On July 20, 2007, this blog reported on a dispute relating to the mass defection of fourteen facultative reinsurance brokers from the U.K. based Marsh Services Limited to Integro, a competitor. A suite was filed in US District Court in New York, which the Court declined to dismiss on jurisdiction grounds. In a parallel suit in the UK, a judge declined to enjoin the prosecution of the US action, but the UK Court of Appeals has allowed an emergency appeal, entering an injunction to restrain the US proceedings. This opinion contains an interesting discussion of the relationships between the UK and US courts, as influenced by an EU regulation relating to employment contracts. Samengo-Turner v. J & H Marsh & McLennan (Services) Limited, [2007] EWCA Civ 723 (July 12, 2007).
UK Court Opinions
UK Court Assesses Costs in Action Deemed Largely Fruitless
The UK Commercial Court, Queen’s Bench Division, has assessed costs in favor of Equitas against broker Horace Holman in an action in which Equitas sought an accounting and other remedies from Horace Holman. The Court found that the action was “largely fruitless,” in part due to the status of Horace Holman’s records, but that Equitas was nevertheless entitled to have its costs paid by Horace Holman. This opinion demonstrates the different approach that UK and US courts take with respect to the assessing of the costs of litigation. Equitas Ltd. v. Horace Holman & Co., [2007] EWHC 903 (Comm) (April 27, 2007).
English Court Rules on Request for Transfer of Assets in International Insolvency Case
The English Court of Appeal dismissed an appeal by the Australian liquidators of HIH Casualty and General Insurance Limited (“HIH”). The question before the court was whether it had jurisdiction to entertain a request under the Insolvency Act for directions to the liquidators in England to transfer assets collected by them to the liquidators in an Australian liquidation. The court considered whether such a transfer would interfere with the statutory scheme imposed on those assets by the Insolvency Act and whether or not the court should exercise its discretion in favor of such a transfer. The Court found that if the companies were in liquidation in England, the court would have jurisdiction to entertain a request under section 426 of the Insolvency Act for directions to the liquidators in England to transfer the assets collected by them to the liquidators in the principal liquidation, even though the result would interfere with the statutory scheme imposed on those assets by the Insolvency Act.
The Court held that if section 426 could authorize a transfer then the only question would be whether the court should exercise its discretion to do so. In exercising its discretion, the court had to consider the prejudice to the interests of some creditors of such a transfer. In this case, the Court of Appeal held that it would not direct a transfer of the English assets by the English provisional liquidators to the Australian liquidators because to do so would prejudice the interests of many of the creditors. Accordingly, the appeal was dismissed. HIH Casualty & General Insurance Ltd & Ors v. McMahon, [2006] EWCA Civ 732 (June 9, 2006).
England Court of Appeals Denies Request to Reopen Case Upon Allegation of Fraud, Asserting Lack of Jurisdiction
This case involves claims by Lloyds names against Lloyds, alleging that they had been misled by misrepresentations by Lloyds of its syndicate auditing and operational controls into becoming members of Lloyds syndicates. The names later suffered serious financial losses with respect to asbestos claims. The names lost the case, but then discovered additional evidence which they contended demonstrated that the judge had been misled by Lloyds. The issue before the court was whether the England and Wales Court of Appeals had jurisdiction to reopen a case upon an allegation that the Court had been misled by a party’s evidence and by fraud. The applicants, who were names at the Society of Lloyds, asserted that under the jurisprudence of Taylor v. Lawrence, 2003 QB 528, the Court had authority to reopen the case.
The Court disagreed, noting that, unlike the present case, Taylor v. Lawrence concerned misconduct by a court in that the judge was said to have been biased. Taylor v. Lawrence did not contain authority for extending the recognition of jurisdiction to reopen an appeal on the grounds of bias to a case where the allegation was not that the court had misbehaved, but that the court had been misled by one of the parties. The court cited authority directly denying the existence of jurisdiction in the latter case, providing that the proper remedy was to bring a collateral action to set aside the judgment allegedly obtained by fraud. Jaffray v. The Society of Lloyds, [2007] EWCA Civ 586 (June 20, 2007).
England’s High Court Orders Reinsurer To Provide For Security For Costs
This dispute arose out of an alleged breach of a gas transit agreement, in which Russian gas giant Gazprom alleged that Naftogaz’s predecessor took more gas than it was entitled to under the terms of a transit agreement. Gazprom’s captive insurer, Sogaz, paid Gazprom over $88 million dollars to cover its loss. Sogaz’s reinsurer, Monde Re, in turn paid Sogaz the like sum. Gazprom’s claims against Naftogaz passed to Monde Re by way of subrogation. Monde Re succeeded on its claim against Naftogaz at the International Commercial Arbitration Court in Moscow. The award was later assigned from Monde Re, which was in liquidation, to Gater Assets Limited (“Gater”).
Subsequently, an English court ordered enforcement of the arbitration award. Naftogaz applied to the English High Court to have the award set aside based on the fact that there was no arbitration agreement between the claimant and the defendant, among several other reasons. Naftogaz also applied for an order that Gater provide security for costs pursuant to CPR 25.12 and 13.
Over Gater’s objections, the Court ruled that it had jurisdiction to order security for costs in favor of a party seeking to set aside enforcement of a domestic or New York Convention arbitration award because such a party can qualify as a defendant under CPR 2.3(1). The court ordered Gater to provide security in the amount of £250,000. Gater Assets Ltd. v. Nak Naftogaz, [2007] EWHC 697 (Comm. Ct. Mar. 22, 2007).