Kennecott Utah Copper Corporation & Ors v Minet Ltd. & Ors

Issue estoppel does not prevent a later broker-negligence claim merely because an earlier preliminary-issues trial decided that insured plant had not attached to operational cover. The estoppel must concern an issue necessary to, and actually determined as part of, the earlier decision.

A later claim is not automatically an abuse because it could have been brought earlier. The court must assess all the circumstances, including litigation strategy, fairness and whether the later claim is inconsistent with the earlier judgment. Claims against brokers cannot be summarily dismissed where earlier findings did not address the pleaded duties or causation.

The claimants appealed from an order of Mr Justice David Steel striking out their claim against Minet and granting summary judgment to the Jardine defendants. The claims arose from the failure to secure continuous insurance and reinsurance cover for plant in a smelter modernisation project.

In earlier proceedings against operational reinsurers, Mr Justice Langley held that the plant had not attached to the operational cover. His judgment was reported at [2000] Lloyd's Law Reports (Insurance and Reinsurance) 179. The present claims alleged that the brokers should have warned of the risk of a gap in cover and advised the claimants to obtain alternative cover. The central questions were whether Langley J’s findings created issue estoppels, whether the later proceedings were an abuse of process, and whether the claims against the Jardine defendants had no real prospect of success.

The appeal was allowed unanimously. The applications by Minet and the Jardine defendants were dismissed, with consequential costs orders.

1. Issue estoppel. Lord Justice Chadwick, whose analysis was expressly agreed by Lord Justice Longmore and Lord Justice Pill, held that the earlier preliminary-issues trial concerned the construction of the policies, attachment of the plant and the effect of the alleged oral agreement of 28 April 1995. Direct consideration of the alternative broker claim and causation had been excluded. The findings that the plant had not attached and had not been tested or commissioned by any possible criterion therefore did not determine whether Minet knew the likely state of the plant, should have warned of a gap in cover, or should have advised the claimants to obtain alternative cover.
2. The present claim accepted that there was no cover under the operational policies. It did not constitute a challenge to Langley J’s decision. Success in the broker claim would therefore be consistent with that decision, and no issue estoppel arose.
3. Abuse of process. Applying the broad, merits-based approach stated in Johnson v Gore Wood [2002] 2 AC 1, the court held that the later proceedings were not an impermissible collateral attack. Although the further claims could have been brought earlier, the parties had knowingly adopted a preliminary-issues strategy and had discussed the possibility of later claims. Preventing the claims would be disproportionate and would not be justified by unjust harassment. Lord Justice Pill added that the guidance in Aneco Reinsurance (Underwriting) Limited v Johnson & Higgins Limited [1998] 1 Lloyd's Rep 565 made simultaneous determination desirable in many cases, but did not impose an inflexible practicability test.
4. Jardine defendants. The earlier findings were made in proceedings to which those defendants were not parties and did not address the new allegations against them. They did not establish that the claimants had no real prospect of proving that the Jardine defendants’ acts or omissions caused the loss.
5. The order striking out the claim against Minet and granting summary judgment to the Jardine defendants was set aside. The applications were dismissed and the respondents were ordered to repay sums paid on account of costs, with interest.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The applications by Minet and the Jardine defendants were dismissed, and costs and repayment orders were made.
2. High Court of Justice, Queen’s Bench Division (Commercial Court): Mr Justice David Steel struck out the claim against Minet as an issue-estoppel and abuse-of-process case, and granted summary judgment to the Jardine defendants on the basis that the claims had no real prospect of success.
3. Earlier High Court proceedings: Mr Justice Langley determined preliminary issues concerning policy attachment and held that the relevant plant was not covered. His judgment was reported at [2000] Lloyd's Law Reports (Insurance and Reinsurance) 179.