Voluntary Purchasing Group Inc. v Insurco International Ltd

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Georges and Kerr, JJ.A.)
• Judgment Date: 20 April 1995
• Date: 20 April 1995
• Court: Court of Appeal (Cayman Islands)

Court of Appeal

(Zacca, P., Georges and Kerr, 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. Roy for the appellant;

I. Paget-Brown and C.G. Quin for the respondents.

Cases cited:

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

(2) Hadmor Prods. Ltd. v. Hamilton, [1983] 1 A.C. 191; [1982] 1 All E.R. 1042, dicta of Lord Diplock applied.

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

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

(5) Société Nationale Indus. Aérospatiale v. Lee Kui Jak, [1987] A.C. 871; [1987] 3 All ER 510, applied.

Injunctions-interlocutory injunction-appeals-appellate court only to interfere with grant or refusal of interlocutory injunction if (a) decision based on misunderstanding of fact or law; (b) based on factual inference liable to be proved wrong by new evidence; (c) subsequent change of circumstances justifies varying it; or (d) decision so aberrant no reasonable judge could have made it

Conflict of Laws-parallel foreign proceedings-stay of foreign proceedings-in deciding whether to stay foreign proceedings, court to consider (a) natural forum for trial of action; (b) whether foreign proceedings vexatious or oppressive; and (c) whether stay would unjustly deprive plaintiff of juridical advantages in foreign forum-direction to be exercised with caution-stay only issued against party amenable to jurisdiction of Cayman court

Conflict of Laws-parallel foreign proceedings-stay of foreign proceedings-discharge of stay-court entitled to discharge stay of foreign proceedings on terms to prevent injustice to either party, e.g. waiver of substantial bond as condition for defending foreign proceedings

The appellant sought the restoration of an injunction restraining the respondents from continuing proceedings against it and Agrichem Ltd. in Texas.

Proceedings were brought against the respondent companies in the United States as a result of property damage caused by pollution escaping from the first respondent”s processing plant and equipment. Agrichem Ltd. was the insurer against the risks and the appellant, a Cayman exempt insurance company which had taken over Agrichem Ltd.”s insurance business, brought the present proceedings seeking a declaration that the respondents” policies had been obtained by the non-disclosure of material facts and that the appellant was not liable to indemnify the respondents. The respondents themselves then brought proceedings in Texas against the appellant and Agrichem Ltd., alleging breach of contract and relying on three other causes of action based on Texas legislation. The appellant

refused to plead to the Texas proceedings on the ground that the court there lacked jurisdiction and obtained an ex parte injunction in the Grand Court (Malone, C.J.) to restrain the respondents from pursuing the Texas proceedings or instituting proceedings for similar causes outside the jurisdiction of the Grand Court. Subsequently, the Grand Court (Harre, J.) granted the respondents” application for the discharge of the injunction, holding, inter alia, that (a) the court should only grant an injunction if it considered that the Cayman Islands were the forum conveniens and the Texas proceedings would be vexatious or oppressive; and (b) the appellant had made material non-disclosure in its ex parte application by failing to reveal that Agrichem Ltd. was also a party to the Texas proceedings and that the parties were awaiting the determination of the appellant”s application to strike out the Texas proceedings for lack of jurisdiction.

On the first working day after the discharge of the injunction, the first respondent entered default judgment against the appellant and Agrichem Ltd. amounting to more than $17m. The judgment was eventually set aside by the Court of Appeal and the case remitted for trial on its merits. To defend the action in Texas, however, the appellant would be required to enter into a bond which was likely to be a sum equivalent to the damages awarded to the respondents by the default judgment.

On appeal, the appellants submitted that the injunction should be restored because (a) the Cayman proceedings were ready to go to trial whereas extensive and costly pre-trial procedures were still outstanding in Texas; (b) the default judgment in Texas had had onerous consequences, in particular the requirement that the appellant and Agrichem Ltd. enter a substantial bond in order to defend the Texas action; and (c) the Cayman Islands were the forum conveniens, as evidenced by their assertion that Cayman law was the proper law of the contract.

In reply, the respondents submitted that the discharge of the injunction should be upheld because (a) it would be unfair to deprive them of the juridical advantage they would obtain by litigating the Texas causes of action in Texas; (b) in the absence of a proper assignment of the policies by Agrichem Ltd. to the appellant, it would be unfair to prevent the respondents from pursuing their claim against Agrichem Ltd. which was only a party to the proceedings in Texas and not to the present proceedings in the Cayman Islands; and (c) Texas was the forum conveniens, as evidenced by their assertion that Texas law was the proper law of the contract.

Held, upholding the discharge of the injunction on terms:

(1) The function of an appellate court on appeal from a judge”s grant or refusal of an interlocutory injunction was one of review only. The court was only entitled to set aside the judge”s decision if it was based on a misunderstanding of fact or law, or on a factual inference which could be proved wrong by new evidence, or if there had been a change of circumstances following the judge”s order which justified varying it, or if

the judge”s decision was so aberrant that no reasonable judge aware of his duty to act judicially could have reached it (page 406, line 30 – page 407, line 17).

(2) The jurisdiction to grant an injunction restraining a party from bringing or continuing proceedings in a foreign court was one which should be exercised with caution. Such injunctions were not directed against the court but against the party concerned and would only be issued to restrain a party who was amenable to the jurisdiction of the court against whom an injunction would be an effective remedy. When deciding whether to grant such an injunction the court had to take into account (a) what was the natural forum for the trial of the action; (b) whether the foreign proceedings would be vexatious or oppressive; and (c) whether granting the injunction would unjustly deprive the plaintiff of juridical advantages in the foreign forum (page 407, lines 18–21; lines 29–36; page 407, line 41 – page 408, line 4; page 408, lines 17–21;page 413, lines 14–28).

(3) The judge had made no error of fact or law and was perfectly entitled to discharge the injunction since there was a juridical advantage to the respondents of litigating the Texas causes of action in Texas and Agrichem Ltd. was a party to the Texas proceedings but not to the Cayman proceedings, although it was the case that the Cayman proceedings were at a more advanced stage and there were still extensive and costly pre-trial procedures to be completed in Texas. Further, the judge was correct in holding that it was unnecessary at this stage to decide upon the proper law of the contract. The requirement, subsequent to the judge”s order, that the appellant post a bond in order to defend the Texas proceedings was, however, onerous but this could be satisfactorily dealt with by discharging the injunctions on terms, namely that the respondents waive the requirement for the bond from the appellant and Agrichem Ltd. in the Texas proceedings (page 411, lines 20–25;page 415, line 32 – page 416, line 29).

KERR, J.A.: The plaintiff-appellant (‘Insurco’) is an insurance
company incorporated in the Cayman Islands on May 13th, 1985. Under the
laws of the Cayman Islands it is an exempt company and is permitted to
carry on business, other than domestic business, from within the Cayman
5	Islands. On June 1st, 1985 Insurco took over the insurance business of
Agrichem Insurance Co. Ltd., its assets and liabilities. Agrichem Ltd.,
formerly Agrichem Insurance Co. Ltd., is also a Cayman company.
The respondents, Voluntary Purchasing Groups Inc. (‘VPG’) and its
wholly-owned subsidiary, Ferti-Lome Distributors Inc. (‘Ferti’), are
10	corporations in and under the laws of Texas and hold or have held policies
of insurance issued by Insurco and its predecessor, Agrichem.
In the action here, the plaintiff”s causes of action and the remedies
sought are as summarized in the endorsements to the writ filed on October
31st, 1991, thus:
15	‘The plaintiff”s claim is against the defendants for:
1. A declaration that the plaintiff is and has at all material times
been entitled to avoid the policies of insurance Nos. AEUML–101,
AEUML–102, AEUML–103, AEUML–103–2, AEUML–103–3,
AGFEL–102, AEXAL–101, AGAPC–102 and 103 and UML–0002,
20	apart from any provision contained therein, on the ground that the
said policies were obtained by the non-disclosure of material facts
and/or by the representation of facts which were false in some
material particular.
2. An order for the rescission of the said policies of insurance.
25	3. Alternatively, a declaration that on the terms and conditions of
the said policies of insurance the plaintiff is not liable to defend or
indemnify the defendants or either of them for any loss or claim
made against them under or in connection with the said policies.
4. Further, and/or alternatively, a

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