Howden North America Inc & Anor v ACE European Group Ltd. & Ors

This appeal concerned whether Field J was right to refuse to set aside his own order permitting service out of the jurisdiction of declaratory proceedings brought by a number of excess-layer insurers against Howden North America (HNA) in relation to cover for asbestos claims. The insurers sought declarations that the policies were governed by English law and, applying English law, that cover under section 1 and section 2 of the policies would not arise in certain asbestos scenarios. The key legal principles were (i) the Part 6 CPR gateway and Practice Direction 6B rules for service out of the jurisdiction, (ii) the Spiliada forum non conveniens test for appropriate forum, and (iii) the requirement that declaratory relief must have "utility" before an English court exercises jurisdiction where foreign proceedings are pending.

The court concluded that Field J erred in finding sufficient utility. Significant weight ought to have been given to the Pennsylvania federal judge's considered view that it was unlikely English law would be found to govern the policies under Pennsylvania choice of law rules, to the readiness of the Pennsylvania court to receive expert evidence on English law under Rule 44.1, and to the advanced state and timetable of the Pennsylvania proceedings. On those grounds the English proceedings were not sufficiently useful and risked operating as a pre-emptive strike to undermine legitimate foreign proceedings. The Court of Appeal allowed the appeal and set aside the grant of permission to serve out of the jurisdiction in respect of the eight policies listed.

Background and parties. HNA, a Howden Group North American subsidiary, faced numerous asbestos personal injury claims in the United States. Eight excess-layer liability policies (1995–1999 periods) were in issue. A number of insurers (collectively "the Insurers") issued declaratory proceedings in England seeking, broadly, declarations that the policies were governed by English law and that, under English law, the insurers were not liable in certain classes of asbestos claims under section 1 and section 2 of the policies.

Procedural posture. The Insurers issued the English claim form on 21 September 2011 and obtained Field J's permission to serve out of the jurisdiction. Related coverage litigation was pending in the U.S. District Court for the Western District of Pennsylvania (Judge Conti) in two sets of proceedings (the 2009 and 2011 proceedings). Those proceedings were advanced; Judge Conti had rejected forum non conveniens challenges and had indicated at interlocutory stage that it was unlikely English law would be held to govern the policies, though she admitted expert material on English conflict rules.

Relief sought and issues. The Insurers sought declaratory relief as to (i) the governing law of the policies (English law), (ii) the construction of section 1 (injury must be actionable in the policy period), (iii) the construction of section 2 (claims or notified circumstances must arise or be notified in the policy period), and (iv) attachment-point/aggregation issues. The court had to consider: (a) whether the CPR Part 6 gateways were made out (accepted), (b) whether there was a serious issue to be tried (accepted), and (c) whether England was the clearly appropriate forum (Spiliada) and, specifically, whether the declaratory relief had sufficient "utility" given the ongoing Pennsylvania litigation.

Court’s reasoning. Field J had held the English proceedings had utility, partly because an English judgment on choice of law and on English coverage principles would at least be of considerable assistance to Judge Conti and partly because of the expectation that London Market parties intended English law to govern. The Court of Appeal disagreed. The appellate court placed significant weight on Judge Conti's detailed consideration that it was unlikely English law would govern under Pennsylvania choice rules, on her acceptance that she could be instructed on English law (admission of Mr Bright's statement), and on the advanced procedural timetable in Pennsylvania. The appellate court held that an unsolicited English judgment would not be useful, that it risked being a pre-emptive strike to affect enforcement strategy, and that there was no need to advise a competent and willing federal court on elementary English law principles. The court therefore concluded Field J was wrong to find sufficient utility and set aside his permission to serve out of the jurisdiction in respect of the eight policies.

Appeal allowed. The Court of Appeal held that Field J was wrong to conclude that the English declaratory proceedings had sufficient "utility" to justify permission to serve out of the jurisdiction. The Pennsylvania court had given a detailed preliminary view that English law was unlikely to govern under Pennsylvania choice of law rules, had admitted evidence on English law, and would be capable of resolving the issues; the English proceedings therefore risked being an unjustified pre-emptive exercise of jurisdiction. Permission to serve out in respect of the eight policies was set aside.

Appeal from the decision of Field J in the Commercial Court (Queen's Bench Division) refusing to set aside his order permitting service out of the jurisdiction in proceedings by insurers against HNA (High Court of Justice, QBD, Commercial Court, Field J, 2011FOLIO1118). The appeal was heard in the Court of Appeal (Civ Div) and allowed. Related appellate authority: Faraday Reinsurance Co Ltd v Howden North America Inc & Anr [2012] EWCA Civ 980 (discussed in the judgment).