Kennecott Utah Copper Corporation & Ors v Minet Ltd. & Ors [2003] EWCA Civ 905

Case No 2002/2204

[2002] EWCA Civ 905

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION (COMMERCIAL COURT)

Venue Royal Courts of Justice

Date Wednesday 2 July 2003

Strand,

London, WC2A 2LL

B e f o r e :

LORD JUSTICE PILL

LORD JUSTICE CHADWICK

and

LORD JUSTICE LONGMORE

Between

(1) KENNECOTT UTAH COPPER CORPORATIONAppellants

(2) KENNECOTT CORPORATIONAppellant

(3) THREE CROWNS INSURANCE COMPANY LIMITEDAppellant

(4)RIO TINTO PLCAppellant

and –Appellant

(1) MINET LIMITEDAppellant

(2) BLAINE NYE TRUNNELLAppellant

(3) JARDINE INSURANCE BROKERS INCAppellant

(4) EMETT AND CHANDLER INCRespondent

(Transcript of the Handed Down Judgment of

Smith Bernal Wordwave Limited, 190 Fleet Street

London EC4A 2AG

Tel No: 020 7421 4040, Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr Julian Flaux QC and Mr Andrew George (instructed by Holman Fenwick & Willan) for Appellants

Mr Jonathan Sumption QC and Ms Helen Davies (instructed by Barlow Lyde & Gilbert) for First Respondent

Mr Michael Swainston QC and Ms Maya Lester (instructed by Clyde & Co) for Second, Third and Fourth Respondents

Judgment

As Approved by the Court

[1]This is an appeal from an order made on 11 October 2002 by Mr Justice David Steel in proceedings brought by Kennecott Utah Copper Corporation (“KUCC”) and others against insurance brokers and advisers in relation to the failure, in 1995, to obtain effective reinsurance cover in respect of newly constructed facilities (“the smelter modernisation project”) at KUCC’s copper mine and smelting and refining plant in Utah, USA. The effect of the order, so far as material, was(i) to strike out the claim and dismiss the proceedings against the first named defendant, Minet Limited, and

(ii) to enter summary judgment for the second, third and fourth named defendants. The claimants appeal to this Court with the permission of the judge.

The parties

[2]KUCC owns and operates a copper mine and smelting and refining plant at Bingham Canyon, Magna, some 20 miles west of Salt Lake City. The fourth named claimant, Rio Tinto Plc (formerly known as the RTZ Corporation Plc) is its holding company. The second and third named claimants, Kennecott Corporation and Three Crowns Insurance Company Limited (“TCI”), are also RTZ subsidiaries. Kennecott Corporation provides management services to KUCC. TCI is a “captive” insurance company, incorporated in Bermuda, whose business is the insurance of risks related to activities carried on by companies within the RTZ group. It was the direct insurer of KUCC and Kennecott Corporation in respect of the smelter modernisation project.

[3]Minet Limited were TCI’s reinsurance brokers for the “operational” or “property” risks of the RTZ companies insured by TCI for the year commencing 1 May 1995. That was the first year for which Minet had placed operational cover for TCI; although it had, since 1992, been responsible for placing contractor’s all-risks (or ‘CAR’) reinsurance for TCI. Minet had been appointed brokers in respect of operational reinsurance in July 1994 in succession to Aon Risk Services Inc (formerly known as Alexander & Alexander of California Inc and, hereafter “A&A”). The second named defendant, Mr Blaine Trunnell, had been a senior broker at A&A until January 1995; and, in that capacity, had been responsible for placing much of RTZ’s operational or property business in 1994. He left A&A in January 1995. From January to October 1995, he was employed by one or other of the third and fourth defendants, Jardine Insurance Brokers Inc and Emett and Chandler Inc. At all material times he was retained by TCI to provide advice in relation to insurance and reinsurance cover. For convenience I will refer to the second, third and fourth defendants as “the Jardine defendants”.

The underlying facts

[4]The smelter modernisation project comprised a number of distinct, but related, components. Amongst those components were a flash converter furnace (“FCF”) and an acid plant (“AP”). Construction commenced in late 1993 and was completed by or about April 1995. The construction contracts contained detailed provisions for the testing, commissioning and acceptance of the various components within the project. Mechanical and pre-operational testing of the acid plant had been completed, and the plant had been handed over to KUCC, by 31 May 1995. Mechanical and pre-operational testing of the FCF had been carried out by 2 July 1995; and the FCF had been handed over to KUCC by 16 September 1995. A common feature of the provisions for testing and commissioning under the construction contracts, as they applied to the FCF and the acid plant, was the requirement for performance tests at or near to 100% of design capacity over a period of 72 hours. That requirement had not been satisfied at the time that the acid plant or the FCF (as the case may be) was handed over to KUCC.

[5]On 16 September 1995 the FCF suffered an explosion or series of explosions. On 10 December 1995 the acid plant suffered major damage. Those two incidents gave rise to an insurance claim, including a business interruption claim, estimated at an amount in excess of US$200 million. As I have said, the direct insurer in respect of the smelter modernisation project was TCI. But it was accepted by the parties to the earlier action against the re-insurers, (to which I shall refer) that - and the current proceedings have been pursed on the basis that - the effective claim (if any) would be that under the reinsurance contracts; and that, in relation to that claim, KUCC, Kennecott Corporation and RTZ might act in concert with TCI.

[6]The smelter modernisation project had been the subject of CAR cover under a policy dated 5 October 1993 and issued by TCI. Reinsurance in respect of that cover had been placed by Minet. Cover under the CAR policy and the reinsurance contract was for a period of 34 months from 1 November 1992 to 1 September 1995 “or completion of the Project including testing and commissioning . . . and a further 12 months warranty period thereafter”. Cover was for physical loss or damage to works or materials used in the project: it did not extend to business interruption losses or advance loss of profits. Importantly, in the present context, the policy did not provide cover in respect of “Any part or Section of the project when taken over or put into operational use other than any operational testing or commissioning insured hereon”. It was essential, therefore, if plant was to be the subject of continuous (or “seamless”) cover, that – at the point when it was taken over or put into operational use – it was transferred onto an operational policy. The need to ensure that plant which had, during construction and pre-operational testing, been the subject of cover under the CAR policy became the subject of cover under an operational policy at (or no later than) the point of time at which cover under the CAR policy ceased was obvious; and was recognised by TCI and by its brokers, Minet.

[7]Operational cover for RTZ’s property worldwide, for a term of twelve months from 1 May 1995, was provided under a TCI policy dated 28 September 1995. Reinsurance in respect of that cover had also been placed by Minet. Cover under the operational policy and the reinsurance contract included both property damage and business interruption. Clause 9(b) of the policy (“Automatic Inclusions”) extended cover to newly constructed and erected property “which has been completed and handed over” to the insured. Property exclusion 15 (applicable only to cover under section 1.2 of the policy) excluded “any Object before it has been installed and completely tested at a specified location”; and, in that context, “completely tested shall mean that the Object has operated at the said location in the capacity for which it was designed as part of the normal process”. There was an obvious need, therefore, to ensure that plant which would be treated as “taken over or put into operational use” for the purposes of the CAR policy would be plant in respect of which reinsurers would accept that the attachment condition in the operational policy - “completed and handed over” - had been satisfied; and to ensure that reinsurers would not seek to contend that such plant was excluded from cover under the operational policy by property exclusion 15 on the ground that it had not been “completely tested”.

[8]KUCC, Kennecott and RTZ claimed under the operational policy; and TCI claimed against reinsurers under the reinsurance contract. The operational reinsurers refused to accept liability. In November 1996 proceedings (1996 Folio No 2683) were commenced against them by the present claimants. In May 1998 Minet was joined as a defendant to those proceedings. On 12 October 1999 Mr Justice Langley gave judgment on preliminary issues. His judgment is reported at [2000] Lloyd’s Law Reports (Insurance and Reinsurance) 179. He held, amongst other things, that the FCF and the acid plant were not covered under the operational policy and the reinsurance contract at the dates when the respective incidents giving rise to the claims had occurred. He reached that conclusion on the grounds(i) that both the FCF (as to which there was no dispute) and the acid plant were, or included, “Objects” for the purposes of property exclusion 15,

(ii) that neither had been “completely tested” within the meaning defined in property exclusion 15 at the date of the relevant incident,

(iii) accordingly, that (whether or not the automatic inclusion provisions in clause 9(b) of the operational policy would otherwise have been engaged) those items were not attached under the policy wording, and so not covered by the reinsurance contract,

(iv) that, even if the acid plant (or any part of that plant) was not properly to be regarded as an “Object” for the purposes of property exclusion 15, the automatic inclusion provisions in clause 9(b) would not have been engaged because the plant had not been “completed and handed over” as required by that clause, and

(v) that it could not be said that either the FCF or the acid plant had attached to the reinsurance contract, notwithstanding the policy wording, by reason of an agreement between representatives of Minet and the lead reinsurer on 28 April 1995.

[9]In the light of his findings on the preliminary issues which were before him for decision, Mr Justice Langley, by an order made on 20 October 1999, dismissed the claim against the operational reinsurers. He also dismissed the claim which had been made against Minet in those proceedings.

[10]On 13 March 2000 the claimants issued a claim form in the present proceedings (2000 Folio No 305). On 15 May 2000 the claimants obtained permission from this Court (Lord Justice Clarke) to appeal from the order of 20 October 1999. Minet was not joined as a respondent to that appeal. On 11 July 2000 the claimants amended the claim form in the present proceedings and served it, and particulars of claim, on Minet. Permission to serve out of the jurisdiction was obtained; and service on the Jardine defendants followed in December 2000 and January 2001. It was agreed (at least with Minet) that the claimants would not take further steps in the present proceedings until the appeal against the order made in the earlier action had been determined. The hearing of that appeal was listed for July 2001. Shortly before that appeal was to be heard, the claimants agreed terms of settlement with the operational reinsurers. Although aware that negotiations for settlement of the claim against the reinsurers were taking place, neither Minet nor the Jardine defendants were party to those negotiations.

The claims in these proceedings

[11]The claims in the present proceedings are expressed in the claim form to be “for negligence and/or breach of contract and/or breach of duty in(1) obtaining/seeking to obtain insurance and/or reinsurance cover for certain property which formed part of a smelter modernisation project in Utah, USA: and

(2) advising and /or failing to provide adequate advice in respect thereof.” There is a further claim in respect of alleged negligent misstatement.

[12]Paragraph 12 of the re-amended particulars of claim sets out the premise upon which the claims are founded:

“It was at all material times the intention and understanding of the Claimants that TCI would provide a continuing and seamless insurance cover in respect of the Smelter Modernisation Project (including the FCF and AP) so that the Smelter Modernisation Project was insured from start to completion, and so that, once complete, the modernised smelting and refinery facilities were insured during their commercial operation. Further, it was the intention of the same parties that TCI, as a captive insurer, would obtain reinsurance cover in respect of all such liabilities (ie both construction and operational) and that such reinsurance cover would be back-to-back with the insurance cover.”

[13]Paragraphs 13 to 15 of the re-amended particulars of claim describe the CAR policy of 5 October 1993 and the corresponding reinsurance contract. Paragraphs 17 to 19 describe the operational policy and the corresponding reinsurance contract. Paragraphs 16 and 20 contain the allegations, in relation to both the CAR policy and the operational policy, that Minet broked the reinsurance cover on behalf of TCI. Paragraphs 21 and 22 describe the incidents on 16 September and 10 December 1995 which gave rise to claims against TCI under the operational policy and the corresponding claims against reinsurers. Paragraphs 23 and 24 allege that those claims were made and rejected by reinsurers. Paragraphs 25 to 30 refer to the earlier proceedings, the stance taken by reinsurers in those proceedings, and the preliminary issues to be decided in those proceedings. Paragraphs 31 and 32 contain a summary of the findings made by Mr Justice Langley at the hearing of those preliminary issues. The claim against Minet

[14]The claim against Minet is set out in section C of the re-amended particulars of claim. Paragraph 33 contains the allegation that Minet was retained to act as broker in relation to the placement of operational reinsurance and had been the placing broker under the CAR policy. Paragraph 34 asserts that Minet was expressly instructed “and it was, in any event, obvious to a competent reinsurance broker)” that:

“. . . in placing the Operational Reinsurance Policy, there must be a seamless insurance cover in respect of the Smelter Modernisation Project (including the FCF and AP) so that the Smelter Modernisation Project (and the component parts thereof) was at all times insured either the Construction Reinsurance Policy or under the Operational Reinsurance Policy (ie there would be no gap in cover).”

Paragraph 35 contains the allegation that it was an implied term of the retainer that Minet would use reasonable care, skill and diligence in carrying out the retainer; and, in particular, would use all reasonable care, skill and diligence to ensure that there was seamless cover for the smelter modernisation project, including the FCF and the acid plant. Paragraph 36 alleges a duty of care at common law to the same effect. Paragraph 37 asserts that “Minet acted in breach of the said implied term of the retainer and/or in breach of the said duty of care owed to each of the Claimants and/or negligently”; and sets out (under 12 sub-paragraphs) particulars of the alleged breach of duty and negligence.

[15]The particulars of breach of duty and negligence on the part of Minet, set out under paragraph 37 of the re-amended particulars of claim, include allegations in relation to a note provided on 28 April 1995 by Mr Nick Murrell, of Minet, to Mr Martin Baines, the leading underwriter acting for the operational reinsurers. The contentions of the operational reinsurers in relation to that note had been set out at paragraph 26.2 of the re-amended particulars of claim:

“On 28th April 1995: 26.2.1 Nick Murrell of Minet, acting for Rio Tinto and/or TCI, provided Martin Baines, the leading underwriter acting for all the Operational Reinsurers, with a note of increased values relating to 12 components (including the FCF and the AP) due to be covered under the Operational Reinsurance Policy. 26.2.2. Martin Baines endorsed the note with the words “agreed subject to exclusion of Testing and Commissioning” (referred to below as “the subjectivity”). 26.2.3. Martin Baines explained to Nick Murrell when signing the note that the subjectivity was intended specifically to exclude cover prior to testing and commissioning of the plant and/or parts thereof and was intended to refer to the standard definition for testing and commissioning in the petrochemical industry, namely operational at 100% capacity for which the machinery was designed for a continuous period of 72 hours. Nick Murrell accepted this. 26.2.4. In the premises, there was an oral agreement to incorporate into the Operational Reinsurance Policy (1) the said petrochemical clause or (2) a clause requiring components to have been operational at 100% capacity for which the machinery was designed for a continuous period of 72 hours. Alternatively, the subjectivity was to be construed as incorporating such clauses into the Operational Reinsurance Policy.”

[16]The particulars of breach of duty and negligence under paragraph 37 include the following:

“37.5 Minet failed to ensure that, at the time when the note referred to Paragraph 26.2.1 above was presented to the Operational Reinsurers, a full explanation was given to the Operational Reinsurers (a) of the pre-commissioning tests that had taken place in relation to the various items of equipment referred to in the note (which included the FCF and AP); (b) that Kennecott and TCI wanted the FCF and AP to attach to the Operational Reinsurance with effect from 30th June 1995 and that, although the FCF and AP would be “operational” at that date, ramp-up would still be taking place, so that the FCF and AP would not have undergone “testing and commissioning” in the sense which Mr Baines told Mr Murrell he meant that phrase during the conversation on 28th April 1995; and (c) that, accordingly, it would not be possible or practicable for the FCF and AP to have undergone “testing and commissioning” in the sense which Mr Baines meant that phrase prior to 30th June 1995 when Kennecott and TCI wanted to attach the FCF and AP to the Operational Reinsurance. 37.6 In those circumstances, Minet failed to take any or any adequate steps to persuade Mr Baines (a) to agree to remove his “subjectivity” or not to impose it in the first place and/or (b) to agree to the attachment of the FCF and AP to the Operational Reinsurance on 30th June 1995 in the condition and state of operation which those items of equipment were in as at that date. Alternatively, if (which is not admitted), Mr Baines would not have been prepared to agree as aforesaid, Minet should have informed or warned TCI and/or the other Claimants of that fact. . . . 37.10 At all material times from 28th April 1995, Minet failed to inform and warn TCI or any of the Claimants that, as a consequence of that conversation [between Mr Murrell and Mr Baines on 28th April 1995] and or agreement and/or additional attachment requirement, given the likely condition and state of operation of the FCF and/or AP as at 30th June 1995 (the date when TCI and the other Claimants thought that the Operational Reinsurers had agreed that those items of equipment would attach to the Operational Reinsurance) (a) those items of equipment would not in fact attach to the Operational Reinsurance on 30th June 1995, alternatively there was a serious risk that they would not attach to the Operational Reinsurance on 30th June 1995 and (b) accordingly there would be a gap in the cover, alternatively there was a serious risk that there would be a gap in the cover. 37.11 At all material times from 28th April 1995, Minet failed to advise TCI or any of the Claimants that in view of the matters referred to at Paragraph 37.10 above and to ensure that there was not a gap in cover, TCI and/or the other Claimants should procure the agreement of the Construction Reinsurers to continue cover under the Construction Reinsurance Policy in respect of the FCF and AP until such time as the subjectivity could be satisfied and/or should obtain business interruption reinsurance from the Construction Reinsurers or other reinsurers.”

[17]In paragraph 38 of the re-amended particulars of claim it is pleaded that “by reason of the matters aforesaid” the claimants have suffered loss and damage. The particulars given are these:

“38.1 But for Minet’s said breaches and/or negligence, Rio Tinto, KUCC and Kennecott would have had property damage and business interruption insurance cover from TCI in relation to the FCF and AP as at the dates of the respective incidents on 16th September and 10th December 1995; and TCI would have had valid and binding property damage and business interruption reinsurance cover. 38.2 If Minet had informed and warned TCI and/or the other Claimants as set out in Paragraph 37.6 and/or 37.10 and/or 37.11 above, the Claimants would have instructed Minet to procure the agreement of the Construction Reinsurers to continue cover under the Construction Reinsurance Policy in respect of the FCF and AP until such time as the subjectivity could be satisfied and/or to obtain business interruption reinsurance from the Construction Reinsurers or from other reinsurers. In those circumstances, Rio Tinto, KUCC and Kennecott would have had property damage and business interruption insurance cover from TCI in relation to the FCF and AP as at the dates of the respective incidents on 16th September and 10th December 1995; and TCI would have had valid and binding property damage and business interruption reinsurance cover. 38.3 Rio Tinto, KUCC and Kennecott have, accordingly, suffered loss and damage to the extent that the property damage and business interruption losses arising out of the respective incidents on 16th September and 10th December 1995 are uninsured losses. 38.4 Further or alternatively, TCI is entitled to recover such loss and damage as has been suffered by Rio Tinto, KUCC and Kennecott on the grounds that TCI’s retainer of Minet was for the ultimate benefit of those parties.”

The claims against the Jardine defendants

[18]The claims against the Jardine defendants are set out in section D of the re-amended particulars of claim. It is alleged in paragraph 40 that, in or about January 1995, TCI retained Mr Blaine Trunnell “acting on his own behalf and/or on behalf of the Third and/or Fourth Defendant”:

“. . . (1) to provide consultancy services to TCI in relation to its insurance and reinsurance coverages; (2) to ‘negotiate with underwriters to achieve agreed policy wordings and cover” (see Agreement for the Provision of Advisory Risk Management Services signed by Blaine Trunnell on 5th July 1995); and (3) to assist Minet in the placement of the Operational Reinsurance Policy.”

Paragraph 41 contains the allegation that, at all material times after January 1995, Mr Trunnell was well aware of the claimants’ requirement that there must be a seamless insurance cover in respect of the smelter modernisation project (including the FCF and the acid plant); and that TCI required corresponding reinsurance cover. Paragraphs 42, 43, 44 and 45 allege that the Jardine defendants owed to the claimants duties to exercise reasonable care, skill and diligence in carrying out the retainer and at common law.

[19]Paragraph 46 of the re-amended particulars of claim contains allegations of breach of duty and negligence on the part of Mr Trunnell and the other Jardine defendants. It is not, I think, necessary to set out those allegations in detail. It is enough to note that the broad complaint is that Mr Trunnell failed to pass relevant information from Kennecott to Minet; and failed to warn TCI and the other claimants that the condition and operational state of the FCF and the acid plant as at the attachment date (15 July 1995) – as set out in documentation sent to him by Mr Ken Done of Kennecott – was such that those components would not satisfy the test for attachment under the operational reinsurance policy. The case in causation is made at paragraph 47 – see, in particular, paragraph 47.2:

“47.2 If, at any time prior to the attachment date of 15th July 1995, Blaine Trunnell (and thus the Third and/or Fourth . . . Defendant) (1) had informed TCI and/or the other Claimants what was the correct test for the attachment of components to the Operational Reinsurance Policy and/or (2) had warned TCI and/or the other Claimants that the condition and state of operation of the FCF and AP as at the attachment date (as set out in his memorandum [dated 28th June 1995 and updated on 10th July 1995]) was such that the FCF and the AP would not satisfy the test for the attachment of components to the Operational Reinsurance Policy and/or (3) had informed and/or warned TCI and/or the other Claimants that there was a gap in the cover or a serious risk that there was a gap in the cover, the Claimants would have instructed Minet to procure the agreement of the Construction Reinsurers to continue cover under the Construction Reinsurance Policy in respect of the FCF and AP until such time as the test for the attachment of components to the Operational Reinsurance Policy could be satisfied by the FCF and the AP and/or to obtain business interruption reinsurance from the Construction Reinsurers or from other reinsurers. In those circumstances, Rio Tinto, KUCC and Kennecott would have had property damage and business interruption insurance cover from TCI in relation to the FCF and AP as at the dates of the respective incidents on 16th September and 10th December 1995; and TCI would have had valid and binding property damage and business interruption reinsurance cover.”

The defendants’ applications in these proceedings

[20]By an application notice issued on 14 August 2001 Minet sought an order that the claim form and particulars of claim in the present proceedings be struck out, pursuant to CPR 3.4(2)(b), and the proceedings against Minet be dismissed, on the ground that these proceedings constitute an abuse of the process of the court and are oppressive. On the same date Minet issued a claim form under CPR Part 8, to which KUCC, Kennecott, TCI and RTZ were defendants, (2001 Folio No 925) seeking an injunction restraining those parties from commencing or taking any step in proceedings in any jurisdiction other than England and Wales in respect of Minet’s conduct in relation to the insurance or reinsurance of the smelter modernisation project.

[21]Minet’s primary case on the application to strike out (as put in written submissions made in support of its application) was that the claims which the RTZ claimants sought to advance in the present proceedings were barred by issue estoppels arising from findings of fact made by Mr Justice Langley in the early proceedings. It was made clear that, in support of that case, Minet relied, not on omissions of relevant matters from the claimants’ case in the earlier proceedings, but “on positive findings on matters which were in issue before Langley J”. The point was put, succinctly, in paragraphs 12 to 14 of a “Summary of Minet’s Submissions in Reply” dated 31 May 2002:

“12. The essential reason why the 2000 action is barred by issue estoppel is that Langley J found that the claim against reinsurers failed because the plant had not been tested and commissioned by ‘any possible criterion’. It failed (i) in accordance with Exclusion 15, whose application was never disputed by any one, (ii) by any of the other criteria canvassed, namely the test for handover under the project contract, the test discussed between Mr Murrell and Mr Baines on 28 April 1995, the explanation of underwriters’ requirements given by Minet to the Claimants, or (iii) the Claimants’ own view of the relevant criteria as set out in the KUCC Memorandum of June 1995, which the Judge regarded as the same as the criteria explained to the Claimants by Minet. 13. This finding meant that the Claimants failed [in the earlier proceedings] because knowing what the criteria for attachment were, they mistakenly thought that the FCF and acid plant would meet those criteria by the date on which they proposed to come off the Construction cover, namely 30 June 1995, later extended to 14 July. That, on the Judge’s findings, was their mistake, not Minet’s. . . . 14. This finding represented the Judge’s answer to issues directly raised on the pleadings [in the earlier proceedings] and part of the preliminary issues. It is not, of course, a finding that Minet were not negligent, for that was not part of the preliminary issues. But it is a finding that there was no cover for reasons that have nothing to do with the broking process. It was therefore fatal to any suggestion that what Minet did or failed to do was causative of any loss, whether it was negligent or not.”

[22]Minet advanced an alternative submission “based not on the proposition that the allegations in the 2000 action were omitted from the 1996 action, but on the fact that they are substantially the same as the matters alleged in the 1996 action, that they cannot stand with the findings of Langley J in that action, and that this [the present proceedings] is an attempt to undermine those findings”. This, it was said, was “not simply another way of putting issue estoppel. To use a subsequent action as a vehicle for challenging the conclusions reached in an earlier one is an abuse of process which is similar to res judicata but ‘untrammelled by the technicalities of estoppel’”.

[23]On 25 January 2002 the Jardine defendants issued an application notice seeking an order that the claims against them be determined summarily against the RTZ claimants pursuant to CPR 24.3 on the grounds that, in the light of the facts and matters determined by Mr Justice Langley in the earlier proceedings, the claimants had no real prospect of succeeding in those claims. It was said, correctly, that (as pleaded) the liability of Jardine Insurance Brokers Inc and Emett and Chandler Inc turned on the acts and omissions of Mr Trunnell; and that the gist of the allegations against him was that “he failed properly to advise and/or misinformed the Claimants about the level of testing and commissioning which would be required in order to transfer items of plant from a builder’s all risks (CAR) policy to an ‘operational’ policy”. There were then set out, at paragraph (5) of the application notice under sixteen sub-paragraphs, findings of fact made in Mr Justice Langley’s judgment of 12 October 1999. On the basis of those findings of fact, it was said that the claimants had no real prospect of establishing(i) that they misunderstood underwriters’ requirements concerning testing and commissioning to any material extent,

(ii) that they were misled by Mr Trunnell in any material way,

(iii) that they relied on anything said (or not said) by Mr Trunnell to their detriment, or

(iv) that they would have proceeded differently if Mr Trunnell had given further or different advice about the level of testing and commissioning required.

The decision below

[24]Those applications came before Mr Justice David Steel for hearing at the end of May 2002. He handed down his judgment, in writing, on 31 July 2002. He accepted Minet’s submission that the claim in the present proceedings was barred by issue estoppel and must be struck out. The reasons which led him to that conclusion can be found, I think, in the following paragraphs of his judgment:

“56. The doctrine of issue estoppel has recently been summarised in Arnold v Natwest Bank [1991] 2AC 93:- ‘Issue estoppel may arise when a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant, one of the parties seeks to reopen the issue’ per Lord Keith at p. 105 57 The thrust of Minet’s submissions was that Langley J found that the claim against reinsurers in the 1996 action failed because the claimants were aware that at least some degree of testing and/or commissioning was required for attachment yet the plant had not been tested or commissioned by 'any possible criterion'. This finding was fatal to any suggestion that what Minet negligently did or did not do was causative of any loss. I agree. . . . 61. It follows [from the findings of fact made by Mr Justice Langley] that the Judge was thus able to find that, by virtue of clauses 15 and or 9b [of the operational policy], the terms of which the claimants were by definition fully aware, the two items of plant never attached. It also follows that the finding that the plant had not been tested or commissioned ‘by any possible criteria’ was a necessary part of the determination of the issue between the parties to the 1996 action. To that extent, it was ‘fundamental’ rather than ‘collateral’. It was not simply a step in the reasoning: it was the ‘immediate foundation’ of the decision: Hoysted v Federal Tax Commissioner [1926] AC 155. 62. However, to make good their case on causation in the 2000 proceedings, Kennecott must seek to reopen that issue since it is otherwise fatal to the new claim because it has already been determined between the parties that there was no cover in any event for reasons that had nothing to do with the broking process. The new case is based on complaints that Minet failed to procure seamless cover, failed to understand the attachment provisions, failed to explain the operational status of the plant to underwriters and failed to inform Kennecott of the content of the subjectivity clause. But in reality, the claimants were fully aware that the criteria for attachment at the very least required some degree of testing and commissioning: yet in the event none was undertaken. The explanation is that the claimants to the contrary insisted on giving mistaken and over-optimistic assessments of the anticipated readiness of the plant and it is not suggested that the true position was available or supplied to Minet.”

The judge took the view that, having determined that the claims against Minet in the present proceedings should be struck out, it was unnecessary to go further and grant the injunction sought by Minet in action 2001 Folio No 925. ‘Issue estoppel may arise when a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant, one of the parties seeks to reopen the issue’ per Lord Keith at p. 105

[25]The judge recognised that, on a strict analysis, his decision in relation to issue estoppel made it unnecessary to consider the alternative submissions based on abuse of process. But, the point having been fully argued before him, he thought it right to address it. He reminded himself of the principles recently restated in Johnson v Gore Wood

[2002] 2 AC 1

– in particular, of the passage in the speech of Lord Bingham of Cornhill at page 31B-E:

“The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”

He described as “the principal thrust of Minet’s argument” on this point the submission that “the 2000 action was being used a vehicle for challenging the conclusions in the 1996 proceedings and, having regard to all the circumstances, Minet were being unjustly harassed”.

[26]The judge accepted that submission. His reasons appear from the following paragraphs of his judgment:

“68. . . . the dominant feature to my mind is the outcome of the trial. From the outset, the position was that, whilst it was appropriate for any alternative claim against Minet to be joined to the action against the underwriters (Aneco Reinsurance (Underwriting) Limited v Johnson v Higgins[1998] 1 Lloyd’s Rep 565), Minet was not perceived as exposed in respect of the court’s decision relating to the contractual exclusions one way or the other. To put it another way, part of the first stage of the trial was an investigation into whether, on the facts, the plant failed to attach simply by virtue of the express provisions of the operational policy, quite apart from any additional requirements imposed by reason of discussions between all the parties. In that event it was common that Minet would have a defence and fall out of the picture. Indeed that this is a proper appreciation of the scope and purpose of the ‘preliminary issues’ as regards the exclusions is confirmed by the dismissal of the claim against Minet by Langley J in the light of his judgment, despite the fact that the alternative claim against Minet was not otherwise under consideration. 69 Furthermore, whilst the overall outcome was accordingly favourable to Minet, it was far from the case that they had won on all the issues. In particular it was, contrary to Minet’s case, held that agreement to the subjectivity clause was reached between Mr Murrell and Mr Baines on 28th April. Given the judgment of Mr Justice Langley based on the absence of any causative significance to the subjectivity and the dismissal of the claim against Minet, it follows that Minet have been deprived of any opportunity to appeal the very finding which supports the new plea. 70. There is the added factor that the new claim necessarily involves a collateral attack on the decision of Langley J. As already explained, the new complaint even if justified can only lead to the recovery of damages in the event that the judge’s conclusion that the items of plant did not attach to the operational policy was wrong. Put another way whatever criterion was adopted, there had been no sufficient testing and or commissioning. Thus it cannot be contended in the light of that finding that but for Minet’s negligence the plant would have attached. 71. A collateral attack may be legitimate if it is not manifestly unfair: see Hall v Simons[2000] 3 WLR 543. Here it would be clearly unfair to reopen the attachment issue and thus the issue of causation. Such would harass Minet since it would require the issue to be relitigated in circumstances where Minet had litigated the issue once on the basis that it would be released from the litigation if it were found that clauses 9 and or 15 excluded attachment. To allow a retrial on that issue would be for the sole purpose of achieving two final but inconsistent decisions.”

[27]The judge then turned to the application for summary judgment made on behalf of the Jardine defendants. He accepted the submission that Mr Justice Langley had made findings to the effect(i) that the claimants, by their own personnel, had known of the requirements for attachment under the operational policy “in the sense that it involved some degree of commissioning and/or testing” and

(ii) that the claimants, by their own personnel, knew that the plant had not been commissioned even by their own understanding of the requirements. He accepted, also, that – no evidence having been adduced to suggest that in any new trial a judge would reach a different conclusion to Mr Justice Langley on those matters – the claimants had no reasonable prospect of success in the present proceedings. In those circumstances he held that the Jardine defendants were entitled to the summary judgment which they sought.

The issues on this appeal

[28]The grounds of appeal – as they appear from the ‘Notice of Appeal’ served with the appellants’ notice – are based on the premise that the judge misunderstood the nature of the claimants’ case in the present proceedings. In particular, it is said, the judge failed to appreciate that the claimants do not seek to challenge – in the present proceedings – Mr Justice Langley’s conclusion that the FCF and the acid plant did not attach to the operational insurance and reinsurance policies. It is pointed out – correctly in my view – that, on a proper analysis of the pleaded case in the present action, the claimants’ case is predicated upon attachment not having occurred. The point is put at paragraph 8 of the Notice of Appeal:

“The Claimants’ case in the 2000 Action is that Minet should have explained what the attachment provisions of the Operational Insurance and Reinsurance Policies required, and in particular what Minet had been specifically told about those requirements by the reinsurers. If Minet had done so, the Claimants would have realised that the FCF and AP were not yet ready to attach to those policies and would have obtained alternative insurance.”

In relation to the Jardine defendants it is said that the judge failed to appreciate that – in the circumstances that those defendants were not parties to the earlier proceedings – there was no basis upon which they could rely on any of the findings made by Mr Justice Langley in those proceedings: “. . . the judgment of Langley J . . . was and is irrelevant so far as the case against the [Jardine] defendants is concerned”.

[29]The Jardine defendants seek to uphold the judgment which they have obtained on an alternative ground, set out in Appendix A to a respondents’ notice relied upon at the hearing of the appeal. Put shortly, it is said to be an abuse of process for the claimants to pursue their claims against the Jardine defendants in the present proceedings in circumstances where (if the claimants’ claim against Minet is struck out) the Jardine defendants will, or may, be prejudiced in seeking contribution against Minet. The underlying premise – which the Jardine defendants reserve the right to challenge – is that (as Minet has asserted), if the claimants fail against Minet on the basis of the findings made by Mr Justice Langley in the earlier proceedings, a claim by the Jardine defendants for contribution against Minet in these proceedings would fail by reason of the provisions in section 1(5) of the Civil Liability (Contribution) Act 1978. If Minet be right in that assertion, the position of the Jardine defendants in this litigation will have been prejudiced by the course which the claimants chose to adopt – that is to say, by the claimants’ decision to join Minet, but not the Jardine defendants, in the earlier proceedings. It is said that “the Claimants’ piece-meal approach would prevent a just resolution of the issues between all parties.”

[30]In my view, the issues for decision on this appeal may be summarised as follows:(i) which (if any) of the matters which the claimants need to establish in order to succeed against Minet in the present proceedings have been subject of a finding by Mr Justice Langley in the earlier proceedings;

(ii) do the findings of Mr Justice Langley on those matters (if any) raise issue estoppels which prevent the claimants from succeeding in their claim against Minet in the present proceedings;

(iii) is it otherwise an abuse of the process of the court for the claimants to pursue their claim in the present action against Minet – in circumstances where their claim against Minet in the earlier proceedings was dismissed by Mr Justice Langley;

(iv) are the Jardine defendants entitled to summary judgment on the ground that, in the light of the findings made by Mr Justice Langley in the earlier proceedings, the claimants have no real prospect of establishing that any act or omission of the Jardine defendants was causative of the loss which they have suffered; and

(v) is it an abuse of process for the claimants to pursue their claims against the Jardine defendants in circumstances where – as a consequence of the course which the claimants have adopted in this litigation – the Jardine defendants are or may be prejudiced in the pursuit of their claims to contribution form Minet.

Issue estoppel

[31]I turn, therefore, to consider the first two of the issues which I have identified:(i) which (if any) of the matters which the claimants need to establish in order to succeed against Minet in the present proceedings have been subject of a finding by Mr Justice Langley in the earlier proceedings; and

(ii) do those findings raise issue estoppels which prevent the claimants from succeeding in the present proceedings.

[32]The starting point must be to identify the elements on which the claimants rely to found a cause of action against Minet in the present proceedings. So far as material in the present context, these are to be found in those paragraphs in section C of the re-amended particulars of claim which I have set out earlier in this judgment. As I have said the particulars of breach of duty and negligence on the part of Minet, set out under paragraph 37 of that pleading, include allegations in relation to the “subjectivity” which (as Mr Justice Langley found) had been agreed between Mr Murrell and Mr Baines on 28April 1995. Those allegations may be summarised as follows:(i) that Minet failed to ensure that the operational reinsurers were aware that the FCF and acid plant would not have undergone “testing and commissioning” - in the sense which the reinsurers understood that requirement - by 30June 1995 (the date at which Kennecott and TCI wanted those items to attach under the operational insurance and reinsurance policies) (paragraph 37.5);

(ii) that Minet failed to persuade the operational reinsurers to agree to the attachment of the FCF and the acid plant in the condition and state of operation in which those items were as at 30 June 1995 - alternatively, failed to inform Kennecott and TCI that the operational reinsurers would not agree (or had not agreed) to that - (paragraph 37.6);

(iii) that Minet failed to warn Kennecott and TCI that, given the likely condition and state of operation of the FCF and the acid plant as at 30June 1995, there was a serious risk that those items would not attach to the operational reinsurance on that date – and so a serious risk that there would be a gap in cover (paragraph 37.10) and

(iv) that Minet failed to advise Kennecott and TCI that, to ensure that there was not a gap in cover, they should seek the agreement of the construction reinsurers to continue cover under the CAR policy in respect of the FCF and acid plant until such time as the subjectivity could be satisfied and obtain business interruption reinsurance from those or other reinsurers (paragraph 37.11).

[33]The causal link between those allegations of breach of duty and the loss in respect of which the claim is made is pleaded in paragraph 38 of the re-amended particulars of claim. It is said that but for Minet’s breaches of duty (including those alleged in the paragraphs to which I have just referred) TCI would have had valid and binding property damage and business interruption reinsurance cover in respect of the FCF and acid plant on 16 September and 10 December 1995 (paragraph 38.1). The basis – or one basis – for that assertion is pleaded in paragraph 38.2. It is said that if Minet(i) had informed the claimants that the operational reinsurers would not (or had not) agreedto the attachment of the FCF and the acid plant in the condition and state of operation in which those items were as at 30 June 1995, or

(ii) had warned that, given the likely condition and state of operation of those items as at 30June 1995, there was a serious risk that there would be a gap in cover, or

(iii) had advised that, to ensure that there was not a gap in cover, the claimants should seek cover elsewhere, the claimants would have instructed Minet to procure the continuation of cover under the CAR (and the associated reinsurance policy) and to obtain business interruption reinsurance.

[34]There is force, as it seems to me, in the criticism that Mr Justice David Steel failed to recognise that the claimants’ case in the present proceedings does not involve a challenge to Mr Justice Langley’s decision that the reason why the FCF and the acid plant did not attach under the operational insurance and reinsurance policies was that there had been no operational testing in any meaningful sense. The claimants accept, in the present proceedings, that the FCF and the acid plant did not attach under the operational policies – indeed, they rely on the fact that those items were not covered under those policies. They accept, also – as it seems to me that they must – that the reason why those items did not attach was the items had not been tested or commissioned ‘by any possible criterion’. The claim in the present proceedings is not put – or not put exclusively – on the basis that “if Minet had informed us what testing we needed to do to satisfy the underwriters’ requirements, we would have ensured that that testing was carried out”. Rather, the claim in the present proceedings is put on the basis that “Minet knew what we were proposing to do; knew what the operational state of the FCF and acid plant were likely to be on 30 June 1995; knew that there was a serious risk that plant in that state would not satisfy the operational underwriters’ requirements (and so would not attach under the policies); and failed to advise us to seek cover elsewhere”.

[35]It is necessary, therefore, to examine Mr Justice Langley’s judgment in the earlier proceedings in order to ascertain whether he did make findings in relation to the matters on which the claimants now rely in the present proceedings. It is important to keep in mind that Mr Justice Langley was engaged in the trial of preliminary issues. Those issues had been defined by an order made by Mr Justice Tuckey on 3 July 1998. The issues, as defined, were these:

“all issues as to (1) the nature of the Reinsurance Contract and its terms; (2) the attachment of the FCF and the Acid Plant to the Reinsurance Contract and the Operational Policy or cover in respect of those components, prior to and at the date of the incident relative to each (including any estoppel issues in relation to such attachment and/or cover); (3) whether the reinsurers are entitled to avoid certain endorsements to the Reinsurance Contract for the reasons pleaded . . . and if so, the effect of such avoidance on the claimants’ claim in the action”

. As Mr

Justice Langley observed ([2000] Lloyd’s Law Reports (Insurance and Reinsurance) 179, 182 rhc):

“The effect of this Order is to exclude from this trial only causation and damage issues, together with direct consideration of the claimants’ alternative claim against Minets.”

He explained what he meant by the expression “the claimants’ alternative claim against Minets” in a subsequent paragraph (ibid, 183lhc):

“The claimants claim against Minets is contingent on failure of their claim against the reinsurers. It is alleged that any such failure will be the consequence of Minets acting in excess of their authority and/or in breach of duty in failing to disclose to reinsurers the contents of a fax dated 26 April 1995 which has come to be known as ‘The Frisco Fax’. Minets deny these allegations.”

As the judge also observed, the evidence before him had been directed to two areas identified in an order made by Mr Justice Rix on 28 April 1999 – that is to say “insurance” evidence as to what the reinsurers did or did not agree to accept and “technical” evidence as to the FCF and acid plant.

[36]Mr Justice Langley had referred (ibid, 183 lhc) to the fact that operational reinsurers were relying on an express oral agreement reached on 28 April 1995 “as to the condition of the plant required before attachment”; alternatively on a ‘scratch’ (described as “the Baines subjectivity”) of the same date which was said to exclude cover until the FCF and acid plant had been “tested and commissioned”. At page 188 (lhc) he explained his approach to the facts:

“In seeking to summarise the material events I also propose to set out the material facts as I find them to be. It is necessary to do so at some length not only because it is important to consider the alleged oral agreement in the context of events both prior and subsequent to 28 April 1995, the day on which it is said to have been made, and to consider the status of the plant at the time the damage occurred, but also because the parties rely to some extent on the background as material to the construction of the policy wording.”

That passage is an important indicator of the task upon which the judge was engaged.

[37]As he had indicated he would find it necessary to do, Mr Justice Langley did review the evidence at some length. He found (ibid 189 rhc) that it was demonstrated by a note dated 20 January 1995 – of a meeting between Kennecott and Minets on that day – that there was “an understanding within Minets . . . communicated to Kennecott that an operational policy would not normally accept items until they had been tested up to 100 per cent of their design capacity”. He found (ibid 193/4) that, on 28 April 1995, it was agreed between Mr Murrell and Mr Baines that items of plant would attach under the operational reinsurance policy “only once they had been ‘tested and commissioned’”; and that no reference was made at that meeting to the Frisco Fax (sent by Kennecott to Minet on 26 April 1995) from which it could have been seen that Kennecott did not expect the FCF and acid plant to be operational on the projected handover date (30 June 1995). He found that to be confirmed by a later document (the May schedule), sent by TCI to Minet on 2 May 1995, which indicated that certain items of plant (including the FCF and acid plant) would be handed over on 30 June 1995 on the basis that they would not by then have been “100% performance tested” but would be regarded as “acceptable operational risks” to insurers.

[38]The judge’s conclusion, in relation to the effect of the 28 April 1995 agreement and the Baines subjectivity are expressed in a paragraph at page 210 (lhc) of his judgment, upon which Mr

Justice David Steel placed reliance:

“Whilst I think if there had been any real doubts about whether the status of the FCF and acid plant could sensibly and reasonably be described as ‘tested and commissioned’ those doubts would rightly be resolved in favour of the claimants, on my findings in no meaningful sense of the words had either the FCF or acid plant been ‘tested’ and both were in the process of commissioning but had not been ‘commissioned’ at the time of the incidents. Moreover, as I find, that was so by any possible criterion, be it the project contracts, the conversation on 28 April as I have held it to have been, the views of the underwriters as explained by Minets to the claimants or indeed the expectations of the claimants themselves . . .”

[39]As I have said, the relevant enquiry on this aspect of the appeal is whether Mr Justice Langley made findings in relation to the matters on which the claimants now rely in the present proceedings. The first – and perhaps the most obvious – response is that those were not matters which were relevant to the dispute between the claimants and the operational reinsurers in the earlier proceedings. The principal question in those proceedings was whether the FCF and acid plant had attached under the terms of the policies. That turned on the actual status of the items at the relevant time and the true meaning to be given to the relevant clauses in the policy documents. The judge answered that question in the negative. A secondary question was whether the oral agreement of 28 April 1995 had had the effect of varying the requirement under the policy documents; and, if so, whether the items of plant had met the requirement as so varied. The judge held that whatever the true meaning to be given to the expression “tested and commissioned” in the context of the oral agreement, the requirement was not met.

[40]A second response to that enquiry is that the matters on which the claimants rely in the present proceedings were not matters which were relevant to any issue between the claimants and Minet which Mr Justice Langley had set out to address in his judgment. He had explained, in the passage (ibid 182 rhc) to which I have already referred, that the order for the trial of preliminary issues excluded “direct consideration of the claimants’ alternative claim against Minets”. It is plain that he had in mind, at the least, that – if the claimants succeeded against the operational reinsurers – the claim against Minet would fall away. But that would not involve “direct consideration” of that claim; it would simply be a consequence of the judge’s finding on the issues between the claimants and the reinsurers. It is plain, also, that he understood that (if the claimants failed against the reinsurers) the claim against Minets turned on whether Minets had acted in excess of authority (or in breach of duty) in making the oral agreement on 28 April 1995 without disclosing the Frisco Fax – see ibid 183 lhc. That would be so if the reason why the claimants failed against the reinsurers was that the oral agreement had led to a requirement in respect of testing and commissioning which was more onerous than would have been the case if the oral agreement had not been made; or if Minet’s failure to disclose the Frisco Fax to the reinsurers had led to the requirement under the oral agreement being more onerous than it would have been if the Frisco Fax had been disclosed. In the event, the judge held that Minet’s had made an oral agreement on 28 April 1995 on behalf of the claimants and had failed to disclose the Frisco Fax; but he held, also, that the reason why the claimants failed against the reinsurers was independent of his conclusion on those matters. It could not be said that anything which Minet was alleged to have done, or failed to do, as the case was presented in the proceedings before Mr Justice Langley, had led to the claimant’s failure against the operational reinsurers. But Mr Justice Langley was never asked to address the matters upon which the claimants rely in the present proceedings.

[41]It is a matter of no surprise, therefore, that Mr Justice Langley made no findings on the matters upon which the claimants rely in the present proceedings. His findings in relation to Minet are limited, in my view, to a finding that Minet’s failure to disclose the Frisco Fax, when Mr Murrell made the agreement on 28 April 1995 which the judge found that he did make, was not the cause of the claimants’ failure to attach the FCF and acid plant under the operational insurance and reinsurance policies. It was unnecessary for the judge to consider whether Minet should have informed the claimants that the operational reinsurers would not agree (or had not agreed)to the attachment of the FCF and the acid plant in the condition and state of operation in which those items were as at 30 June 1995; or should have warned that, given the likely condition and state of operation of those items as at 30June 1995, there was a serious risk that there would be a gap in cover; or should have advised that, to ensure that there was not a gap in cover, the claimants should seek cover elsewhere; or whether, if Minet had so informed, warned or advised the claimants, the claimants would have taken steps to obtain (and would have obtained) cover elsewhere.

[42]It follows that I take the view that there are no findings in the judgment of Mr Justice Langley which raise issue estoppels which prevent the claimants from succeeding in the present proceedings.

Abuse of process

[43]It follows, also, that I would reject the submission (which found favour with Mr Justice David Steel) that it is an abuse of the process of the court for the claimants to pursue a claim against Minet in the present proceedings in so far as that submission is put on the ground that the claim in the present proceedings involves a collateral attack upon the decision of Mr Justice Langley in the earlier proceedings. It will be apparent from what I have said already that I am not persuaded that success in present proceedings would be inconsistent with that earlier decision.

[44]The more powerful contention, as it seems to me, is that it is a misuse of the process of the court for the claimants to bring claims in a later action which they could, and should, have brought in the earlier proceedings. The point was addressed by Mr Justice David Steel at paragraph 67 of his judgment. He identified the following as relevant considerations:

“(a) It is standard and proper practice for claims against the broker to be made in the same action as claims against insurers taking a coverage defence: see Aneco. [Aneco Reinsurance (Underwriting) Limited v Johnson & Higgins [1998] 1 WLR Lloyd’s Rep 565] (b) The order for preliminary issues in fact constituted an order for determination of all issues relating to the content and construction of the operational policy and to the attachment of the FCF and acid plant. (c) Amending the particulars of claim against Minet to add further complaints would not have enlarged the scope or length of the hearing that had been ordered. (d) At the hearing before Mr Justice Rix in 1999, Minet had made it plain that it wanted all the allegations to be pleaded, a course of action forcefully encouraged by Rix J. (e) An amendment to add the very complaint that there had been a “failure to obtain seamless cover” was canvassed by Holmans [solicitors for the claimants] in their letter of the 5 May [1999] as suitable for leaving over until after the determination of the preliminary issue, a proposal which was roundly rejected by Minet. (f) Minet were fully justified in adopting this stance since the ambit of the pleaded case against it might have a bearing on its conduct at the trial (including the agreement to co-operate with the Claimants.”

The judge described those points as “telling”. I agree. The question is whether, in the particular circumstances of this case, they should lead the court to deny the claimants the opportunity to bring the claims in the present proceedings which they could and should have brought in the earlier proceedings. As Lord Bingham pointed out, in the passage in his speech in Johnson v Gore-Wood

[2002] 2 AC 1

, 31 B-E, to which the judge referred, what is required is “a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case . . .”

[45]It is a feature of this litigation that the claimants had identified (at least in substance) the claim which they now wish to pursue against Minet in the present proceedings at a date which was before the hearing of the preliminary issues in the earlier proceedings but had decided not to pursue that claim at that stage. On 4 May 1999 solicitors acting for the claimants sent, on “a without prejudice basis” (whatever that may mean in this context) proposed further amended points of claim. Minet’s solicitors responded on the following day:

“You should be aware that if you proceed with the amendments which you are proposing, we are likely to find ourselves in an adversarial position not least because it will be necessary for us to raise issues with regard to your client’s failure to provide information as requested by Minet. Such a dispute between us can only be to the advantage of reinsurers ”

It was pointed out that the proposed amendments would be likely to put the hearing of the preliminary issues (then fixed for June 1999) in jeopardy. The claimants’ solicitors wrote back on 5 May 1999, pointing out that the proposed amendments were intended to do no more than pass on to Minet allegations of non-disclosure made by the reinsurers. The letter continued:

“Further Amendments In the course of the conversation between [solicitors] today (and on 28th April) it was made clear that there may be further claims made by our clients against Minet. It has always been understood by our respective clients that any such claims would not be pleaded at this stage of the litigation. Such claims might include the following: (i) Failing to ensure that the transfer from the CAR/EAR policy and reinsurances was ‘seamless’. (ii) Failing to obtain operational reinsurers agreement that attachment under the operational reinsurances would be subject to the same criteria agreed with the CAR/EAR reinsurers in respect of the cessation of cover under the CAR/EAR policy. We propose that any such further claims (which given our respective confidence in our clients’ positions may make claims over unlikely) should be advanced against your client after the determination of the current preliminary issues. As to how those matters are dealt with, we are as indicated this morning flexible as to the forum and format.”

[46]The parties’ solicitors spoke on the telephone on 6 May 1999; but reached no agreement as to how matters should proceed. Following that conversation Minet’s solicitors wrote:

“We note that you do not seek leave to amend at this stage. That is a matter for you. Clearly, we cannot prevent you from seeking leave to amend at any time. We confirm, however, that we will resist any amendment which you do seek to make.”

The claimants’ solicitors replied on 11 May 1999, re-asserting their contention that it had been an agreed position that any further claims which the claimants might have against Minet in relation to their role as broker “would be dealt with at another time, and in certain respects, would be dependent upon the outcome of the preliminary issues”. The letter continued . . . “should our clients be unsuccessful in their claims against reinsurers, they will consider thereafter bringing proceedings against your clients . . . depending on the outcome of the preliminary hearing”. The response from Minet’s solicitors, in a letter dated 13 May 1999, contained the following passage:

“We both regard it as overwhelmingly likely that you will succeed against reinsurers on the attachment issue this summer. It is very probable, therefore, that these discussions between us shall remain academic. In the circumstances, we suggest that we re-focus on co-operating to establish reinsurers’ liability as we have done effectively and productively in the past. It would be a shame for that co-operation to be weakened by our current debate which can only serve to bring succour to the reinsurers if it is continued.”

[47]Mr Justice David Steel described that correspondence as “tactical posturing by both sides”. He said this, at paragraph 46 of his judgment:

“. . . The claimants were anxious to try and keep their options open for any post judgment claim against Minet but were also concerned not to jeopardise the preliminary issues or the co-operation that they were receiving from Minet. Minet were attempting to eliminate any follow up claim and were both claiming that any amendment would undermine their co-operation but in the same breath insisting that the entire claim against them should be pleaded. The matter was left there because in reality, both the claimants and Minet expected to win on the preliminary issues thus disposing of any cross-claim.”

[48]There is no reason to think that Mr Justice Langley was aware of the correspondence to which I have just referred; or to the possibility that, if they failed in their claim against the reinsurers, the claimants would seek not only to pursue the claim against Minet already pleaded in the proceedings before him – that is to say, the claim based on Minet’s part in the oral agreement of 28 April 1995 – but to bring further claims against Minet which had not then been pleaded. It is, therefore, no surprise to find that he acceded to an application, made to him on behalf of Minet after he had handed down judgment on the preliminary issues, that the claim against Minet in the proceedings which were before him should be dismissed; and judgment should be entered for them. As he put it:

“The resolution of the attachment issue against the claimants has the admitted consequence that they cannot succeed in their claim against Minet. . . . The final question is whether Minets are entitled to their judgment. I think they are. Their position is no different from that of the reinsurers. On the basis of my judgment, as is agreed, the claim against them must fail.”

Leading counsel then appearing for the claimants did not inform the judge that the claimants were considering bringing further claims against Minet – as foreshadowed in the correspondence which had taken place in May 1999. The judge was not asked to consider whether those further claims should be brought by amendment in the proceedings then on foot (with the consequence that final judgment as between the claimants and Minet would be premature) or in fresh proceedings. So – as he was bound to do in those circumstances – he dealt with the matter on the basis that the only claim against Minet was that raised by the pleadings as they stood.

[49]As I have said the question is whether the history which I have set out should lead the court to deny the claimants the opportunity to bring the claims in the present proceedings. In my view, that would be a disproportionate response in this case. The correspondence between solicitors in May 1999 does not sit easily with a submission that the present proceedings amount to unjust harassment of Minet. It is, I think, reasonably clear that it suited both the claimants and Minet that the preliminary issues in the earlier action should proceed in June 1999 as planned – without the complications which would result from the introduction of hostile claims inter se. As Mr Justice David Steel observed, they each expected that success against the reinsurers would lead to a position in which those claims would never need to be litigated. Minet’s present stand may, fairly, be seen as an attempt to take forensic advantage of the claimants’ decision to adopt a course which – if the tactical posturing is disregarded - suited Minet well enough at the time.

The Jardine defendants

[50]For my part I would accept that, if it were necessary to try – as between the claimants and the Jardine defendants - the question whether the FCF and acid plant attached under the operational insurance and reinsurance policies, the probability is that a judge would reach the same conclusion as Mr Justice Langley has reached in the earlier proceedings. Further, I would accept that a judge might well reach the conclusion – for the reasons set out by Mr Justice Langley – that the claimants failed to carry out testing in any meaningful sense, including the sense in which they, themselves, understood the requirement. But that does not lead to the conclusion that the claimants have no real prospect of success in their claims against the Jardine defendants. The claimants do not seek to challenge those findings. The matters upon which the claimants rely in support of those claims are set out at paragraphs 46 and 47 of the re-amended particulars of claim; and have been expanded in voluntary particulars served on or about 12 February 2003. Mr Justice Langley made no findings in relation to those matters. It is, in my view, impossible to contend, on the basis of the findings which he did make on other matters - which were before him in proceedings to which the Jardine defendants were not parties - that the claimants have no real prospect of persuading a court that the matters upon which they rely in the present proceedings ought to be determined in their favour. Mr Justice David Steel may well have been right to observe that “the issues which arise on [the Jardine defendants’] application are merely an extension of the points already discussed”. But if, as I would hold, he was wrong to reach the conclusion which he did in relation to Minet’s application, it must follow that he was wrong to hold (on that ground) that the claims against the Jardine defendants had no real prospect of success.

[51]The further point – which the Jardine defendants seek to raise by their respondents’ notice – falls away if the claim against Minet in the present proceedings is not to be struck out.

Conclusion

[52]I would allow this appeal.

[53]The claimants run one of the biggest copper smelting complexes in the world at Bingham Canyon in the state of Utah, not far from Salt Lake City. In the early 1990’s they wanted to modernise their undertaking and decided to build, inter alia, a new flash converting furnace (“FCF”) and an acid plant (“AP”). During construction, these buildings were to be covered by contractors’ all risks (“CAR”) insurance; once they were in operation they were to be covered by what is called operational insurance. One of the most dangerous times was the time during which, after construction, the FCF and AP were being tested and commissioned. Under the building contracts, there were provisions for handover at particular dates. CAR insurers, or reinsurers, did not readily insure beyond such handover dates. It was not necessarily the case that, at the time of handover, any particular item of plant would be fully operational in the sense of being tested to its full capacity. Operational insurers and reinsurers did not want to cover items of plant unless they had been tested to full capacity and, until this happened, did not intend the items of plant to attach to the policy. Possibilities of a gap in cover existed and the retention of the services of a skilled insurance broker was essential.

[54]Accidents and ensuing loss and damage to the FCF and the AP occurred sometime after handover; the question arose whether these items of plant had attached to the operational insurance cover. That could be expected to be a question of construing the operational insurance and reinsurance policies. On one view, that would be a suitable question to be determined as a preliminary issue before determining any questions relating to the broking history. There was, however, a niggle; operational reinsurers wanted to argue that, quite apart from the terms of the policy itself, a relevant agreement had been made orally between Mr Baines of Allianz (the leading reinsurer) and Mr Murrell of the claimants’ London reinsurance brokers, Minet. This was an oral agreement that no item would attach to the policy unless it had been tested to 100% capacity over a period of 72 hours. When this allegation emerged, Minet denied that any such agreement had been made but the claimants wished to argue that, if any such agreement was made by Minet, Minet had no authority to do so and that, they, the claimants, were not, therefore, bound by that oral agreement.

[55]When proceedings were initiated against reinsurers by the owners of the plant and their captive insurer, it seemed to those advising the parties that the question whether cover had attached was comparatively narrow but that other questions arising under the policy, including the calculation of the amount of recovery under the policy (if available), were extremely complex. Loss and damage to the FCF and AP themselves were covered by the policy; so was business interruption, which formed the main part of the claim and was expected to be highly controversial. It would be necessary to consider the extent to which the claimants lost business by reason of the non-functioning of the FCP and AP, rather than by reason of any general downturn in the world demand for copper or by reason of causes internal to the claimants such as inability of the plant at the relevant times to function at full capacity. The claim was very large and could be expected to take weeks to try. The attraction of a preliminary issue on the attachment of the operational cover was obvious.

[56]The first attempt to define a preliminary issue was made in a claimants’ application of 10th June 1997. It would be necessary to join Minet in the action for the purpose of binding them to the result of the preliminary issue. In particular they would need to be bound by the court’s interpretation of the policy and by any finding as to whether the alleged oral agreement was made, what it meant and whether the making of such agreement was within their authority as brokers. The claimants’ solicitors (Holmans) and Minet’s solicitors (Barlows), than whom there can be few more experienced solicitors in insurance and reinsurance matters in the City of London, accordingly entered into negotiation about Minet being joined to the proceedings. Not surprisingly Barlows for Minet wanted an agreement that, once the proposed preliminary issues were decided, there should be no question of further proceedings against Minet; not surprisingly, Holmans made it clear that they did not agree that there should be no further proceedings “in respect of any other matter relating to Minet’s broking activities”. David Steel J, in his judgment, records the details of the correspondence between Holmans and Barlows which ensued and took place over many months until the summer of 1999. The respective position of each firm of solicitors was as clear at the end of the correspondence on this topic as it was at the beginning. In the event, Toulson J rejected the first attempt to formulate a preliminary issue but Minet did not object to being joined to the proceedings with a view to participating in such preliminary issues as might be ordered in due course. On 22nd April 1998, Mance J made a provisional order for preliminary issues relating to attachment of cover and the alleged oral agreement. He also ordered Minet to be joined to the action.

[57]By this time a further difficulty had surfaced. Reinsurers wished to allege that the claimants had their own practice in relation to “testing and commissioning” of items of plant and that this practice was an unusual practice in the business which ought to have been, but was not, disclosed to reinsurers. It was for this reason that Mance J’s order for preliminary issues was provisional only.

[58]On 2nd September Tuckey J gave leave to reinsurers to make their non-disclosure amendment and settled the final form of the preliminary issues. Reinsurers then served their amended Points of Defence and on 1st October Holmans on behalf of the claimants served a re-amended Points of Claim against Minet in which they asserted that their practice/interpretation in relation to testing and commissioning had been made clear to Mr Powell of Minet who had himself made it clear to his London office in a fax he had sent while he was staying in San Francisco (“the Frisco fax”)

[59]There matters remained until March 1999 when reinsurers served better particulars of their non-disclosure plea including the allegation that the claimants knew that commissioning of the FCF and AP had not taken place. The claimants’ view of that plea was that that knowledge was shared with Minet but neither Holmans nor Barlows thought it sensible that that complaint should be ventilated in the case against reinsurers and a draft plea to the effect that Minet knew that commissioning had not taken place was not pursued, the respective solicitors still taking their 1997 positions in relation to the issues between their respective clients. The claimants had attempted to strike out the particulars at a pre-trial review before Rix J on 28th April 1999 but he declined to do that saying that the parties could call further evidence in relation to the particulars of the plea.

[60]It was, therefore, apparent by the time when the trial of the preliminary issues began before Langley J in June 1999 that outstanding issues remained between the claimants and the brokers which Langley J was not being invited to try. Barlows had been saying to Holmans for months that that was not satisfactory and it is clear that there was no agreement that such issues should be deferred. But the trial of the preliminary issues went ahead in large measure because the claimants and Minet both thought that, on those preliminary issues, the claimants would succeed and the reinsurers would fail.

[61]This confidence turned out to be misplaced when Langley J gave judgment on 20th October and decided that the FCF and AP had never attached to the operational insurance for the reasons set out in Chadwick LJ’s judgment, which can be summarised by saying that they had not been tested “by any possible criterion” (page 210 of the judgment of Langley J). He further decided, under the relevant attachment clause, contrary to Minet’s evidence, that the alleged oral agreement of 28th April had been made but that Minet had authority to make the agreement which, in any event, did not alter the meaning of the attachment clause in the policy. He made no decision about non-disclosure. Since CAR insurance had ceased on handover of the plant, there was thus a gap in cover and the relevant items of plant had been uninsured between the date of handover and the respective dates of the accidents. Langley J, having decided the preliminary issues, gave judgment in the action as then constituted in favour of reinsurers. He also gave judgment for Minet since he had decided in their favour on the argument about excess of authority and had not needed to make any decision in relation to non-disclosure. In March 2000 the claimants instituted new proceedings against Minet; to these proceedings they have joined their local American brokers, whom they now sue for the first time.

[62]These proceedings have been stayed by David Steel J because in his view there is an issue estoppel arising from the judgment of Langley J in that, since that learned judge decided that the FCF and the AP had not been tested by any relevant criterion, he also decided that the lack of insurance was nothing to do with the broking process. He also considered that it was an abuse of process to seek to litigate matters other than those matters canvassed in the trial of the preliminary issues, because such matters ought to have been litigated at the same time as the preliminary issues. Since Langley J had decided on the evidence in relation to the issues before him that there was nothing in the broking process that caused the claimants to be uninsured, Steel J also gave summary judgment in favour of the American brokers. Each of those decisions is now appealed to this court.

[63]It is a curiosity of the appeal that it was necessary for us to be treated to a detailed analysis of the judgment of Langley J in order to show that there is or is not an issue estoppel barring the present claim. In a case of this kind, it would normally be more natural (and certainly much easier) to consider whether a second claim was an abuse of the court’s process. Since, however, both relevant sets of solicitors were, at all times, aware that the claimants had potential claims which it was not their intention to litigate as part of the preliminary issues (and which it was hoped it would not be necessary to litigate at all), any argument to the effect that Minet was being “unjustly harassed” (to use Lord Bingham of Cornhill’s phrase in Johnson v Gore Wood

[2002] AC 1

at page 31C) had its difficulties. Thus it is that Minet have been driven to attempt to derive an issue estoppel from the original judgment. Logically that is the prior argument.

[64]Thus it is that paragraphs 31 – 42 of my Lord’s judgment are (and have to be) devoted to a detailed analysis of both the claim against Minet and the judgment of Langley J. It is an analysis which I could not possibly improve upon. I need only say that I whole-heartedly agree with it.

[65]In relation to the second head of abuse, I have already observed that the suggestion that Minet would be unjustly harassed by a second set of proceedings has its difficulties in the light of the fact that their solicitors knew of the existence of claims that might well be brought if the claims against reinsurers failed. The highest that Mr Sumption QC (now appearing for Minet) could put it was to argue (as he had suggested to the claimants’ original counsel, Ms Barbara Dohmann QC, in the course of his cross-examination of her before David Steel J at page 137 line 15ff and page 145 line 17ff) that the reason why such claims were not, at least, pleaded in the original litigation was that it would then have emerged that Minet had explained to the claimants what underwriters’ criteria for attachment were. He pointed out that that was part of reinsurers’ case at trial and Ms Dohmann agreed that that was part of the story; she asserted, however, that there was no attempt to avoid that being part of the case. Mr Sumption submitted that Ms Dohmann was there agreeing that there were tactical reasons for deliberately not pursuing the claims against Minet at that stage and that, therefore, the claims should not now be pursued at all. I do not read Ms Dohmann’s evidence in that way; she was merely saying that it did not make sense for the claimants to pursue their claims against Minet at that stage of the preliminary issues especially since, if they were then to be pursued, further witnesses would have to be called, there would be a considerable expansion of the preliminary issues and there was a risk that the trial of the preliminary issues might be lost altogether (page 138 line 24 – page 141 line 3 and page 146 lines 1 – 6). That was the reality of the matter at that time and abuse of process is, in my judgment, not, therefore, established.

[66]I therefore agree with Chadwick LJ about abuse of process; I also agree about the Jardine defendants and I would allow the appeal.

[67]I agree with both judgments. As to issue estoppel, I too agree with the analysis of Chadwick LJ at paragraphs 31 to 42 of his judgment. It is in my view clear from a reading of the judgment of Langley J as a whole that the issue he was considering was whether the plant had attached under the terms of the policies, including consideration of whether the oral agreement of 28 April 1995 had the effect of varying the requirement under the policy documents.

[68]The identification of the issues both at the beginning of the judgment and in Annex B support that view. Moreover, the judgment included a detailed assessment of the evidence covering the period from May 1994 to early 1996, which also demonstrates the scope of the judgment. It was prefaced by a paragraph headed “Chronology” and stating:

“In seeking to summarise the material events I also propose to set out the material facts as I find them to be. It is necessary to do so at some length not only because it is important to consider the alleged oral agreement in the context of events both prior and subsequent to 28 April 1995, the day on which it is said to have been made, and to consider the status of the plant at the time the damage occurred, but also because all the parties rely to some extent on the background as material to the construction of the policy wording.”

The contents of the summary of material events which follows bears out the purpose for which it was intended.

[69]Reliance is placed on behalf of Minet on Langley J’s finding (page 210 of Langley J’s judgment) that in no reasonable sense of the words had the plant been either tested or commissioned. The judge found that to be so by any possible criterion including “the expectations of the claimants themselves as set out by Mr George in June 1995”. The judge also found (page 206) that not even the tests or demonstrations proposed by Mr George on 12 and 28 July 1995 had been carried out.

[70]For Minet, Mr Sumption QC submits that the judge found not only that there had not been the required testing and commissioning, so that there was no cover, but also why there was no cover. The cause of their loss was that they did nothing about satisfying the criteria for attachment. That finding, it is submitted, is fatal to a subsequent claim against the brokers.

[71]I do not accept that submission. I read those findings of the judge as relevant to the question whether there was cover and not to the position as between the Claimants and their brokers, direct consideration of which had been excluded from the trial. Save as to the extent of Minet’s authority at the 28 April meeting, that relationship and its incidents were not explored in the judgment nor was it intended by the parties to be explored. Minet had been joined for the very limited purposes identified by Longmore LJ at paragraph 56. The fact that the Claimants did not test and commission the plant does not exclude a claim that it was the negligence of their brokers that caused the failure to be covered and the absence of testing far from concludes the issues between Claimants and their brokers. Chadwick LJ has identified, in the second part of paragraph 41 of his judgment, issues between Claimants and Minet which it was unnecessary to consider at the trial.

[72]As to abuse of process in bringing the present claim, I agree with David Steel J’s reference to “tactical posturing” by the solicitors to the Claimants and Minet in their correspondence, to which Chadwick LJ has referred in his judgment. Minet’s solicitors stressed the value of cooperation between the claimants and Minet at the trial of the preliminary issue. They said that they would oppose any amendment by the claimants in that action. The claimants’ solicitors asserted a right to bring proceedings against Minet at a later stage.

[73]On behalf of Minet, reliance has been placed on the judgment of Cresswell J in Aneco Reinsurance (Underwriting) Limited (In liquidation) v Johnson & Higgins Limited

[1998] 1 Lloyd’s Rep 565

. In the course of making a number of points of general interest to the reinsurance market, Cresswell J stated:

“It is highly desirable in the interests of justice (and of avoiding unnecessary costs and delay) that whenever practicable claims over against brokers be heard at the same time and by the same tribunal that determines whether underwriters have validly avoided.”

I do question whether practicability is the correct word or test. Undoubtedly, the interests of justice will often, probably in most cases, operate in the direction indicated by Cresswell J. Costs and delay are rightly regarded as important considerations. However, there are likely to be cases in which it is entirely practicable to take the course recommended by Cresswell J but where practical considerations consistent with the interests of justice will properly lead to a decision to take a different course.

[74]I agree with Chadwick LJ that in the particular circumstances of this case, the failure to follow the course recommended by Cresswell J does not mean that the process of the court is being abused. The claimants and Minet favoured the prior determination of preliminary issues for reasons which each of them considered cogent, including a belief that they would succeed against the reinsurers. As Longmore LJ has put it, the attraction of a preliminary issue on the attachment of the operational cover was obvious. In the event it is of course the reinsurers who have gained from having been involved in an action much less complex than if the claim over against the brokers (including the Jardine defendants) had been heard at the same time. Following interlocutory hearings, the preliminary issues were framed in a way which could reasonably be regarded as in the interests of the parties and not inimical to the interests of justice.

[75]Even if the views of the parties have proved to be unsound, the second action is not in my judgment an abuse of the process of the court in the circumstances. Minet did not agree to the holding over of a claim against them but were party to the course events took, with full knowledge of the circumstances. They cannot be heard to say that the claimants are abusing the process of the court by bringing the present action against them. Nor is the court affronted.

[76]I also agree with the conclusion of Chadwick LJ in relation to the Jardine defendants.

[77]I agree that the appeal should be allowed.

ORDER:

[1]The Appellants’ appeal against the judgment of David Steel J dated 11 October 2002 in respect of both the First Respondent and the Second to Fourth Respondents be allowed.

[2]The First Respondent’s applications by Application Notice dated 14 August 2001 be dismissed.

[3]The Second to Fourth Respondents’ applications by Application Notice dated 25 January 2002 be dismissed.

[4]The First Respondent do pay the Appellants the costs of the appeal against the First Respondent and the costs incurred by the Appellants in relation to the First Respondent’s applications, to be assessed if not agreed.

[5]The First Respondent do repay to the Appellants the sum of £220,000 paid on account of costs pursuant to the Order of David Steel J, together with interest thereon at 1% over base rate.

[6]The Second to Fourth Respondents do pay the Appellants the costs of the appeal against the Second to Fourth Respondents and the costs incurred by the Appellants in relation to the Second to Fourth Respondents’ applications to be assessed if not agreed.

[7]The Second to Fourth Respondents do repay to the Appellants the sum of £120,000 paid on account of costs pursuant to the Order of David Steel J, together with interest thereon at 1% over base rate.

[8]Liberty to apply to the Commercial Court for an interim payment as to costs. (Order not part of approved judgment)