Re Kemper Reinsurance Company 1996 Civil Jur. No. 148

• Jurisdiction: Bermuda
• Judgment Date: 17 December 1996
• Date: 17 December 1996
• Docket Number: Civil Jurisdiction 1996 No. 148
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Wade, J.

Civil Jurisdiction 1996 No. 148

Re Kemper Reinsurance Company

E Gloster, QC

Mr Higham, QC

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Lucie v NoalUNK (1982) 45 ALR 411

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R v Ashford, Kent, JJ ex parte Richley (No.2)ELR [1956] 1 QB 167

Burns v County Court Judge of Tyrone [1961] NILR 167

R v Portsmouth Crown Court ex parte DPP (unreported)

Begum v Secretary of State for the Home Department [1990] Imm LR 1

R v Secretary of State for the Home Department, ex parte Chinoy [1992] 2 Admin LR 457

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R v Inland Revenue Commissioner ex parte National Federation of Self-Employed and Small Business Ltd.ELR [1982] AC 617

R v Secretary of State for Agriculture ex parte Dairy Trade Federation (unreported)

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Application to set aside order of Ground, J — Ex parte application for leave to issue judicial review proceedings — Delay — Extension of time — Redomestication of company to Bermuda — Claim by Kemper Re that there was fraudulent misrepresentation of EMLICO's solvency — Alternative remedy

DECISION

Wade, J.

This is an application by Electric Mutual Liability Insurance Company (EMLICO) seeking an order to set aside the order made by Mr. Justice Ground on the 16th April, 1996 by which Kemper Reinsurance Company (Kemper Re) on their exparte application for leave to issue judicial review proceedings was granted:

• (1) an extension of the time limit of 6 months within which judicial review proceedings are required to be brought; and

• (2) leave to issue an originating summons for a hearing of an application by Kemper Re principally for an order of certiorari to remove into this court and to quash each of the decisions of:

  • (a) the Minister of Finance (‘the Minister’); and

  • (b) the Registrar of Companies (‘the Registrar’);

whereby EMLICO was continued in Bermuda as an exempted company and registered as an insurer.

The condition on which the learned Judge made his order (dated 16th April, 1996) can he gleaned from his reasons for the order. I do not propose to restate these reasons except for the learned Judge's observation at the last paragraph at page 2.

The learned Judge said:

‘what Mr. Higham invited me to do was to go on and consider the question of an extension of time on the basis that, if I granted it, the order being made on an ex parte basis, any party to the proceedings when instituted could apply to set it aside. Moreover, he expressly accepted that on any such application the onus would remain on him to justify the extension.’

In my judgment, this concession squarely puts the onus on Kemper Re to ‘justify the extension’. In other words, on any application to set aside the leave granted by Mr. Justice Ground, any further hearing would be de novo.

The Respondents to the Originating Summons are the Minister and the Registrar. Pursuant to rule 6(1) of the Administration of Justice Prerogative Writs Act 1978 EMLICO was served with the Originating Summons as a ‘person affected’.

EMLICO now seeks to set aside Mr. Justice Ground's order granting the extension of time and leave to issue the originating summons on the following grounds:

• ‘(i)the applicant has failed to bring its application for judicial review within the time limited by section 10(4) of the Administration of Justice (Prerogative Writs) Act 1978;

• (ii) no special reason exists for the prescribed period being extended;

• (iii)the court should not, in the exercise of its discretion, extend time, having regard to the relevant considerations, including:

  • (a) there is no sufficient cause shown by the Applicant for its delay in making its application;

  • (b) the relief sought herein and/or the extension of time for the making of the application for such relief is:-

    • (i) likely to cause substantial hardship and/or prejudice to persons, including EMLICO, the Joint Provisional Liquidators, and those with whom the Joint Provisional Liquidators have dealt pursuant to their appointment by this Court on 20th October, 1995; and/or

    • (ii) detrimental to good administration;

  • (c) the evidence before the Court does not justify the extension of time;

  • (d) there is no prima facie case for the grant of the relief sought;

• (iv) the grant of leave should in any event be discharged because the evidence before the Court does not disclose a prima facie case for the grant of the relief sought, in that it does not disclose a prima facie case of ‘clear and manifest fraud.’

This application came on for hearing on the 8th day of October, 1996. The hearing lasted 11 days.

Counsel on both sides provided the court with written submissions. I shall from time to time use their exact words lest I do them injustice in summarizing their submissions.

The Parties

Electric Mutual Liability Insurance Company (EMLICO) was a mutual/property Casual Insurance Company incorporated in the Commonwealth of Massachusetts, United States of America (U.S.A.), licensed to write insurance, inter alia, in the U.S.A.

Kemper Reinsurance Company (Kemper Re) is a reinsurance company domiciled in Illinois, U.S.A., entered into several casualty excess of loss reinsurance treaties with EMLICO, reinsuring certain policies written by EMLICO between the years 1975 to 1985. Kemper's only relationship with EMLICO is that it is a party to reinsurance treaties/contracts with EMLICO

The Background

A short summary of the affidavit evidence before the court reveals that on June 28, 1995 the Massachusetts Insurance Commissioner approved EMLICO's application for its redomestication to Bermuda. On the 29th day of June 1995, the Minister of Finance gave his consent under Section 132(C)(1) of the Companies Act 1981 (‘CA 1981’) to the continuation in Bermuda of EMLICO as an exempted company.

On 30th June, 1995 the Registrar of Companies issued EMLICO a Certificate of Deposit of the memorandum of continuance and a Certificate of Continuance under section 132(C)(4) of the CA 1981.

On the 28th day of June, 1995 the Minister gave his decision to register EMLICO with effect from 1st July, 1995, as an insurer under section 4 of the Insurance Act 1978 (‘IA 1978’).

On the 20th day of October 1995 EMLICO petitioned for its winding up on the grounds that it was insolvent and for the appointment of joint provisional liquidators (which was granted).

On the 17th October, 1995 Kemper was informed that EMLICO had redomesticated to Bermuda, and on the 25th October, 1995 Kemper learnt of EMLICO's winding-up petition.

On the 15th December, 1995 Kemper Re began judicial review proceedings in Massachusetts.

On the 8th April, 1996 Kemper Re made an arbitration demand.

On the 11th April, 1996 (some 91/2 months after the proceedings began in Bermuda and some 31/2 months after the expiration of the time limit within which judicial proceedings should have been brought) Kemper Re filed its ex-parte application for an extension of the 6 month time limit within which to file its application, and for leave under Rule 5 of the Prerogative Writs Rules 1978 to bring judicial review proceedings.

Kemper Re challenges the decision of the Minister of Finance and the Registrar of Companies which resulted in the redomestication of EMLICO to Bermuda. Kemper Re maintains that the Regulator's decisions were procured by fraudulent misrepresentations as to EMLICO's solvency made by EMLICO to the Regulators.

EMLICO, the Minister and the Registrar were given notice of the application on the afternoon of the hearing before Mr. Justice Ground who granted an extension of time and leave.

On the 9th May, 1996 and 5th July, 1996 EMLICO filed its application (i) to set aside the ex-parte extension of time and (ii) the grant of leave.

The Evidence of the Bermuda Regulators

In his evidence, the Registrar of Companies, Mr. Astwood is recorded as saying:

• (1) he has read the applicant's notice of application for leave to issue an originating summons for orders of certiorari and mandamus and the affidavits in support:

• (2) That through his knowledge of the ‘insurance industry, and particularly, as a keen observer of developments in the United States domestic insurance market, I was and am well aware of the enormous difficulties being experienced in recent years by insurance companies in the area of environmental claims. I was fully aware from the outset of this application that in the event of any number of developments in this area including coverage issues, legal decisions and general market developments relating to the handling and reserving of environmental claims, EMLICO could be...