Fremont Insurance Company Ltd v Fremont Indemnity Company [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mance J. |
| Judgment Date | 31 July 1997 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 31 July 1997 |
Mance J.
Queen's Bench Division (Commercial Court)
Writ — Validity of writ — Consolidation of actions — Service out of jurisdiction — Parties overlooked requirement to issue concurrent writ for service out of jurisdiction within four months — Whether validity of writ should be extended — Whether action was time barred — whether actions should be consolidated if plaintiff would gain ability to serve out of jurisdiction and limitation advantage — Rules of the Supreme Court, O. 4, r. 9, O. 6, r. 8, O. 11, r. 1(1)(c).
This was an application to extend the validity of a writ and consolidate two actions and for leave to serve out of the jurisdiction.
The plaintiff was an insurance company in provisional liquidation and in run off. It was a member of a group of companies including its immediate parent, “FIC”, a Californian company, and “FRC” of Bermuda. The plaintiff on 20 September 1996 issued proceedings against FIC and FRC in relation to reinsurance contracts which FIC and FRC denied were binding on them or had been avoided or cancelled by 4 March 1991. The plaintiff on 7 February 1997 amended its writ to add directors of the companies as defendants on the basis that if the reinsurance was terminated that involved a breach by the directors of their fiduciary duties. On 14 February 1997 a separate writ was issued against a further director, “M”, and on 18 June 1997 the plaintiff issued a summons to consolidate the actions intending after consolidation to apply for leave to serve M out of the jurisdiction under RSC, O.11, r. 1(1)(c) on the ground that M was a necessary or proper party to the proceedings already served on other defendants outside the jurisdiction.
M objected to consolidation on the ground that any claim against him was time-barred and not a claim in respect of which the plaintiff could obtain leave to serve out and that the plaintiff should not be allowed to achieve by a fresh writ and consolidation what it was too late to achieve by re-amendment of the first writ.
Held, extending the validity of the writ and consolidating the actions:
1. The parties had overlooked the existence and implications of RSC, O. 6, r. 8(1A) which provided that the original writ issued not for service out of the jurisdiction against M could not generate the concurrent writ required for service on him out of the jurisdiction and having a six month period of validity unless such concurrent writ was issued within four months of the date of issue of the original writ, i.e. by 14 June 1997.
2. There was a good reason for extending the validity of the writ. The reason for extension and the explanation for failure to apply for extension before the validity of the writ expired were one and the same. The validity of the writ should be extended to six months to put the plaintiff in the position in which it believed that it was and in which the defendant also thought that he was. There was no good or sufficient reason for a further extension of time for service of the second writ out of the jurisdiction.
3. The nature of the two actions and of their common subject-matter and issues made them clearly appropriate for consolidation. The plaintiff would have gained a limitation advantage by the course adopted of issuing a second writ and applying to consolidate it, but the issue of the second writ had not been suggested or shown to have been abusive. The two actions should be consolidated even though that would enable the plaintiff to apply under O.11, r.1(1)(c).
4. The case was appropriate for service out on M, despite the age of its subject-matter and the period taken to issue and take steps to serve proceedings.
The following cases were referred to in the judgment:
Arab Business Consortium International Finance & Investment Co v Banque Franco-TunisienneUNK [1996] 1 Ll Rep 485; [1997] 1 Ll Rep 531 (CA).
Arab Monetary Fund v Hashim (No. 4)WLR [1992] 1 WLR 553; [1992] 1 WLR 1176 (CA).
Dong Wha Enterprise Co Ltd v Crowson Skipping LtdUNK [1995] 1 Ll Rep 113.
Jay Bola, TheUNK [1992] 1 Ll Rep 62.
Ketteman v Hansel Properties Ltd [l987] AC 189.
Kleinwort Benson Ltd v Barbrak Ltd (“The Myrto”)ELR [1987] AC 597.
Kyriaki, TheUNK [1993] 1 Ll Rep 139.
Nelson v RyeWLR [1996] 1 WLR 1378.
Practice Direction (Arbitration Award: Appeal)WLR [1985] 1 WLR 959.
Schothurst v Franz Dauter GmbHUNK [1973] 2 Ll Rep 91.
Welsh Development Agency v Redpath Dorman Long LtdWLR [1994] 1 WLR 1409.
David Mabb (instructed by Manches) for the plaintiffs.
Steven Loble of Morgan Lewis & Bockius for defendants.
Mance J:
The plaintiff has been in provisional liquidation since October 1992. It is represented before me by Mr David Mabb, instructed by Manches & Co. Prior to 7 March 1991 it was active as an insurance company, writing new and renewal business. Since then it has been in run off. It was and is a member of the Fremont insurance group of companies, which includes its immediate parent, Freemont Indemnity Co (“FIC”), a Californian company, and Fremont Reinsurance Co Ltd (“FRC”) of Bermuda. Its directors included Hans Coffeng, Geoffrey Wrightman, Richard Williams and James McIntyre. Mr Coffeng and Mr McIntyre reside in California, and Mr Wrightman and Mr Williams in this country. The interests of FIC, Mr Coffeng and Mr McIntyre (although he has not been served, and the issue is whether he can be) have been represented before me by Mr Loble of Morgan Lewis & Bockius, solicitors.
The plaintiff on 20 September 1996 issued proceedings in action 1996 Folio No. 1888 against FIC and FRC, alleging that they were parties to two stop loss contracts made on or about 15 February 1991 and 16 December 1991 reinsuring the plaintiff. For present purposes, it is the first only of these alleged contracts, with FIC, which is material. Leave to serve out of the jurisdiction was granted by Colman J on 20 September 1996, the writ was served, FIC and FRC as defendants acknowledged service through Morgan Lewis & Bockius and points of defence were served on 26 November 1996. FIC alleges in the points of defence that no binding reinsurance contract was made, alternatively that any made has been validly avoided or in the further alternative that any made was cancelled and treated as being of no effect at an unspecified date, which the evidence before me now puts as having been on or before 4 March 1991.
The writ in action 1996 Folio No. 1888 was on 7 February 1997amended with leave to add Coffeng, Wrightman and Williams as third to fifth defendants, on the basis that, if the reinsurance contract was terminated, this involved a breach by them of their fiduciary duties as directors, in respect of which they are liable to pay the plaintiff “equitable compensation”. Leave to serve Mr Coffeng was granted by Clarke J on 23 May 1997 and he was served on 10 June 1997. Wrightman and Williams were served within the jurisdiction.
On 14 February 1997 the plaintiff decided also to pursue Mr McIntyre on like basis to Coffeng, Wrightman and Williams. A fresh writ was issued against him, giving rise to action 1997 Folio No. 365. The writ was endorsed “Not for service out of the jurisdiction”, and carried the usual note:
“NOTE: This Writ may not be served later than 4 calendar months beginning with that date [viz, 14 February 1997] unless renewed by order of the court (or if leave is required to effect service out of the jurisdiction, 6 months).”
The plaintiffs solicitors on 14 March 1997 sent Mr McIntyre copies of both the writs, saying:
“Although we have advised our clients that they have a strong claim against you (and other directors of [the plaintiff]) the proceedings are essentially protective of our clients” position. They have been issued because otherwise the claims against you and your co-directors arguably would have become statute-barred. Our clients do not propose pursuing the proceedings against you for the time being. What we propose, therefore, is that the proceedings be served on you and then stayed. The stay will be determinable on our giving you not less than 14 days notice of our intention to proceed with the claims against you.
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