England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		02/10/2007

Mr Justice David Steel:

1. The Claimant ("GM") is a company incorporated in the state of Delaware, U.S.A. Its principal place of business is in the state of Michigan, U.S.A.
2. The First Defendant is a company incorporated in England with its principal place of business in London. The Second Defendant is its parent company. I shall refer to them jointly as "RSUK".
3. GM is on the receiving end of a large number of claims for alleged asbestos related injury and environmental liability in the United States. Apart from exposure to liability judgments, very substantial defence costs have been incurred by GM, already said to amount to $100 million.
4. GM contends that it has the benefit of insurance coverage in respect of those liabilities and costs under various insurance policies issued by Royal Indemnity Company or its predecessor ("RSUSA"), a company incorporated in the State of Delaware with its principal place of business in the state of North Carolina. RSUSA is a former subsidiary of RSUK.
5. GM contends not only that it enjoys insurance coverage furnished by RSUSA ("the coverage claims") but also that RSUK is liable for the claims and costs because it was either the alter ego of the former subsidiary or because RSUK orchestrated the refusal of coverage in such a manner as to incur liability for tortious interference with contract ("the parent company claims").
6. These disputes have given rise to litigation on a grand scale. Initially, GM and RSUSA entered into a standstill agreement on 9 December 2003. This was subject to 21 days notice of termination by either side at any stage after 31 December 2004. Negotiations then got underway in regard to GM's assertion that RSUSA was liable to provide coverage for the asbestos and environmental claims under policies issued between 1954 and 1972.
7. On 4 January 2005 GM gave notice to terminate the standstill agreement which was thus due to expire on 26 January 2005. On that day, RSUSA commenced proceedings in the Superior Court of the State of Delaware seeking a declaration of non-liability. On the same day GM commenced proceedings in the Circuit Court of the State of Michigan against RSUSA and against the Second Defendant seeking declarations of liability.
8. On 17 February 2005, RSUSA filed a motion to dismiss or stay the Michigan proceedings on the grounds of forum non conveniens. That same day GM filed a motion for partial summary disposition of the Michigan proceedings on the issue of the alleged duty to defend. Shortly thereafter, on 10 March 2005, GM duly filed its own countervailing motion to dismiss or stay the Delaware proceedings on the grounds of forum non conveniens.
9. On 23 March, the Second Defendant filed a motion for summary dismissal of the parent company claims on the grounds of forum non conveniens. In the alternative, the motion sought bifurcation (i.e. a split) of the Michigan proceedings, together with a stay of the parent company claims pending the outcome of the underlying coverage claim against RSUSA.
10. On 6 June 2005 Hon. Justice McDonald handed down his opinion on these issues. He denied RSUSA's motion based on forum conveniens. The basis of his decision was that none of the relevant documents or witnesses were situated in Delaware: to the contrary a large number of witnesses were situated in Michigan and would be compellable in the Michigan proceedings.
11. However the judge granted the motion to bifurcate and stayed the claims against the Second Defendant pending resolution of the coverage dispute. Furthermore the Second Defendant was given leave to resurrect its forum non conveniens motion if, in due course, the stay was discharged.
12. The next stage in this forensic war was a motion by GM to add the First Defendants as defendant to the Michigan proceedings in regard to the parent company claims. Leave was duly given on 13 July 2005.
13. On 26 July 2005, the Delaware Superior County Court denied GM's motion to dismiss on forum non conveniens grounds (on the basis that GM had failed to establish "overwhelming hardship") but, for the reasons set out in the detailed Memorandum Opinion of the Hon. Justice Cooch, the court granted a stay of the proceedings in favour of the Michigan proceedings. These reasons were similar to those that had prevailed in Michigan.
14. In parallel with the earlier application by the Second Defendant, the First Defendant filed a motion for bifurcation on 16 August 2005. This was duly granted, despite opposition from GM, on 12 October 2005.
15. In the meantime, on 17 August 2006, Hon. Justice McDonald had handed down a case management ruling. This divided the coverage issues into two: Tranche 1 to deal with asbestos claims and Tranche 2 environmental claims, with all aspects relating to "piercing the corporate veil issues" postponed. The trial of the asbestos claims was to commence in September 2006 with environmental claims to follow in October 2007. No trial schedule was fixed for the parent company claims.
16. On 19 May 2006, GM commenced these proceedings against the First and Second Defendants. It is common ground that they form a duplication of the proceedings against RSUK in the Michigan Court. They were accompanied by a Press Release issued by GM:

"As the Royal Sun Alliance Insurance Group PLC insisted that the US court lacks jurisdiction over them and the London courts are the more appropriate place for GM's case against them, GM has initiated proceedings in the UK."

17. RSUK acknowledged service of the proceedings without, not surprisingly, intimating any challenge to jurisdiction. However it was suggested by RSUK that the Michigan proceedings against them should be withdrawn and that there should be a general extension of time for serving RSUK's defence in these proceedings pending the outcome of the coverage claims in Michigan.
18. In the absence of agreement, RSUK made an application to the court for a general extension of time. The issue was dealt with by the terms of a consent order dated 24 July 2006 in the following terms. This consent order lies at the heart of the present dispute between the parties:

"UPON THE CLAIMANT AND THE DEFENDANTS UNDERTAKING to be bound in these proceedings by any final judgment as between the Claimant and Royal & Sun Alliance USA, Inc, Royal Indemnity Company and Royal Insurance Company of America by the US Courts (including any appellate Courts) on the outcome of both "Phase I" (as defined in the proceedings in Case number 05-063863-CK in the State of Michigan Circuit Court for the County of Oakland("the US Proceedings")), concerning the existence and enforceability of certain policies at issue in the US Proceedings and the application of those policies to certain asbestos claims, and of "Phase II", concerning the claim for coverage of certain environmental claims."

AND UPON THE CLAIMANT AND THE DEFENDANTS UNDERTAKING not to challenge the jurisdiction of the English Court in these proceedings or seek any relief based upon any contention that the Commercial Court is not an appropriate forum for trial of this action.

AND UPON THE CLAIMANT AND THE DEFENDANTS UNDERTAKING as soon as reasonably practicable to procure the dismissal of the claims in the US Proceedings against the Defendants and the removal of the Defendants as parties to the US Proceedings in the form of a draft Order to that effect, which is attached at Schedule 1 to this Order (it being agreed upon by the parties that such dismissal is made on a without prejudice basis and will have no effect upon the obligations to the parties to participate in Phase I and Phase II discovery in the US Proceedings.)

BY CONSENT

IT IS HEREBY ORDERED that:-

1. These proceedings be stayed generally until 28 days after final judgment by the State of Michigan Circuit Court for the County of Oakland following the trial in Phase 1 of the US Proceedings."

19. In compliance with this order, it was soon followed on 26 July 2006 with the voluntary dismissal in Michigan of the claim by GM against RSUK on terms that such claims be "dismissed without prejudice in favour of the UK action". By the same token, RSUK withdrew its forum non conveniens motion.
20. On 15 September 2005 RSUSA filed a motion in the Michigan proceedings for summary disposition on the grounds that the claims against it were time barred. Hon. Justice McDonald's opinion was handed down on 18 January 2007 duly granting summary disposition on the grounds of limitation:

"Taking all of the facts and all of the documents submitted in the light most favourable to Plaintiff, GM, the Court finds, that at the latest, by the 1991 letter from Royal employee Karl Ambos which discussed viability of the occurrence policies, GM knew that Royal had denied that GM had coverage for newly filed claims under the old occurrence policies. Also, GM knew and accepted that by 1991, Royal was allocating all asbestos claims to the claims made MIC policies. In addition, Royal has produced evidence that for many years, Royal sent GM "Notifications of Coverage" that stated that Royal would pay all claims arising from accidents reported after 1972 under claims-reported policies in effect in the year in which the claim was reported. Further with regard to environmental claims, GM denied to EPA that it had occurrence policies for various environmental contamination sites. These unconditional denials and diversions of coverage were a total breach of the policies and caused this claim to accrue and started the running of the statute of limitations. At that time, GM had six years in which to bring this suit for a determination of coverage under its policies. GM failed to act within the prescribed time period and thus its action is time barred.

Accordingly Royal's motion is granted pursuant to MCR 2.116(C)(10 & (7). IT IS SO ORDERED."

21. In the meantime there had been significant developments in Delaware. Although RSUK had announced proposals to withdraw from US business in September 2003, it was not until September 2006 that the mechanism of withdrawal was announced in a shareholder circular. In pursuance of this plan, on 28 September 2006, Arrowpoint Capital Corp and Arrowpoint Capital LLC submitted a request to the Insurance Department of the State of Delaware for the regulatory approval of the acquisition of RSUSA.
22. On 17 November 2006, GM, who had already sought further information from the Deputy Commissioner of the Delaware Department of Insurance about the transaction, lodged a formal objection to it. A public hearing was then held before an appointed officer on 19 January 2007 (i.e. the day after the hand-down of the decision on limitation in Michigan).
23. Prior to the hearing officer publishing his proposed order 2007, GM commenced proceedings on 26 January 2007 against RSUK (and certain officers and directors of RSUSA) in the Court of Chancery in Delaware. As regards RSUK, these duplicated the proceedings in England (and indeed the earlier proceedings in Michigan).
24. On 2 February 2007 the hearing officer publicised the proposed order approving the transaction. On 5 February, the Defendants issued their application for an anti-suit injunction in the present proceedings in the following terms:

"…that the Claimant be restrained from taking any further step in proceedings in Delaware (apart from having those proceedings discontinued and/or dismissed), or any forum other than England, arising out of or in connection with the insurance policies which are the subject of the Delaware proceedings

because

(1) the Claimant has, by a Consent Order in these proceedings, agreed that England is the most appropriate forum in which these claims should be heard; and/or

(2) it is vexatious and/or oppressive and/or an abuse of process for the Claimant now to seek to commence proceedings against the Defendants in Delaware."

25. In response GM agreed to extend time for service of the answer or defence to the Delaware proceedings pending the outcome of the injunction application. However on 6 February 2007, GM's attorneys in the US wrote to RSUK's attorneys denying that the Delaware proceedings constituted a violation of the Consent Order. The letter commented:-

"It does not inexorably follow from the Michigan Court's ruling that GM's alter ego or tort claims are "hopeless" or that "there is no primary liability on RSA USA". Rather, the only thing that inexorably follows from the Michigan Court's ruling (if it withstands appeal) is that this remedy (a damage claim) is time barred in Michigan…

"In any case, there are several viable alternatives available to GM. Although delayed, it will see its claims determined on the merits by a jury trial …"

26. On 20 February 2007, Commissioner Denn issued his final order approving the sale of RSUSA to Arrowpoint. In due course, in March 2007, the terms of the order became effective and the sale was completed. In his ruling the Commissioner said this:

"….Therefore, a condition of my approving this transaction is agreement from Royal UK and its relevant subsidiaries and affiliates to submit to personal jurisdiction in the courts of this state for the purpose of resolving any legal claims brought by policyholders…."

27. RSUK duly gave their consent to abide by the condition by letter dated 3 March 2007:

"…we are asked on behalf of applicable Royal UK affiliates to confirm that, without prejudice to any other rights and defenses, we will not interpose the defense of lack of personal jurisdiction in any action by policyholders of the Royal USA insurers commenced in the Delaware courts seeking to resolve claims arising from those policies in relation to conduct predating the consummation of the transaction. On our own behalf and on behalf of our applicable affiliates, we hereby confirm our agreement to be so bound."

28. On 23 March 2007, GM commenced proceedings against RSUSA in the State of Maryland. These duplicated the coverage claim in Michigan and were stayed. These proceedings in Maryland were said by GM to be dependent on whether the decision of the Michigan Court constituted a decision on the merits. In the event, they have now been voluntarily dismissed. On 23 April 2007, GM also voluntarily dismissed its claim against the individual defendants to the Delaware proceedings.
29. The next day the Michigan Court of Appeal handed down a judgment relating to RSUK's duty to defend the policy claims. The precise interplay between this judgment and the first instance judgment of Justice McDonald was a matter of some controversy. But it is GM's case that it can now at least recover the costs incurred in defending underlying claims up to the date on which it has been held that the action was time-barred. On 27 April 2007, GM filed its appeal against the earlier order.
30. In response to RSUK's application for an anti-suit injunction, GM issued its cross application to discontinue these proceedings on 11 May 2007. (The Court's leave is required pursuant to CPR 38.2 (2)(a)(ii) because of the undertakings given to the Court in the consent order.) The grounds of the application are as follows:

"For the reasons set out in the Witness Statement of Nicola Boulton, the Claimant believes Delaware is a more appropriate forum for its claims against the Defendant to be heard. The Claimant therefore wishes to discontinue these proceedings and progress the claims in Delaware."

31. In resisting this application (and in prosecuting their application for an injunction), RSUK's primary case was that the consent order, properly construed, reflected the parties' intention to confer exclusive jurisdiction on the English Courts to determine the parent company claims.
32. In contrast, GM contended that the order reflected no agreement on jurisdiction whatsoever (or, at the most, an agreement to accord non-exclusive jurisdiction as regards the parent company claims to the English courts). Thus GM submitted that the parties, having accepted access to one forum, were nonetheless free to select any other available forum to commence new proceedings without being bound therein (absent any issue estoppel) by the final judgment of the Michigan Courts on the coverage issues.
33. Thereby, so the argument ran, the party pursuing that course would not, contrary to the undertakings, be challenging the jurisdiction of the English Court, let alone seeking relief based on any contention that the Commercial Court was not an appropriate forum for the trial.
34. However it was accepted by GM that the selecting party could not make a forum non conveniens application in England and equally could not make an application for an anti-suit injunction in the new forum. The only potential restraint on the selection of another available forum would be a forum non conveniens application by the opposing party in the new jurisdiction.
35. In my judgment RSUK's primary case is correct.
36. In construing the consent order, the background is very important. The Michigan proceedings were split, with the parent company claims being postponed until October 2007 at the earliest at which stage it was open to RSUK to reopen the issue of forum non conveniens. This prompted GM to commence these proceedings, jurisdiction for which it was clear that RSUK would and, indeed, could not challenge (a stance made clear in RSUK's original forum non conveniens motion in Michigan).
37. There were the added advantages from GM's perspective that the claim would thereby proceed in the forum where execution could be readily achieved and further that the issue of limitation would not be exacerbated by any further delay in the US. By the same token, it was advantageous to RSUK both to obtain its release from proceedings in the Michigan courts and to obtain GM's participation in proceedings in the English courts.
38. Further, it must be borne in mind that the consent order was entered into in the face of RSUK's application to extend time for service of the defence. It was in both parties' interest to wait until there had been a ruling on the coverage issues (albeit between different parties). It follows, in my judgment, that the order reflects a package whereby the parties intended to settle on proceedings in England as regards the parent company claims in due course but to await the outcome of the Michigan proceedings and, crucially, be bound thereby.
39. No doubt the parties could have made their intentions clearer by making express reference to English jurisdiction being 'exclusive' in some form. Thus, it is true that, when read in isolation, the second undertaking did not expressly prohibit the issuance of further proceedings elsewhere. In one sense such would not be a "challenge to the jurisdiction of the English Court".
40. But even so, it is difficult to see what purpose there could be to the undertaking not to challenge the jurisdiction of the English Court save in the sense of agreeing that the English Courts should have exclusive jurisdiction. As regards GM, it had chosen to issue proceedings here, a perfectly legitimate selection of jurisdiction given the domicile of RSUK (and indeed Article 2 of the jurisdiction regulations). GM had also submitted to the jurisdiction for the purposes of any counterclaim. RSUK had not challenged jurisdiction in its acknowledgement of service. In any event, there was no basis for a challenge to service or to jurisdiction either in principle or on the basis of convenience.
41. There is no apparent purpose in agreeing to be bound by Phase I and II of the Michigan proceedings, together with the withdrawal of the parent company claims, save on the basis that the English Courts should have exclusive jurisdiction. In short, in my judgment, the parties have not simply precluded themselves from denying that the chosen court has jurisdiction but accepted a positive obligation to conduct the dispute in England.
42. Indeed, whatever the legitimacy of the new proceedings, the only way in which the invocation of English jurisdiction can be terminated is by way of an application by GM to discontinue. However, that application is inevitably based on the premise that "Delaware is a more appropriate forum", an argument that is difficult to reconcile with the terms of the undertaking not to challenge jurisdiction or seek relief based on the contention that the Commercial court is not an appropriate forum.
43. Accordingly, for all those reasons, I accept the primary argument presented by RSUK that the consent order had the effect of constituting an exclusive jurisdiction agreement.
44. On the basis that the consent order puts into effect an agreement to confer exclusive jurisdiction, I understood it to be common ground that RSUK is entitled to an anti-suit injunction unless GM can discharge the burden of establishing "strong reasons" for refusing such an order: Trafigura Beheer BV v. Kookmin Bank Co (No2) [2007] 1 Lloyd's Rep 669. This burden must clearly be the heavier when it is GM which has selected the relevant jurisdiction.
45. The only justification advanced by GM was the emergence of RSUK's undertaking to the Delaware Insurance Department not to raise a defence of lack of personal jurisdiction in regard to any assured of RSUSA. But this only emerged after the Delaware proceedings were instituted. Furthermore, it is common ground on the expert evidence that a waiver of want of personal jurisdiction does not preclude reliance on other jurisdictional defences (such as an application based on forum non conveniens or even a challenge to subject matter jurisdiction). The mere emergence of another forum to which RSUK was amenable at the instance of one assured (in proceedings which have in effect been stayed pending the binding outcome of the coverage issues in Michigan) does not furnish a strong reason for sidelining the exclusive jurisdiction clause.
46. RSUK also contended that GM, having commenced proceedings against RSUK in their home jurisdiction, thereby conferred upon RSUK a statutory right to rely upon the mandatory provisions of Article 2 of the Jurisdiction Regulation and, further, that, in the light of Owusu v Jackson [2005] ECR 1-1383, the court has no discretion to decline to hear the proceedings even in favour of a non-member state.
47. In the light of my conclusions set out above it is not necessary to deal with these contentions.