Faraday Reinsurance Co Ltd v Howden North America Inc & Anor

Permission to serve proceedings out of the jurisdiction may be justified where a claimant has a legitimate commercial interest in obtaining an early determination of a defined question concerning potential liability, even though no present claim has been made.

The court should exercise caution when granting negative or preliminary declaratory relief, particularly where foreign proceedings are pending. It must consider utility, the risk of forum shopping and concurrent proceedings, and the appropriate forum. Where an insurance policy was placed and underwritten in the London market, those circumstances may strongly support an implied choice of English law and England as the appropriate forum for construction issues. The existence of wider foreign proceedings does not necessarily make England inappropriate where the relevant policy is a separate contract and English law governs it.

Faraday sought declarations concerning three excess liability policies originally written by General Star International Indemnity Ltd and later transferred to Faraday under section 111(1) of the Financial Services and Markets Act 2000. The declarations concerned the applicable law and jurisdiction, the effect of the policy periods, and the operation of the indemnity provisions in relation to asbestos liabilities.

Howden North America Inc applied to set aside an order permitting service out of the jurisdiction. It argued that the proceedings lacked utility, particularly because it did not presently seek cover under two policies, and that Pennsylvania was the more appropriate forum because related insurance litigation had long been proceeding there. The central issues were whether the first policy was arguably governed by English law, whether England was the proper forum, and whether the proceedings served a useful purpose.

1. Application partly granted. The order permitting service out was set aside in respect of the second and third policies because, on the defendants’ concession, they would not seek coverage under those policies for the relevant asbestos personal injury liabilities. Proceedings concerning the first policy were allowed to continue.
2. The jurisdictional gateways in CPR 6.36 and paragraph 3.1(6) of Practice Direction 6B were satisfied. For the first policy, Faraday had much the better of the argument that the policy was made within the jurisdiction, made through London brokers, and governed by English law.
3. The absence of an express choice-of-law clause was not decisive. The first policy was placed on a London market underwriting slip, contained London market clauses and references, was stamped using London market abbreviations, and required notification to London brokers. These factors demonstrated with reasonable certainty an implied choice of English law. The reference to the Motor Vehicles (Authorisation of Special Types) Order 1969 did not assist because it applied in Scotland as well as England and Wales.
4. England was the appropriate forum for the first policy. The governing-law issue and significant construction questions concerned English law, and the relevant insurance contract was separate from the wider Pennsylvania insurance programme. The existence of related foreign proceedings, and the fact that they involved a broader factual dispute, did not outweigh the strong connection with England.
5. The court applied the principles governing negative declarations in New Hampshire Insurance Co v Philips Electronics North America Corp [1998] CLC 1062. A claimant may have utility in obtaining an early determination of a defined issue even where no claim has yet been made and further proceedings may remain necessary. The court should not resolve disputed questions about the effect that its judgment might have under Pennsylvania law.
6. Comity required respect for the Pennsylvania proceedings, but did not require the English proceedings concerning the first policy to be set aside or stayed.