CGU International Insurance Plc v AstraZeneca Insurance Company Ltd

JurisdictionEngland & Wales
JudgeLord Justice Rix,Lord Justice Longmore
Judgment Date16 October 2006
Neutral Citation[2006] EWCA Civ 1340
Docket NumberCase No: A3/2005/2844
CourtCourt of Appeal (Civil Division)
Date16 October 2006
Between:
Cgu International Insurance Plc & Ors
Applicant
and
Astrazeneca Insurance Co Ltd
Respondent

[2006] EWCA Civ 1340

Before:

Sir Anthony Clarke (Mr)

Lord Justice Rix and

Lord Justice Longmore

Case No: A3/2005/2844

IN THE SUPREME COURT OF JUDICAT

COURT OF APPEAL (CIVIL DIVISI

ON APPEAL FROM QUEEN'S BENCH DIVISION, COMMERCIAL CO

MR JUSTICE CRESSW

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Colin Edelman QC & Mr David Edwards (instructed by Messrs Mayer Brown Rowe & Maw LLP) for the Applicant

Mr Christopher Butcher QC & Mr Stephen Kenny (instructed by Messrs Lovells) for the Respondent

Lord Justice Rix
1

This is an application for permission to appeal, on notice, with appeal to follow if permission is granted. The application for permission to appeal is in itself highly contentious, for the respondents submit that there is a statutory and thus jurisdictional bar on any possibility of this court, the court of appeal, granting permission to appeal or entertaining any form of appellate proceedings in circumstances where the judge did not give permission to appeal himself: see section 69(8) of the Arbitration Act 1996. The applicant, however, submits that there is court of appeal authority, namely North Range Shipping Ltd v. Seatrans Shipping Corporation [2002] EWCA Civ 405, [2002] 1 WLR 2397, which allows a residual discretion to permit an appeal, despite the judge's refusal of permission, where that refusal can be challenged on the grounds of unfairness pursuant to article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the "Convention") . The appellant submits that there was such unfairness here. The respondents on the other hand submit that North Range was decided per incuriam and is wrong, and should not be followed; and that in any event, what is dressed up as a challenge to unfairness below is in truth nothing more than a complaint that the judge erred in refusing permission.

Section 69(8) of the Arbitration Act 1996

2

Section 69(8) is one of a number of provisions of the Arbitration Act 1996 (the "1996 Act") which limit the right of appeal to cases where the first instance judge himself gives leave to appeal. (The 1996 Act, preceding as it does the CPR, uses the expression "leave" where the CPR now speaks of "permission".)

3

Section 69 is concerned with appeal from arbitration awards. It enacts a concern, in the interests of party autonomy, privacy and finality, that such awards should not be readily transferred to the courts for appellate review. Therefore, an appeal to the (first instance) court can only be brought with leave and only if a number of conditions are met, eg the decision of the tribunal on a point of law is "obviously wrong" or that "the question is one of general public importance and the decision of the tribunal is at least open to serious doubt" (section 69(3) ) . If leave to appeal to the court is refused, then an appeal to the court of appeal from that refusal can only be granted by the first instance court, unless that court itself gives leave to appeal from its refusal of leave. Thus section 69(6) provides:

"(6) The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal."

Section 69(2) also provides that

"(2) An appeal shall not be brought under this section except…with the leave of the court."

5

In this case we are concerned with section 69(8) which deals with the situation where what is in consideration is a further appeal to the court of appeal from the decision of the court of first instance on the merits of the appeal from the arbitrators' award. Thus –

"(8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.

But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal."

6

There is a similar provision under section 68, which provides for the possibility of challenging an award for "serious irregularity affecting the tribunal, the proceedings or the award". Thus, under section 68(4) :

"The leave of the court is required for any appeal from a decision of the court under this section."

7

Section 67, which is concerned with challenging an award on the ground of the arbitral tribunal's lack of substantive jurisdiction, also contains, in its subsection (4) , a provision in identical terms to section 68(4) .

8

It is therefore common ground in this case that, without the commercial court judge's leave to appeal, the merits of his decision on the appeal to him from the award, cannot come before this court. And it is also common ground that, as a corollary of the need for leave to appeal from the judge, this court cannot entertain an appeal, or an application for permission to appeal, on the merits of the judge's decision to refuse leave to appeal: Lane v. Esdaile [1891] AC 210, itself applied in Henry Boot. As Tuckey LJ said in North Range (at para 11) : "What is clear is that there is no appeal from the judge's refusal to give leave on the merits."

9

The issue is whether the residual discretion, to consider where necessary the fairness of the judge's refusal of leave to appeal, in the event of a breach of article 6 of the Convention, propounded by this court in North Range, survives the per incuriam submission made to us; and if it does, assists the applicant on the facts of this case.

The underlying dispute between the parties

10

The applicant is AstraZeneca Insurance Company Limited, a wholly owned subsidiary of AstraZeneca plc and a captive insurer of the group's property, business interruption and liability insurance ("AZICL") . The respondents are a group of insurance or reinsurance companies, lead by CGU International Insurance plc ("CGU") and Royal & Sun Alliance Insurance plc ("RSA") . For convenience, I will refer to the respondents as the reinsurers.

11

In 1997 AZICL insured the group companies under a worldwide Excess Liability Policy ("ELP") and reinsured with the reinsurers. The ELP contained no express choice of law; the reinsurance contract expressly referred to English proper law. It has always been common ground, however, that the ELP was also governed by English law as its proper law.

12

For relevant purposes, the cover granted by the ELP and reinsured with the reinsurers was liability to pay "damages on account of (a) Personal Injuries [and] (b) Property Damage".

13

The ELP contained a "USA Service of Suit" clause relating to insureds operating in the USA. Such a clause bound such insureds to submit to a court of competent jurisdiction within the USA. The reinsurance contract contained a London arbitration clause.

14

The ELP contained a "follow the fortunes" clause, but no "follow the settlements" clause. It is said that whereas the former would or might bind the reinsurers to pay in respect of a liability imposed on AZICL under the ELP by the judgment of a foreign court even interpreting the ELP cover by means of its own law and in a way different from English law, a settlement in anticipation of such a liability would not be binding on reinsurers if English law applied to the relevant liabilities.

15

In November 1997, Garst Seed Company ("Garst") , an AstraZeneca company operating in the USA, incorporated in Delaware, and with its headquarters and principal place of business in Iowa, obtained a licence to produce and distribute a genetically modified corn-seed called "Starlink". The US Department of Agriculture permitted the use of Starlink for animal feed purposes but not for human consumption. In September 2000 there were reports that certain human feed products had tested positive for a protein which Starlink produced. These reports generated a large number of claims against Garst brought by farmers, food manufacturers, food processors and the like. Claims totalling about $2 billion were ultimately settled for a sum of approximately $80 million. AZICL covered and paid Garst and sought recovery from the reinsurers, who declined liability for some 90% of the claim.

16

AZICL's claim went to arbitration. The essential dispute between the parties was as to whether the reinsurance contract covered the settlements in circumstances where, as the reinsurers alleged, Garst's liability to pay damages was not (for the most part) on account of Property Damage, but on account of the US claimants' own liabilities. For these purposes AZICL alleged that had AZICL declined Garst's claim, Garst would have commenced proceedings against AZICL in the state courts of Iowa and that those courts, applying Iowa law to the ELP in accordance with their local conflict of laws rules, would have held that all the amounts claimed by Garst were covered as "damages on account of…Property Damage". The reinsurers put those matters in issue as questions of fact, but also contended that the only relevant law was English law and that under English law Garst's and AZICL's claims were not in respect of damages payable on account of Property Damage. AZICL conceded that English law was the proper law of both insurance and reinsurance contracts (as I have said that was...

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