

Grand Court (Civil Procedure) Rules, r.13: The relevant terms of this rule are set out at page 227, line 22 – page 228, line 2.

r.16(5): The relevant terms of this sub-rule are set out at page 228, lines 4–5.

r.16(6): The relevant terms of this sub-rule are set out at page 228, lines 6–11.

Conflict of Laws-contract-proper law of contract-law with which contract of insurance has closest connection-place of business (where proposals accepted and claims paid), form of contract, place where risks arise, not decisive-decisive to be able to identify jurisdiction at time contract made

Conflict of Laws-jurisdiction-forum conveniens-proper law of contract not determinative of forum-foreign jurisdiction more appropriate forum for action on disputed insurance claim governed by Cayman law if questions of fact and law similar to proceedings in foreign jurisdiction and witnesses resident there

Civil Procedure-judgments and orders-declaratory judgments-declaration of non-liability-not to be granted if applicant merely forum-shopping to obtain defence to foreign proceedings

Civil Procedure-appearance-unconditional appearance-foreign defendant entering unconditional appearance not precluded from applying to set aside writ or leave for service out of jurisdiction if court”s lack of jurisdiction emerges later-defendant to enter conditional appearance if lack of jurisdiction immediately obvious

The appellant insurance companies sought declarations of non-liability to the respondents in the Grand Court and were granted leave to serve the respondents out of the jurisdiction.

The appellants were registered, issued insurance policies covering risks in the United States, received premiums and settled claims in the Cayman Islands in accordance with an unrestricted Class B insurance licence.

Frit and Gowan were US corporations who manufactured and distributed agricultural chemicals. They obtained insurance cover for their

US operations from the appellants under standard US policies which did not specify the proper law applicable. As a condition precedent to becoming policyholders, Frit and Gowan became members of the appellants” companies under an agreement expressly governed by Cayman law. Frit was also insured by Mutual.

Actions were commenced in the United States against Frit and Gowan alleging that defective products supplied by them had caused pollution. Gowan and Mutual instituted proceedings claiming that the appellants were liable to defend the actions on their behalf and indemnify them against successful claims.

In the Cayman Islands, the appellants sought, inter alia, declarations of non-liability on the bases that they had already settled claims up to the policy limit in respect of Frit and the disputed events in Gowan”s action had taken place before the policy was issued. In any event, Gowan”s policy excluded the appellants” liability and was rendered void ab initio by Gowan”s material non-disclosure and misrepresentation of a US action in respect of the same chemical. Similar averments were made in the defence to the US actions. The Grand Court granted leave for service out of the jurisdiction on all three respondents.

Gowan and Frit entered conditional appearances and Mutual a general appearance. They all sought to set aside the order for leave to serve process out of the jurisdiction. Frit and Gowan also sought orders setting aside the writ of summons and dismissing the action, while Mutual applied for a stay with a general prayer for other and further relief.

The Grand Court (Schofield, J.) granted the orders sought and further ordered that certain parts of the writ against Mutual be struck out as an abuse of the process of the court. It held that (a) although Mutual had entered a general appearance, it was entitled to seek a stay of the proceedings and an order to set aside leave for service out of the jurisdiction since the question of forum non conveniens was not jurisdictional; (b) leave for service would be set aside since the appellants were governed by a US insurance agency, provided cover in the United States for US corporations, used US standard forms and their policies were therefore governed by US law, which together with many other significant factors pointed towards the United States rather than the Cayman Islands as the forum conveniens; (c) the action against Frit and Gowan would be set aside and the action against Mutual stayed because, although the court could grant a negative declaration, to do so in this case would be an abuse of its process when not all of the issues in the US proceedings could be resolved here and when there was no reason to expect the US court to be bound by them. The proceedings in the Grand Court are reported at 1992–93 CILR 445.

On appeal, the appellants submitted, inter alia, that (a) the Grand Court had erred in finding US law to be the proper law of the policies since (i) their companies were registered in the Cayman Islands and carried on their business here, the contracts were formed and performed here and not where the risks lay; (ii) the parties” intention to have the policies governed

by Cayman law should be inferred from the shareholders” agreement being expressly subject to it; and (iii) in the interests of certainty, it had to be possible to determine the proper law at the time the contracts were formed and it could not depend upon subsequent connections; (b) the forum conveniens must be the Cayman Islands since the policies were governed by Cayman law and the appellants would be at a juridical disadvantage if the case were heard in the United States and, consequently, leave for service out of the jurisdiction should not have been set aside; (c) furthermore, the writs should not have been set aside since the declarations were not simply designed to provide an indefeasible defence to the US action but included a positive averment of wrongdoing; and (d) the court could only exercise its discretion to grant leave for service under the Grand Court (Civil Procedure) Rules, r.13(3) if it had the jurisdiction to do so and, consequently, Mutual could not seek the setting aside of the order for leave for service or the writ once it had submitted to the jurisdiction.

The respondents submitted in reply, inter alia, that (a) US law was the proper law of the policies since (i) the place in which the contracts were formed was of limited relevance because it was the result of pure chance and the importance of the place of performance varied from contract to contract and (ii) the shareholders” agreement was irrelevant to the matter but the parties” intention could be inferred from the use of US standard forms; (b) the proper law of the policies was only one of the factors in deciding forum conveniens and in this case the United States was more appropriate because (i) the declarations sought raised questions of fact and law which were similar to the appellants” defences in the US actions; (ii) the witnesses as to fact would come from the United States where the events occurred and only one witness would be required from the Cayman Islands, to give evidence of the relevant law; and (iii) there was no real disadvantage to the appellants in hearing the action in the United States because, as insurers of US risks, they should have acquainted themselves with the relevant law; and the orders setting aside leave for service out of the jurisdiction should therefore be upheld; (c) one positive averment of wrongdoing could not disguise the fact that the declarations were sought as an attempt to provide a conclusive defence to the US actions and they should be refused as an abuse of the process of the court-and, in any case, they would not be recognized in the United States; and (d) conditional appearance was for use when the court obviously lacked jurisdiction but, by submitting to the jurisdiction by entering a general...

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