English & American Insurance Company Ltd v AXA Re SA

This is the dying stage of an appeal by Axa Re SA (“Axa”) from the judgment of Gloster J, handed down on 20 December 2006, whereby inter alia she gave summary judgment against Axa in part on a claim brought by English and American Insurance Company Limited (“EAIC”), an insurance company in a scheme of arrangement. The only question that arises now on this appeal is a question of costs because, since issuing its notice of appeal and obtaining permission to appeal from Sir Henry Brooke, Axa now accepts that the evidence for the sum for which summary judgment was given against it -- indeed for more than that sum -- has been provided to it in the form of two reports supplied to it in the interim by EAIC. So although the sum for which summary judgment was given -- namely US$673,808 plus interest -- has been paid (and indeed a further sum of US$90,730 has also been paid making up the total figure of US$772,538), Axa nevertheless submits that the application for summary judgment was premature and that the judge was wrong to have acceded to it. In these circumstances, where only costs remain in issue and the appeal is otherwise moot, in my judgment it is not appropriate for this court, as I think is accepted by Mr Stephen Phillips who is arguing this matter on behalf of Axa, to go into the full details of the merits of the judgment of the judge below as though there was a substantive appeal before it.

It is only a question of costs in a case where liability is now accepted; and therefore my approach in these circumstances is that the court is entitled, and not bound to do more than, to look really relatively briefly at the issues below to see whether the appellant can plainly establish that the judge was wrong to have given summary judgment at that earlier time. The summary judgment was sought for the larger figure of some US$773,000 but it was accepted in the course of argument by Mr Southern QC, who appeared on behalf of EAIC, that judgment would only effectively be pursued for the lower sum of US$673,000 approximately, on the basis that the difference of about US$98,000 lay in a different area as reflecting only IBMR figures. This is a claim between a reassured EAIC and its reinsurer Axa in circumstances where EAIC was fronting for the insurance of primary accused Dow Corning, in respect of what turned out to be its liabilities arising out of the sale of materials for the purposes of breast augmentation. This led to large claims being brought against Dow Corning and by Dow Corning against its liability insurers. So far as solvent London insurers were concerned this led to a settlement governed by certain principles under the London Market Settlement Agreement (LMSA) in October 1995 in a sum of US$233 million.

Unfortunately, it might be said for EAIC, it was already in a scheme of arrangement by that time and therefore fell outside, or chose not to remain inside, the LMSA settlement. When subsequently EAIC was pursued by Dow Corning in the courts of Michigan, EAIC sought, but unsuccessfully so far as the decisions of the Michigan courts were concerned, to limit its liability to the same principle as had been applied in the LMSA. Following the adverse decisions in the Michigan courts, EAIC accepted a liability in the sum of at least some US$3.75 million. It therefore wrote to Dow Corning to say:

That arrangement was made in order to put aside efforts to agree a mutually acceptable mechanism to resolve the full value of the Dow Corning claim. When in consequence EAIC pursued its claim against its reinsurer Axa for Axa’s proportion of that sum of approximately US$3.75 million, in the sum of US$772,000 odd, Axa complained that it was not bound to follow a settlement because there had been no settlement only an entirely without prejudice arrangement. It contended that EAIC could ultimately reclaim the whole of the money paid over by it, even though recognised and acknowledged as a liability, and in any event said that there had been no ascertainment of the liability of EAIC and indeed no proper definition of the claims in respect of which that minimum sum had been acknowledged as one to which EAIC was liable. The judge below rejected those submissions, other than so far as the relevant liability figure was reduced by that US$98,000 odd of IBMR, but went on to give an alternative basis of summary judgment on the ground that, whether or not there had, on the evidence, been a settlement which Axa was bound to follow, there was nevertheless:

In my judgment, whatever might be the case so far as concerns the more refined submissions relating to the jurisprudence on follow the settlement clauses, the judge was upon the material before her perfectly entitled to come to that alternative view. The judge, faced by a claim for summary judgment, had of course to form a view as to whether there was a realistic prospect of defence for at least the sum for which she was asked to give judgment. In circumstances where the relevant claims had been the subject matter of consideration for the purposes of the LMSA, where again the matter was considered for the purposes of the claims that Dow Corning sued against EAIC outside the LMSA, in circumstances where the sum for which EAIC recognised and acknowledged its liability as a minimum was based upon the LMSA principles, and in circumstances where Axa itself has, albeit in an offer under which an attempt was made to find a full and final solution, been quite prepared to accept liability on the LMSA model for the sum of US$772,000 odd, it seems to me that the judge was entirely entitled to come to her view as to the realistic prospects of a final trial. Her view has been entirely justified by the fact that, following the submission of the two further reports to which I have referred, Axa has indeed accepted liability for the US$772,000 odd sum. So the judge’s assessment of what was the realistic prospect has been entirely borne out in fact and without the necessity of a trial at all. In these circumstances, whatever might be the position about the question of a final settlement between EAIC and Axa, it seems to me that the judge’s alternative ground for summary judgment was a valid one.

It seems to me that in those circumstances it is not necessary for me to go into the more refined submissions relating to the follow the settlement position. Nearly all of Axa’s submissions have been directed to the follow the settlement position. It has raised no real basis upon which to detract from its longstanding willingness, albeit for the sake of a full and final settlement, to pay the sum of US$772,000. It has put no meat upon the bone of its submission that there is difficulty in EAIC showing that the claims fall within the scope of the reinsurance cover; nor has it explained, other than by a dogged insistence on putting EAIC to proof of every single factor of its claim, what there is that undermines the payments, acknowledgments and offers that have been made in this case all along. That represents my quick view of the merits of this matter for the purposes of this appeal on costs. It seems to me that the application for summary judgment was not premature. The argument of prematurity is really entirely based upon the submission that the follow the settlements clause sets up formal requirements and hurdles which EAIC had not met or jumped over; and there has been, as I have already said, practically no explanation of why there would be a realistic prospect at trial, if that had been necessary, of Axa being able to avoid liability for the minimum sum in question. I would therefore dismiss the remnant of this appeal against the order for costs below in the relevant sum of £35,000.

I agree.

I also agree.