Kemper Reinsurance Company v Minister of Finance (Bermuda) and Others

5 May 1998. The judgment of their Lordships was delivered by Lord Hoffmann.

The question in this appeal is whether the Court of Appeal of Bermuda has jurisdiction to hear an appeal from an order discharging leave to apply for an order of certiorari. The point is a perfectly general one, unaffected by the facts of the case. But the appellant also made a preliminary application to the Board which makes it necessary to explain the background against which the main point arises.

The appellant (“Kemper”) is an Illinois reinsurance company. It has treaties of reinsurance with Electric Mutual Liability Insurance Co. (“Emlico”) which is incorporated in Massachusetts. Emlico is a subsidiary of the General Electric Company (“G.E.”) and its business appears to be confined to insuring companies in the G.E. group and reinsuring those risks in the market. The policies it has written for G.E. have given rise to very large long-tail claims for indemnity against liabilities for asbestos-related diseases and cleaning up toxic waste. In 1994 Emlico reorganised its business by transferring its more profitable lines of insurance to a subsidiary, leaving itself only with long-tail liabilities under policies issued to G.E. It then transferred its domicile to Bermuda. The procedure by which a foreign company may acquire a domicile (in the statutory language, “be continued”) in Bermuda is governed by section 132C of the Companies Act 1981 and requires the consent of the Minister of Finance. An applicant must provide the minister with, among other things, proof that it has obtained “all necessary authorisations required under the laws of the country in which it was incorporated to enable it to make this application.” For this purpose, Emlico produced an order of the Massachusetts commissioner of insurance approving of the transfer of domicile. The order was made under section 49A of Chapter 175 of the Massachusetts General Laws (Insurance), which provides that the commissioner shall approve the transfer of an insurance company's domicile to “any other state in which it is admitted to transact the business of insurance” unless she determines that this is “not in the interests of the policyholders of the commonwealth.” The minister was duly satisfied by the commissioner's order and gave his approval. Emlico was registered as having been continued in Bermuda and became subject to the laws of Bermuda as if it had been incorporated there. Four months later, it petitioned for its own winding up on the grounds of insolvency.

Kemper considers itself prejudiced by Emlico's removal to Bermuda. It attempted unsuccessfully to intervene in the winding up but on 26 July 1996 the usual order was made and joint liquidators appointed. Kemper also applied ex parte to Ground J. for leave to apply for an order of certiorari to quash the consent of the minister and the subsequent registration by the Registrar of Companies on the ground that the approval of the Massachusetts commissioner of insurance had been obtained by fraud. The judge gave leave but Emlico, acting by its joint liquidators, applied to discharge it. On 18 December 1996, after a lengthy inter partes hearing, Wade J. discharged the leave which Ground J. had given. She gave leave to appeal against her order. When Kemper attempted to appeal, Emlico raised a preliminary objection that the court had no jurisdiction to hear appeals from the grant or refusal of leave to apply for certiorari. On 17 June 1997 the Court of Appeal upheld the objection and dismissed the appeal. On 25 June 1997 the Court of Appeal granted leave to appeal against its jurisdictional ruling to Her Majesty in Council. It is this appeal which is now before the Board.

Meanwhile, however, there have been developments in Massachusetts. On 5 January 1998, in an appeal in In re Electrical Mutual Liability Insurance Co. Ltd. (No. 1) (1998) 426 Mass. 362, the Supreme Judicial Court of Massachusetts decided that any other state” in section...