UK: Service Out Of Jurisdiction - Utility And Forum Conveniens

Last Updated: 27 September 2012
Article by James Crabtree and Susannah Wakefield

Ace European Ltd & 5 Others v Howden Group Ltd and Howden North America Inc (2012) 

Commercial Court, 17 September 20121 

The English High Court held in this case that it would not blindly follow the reasoning of the Court's previous decision in Faraday Reinsurance Co Ltd v Howden [2011]2  when considering the utility of exercising jurisdiction over a claim for declaratory relief. Instead, the Court will apply the relevant principles in the context of the specific facts of each case. The declaratory relief sought must serve some useful purpose (utility) in order to justify the English court exercising jurisdiction.3 

This judgment relates to an application brought by Howden North America, Inc. ("HNA", an engineering group supplying fans and gas cleaning equipment) to set aside an order granting the claimants (insurers subscribing to various layers of an excess public and product liability insurance programme) permission to serve out of the jurisdiction.

HNA faced personal injury claims in the U.S. alleging that HNA was responsible for exposure to asbestos products. HNA, in turn, brought claims against its insurers in federal court in Pennsylvania, which are ongoing. HNA joined the insurer claimants in this case to the Pennsylvania proceedings but the insurers sought a declaration from the English Court that: (i) the policies are governed by English law; and (ii) on a proper construction of the policies the insurers are not liable for asbestos-related claims where the third-party claimant had not suffered actionable personal injury or loss of or damage to material property which happens or occurs within the policy period or where a claim arising out of faulty materials was not made or notified within the policy period. The benefit for insurers of the policies being governed by English law as opposed to Pennsylvanian law is two-fold: (1) exposure to a hazardous condition does not trigger liability; and (2) the period clause is of fundamental importance and the relevant trigger must occur during the policy period.  

In granting leave to serve out of the jurisdiction, the Court had applied well established general principles.  HNA conceded for the purposes of its application to set aside that insurers had a good arguable case that the claims in respect of certain policies (which do not have an express English law or jurisdiction clause) fell within CPR Part 6.36 and paragraphs 3.1 (6)(a) (contract made within the jurisdiction) and (b) (contract made by or through an agent trading or residing in the jurisdiction) of Practice Direction 6B. Moreover, Field J stated that, in his opinion, these claims also fell within paragraph 3.1(6)(c) (contract governed by English law) because the policies were placed in England through London brokers. Other policies contained express English law and jurisdiction clauses. 

It was also not disputed by HNA that there was a serious issue to be tried on the merits of the claim.  What was disputed, however, was whether insurers had shown that the granting of the declaration sought would be of sufficient utility (purpose) and/or that England was the proper forum.   

In finding that the proceedings were properly served out of the jurisdiction, the Court made it clear that it did not merely follow its decision in Faraday without consideration (Faraday subscribed to three of the same policies in the excess layers and sought the same declaration).  Field J applied the relevant principles in the context of the facts of this case. The Court took a broad view in deciding whether insurers had established sufficient utility for it to exercise jurisdiction over the claims. Field J found that there was sufficient utility despite Judge Conti indicating in the Pennsylvania proceedings that English law was unlikely to apply.  The Court found there to be utility of an English judgment as there remained a real prospect that the Pennsylvania court would find English law to apply and, in such an event, the Pennsylvania court would at the very least find the English ruling of "considerable assistance".

The Court also noted that although Faraday Re is a UK company and the claimant insurers in this case are foreign entities or English subsidiaries of foreign conglomerates, the claimant insurers are "London market insurers who have a legitimate expectation that the parties to the policies would be bound by their express or implied agreement that the policies were governed by English law". As such, there was further utility in providing a judgment that could be used by the claimant insurers to resist any judgment of a foreign court that ignores the choice of law under the policies.

England was found to be the more appropriate forum following Beatson J's comments in Faraday that a local court is more apt to apply its own law and, additionally, for the reasons that the trial would be short, with limited factual evidence and unlikely to prejudice the Pennsylvania proceedings. 

Finally, the Court also commented that if HNA undertook not to claim under those policies containing express English law and jurisdiction clauses the Court would not exercise jurisdiction over the claims as the utility for exercising that jurisdiction would have fallen away.

The case demonstrates that insurers seeking declaratory relief in a cross-jurisdictional dispute must be prepared to establish the utility of such relief on their own individual circumstances and that the issue of utility will entail a very facts-specific analysis. The Court followed Faraday but stressed that it had done so having considered the facts in this case and applied the relevant principles accordingly.

However, as illustrated in the Court of Appeal decision in Faraday, where the lower court has considered the issue of utility and found that it is justified in applying its discretion to exercise jurisdiction over the matter, the appellate courts will not usually be willing to interfere with such discretion.4

Footnotes

1 [2012] EWHC 24271

2 [2011] EWHC 2837

3 Utility was one of several relevant factors considered in New Hampshire v Philips [1998] CLC 1062 to justify such exercise of jurisdiction.

4 [2012] EWCA Civ 980, at para 35 citing Phillips LJ's comments in New Hampshire

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