Hughes & Others v Hannover Ruckversicherungs-Aktiengesellschaft
| Jurisdiction | England & Wales |
| Judge | MORRITT LJ |
| Judgment Date | 28 January 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0128-6 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | FC3 96/7703/B, FC3 96/7509/B |
| Date | 28 January 1997 |
[1997] EWCA Civ J0128-6
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE KNOX
Royal Courts of Justice
Strand
London WC2
Lord Justice Roch
Lord Justice Morritt
and
Lord Justice Thorpe
FC3 96/7703/B, FC3 96/7509/B
FC3 96/6913/B, FC3 96/7713/B
MR G MOSS QC & MISS S PREVEZER (Instructed by Messrs Freshfields, London EC4) appeared on behalf of the Appellant
MR H PASCOE (Instructed by Messrs Lovell, White & Durrant, London EC1) appeared on behalf of the Respondent
Insolvency Act 1986 s.426 provides, so far as relevant, that
(4) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory.
(5) For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court in any other part of the United Kingdom or in a relevant country is authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction.
In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.
(10) In this section "insolvency law" means-
(a)in relation to England and Wales, provision made by or under this Act or sections 6 to 10, 12, 15, 19(c) and 20(with Schedule 1) of the Company Directors Disqualification Act 1986 and extending to England and Wales;
…….
(d)in relation to any relevant country or territory, so much of the law of that country or territory as corresponds to provisions falling within any of the foregoing paragraphs;
Bermuda is a relevant territory (The Co-operation of Insolvency Courts (Designation of Relevant Countries and Territories) Order 1986 S.I. 1986/2123) and the Supreme Court of Bermuda has jurisdiction in relation to insolvency law in Bermuda corresponding to that of the High Court in England and Wales. By a Letter of Request dated 9th February 1996 the Supreme Court of Bermuda, in the exercise of its inherent jurisdiction, requested the High Court of Justice in England pursuant to the provisions of Section 426 Insolvency Act 1986 to assist it by
"(1) recognising the right and title of David E.W.Lines, Peter C.B.Mitchell and Christopher J.Hughes, when acting within the jurisdiction of the High Court of Justice in England, to represent and to act for and on behalf of [Electric Mutual Liability Insurance Company Ltd] as its Joint Provisional Liquidators for the purposes of restraining any actions or proceedings issued by [Hannover Ruckversicherungs-Aktiengesellschaft] in England and in any and all jurisdictions
(2) ordering that:-
(a) the continuation or commencement of any actions and proceedings brought by Hannover Re or any of its associated or subsidiary companies against the Company within the jurisdiction of the High Court of Justice in England and in any and all jurisdictions
(b) the putting in force of any attachment, sequestration, distress or execution within the jurisdiction of the High Court of Justice in England and in any and all jurisdictions by Hannover Re or any of its associated or subsidiary companies against the estate or effects of the company be restrained subject, in each case, to the leave of this court;"
Earlier in the letter it had been recited that a petition to wind up the company referred to had been presented to and the joint provisional liquidators appointed by that Court on 20th October 1995 and that
"it has been shown to the satisfaction of this Court that it is necessary for the purposes of justice and to assist the Joint Provisional Liquidators in the performance of their duties.."
that, in effect, such orders should be made.
On 9th and 15th February 1996 Harman J made orders in terms of the Request pending the full hearing of the application for such relief made by the Joint Provisional Liquidators of Electric Mutual Liability Insurance Co.Ltd. ("the Company"). By his order made on 3rd April 1996 following such hearing Knox J declined to continue the injunctive relief in respect of "any and all jurisdictions" outside England and Wales as sought in the Letter of Request. As the Joint Provisional Liquidators were not concerned to obtain such relief confined to England and Wales Knox J dismissed their application. This appeal of the Joint Provisional Liquidators from that order is brought with the leave of the judge.
The Company was incorporated in the State of Massachusetts in 1927 on the initiative of interests connected with General Electric Company, a company incorporated in New York. It was formed to carry on business as a mutual property/casualty insurance company and as such issued, amongst others, comprehensive general liability policies covering risks arising in the United States and Puerto Rica to, principally, General Electric and its associated companies. The Company does not now and never did have any place of business in the United Kingdom.
One of the reinsurers of the Company was the Defendant, Hannover Ruckversicherungs-Aktiengesellschaft ("Hannover Re"), which at all material times had and still has a place of business in Fountain House, 130 Fenchurch Street, London, EC3 and in Chicago, Illinois, USA but none in Bermuda. This reinsurance, though effected through brokers in London, was accepted by Hannover Re through its office in Germany. Each of the eight contracts of reinsurance between the Company and Hannover Re in force at the material time contained an arbitration clause in common form which, so far as relevant, provided that
"Should any difference of opinion arise between the Reinsurers and the Company which cannot be resolved in the normal course of business with respect to the interpretation of this Agreement or the performance of the respective obligations of the parties under this Agreement, the difference shall be submitted to arbitration.
…….
The arbitrators and umpire shall be officials of insurance or reinsurance companies authorised to transact business in one or more states of the United States of America and writing the kind of business about which the difference has arisen. The arbitrators and umpire are relieved from all judicial formalities and may abstain from following the strict rules of law and they shall make their award with a view to effecting the general purpose of this Agreement rather than in accordance with the literal interpretation of the language and the decision of the majority shall be final and binding upon the parties under this Agreement.
…….
The arbitration shall be held at the times and place agreed upon by the arbitrators and umpire. The laws of the State of Massachusetts shall govern the arbitration."
From 1991 onwards the Company faced very substantial claims from General Electric which the latter contends are covered by the comprehensive general liability policies issued to it by the Company. Those claims are in respect of the cost of cleaning up toxic waste dumps in the United States used for many years by General Electric and in respect of persons alleged to have contracted asbestos related diseases from asbestos products manufactured by General Electric. The evidence suggests that there are now some 600 of such sites and 75,000 such asbestosis claims.
In 1995 the Company reorganised its business. The reorganisation involved two principal steps. The first was to hive down to a wholly owned subsidiary, Electric Insurance Company, the more profitable insurance business of the Company and assets worth about US$75m. The effect of this step was to leave General Electric as the only creditor of substance of the Company in respect of the claims relating to toxic waste and asbestosis. The shares in Electric Insurance Company were transferred to Wilmington Trust Company as the trustee of a Delaware Guarantor Trust of which the Company was and is the beneficiary. The second principal step was to "redomesticate" itself to Bermuda. This step involved transferring its domicile as permitted by s.49A Massachusetts Insurance Code and being "continued" into Bermuda as an "exempted Company" in accordance with Part XA Bermudian Companies Act 1981.
The Reorganisation and therefore both these steps required the approval of the Commissioner of the Massachusetts Division of Insurance pursuant to Massachusetts General Laws Chapter 175 paragraph 206B. Application for approval was made on 7th June 1995 and, following a public hearing held on 20th June, was granted on 28th June 1995. On 1st July 1995 the Company was re-registered in Bermuda and thereby continued as a exempted company.
On 20th October 1995 the Company presented a petition to the Supreme Court in Bermuda for its winding up by that Court on the grounds that it was insolvent. On the same day the Joint Provisional Liquidators were appointed. The Company contended that its reserves, stated in the accounts for the periods ended 31st December 1994 and 30th June 1995 to be some US$250m., were non-existent and that its liabilities exceeded its assets by US$500m.
By a letter addressed to the Company dated 9th January 1996 Hannover Re demanded arbitration under the various reinsurance contracts then subsisting between them. The relief sought was "rescission of the Treaties from inception". In the alternative Hannover Re sought, but has since abandoned, an order "to withdraw its Bermudian winding up petition as fraudulently filed and redomesticate back in...
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