English & American Insurance Company Ltd v AXA Re SA

Where an appeal has become moot on the merits because liability is accepted and only costs remain, the Court of Appeal may confine itself to a brief review of the underlying decision. It need ask only whether the appellant can plainly show that the judge was wrong. Summary judgment is not premature merely because formal requirements of a follow-the-settlement clause are disputed. If the evidence shows no realistic prospect of avoiding liability for at least the sum claimed, an alternative ground for summary judgment may suffice without resolving more refined contractual issues.

English and American Insurance Company Limited brought a claim against its reinsurer, AXA Re SA, arising from liabilities connected with Dow Corning claims. Gloster J granted summary judgment in part for approximately US$673,808 plus interest, alternatively finding no realistic prospect that AXA could avoid liability for the paid claim amounts.

During the appeal, EAIC supplied two further reports and AXA accepted liability for the relevant sum. The merits appeal therefore became moot, leaving only the costs order in issue. The central questions were whether the summary judgment application had been premature and whether the judge had been plainly wrong.

Appeal dismissed. Lord Justice Rix delivered the principal judgment, with Lord Justices Waller and Keene agreeing.

1. As liability had been accepted and only costs remained, the Court of Appeal was not required to examine the merits as if there were a substantive appeal. It was entitled to review the issues relatively briefly to determine whether AXA could plainly establish that the judge was wrong.
2. The judge had been entitled to grant summary judgment on the alternative basis that there was no realistic prospect of AXA establishing liability did not exist for at least the paid claim amounts. The claims had been considered in the context of the London Market Settlement Agreement and the subsequent Michigan litigation. EAIC had acknowledged a minimum liability, and AXA had itself been willing to accept liability on the same general model.
3. The Court did not need to resolve the more refined issues concerning the jurisprudence of follow-the-settlement clauses. Those issues did not provide a realistic basis for avoiding liability for the minimum sum. The dispute about whether there had been a settlement binding on AXA therefore did not make the summary judgment application premature.
4. AXA’s later acceptance of liability, following the provision of the further reports, confirmed the judge’s assessment. The remaining appeal against the costs order, in the relevant sum of £35,000, was dismissed.

• Queen’s Bench Division, Commercial Court: Gloster J handed down judgment on 20 December 2006 and granted EAIC summary judgment in part, alternatively finding no realistic prospect of AXA avoiding liability for the relevant paid claim amounts.
• Court of Appeal (Civil Division): After AXA accepted liability following receipt of further reports, the merits appeal became moot. The court upheld the judge’s alternative reasoning for the purposes of the costs appeal and dismissed the appeal.