April 21, 2016

In Axa v Weir the Commercial Court determined applications for an anti-suit injunction and to set aside service out of the jurisdiction from an insurer and insured respectively. In doing so the Court reaffirmed the principle that where the primary issues in a case concern the construction of insurance policies written on the London Market and governed by English law, that fact can be a decisive feature in favour of the English Courts. Mr Justice Blair’s decision is considered by Shail Patel of 4 New Square.

Axa Corporate Services was represented by Jonathan Hough QC of 4 New Square.

THE FACTS

The claimant was the French insurer AXA, and the defendant an Australian subsidiary of the Weir group, an international engineering group. AXA provided a worldwide integrated liability insurance programme which consisted of both ‘local policies’ written in particular jurisdictions, and English law ‘global master policies’ which provided cover on a DIC/DIL (difference in conditions/difference in limits) basis. The effect was that where there was no local policy, or the claim fell outside the terms or limits of indemnity of a local policy but within the terms or limits of the global policy, Weir could claim on the global policy instead.

The insurance claims by Weir arose out of a claim against Weir by a mining company regarding the refurbishment of a large item of plant in the Philippines. The mining company launched an unsuccessful arbitration against Weir in Sydney. However Weir had incurred substantial defence costs and remained liable for a contractual ‘collar’ payment agreed to before the award was given. Weir claimed those losses from AXA.

AXA rejected the insurance claims on the basis of the global policy wording, including in relation to the definition of “Products” in the policy, other exclusion clauses, whether Weir was entitled to any indemnity where the arbitration had failed, and a late notification defence.

THE PROCEEDINGS

AXA brought proceedings in England for a declaration of non-liability under the global master policies, obtaining permission to serve Weir in Australia. When service was affected Weir launched proceedings in Australia for an indemnity under both the local policy and the global master policy.

AXA applied for an anti-suit injunction to halt the Australian proceedings and Weir applied to set aside service in the English proceedings on the grounds that England was not the proper form for bringing the claim.

THE COURT’S DECISION

Each party made the usual sorts of submissions regarding forum non conveniens, regarding the location of witnesses and documentary evidence. AXA’s submissions focussed on the whereabouts of persons relevant to the coverage dispute (the UK). Weir’s focussed on the whereabouts of persons relevant to the underlying arbitration (Sydney) and the fact that the award, costs incurred and collar agreement were all governed by Australian law.

The Court (Blair J) did not consider these points to be very compelling one way or the other.

Weir’s strongest point was that the Australian Court was seized of the entire dispute, as claims under both local and global policies fell to be determined there. This had come about because Weir was able to serve a branch of AXA in Sydney. Conversely the English court had no jurisdiction over the Australian local policy dispute. On the face of it therefore, if proceedings were allowed to continue in England and be halted in Australia, that would not necessarily be the end of the matter.

AXA’s strongest point was that the principal issues in the English proceedings concerned the construction and application of the global policies as a matter of English law, including whether the “Product” which caused the damage was to be regarded as the entire plant or a particular component; the construction of an exclusion dealing with “Damage to the Product”; the construction of the “Design or Advice” exclusion, and of provisions regarding late notification. AXA’s evidence was that the global; policy was widely used by AXA.

The Court concluded that in a relatively balanced debate, the decisive point was that English Court’s should where possible determine questions of construction of English law policies. The Court cited Lincoln National Life Insurance Co v Employers Reinsurance Corp [2001] 1 Lloyd’s Rep 853, 858 at [25]; CGU International Insurance plc v Szabo [2002] 1 All ER (Comm.) 83 at [52]; Ass. Generali SpA v Ege Sigorta AS [2002] 1 Lloyd’s Rep 480 at 485-487; and Faraday Reinsurance Co Ltd v Howden North America Inc [2012] 1 Lloyd’s Rep IR 631, 643 at [66] – as well as Dicey and Briggs.

Accordingly Weir’s application on forum non conveniens grounds was dismissed. AXA’s anti-suit injunction application was also dismissed on the basis that the high hurdle for showing unconscionable, vexatious or oppressive conduct was not made out in respect of the Australian action.

CONSEQUENCES

The consequence was that both sets of proceedings would continue simultaneously in respect of partly the same subject matter. This was prima facie an undesirable outcome.

The Court therefore resorted to case management tools. Blair J accepted that given the DIC/DIL cover, it was logical to try the claim on the Australian local policy first. AXA then accepted that the English proceedings should be stayed pending the resolution of the Australian Court of the claim under the local policy.

It appears from the final few paragraphs of the Judgment that both parties accepted that in principle. However as the Court observed, there was nothing the English Court could do to prevent Weir seeking to try both policies in the Australian Court. The case management technique adopted by Blair J would thus require buy-in from the Court in New South Wales or a sensible approach from the parties.

COMMENTARY

It might be observed that the readiness of the Australian Court to try only part of the claim before it is not a foregone conclusion. Indeed for the process to work Weir would need to drop the global policy claims in Australia altogether, which might generate a costs dispute. If Weir were to decide to press ahead with the global policy claim in Australia it would thwart the entire basis of the Court’s decision (viz. for an English court to opine on English policy wording). The lesson here may be that in international insurance disputes, the ability of the Courts of any one forum to case manage the whole global litigation may well be limited, and the greatest degree of cooperation between the parties will be needed to avoid a wasteful multiplicity of actions.

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