Faraday Reinsurance Co Ltd v Howden North America Inc & Anor

In an international insurance dispute, a claimant seeking to continue English proceedings must show that they serve a useful purpose. The court may assess utility broadly. It need not decide contested questions of foreign law or issue preclusion at an interlocutory stage. An English declaration may be useful even if a foreign court may not treat it as preclusive, because it may clarify the governing law, assist that court, or matter in another enforcement jurisdiction. An appeal against a jurisdictional decision should ordinarily not proceed unless the first-instance judge made an error risking adverse consequences at trial which significantly outweigh the prejudice caused by the appeal.

Faraday brought English proceedings concerning a 1998 excess public and products liability policy originally written by General Star International Indemnity Ltd and transferred to Faraday under section 111(1) of the Financial Services and Markets Act 2000. It sought declarations concerning governing law, jurisdiction, policy periods and coverage for asbestos-related claims.

Howden challenged permission to serve out of the jurisdiction, arguing that the proceedings served no useful purpose and that Pennsylvania was the appropriate forum. Beatson J set aside permission for later policies after an undertaking, but held that the first policy was governed by English law, that the proceedings had utility and that England was the convenient forum. Howden appealed only on utility, arguing that the judge should have resolved the evidence on whether a Pennsylvania court would give an English judgment preclusive effect.

1. Appeal dismissed. The findings that the first policy was governed by English law and that England was the convenient forum were not challenged. The issue was whether the proceedings served a useful purpose.
2. Faraday bore the burden of showing utility. That requirement did not confine the court to the particular benefit of securing issue preclusion in Pennsylvania. The court could take a broad view. A declaration concerning English law and the construction of the policy could assist a Pennsylvania court even if it was not binding, and could also be useful in another jurisdiction where enforcement was sought. The divergence between English and United States approaches to asbestos insurance claims, illustrated by Wasa International Insurance Co v Lexington Insurance Co [2010] A.C. 180, made that assessment legitimate.
3. It was inappropriate at an interlocutory stage to conduct a detailed battle about contested foreign law. That would increase expense and delay while the parties should concentrate on determining the substantive dispute. Beatson J had directed himself correctly, adopted a broad view of suitability and had not reversed the burden of proof by using a double negative.
4. The court applied the guidance in New Hampshire v Phillips Electronic [1998] CLC 1062: an appeal on a jurisdictional issue should not proceed unless the first-instance judge made an error risking adverse consequences at trial which significantly outweighed the prejudice inevitably caused by the appeal. Beatson J had made no such error, so the Court of Appeal was slow to interfere.
5. Sir Stephen Sedley LJ added that a true discretion is conceptually different from a reasoned value judgment about utility. Ward LJ agreed that the distinction existed but considered it immaterial here. Longmore LJ also gave future-case guidance that an applicant seeking permission to appeal on an international insurance jurisdiction issue ex parte should draw the caution against interlocutory appeals specifically to the court’s attention and explain why it did not justify refusing permission.

• Court of Appeal (Civil Division): In [2012] EWCA Civ 980, Longmore LJ gave the leading judgment. Sedley LJ and Ward LJ agreed. The appeal was dismissed.
• High Court, Queen’s Bench Division, Commercial Court: Beatson J held that the first policy was governed by English law, that the English proceedings served a useful purpose and that England was the convenient forum. Permission to serve in relation to later policies was set aside following an undertaking.