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*1211 Rome and Another v Punjab Na onal Bank (No. 2)

Court of Appeal

6 July 1989

[1989] 1 W.L.R. 1211

Parker L.J. , Sir Roualeyn Cumming-Bruce and Sir John May

The defendant, a foreign bank, had a place of business in Great Britain and registered with the registrar of companies the names and addresses of persons resident in Great Britain authorised to accept service of process on its behalf, as required by sec on 691( 1) of the Comp ani es Ac t 1985 . 1 Altera ons in the name s and addr esses of such per sons we r e no fied t o the r egi s t rar i n accordance with sec on 692( 1) . Subsequently the defendant closed its places of business in Great Britain and transferred most of its assets in Great Britain to S., another foreign bank. The defendant no fied t he r egi strar of compa ni es of the cesser of bus i nes s , pur suant to s ec on 696(4) of the Act of 1985, and asked for the registra on under sec on 691( 1) to be cancelled. The registrar closed the defendant's public file, but the name s and addr esses last no fied under sec on 692( 1) rema i ned on it. The per sons so name d le Great Bri tain. The plain ffs issued a writ against the defendant, and handed it, addressed to one of the persons named on the closed file at the addr ess ther e regi ster ed, to an official of S. at t hat addres s. The defendant applied for service of the writ to be set aside or a declara on that it had not been dul y ser ved in accordance with sec on 695( 1) of the Act of 1985. Hirst J. dismissed the applica on.

On appeal by the defendant: —

Held, dismissing the appeal, that on a true construc on of sec on 695( 1) of the Compa ni es Act 1985 a writ was sufficient l y served on an overseas compa ny i f addr essed t o a per son who se name and address had been delivered to the registrar of companies under, inter alia, sec on 691(1) or sec on 692( 1) of that Act and le at or sent by pos t to that addr ess, not wi ths tandi ng that the company had ceased to carry on business in Great Britain, that the persons so named were no longer resident there, and that those facts had been no fied t o t he r egi strar under sec on 696( 4) ; that sec on 695( 2) was in effect a pr ovi so to sec on 695( 1) and t her efore did not qualify the plain meaning of sec on 695( 1) ; and that , accor di ngl y, the wr i t had been dul y served on the defendant (post, pp. 1219F–G, 1220A, E–F, G–1221B, D).

*1212

Employers' Liability Assurance Corpora on v. Sedgwi ck, Col lins & Co. Ltd. [1927] A. C. 95, H. L. (E. ) and Saba er v. The Tradi ng Co. [1927] 1 Ch. 495 appl ied .

Per Parker L.J. and Sir Roualeyn Cumming-Bruce. It is to be hoped that Parliament will before long amend the Act of 1985 so as to restrict resort to sec on 695( 1) , a er an overseas compa ny has ceased to carry on business in Great Britain and has removed itself, to proceedings arising out of ma er s wh i ch at least had thei r or i gi n in the per iod bef or e i t so ceased and remo ved itself (post, p. 1221B–C, D).

Decision of Hirst J. affirmed .

The following cases are referred to in the judgment of Sir John May:

Deverall v. Grant Adver si ng Inc. [1955] Ch. 111; [1954] 3 W. L. R. 688; [1954] 3 Al l E. R. 389, C. A.

Kinning's Case (1847) 10 Q.B. 730

Saba er v. The Tradi ng Co. [1927] 1 Ch. 495

Sedgwick Collins & Co. v. Rossia Insurance Co. of Petrograd [1926] 1 K.B. 1, C.A. ; sub nom. Employers' Liability Assurance Corpora on Ltd. v. Sedgwi ck, Col lins & Co. Ltd. [1927] A. C. 95,

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H.L.(E.)

Sirdar v. Rajah of Faridkote [1894] A.C. 670, P.C.

The following addi onal cases we r e ci ted in ar gume nt :

Afro Con nent al Ni ger ia Ltd. v. Me r idi an Shi ppi ng Co. S. A. (The Vr ont ados ) [1982] 2 Ll oyd' s Rep. 241, C.A.

Allen v. Thorn Electrical Industries Ltd. [1968] 1 Q.B. 487; [1967] 3 W.L.R. 858; [1967] 2 All E.R. 1137, C.A.

Madrid, The [1937] P. 40; [1937] 1 All E.R. 216

Okura & Co. Ltd. v. Forsbacka Jernverks Ak ebol ag [1914] 1 K. B. 715, C. A.

South India Shipping Corpora on Ltd. v. Expor t-Imp or t Bank of Kor ea [1985] 1 W. L. R. 585; [1985] 2 All E.R. 219, C.A.

Theodohos, The [1977] 2 Lloyd's Rep. 428

Tyne Improvement Commissioners v. Armement Anversois S.A. (The Brabo) (1946) 79 Ll.L.R. 373

INTERLOCUTORY APPEAL from Hirst J.

By a writ of summons dated 24 February 1988 the plain ffs, Chr i stopher Wil liam R ome ( sui ng on behalf of himself and all other Lloyd's underwriters subscribing policy of insurance numbered M6346/81) and Andrew Bathurst (suing on behalf of himself and all other Lloyd's underwriters subscribing policy of insurance numbered M6346/81A), claimed against the defendant, Punjab Na onal Bank, an over seas comp any, ( 1) a decl ar a on t hat they had val i dly avoi ded bot h policies ab ini o or al ter na vel y that they wer e en t led t o resci ssion f or mi sr epresenta on, and/or (2) repayment of $28,831,217.79 paid by them to the defendant pursuant to a claim made by the defendant under the policies. By a summons dated 7 April 1988 the defendant applied under 3 R.S.C., Ord. 12, r. 8 for an order that (i) service of the writ on the defendant be set aside; and/or (ii) it be declared that the writ had not been duly served on the defendant, on the grounds that (a) at the date of the commencement of the ac on the def endant , a for ei gn corpora on, had no pl ace of bus i ness i n Gr eat Br i tai n, and ( b) pur por ted ser vi ce at t he defendant's erstwhile place of business by the leaving of an envelope containing the writ addressed to one of the persons whose name and address had been delivered to the registrar of companies as a person *1213 authorised to accept service on behalf of the defendant but who had le Gr eat Br i tai n pr ior to the comme nceme nt of the ac on, did not cons tute good servi ce of the writ on the defendant. On 31 October 1988 Hirst J. in the Commercial Court dismissed the summons with 75 per cent. costs and gave the defendant leave to appeal and the plain ffs leave (if necessary) to cross-appeal.

By a no ce of appeal dat ed 22 Novemb er 1988 the def endant appeal ed on the grounds that the judge had (1) erred in law in construing sec on 695( 1) of the Comp ani es Ac t 1985 in isola on, rather than in the context of sec on 695 as a whole and of the other sec ons of the Ac t, i n par cul ar sec ons 691, 696, 705 and 714 ; (2) erred in law in trea ng sec on 695( 2) of the Act as a “proviso” to the rest of sec on 695 : subsec on (2) had its origin in the Companies Act 1928 , where it was expressed not as a proviso but as an amendment or addi on to the exi s ng statutory provisions; (3) erred in law (even if it were a proviso) in construing sec on 695( 2) so as

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not to affect the cons truc on of sec on 695( 1) , rather than to make sense of the sec on as a whole; (4) erred in law in following the decision of Clauson J. in Saba er v. The Tradi ng Co. [1927] 1 Ch. 495 in that he had failed (a) to hold that the effect of the Ac t of 1928 and subsequent Companies Acts had been to overturn that decision and/or to invalidate its reasoning, (b) to dis ngui sh that case and the ear l ier deci si on in Emp l oyer s' Li abi lity As sur ance Corpora on v. Sedgwi ck, Col lins & Co. Ltd. [1927] A. C. 95 by reference to the fact that in those cases service had actually been effected on the per sons name d on the regi ster , wh er eas in thi s case the persons so named had prior to service le the jur i sdi c on, and ( c) to give sufficient weight to the fact that the relevant observa ons of Cl auson J. had been obi ter and that the decision in the Employers' Liability case had depended on the fact that the defendant company there had taken no steps to cancel its registra on under the then pr evai ling l egi sl a on; (5) failed adequately to dis ngui sh the pr inc i pl e (wh i ch the def endant accept ed) that a for ei gn corpora on car ryi ng on bus i ness in Gr eat Br i tai n shoul d be pl aced, so far as ser vi ce of pr ocess was concerned, on the same foo ng as an Engl ish comp any, such that the pl ai n ff shoul d be spared the expense and delay involved in serving such a company abroad, from the plain ffs' argument that that principle extended to companies which used to have a place of business in Great Britain, including at the me wh en cont ractual ar rangeme nt s had been ent er ed betwe en the defendant and the plain ff: the def endant deni ed t hat ther e was any such pri nci ple, whi ch would conflict wh i ch the pr inc i pl e in Si rdar v. Raj ah of Far idkot e [1894] A. C. 670 , to the effect that (special provisions such as R.S.C., Ord. 11 apart) a plain ff had t o sue i n t he cour t to whi ch a defendant was subject at the me of sui t, not in that of a count ry wh er e he had res i ded wh en the obliga on sued upon had been ent er ed; ( 6) er red i n l aw i n s eeki ng t o answe r t he defendant's objec on, that the pl ai n ffs' const r uc on of sec on 695( 1) would r ender o ose sec on 695( 2) wh er e the nomi nat ed per son had ceased to res i de in Gr eat Br i tai n, by hol di ng that in such circumstances a plain ff mig ht s l l wish to avai l himsel f of s ec on 695(2) , s ince such service might then be more readily recognisable abroad under private interna onal l aw and less prone to result in a stay of proceedings under the inherent jurisdic on of the Engl ish court: that explana on coul d not be ri ght , si nce it wa s inconcei vabl e that Par l iame nt coul d have intended to give a plain ff such an op on wher e the nomi na ted per son had ceased t o *1214 reside but no such op on wh er e he con nued s o t o r esi de; and ( 7) err ed i n hol ding t hat the anomalies which he accepted to be inherent in his construc on of sec on 695( 1) coul d be dealt with under the court's inherent jurisdic on to stay pr oceedi ngs; those anoma l ies showe d that his construc on wa s wr ong.

By a respondents' no ce and no ce of cross -appeal dat ed 7 Dec embe r 1988 t he pl ain ffs cross-appealed for an order for the en ret y of thei r cos ts to be pai d by the def endant , and contended that the judge's order should be affirmed on t he addi onal grounds t hat t he defendant had been validly served with the writ pursuant to sec on 695( 2) of the Ac t of 1985 and that (1) the judge had erred in holding that at the date of service of the writ the defendant did not have an established place of business at the address at which the writ had been le ; (2) the judge had erred in holding that (a) the ac vi es whi ch t he def endant had been carr ying on at that place at that date were not “business ac vi es, ” (b) in so f ar as thos e ac vi es were “business ac vi es” they wer e i nsufficient t o cons t ute that pl ace an est abl i shed pl ace of business of the defendant at that date, for the purposes of sec on 695( 2) , and ( c) those ac vi es wer e i nsufficient unles s t hey were i ncidental to the mai n bus iness of the def endant ; (3) it had been conceded by the defendant, as was the case, that (a) certain business ac vi es were being carried on by the defendant at that place at that date, (b) the period during which those ac vi es had been carr ied on by the def endant pri or to t hat dat e at the place had been sufficient (subj ect onl y to t he amou nt or char act er of the ac vi es actual ly carri ed on by it there at that date) to cons tut e it an establ ished pl ace of bus i ness of the def endant , and (c) that the defendant had an established place of business in the United Kingdom at least un l mid-December 1987; and (4) the judge ought to have held that (a) in the light of those

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concessions any business ac vi es whi ch wer e not de mi n imis and wer e carr ied on by the defendant at that place on that date would be sufficient to cons tute that place an es tabl i s hed place of business of the defendant on that date; (b) the defendant had been carrying on business ac vi es at that place on t hat dat e; (c) those ac vi es had not been de mi nimis a nd/or had been incidental to the defendant's business and/or had been incidental to its main business and had been sufficient to cons tute that place an es t abl i s hed pl ace of bus i ness of t he defendant on that date, and (d) the ac vi es carr ied on by the def endant at that place on t hat date had been of the same nature (viz. the “running off” of its Engl ish banki ng bus i ness) as the ac vi es carr ied on by i t from t hat place t hroughout 1987, dur i ng whi ch per i od t he def endant conceded that that place had been an established place of business.

The facts are stated in the judgment of Sir John May.

Representa on

Peter Sco Q. C. and Mi chael Br indl e for the def endant .

Gavin Lightman Q.C. and Stephen Ru le for the pl ai n ffs.

Cur. adv. vult.

Sir John May

6 July. The following judgments were handed down.

This is an appeal against a judgment of Hirst J. of 27 October 1988. On that occasion the judge held that the writ in this ac on had been val idl y ser ved on the def endant bank pur suant to *1215 sec on 695( 1) of the Comp ani es Ac t 1985 . This was essen al ly a ques on of law. In case they had been wrong in their principal submission, however, the plain ffs cont ended i n t he alterna ve that on the facts bef or e the judge the bank had establ ished a pl ace of bus i ness at the place at which the writ had been purportedly served and that accordingly that service had been valid pursuant to sec on 695( 2) of the Act. In the light of his decision on the ques on of law raised on the first subsec on, the j udge deal t rel a vely br iefly with the ques on of f act under the second subsec on. Ne ver thel ess he “had no hes i ta on wha t ever” i n deci ding i t in favour of the bank. In the proceedings before us, by the no ce of appeal and respondent s' no ce respec vel y, each of the par es r el i ed on t he s ame p r incipal conten ons as they had before the judge.

The relevant statutory provisions are contained in Part XXIII of the Act of 1985, which is headed “Oversea Companies,” and are:

(1) When a company incorporated outside Great Britain establishes a place of business in Great Britain, it shall within one month of doing so deliver to the registrar of companies for registra on…

(b) a return in the prescribed form containing…

(ii) a list of the names and addresses of some one or more persons resident in Great Britain authorised to accept on the company's behalf service of process and any no ces requi red to be ser ved on it…

(1) If any altera on is ma de in…

(c) the names or addresses of the persons authorised to accept service on behalf of an oversea company, the company shall, within the me speci fied bel ow, del i ver to t he registrar of companies for registra on a ret ur n cont ai ni ng the pr escribed par cul ars of the altera on…

(1) Any process or no ce requi red to be ser ved on an over sea comp any is sufficientl y served i f addressed to any person whose name has been delivered to the registrar under preceding

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sec ons in thi s Par t and le at or sent by pos t to t he addr ess whi ch has been so del i vered.

(2) However —

(a) where such a company makes default in delivering to the registrar the name and address of a person resident in Great Britain who is authorised to accept on behalf of the company service of process or no ces , or

(b) if at any me al l the per sons wh ose name s and addr esses have been so del iver ed are dead or have ceased so to reside, or refuse to accept service on the company's behalf, or for any reason cannot be served, a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in Great Britain.

(4) If an oversea company ceases to have a place of business in either part of Great Britain, it shall forthwith give no ce of that fact to the regi strar of comp ani es for that par t; and as from the date on which no ce is so gi ven the obl iga on of the compa ny to del i ver any documen t to the registrar ceases.”

The factual background to this case is as follows. Un l 1986 the def endant bank car ried on par t of its banking business at its premises at Moor House, London Wall. and also at a number of provincial branches in England. By late 1986 the defendant had decided to cease its business in Great Britain. Its provincial branches had also been closed by the end of 1986 and its London office was closed by the end of Mar ch 1987.

*1216

By an agreement made at the end of December 1986 the bulk of the defendant bank's assets and liabili es we r e trans fer red to the Stat e Bank of I ndi a dur ing 1987. The rel a vel y smal l number of assets excluded from this agreement were transferred by the defendant back to India during 1987. In that year the defendant carried out a number of winding up or running down ac vi es, as par t of its cesser of bus i nes s i n Great Bri tain, by two empl oyees , a Mr. Bakshi and a Mr. Golani, who worked from the offices of the State Bank of Indi a i n State Bank House, 1, Milk Street, London EC2P 2JP, once the Moor Street offices had been c losed. Mr. Gol ani le for home in October 1987 and Mr. Bakshi in February 1988. Therea er the def endant had no employees working for it in Great Britain. The defendant surrendered to the Bank of England its authorisa on under the Banki ng Ac t 1987 with effect from 31 Decemb er 1987.

Mean me , a er ear l i er returns to t he r egi strar of compa ni es under the provi sions of Par t XXI I I of the Act of 1985 which I have quoted, the defendant delivered to the registrar two returns, each dated 13 August 1987 nomina ng Mr . Bakshi and Mr . Gol ani , wi th thei r addr esses , as the persons authorised to accept service on behalf of the defendant in the place of those previously nominated.

However by a le er dat ed 31 Decemb er 1987, si gned on its behal f by Mr . Bakshi , the def endant also wrote in the following terms to the registrar of companies pursuant to the requirements of sec on 696( 4) of the Act:

“We refer to the registra on of Punj ab Na onal Bank as an overseas compa ny havi ng a place of business in this country. We write to inform you that with effect from 31 December 1987 Punjab Na onal Bank has ceased to have a pl ace of bus i ness wi thi n the United Kingdom and consequently would you therefore please cancel this registra on. ”

By le er i n repl y dat ed 15 January 1988 the regi strar confirmed t hat “the publ i c fil e of t he [defendant] has been closed.”

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On a date not later than 29 February 1988 a copy of the defendant's le er to the regi strar of 31 December 1987 was filed in the Comp ani es Regi stry, wi th a super imp osed stamp sta ng “fil e closed 15 January 1988.” Nevertheless the two returns from the defendant of 13 August 1987 were not removed but remained on the file.

On 24 February 1988 the plain ffs i s sued t hei r wr i t in t he ac on c l ai mi ng , i nt er al i a, a declara on that two pol ici es of insur ance under wh i ch the def endant wa s the assur ed had been validly avoided and the repayment of a sum exceeding $28m., which had been paid pursuant to a claim under those policies. For the purpose of this appeal I need not go into any further details.

On 2 March 1988 a representa ve of the pl ai n ffs' sol i c itors who had been appr i s ed by 12 February 1988 of the contents of the relevant file at the Comp ani es ' Regi stry, per sonal ly handed the writ to an official of the State Bank of Indi a at the addr ess stated i n t he r eturns of 13 August 1987 in an envelope addressed to Mr. Bakshi at that address together with a covering le er similarly addressed.

In the light of the relevant statutory provisions and against the factual background I have outlined, the plain ffs rel y upon t his as good servi ce of the wri t on t he def endant . Howev er on 8 April 1988 solicitors ac ng for the la er i ssued a summo n s pur suant to R.S.C., Ord . 12, r. 8 *1217 seeking an order that the service or purported service of the writ on it should be set aside and/or that it should be declared that the writ had not been duly served on it.

It was this summons which came before the judge on 27 October 1988. He refused the relief sought. The defendant challenges that refusal in this appeal as I have indicated.

Mr. Sco 's pr inc i pal submi ssi on on behal f of the def endant bank in thi s appeal , repea ng t he submissions made on its behalf in the court below, was that sec on 695( 1) of the Act must be construed in the context of sec ons 691 to 696 . If this is done then on the proper construc on of the relevant subsec on a nomi na on mad e i n a r eturn t o t he r egi strar of compa ni es under sec on 691 , in par cul ar under sub- sec on ( 1)( b)( ii) of that sec on, cannot con nue t o have effect a er the oversea compa ny concerned has ceased t o have an est abl i shed pl ace of business in Great Britain, at least where, first, it has no fied t he r egi s t rar t hat i t has so ceased, secondly, that fact has been recorded on the register, and thirdly, the registrar has marked the company's file as cl osed. Al bei t that , f or i ns tance, sec ons 705( 2) and 714( 1)( b) contain a somewhat confusing double nega ve, the wa y that these deal wi th the regi strar ' s tasks in thi s context support the construc on cont ended for . The me r e use of the wo r ds “has been del iver ed to the registrar,” upon which the plain ffs rel i ed and r el y i n suppor t of thei r cont en on t hat a company once registered must be deemed to have been always registered, is not sufficient to preclude the basic construc on for wh i ch the bank cont ended. The phr ase “has been del iver ed” is ambiguous, as Kinning's Case (1847) 10 Q.B. 730 shows, and as a ma er of the use of language the phrase can well be understood as meaning “is registered with.” That a person's name has been delivered to the registrar as a pre-condi on to val id ser vi ce of pr ocess upon that person on behalf of the company, as it is, is not inconsistent with the conten on that the effect of that earlier delivery determines if the oversea company ceases to have an established place of business in Great Britain.

Mr. Sco fur ther ar gued that the cons truc on cont ended f or by the plain ffs, which could as I have said be summarised as “once registered, always registered” was contrary to other well-established principles. In the fiel d of pr i vat e i nt er na onal law i t was cl ear that the i n personam jurisdic on of Engl ish cour ts over for ei gner s is based upon the fact of res i dence or presence: see Sirdar v. Rajah of Faridkote [1894] A.C. 670 , 682–683, per the Earl of Selborne. That jurisdic on shoul d con nue a er a cesser of r esidence or presence, as occurs when an oversea company ceases to have an established place of business in this country, is in clear conflict wi th such pr inc i pl e. For thi s reason the judge wa s wr ong to say that the gener al pur pose of the material provisions of the Act was to protect English creditors of an oversea company and

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that such a company which has at one me car ried on bus i ness her e shoul d be pl aced i n a similar posi on, at least in so far as ser vi ce of pr ocess wa s concer ned, as an Engl ish comp any. There is no reason why differ ent rul es shoul d not appl y dependi ng on wh et her or not the company is English.

Counsel also submi ed that to adopt the cons truc on cont ended f or by the pl ain ffs led to clear absurdi es . For ins tance, ser vi ce on a pr evi ous l y nomi nat ed per son wo ul d be good even if in the interim he has died, or has long since le the count ry, or wh er e sever al year s have *1218 elapsed since the foreign company sought to do business here. Further, if such be the law then sec on 695( 2) is in ma ny cases o ose.

Our a en on was al so drawn t o t he l egi sla ve hi st ory of t he mate r ial statut or y provi s i ons, par cul ar l y in the light of a numb er of rel evant deci ded cases , in wh i ch those pr ovi si ons we r e considered. Whilst sec on 274( 2) of the Comp ani es (Consol ida on) Act 1908 was couched i n very similar terms to those of sec on 695( 1) of the Ac t of 1985, the ear l ier stat ut e cont ai ned no equivalent of the later sec on 695( 2) . In Saba er v. The Tradi ng Co. [1927] 1 Ch. 495 Clauson J. had to consider a case similar on its facts to the instant one. It too concerned service on the nominee of a foreign company which had ceased to do business here, and had so no fied t he registrar, who had marked the file cl osed. I thi nk that that case wa s actual ly deci ded on the ground that the relevant foreign company s ll had a pl ace of bus i ness in thi s count ry and an agent here authorised to accept service, who was so served. In so far as the point raised in the instant case was concerned, therefore, a decision was, in the event, unnecessary. As Clauson J. said, at p. 506:

“My view of the facts makes it, strictly speaking, unnecessary for me to deal with the point, but as the point was argued at length, I will proceed to deal with it.”

In doing so he said, at p. 507:

“My view of the sec on i s that , so far as i s ma t er ial for the pr esent pur pose, the sec on mu s t be read l iter al ly, and that i f once a comp any has establ ished a pl ace of business here, it remains bound, even if it ceases to carry on business here, so long, at all events, as the name of a nominee, placed on the register under sec on 274( 1) ( c ), remains on the register.”

A similar problem had arisen a li le ear l ier i n a case i nvol vi ng t he val idi ty of garni shee proceedings (in the Court of Appeal sub nom.Sedgwick Collins & Co. v. Rossia Insurance Co. of Petrograd [1926] 1 K.B. 1 , and in the House of Lords sub nom. Employers' Liability Assurance Corpora on Ltd. v. Sedgwi ck, Col lins & Co. Ltd. [1927] A. C. 95 ). The judgment debtor was a Russian company which had carried on business in London before the 1914–1918 war and had registered a Mr. Collins as its agent to accept service. A er 1917 the comp any' s bus i ness and assets were transferred to the Soviet government under the revolu onary legi sl a on. In 1923 a writ was served on Mr. Collins, and, in default of appearance, judgment was signed against the defendants despite Mr. Collins' protest that the company had ceased to exist. In both tribunals the validity of the service was challenged, but having found that the company con nued to exi st both the Court of Appeal and the House of Lords held that the Russian company, by filing Mr . Collins' name and address, had submi ed vol unt ar i ly to the jur i sdi c on of the Engl i sh cour t s and that so long as his name remained on the register, service on him was good service.

Although the Act of 1908 did not contain the equivalent of the present sec on 695( 2) , in hi s judgment in the instant case Hirst J. referred to a number of passages from the speeches in the House of Lords which considered the purpose of the basic statutory provision. For instance Lord Sumner said [1927] A.C. 95 , 108:

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“One plain object of the provision is to protect the company's Bri sh credi tor s by obtaining for them ab ini o the me ans of *1219 serving process in this country, free from the inconvenience of seeking out the foreign company in its country of incorpora on. ”

Lord Parmoor commented, at p. 115:

“The main object of sec on 274 is to take awa y any di fficulty in the s ervi ce of a wr it on foreign corpora ons car ryi ng on bus i ness i n thi s count ry, and i n effect to pl ace a foreign corpora on for thi s pur pose on the same foo ng as an Engl i sh compa ny, and liable to the service of a writ under a similar form of procedure.”

In the Court of Appeal Sargant L.J. had said [1926] 1 K.B., 1, 15:

“It is true that Mr. Collins has a emp t ed to di scl ai m hi s pos i on as repr esen ng t he Rossia Co. in this country. But this he cannot, in my judgment, do, so as to affect the posi on of credi tor s in thi s count ry. Ot herwi se, i t wo ul d be pos si bl e for any for ei gn company desirous of doing business in this country to en rel y escape a t any convenient me f rom the resul ts of comp l iance wi th sec on 274 as to s ervi ce of process by merely removing the name of their nominee from the register or instruc ng him to disclaim.”

However Mr. Sco poi nt ed out t hat bot h Scru on L . J ., in t he Cour t of Appeal , and Lord Blanesburgh, in the House of Lords, dissented empha cal ly from the respec ve maj ori es. Then Parliament enacted the Companies Act 1929 in which, as I have said, the predecessor of the present sec on 695( 2) ma de its first appear ance as the provi so t o s ec on 349 . In the l i ght of this history, and par cul ar l y the enactme nt of the Ac t of 1929 so soon a er the deci sions of the courts in Saba er v. The Tradi ng Co. [1927] 1 Ch. 495 and the Sedgwick Collins case counsel submi ed that i t wa s cl ear that i n 1929 the l egi sl at ur e had i nt ended to change the l aw as decided by those two cases and had made it clear that the then equivalent of the present sec on 695( 1) wa s onl y to appl y so long as the for ei gn comp any ma i nt ai ned a pl ace of bus i ness in this country.

In my opinion there is considerable force in this argument, supported by the others advanced on behalf of the defendant, to some of which I have referred, but in the end I prefer the views expressed by the judge below and the arguments suppor ng t hem put bef or e us by Mr . Lightman on behalf of the plain ffs.

In the first pl ace I agree that the wo r di ng of sec on 695( 1) is cl ear and expl i cit. Furt her although sec on 695( 2) i s not wo r ded as a pr ovi so, as we r e i ts pr edecessor s, i t i s cl ear l y tantamount to one. Thus, on well established principles (see Halsbury's Laws of England , 4th ed., vol. 44 (1983), para. 881), it is not capable of qualifying the clear words of sec on 695( 1) . Consequently, as the judge said, the la er

“stands on its own as an unequivocal statutory declara on that ser vi ce in the ma nner described (which was in fact undertaken in the present case) is ‘sufficient servi ce. ’ ”

I also agree that although in certain circumstances, given the terms of sec on 695( 1) , a pl ai n ff may have no need to invoke sec on 695( 2) , never thel ess it ma y be to hi s advant age to do so, since such service might well be more readily accepted and recognised abroad under private interna onal l aw. Fur ther any i nj us ce whi ch may resul t from r el i ance on t he provi sions of sec on 695( 1) wh en, for i ns tance, the for ei gn comp any has l ong si nce l e our shor es, can

Page9

always be remedied *1220 by a stay of the proceedings under the inherent jurisdic on of the English court.

Further, although I think that the decision of Clauson J. on the point in issue in the present case in Saba er v. The Tradi ng Co. [1927] 1 Ch. 495 was obiter and that the Sedgwick Collins decision was not directly in point, albeit of substan al per suasi ve effect , ther e have been l ater deci sions in which the earlier two have been treated as good law. In Deverall v. Grant Adver si ng Inc. [1955] Ch. 111 the Court of Appeal had before it a case in which the issue was whether, in sec on 412 of the Comp ani es Ac t 1948 , the wo r ds “any pl ace of bus i ness establ ished… in Gr eat Britain” included a former place of business of an oversea company but which was no longer such at the me of the ser vi ce in ques on. Thus agai n any statemen t on t he poi nt at issue i n t he instant case was obiter. However, Jenkins L.J., with whose judgment Hodgson and Romer L.JJ. agreed, said, at pp. 118–119:

“In my view, the second decision in Saba er v. The Tr adi ng Co . has no applica on to the present case. Where, in compliance with sec on 407 or its pr edecessor , the name and address of some person authorized to accept service on behalf of the company is delivered to the registrar of companies, then, by the Act, service on that person is made good service, so long as his name con nues on the file, and t he per son effec ng service is in no way concerned with the ques on wh et her the comp any has at that me a pl ace of bus i ness i n Gr eat Br i tai n. The ser vi ce can be effect ed on t he very person whose name has been filed as the name of the per son aut hor i zed to accept service.”

I agree that in none of the other more recent cases, in which Saba er v. The Tradi ng Co. [1927] 1 Ch. 495 and the Sedgwick Collins case have been treated as good law, was the point which arises in the instant case precisely in issue. Nonetheless, all the decisions to which I have referred together represent a substan al per suasi ve body of opi ni on, wh i ch i n my vi ew the arguments advanced on behalf of the defendant, strong though they are, are insufficient to displace. In the end, sec on 695( 1) is expr essed in cl ear and simp l e language and in my opi ni on effect mu s t be gi ven to it.

Taking this view as I do it is unnecessary for me to deal with the point raised in the respondents' no ce. Suffice i t to say, howeve r , that havi ng been hel pf ul ly taken t hrough al l the f actual material that there was before the judge I would, had it been necessary, have agreed with him that the place at which the writ was delivered was not a place of business established by the defendant bank at the me of ser vi ce. Thus had I taken the vi ew that the judge had er red in hi s approach to sec on 695( 1) I shoul d never thel ess have agreed wi th hi m as to the facts rel evant to sec on 695( 2) .

However, for the reasons I have given which are in large measure iden cal to those gi ven by the judge, for whose clear and detailed judgment I am very grateful, I would dismiss this appeal.

Parker L.J. I agree. The issue on the construc on of sec on 695( 1) of the Compa ni es Act 1985 will result, whichever way it is decided, in what may appear to be an absurdity. If the defendant is right, it will be open to an oversea company to carry on business here for a period and run up huge debts and then close down its business and remove itself, *1221 leaving its creditors to follow it home or seek leave to serve it out of the jurisdic on. Thi s appear s to be wh ol ly contrary to the plain wording and clear inten on of the pr ovi si on.

If, however, the plain ffs are r ight , an oversea compa ny wi l l be exposed t o s ervice under the provision notwithstanding (a) that it may have ceased to carry on business and removed itself many years previously, and (b) that the cause of ac on ar i ses out of ma ers whi ch occurr ed a er i t had so ceased and remo ved i tsel f. Thi s does not appear to be l ikel y to have been the legisla ve int en on but i t i s not cont r ary to t he plain wor ding.

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In this situa on it is, in my judgme nt , necessar y to adopt the pl ai n ffs' conten on whi ch fol lows the wording. I would however express the hope that before too long the unsa sfactor y pos i on will receive the a en on of Par l i amen t and l ead t o an amen dmen t , whi ch r est ricts resort to sec on 695( 1) , a er an oversea compa ny has ceased t o carr y on bus i nes s and r emov ed i tsel f , to proceedings arising out of ma er s, wh i ch at l east had thei r or i gi n in the per iod bef or e i t so ceased and removed itself.

On the other issue I have nothing to add.

Sir Roualeyn Cumming-Bruce

I agree with both judgments and have nothing further to add.

C. R. S.Representa on

Solicitors: Slaughter and May; Ince & Co.

Appeal dismissed with three-quarters costs. Time for service of writ extended. Leave to appeal refused.

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[2000] 4 All ER 371 Sea Assets Ltd v PT Garuda Indonesia QUEEN'S BENCH DIVISION (COMMERCIAL COURT) LONGMORE J 16, 29 FEBRUARY 2000 Company - Oversea company - Service on oversea company with branch in Great Britain - Claimant serv-ing proceedings on London branch of oversea company - Dispute not rela ng to car ryi ng on of br anch' s business - Whether service valid - Companies Act 1985, s 694A - CPR 6.5(6).

The claimant, S Ltd, commenced proceedings in England against G, a company incorporated in Indone-sia, which had its head office i n J akart a, but also had a branch i n London. As an oversea compa ny wit h a branch in Great Britain, G was required to lodge certain par cul ar s of the br anch, inc l udi ng the name s and addresses of persons authorised to accept service of process, with the registrar of companies, and was subject to s 694Aa of the Companies Act 1985. Under that provision, which dealt with the service of process on an oversea company in respect of the carrying on of the business of a registered branch, process was 'sufficient l y served' on s uch a compa ny i f it was addr essed t o an author i sed per son, and l e at, or sent to, that address. The dispute between the par es di d not rel at e to the car ryi ng on of the business of G's London branch, and accordingly S Ltd was unable to serve the claim form on G in accor-dance with s 694A. It therefore sought to serve G in accordance with CPR Pt 6 which set out, inter alia, methods of service on a company alterna ve to thos e speci fied i n t he 1985 Act . Under CPR 6.5(6) b, a company registered in England and Wales was to be served at its principal office or at a place of its business within the jurisdic on wh i ch had a real connec on wi t h t he cl aim. In t he case of any other company, service was to be effected on any pl ace of bus i ness of the comp any wi thi n the jur i sdi c on. S Ltd served the claim form on G's branch on the basis that G fell within the 'any other company' provision of r 6.5(6). G applied to have service set aside, contending that s 694A established the statutorily re-quired method of service on oversea companies with branches in Great Britain, and that accordingly CPR Pt 6 was ultra vires in so far as it purported to provide for an alterna ve me t hod of ser vi ce. Al ter na- vel y, G cont ended that i t wa s a comp any regi ster ed i n Engl and and Wa l es wi thi n the me ani ng of r 6.5(6), and that therefore service could not be effected on i ts br anch wh i ch wa s nei ther i ts pr inci pal office nor a place of bus i nes s wit h a r eal connec on t o the c l ai m.

a Sec on 694A is set out at p 373 f to j, pos t b Rule 6.5, so far as material, is set out at p 376 a to d, post

Held - On its true construc on, s 694A of the 1985 Ac t di d not pr event some ot her stat ut or y pr ovi si on, whether original or subordinate legisla on, from ma ki ng ot her pr ovi si on for ser vi ce on over sea comp a- nies with a branch in Great Britain. That sec on wa s permi ssi ve, not ma ndat or y. Nor wa s ther e any statutory provision which provided that an oversea company with a branch in Great Britain could only

Page 2

be sued in respect of the carrying on of the business of that branch. It followed that the relevant provi-sions of CPR Pt 6 were not ultra vires. Moreover, [2000] 4 All ER 371 at 372

such companies did not become companies registered in England by virtue of complying with their obli-ga ons to submi t par cul ars to t he r egi strar of compa ni es and by obt aining a branch r egi stra on. The essence of such a company remained overseas. Accordingly, in the instant case the claim form had been validly served, and the applica on wo ul d be di smi ssed (see p 375 b to e and p 376 h to p 377 b, post).

Dictum of Clarke LJ in Saab v Saudi American Bank [1999] 4 All ER 321 at 324-325 followed. Notes

For service on oversea companies with a branch in Great Britain, see 7(2) Halsbury's Laws (4th edn) (1996 reissue) para 1813.

For the Companies Act 1985, s 694A, see 8 Halsbury's Statutes (4th edn) (1999 reissue) 545.

Cases referred to in judgment

Saab v Saudi American Bank [1999] 4 All ER 321, [1999] 1 WLR 1861, CA.

South India Shipping Corp Ltd v Export-Import Bank of Korea [1985] 2 All ER 219, [1985] 1 WLR 585, CA.

Applica on

By applica on dat ed 16 Novemb er 1999 the def endant Indones i an comp any, PT Ga r uda Indo- nesia, applied to set aside the service on its London branch of the claim form in proceedings brought against it by the claimant, Sea Assets Ltd. The facts are set out in the judgment.

Robin Dicker (instructed by Freshfiel ds ) for the def endant . David Donaldson QC (instructed by Gouldens) for the claimant.

Cur adv vult 29 February 2000. The following judgment was delivered. LONGMORE J. Introduc on

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This applica on needs to deci de wh et her a comp any incor por at ed out si de the Uni ted Ki ngdom but wi th a registered branch in England can be validly served by leaving the claim form where the company car-ries on its business in England. That requires a considera on of the pr ovi si ons of Pt XXI II of the Comp a- nies Act 1985 which is en tled 'Ov er sea Comp ani es ' .

Before 1 January 1993 s 691 of the 1985 Act required companies which established a place of business in Great Britain but were incorporated elsewhere (oversea companies) to lodge certain documents with the Registrar of Companies and to give him the name and address of one or more persons who were resident in Great Britain and were authorised to accept service of proceedings on the company's behalf; s 695 provided that if the company did that, any proceedings against the company could be validly served on such persons and that, if the company did not, proceedings could be validly served by leaving the claim form at or sending it by post to any place of business of the company in Great Britain (see South India Shipping Corp Ltd v Export-Import Bank of Korea [1985] 2 All ER 219, [2000] 4 All ER 371 at 373

[1985] 1 WLR 585). In 1989 the European Commission issued its Eleventh Council Direc ve (EEC) 89/666 (concerning disclosure requirements in respect of branches opened in a member state by certain types of company governed by the law of another state) requiring companies incorporated in states within the European Community (EC) but having a branch in other states of the EC to lodge certain par cul ar s about both the company and the branch and also to give to the appropriate official the names and ad- dress of persons who were resident in the state of the branch and who were authorised to accept ser-vice of process on the company's behalf. It fell to Mr Neil Hamilton MP on behalf of the Secretary of State of Trade and Industry to introduce, by the Oversea Companies and Credit and Financial Ins tu ons (Branch Disclosure) Regula ons 1992, SI 1992/3179, legi sl a on t o ensure compl i ance wit h t he EC dir ec- ve. He di d thi s by enac ng wha t became s 690A and Sch 21A i n t he 1985 Act , provi ding f or all oversea companies (not just EC companies) with a branch in the United Kingdom to lodge the required par cu- lars and provide names and addresses of persons authorised to accept service of process in respect of the business of the branch. Sec on 690B then enacted that the pr ovi si ons of s 691 we r e not to appl y to oversea companies with a branch in the United Kingdom. Sec on 691 rema i ned int act .

There have thus come into existence two parallel but very similar sets of provisions, the first set deal ing with oversea companies with branches in the United Kingdom and the second dealing (as before) with oversea companies establishing a place of business in Great Britain but (presumably) not doing so at a branch. No defini on of a branch i s given.

Paragraph 3 of the new Sch 21A to the Act enacted that among the par cul ar s of the br anch that had to be delivered to the Registrar of Companies was a list of names and addresses of persons resident in Great Britain authorised to accept service in respect of the business of the branch and it was, of course, necessary for the minister to enact an equivalent provision to s 695 about validity of service. This he did, by enac ng s 694A in rel a on t o compa ni es wit h branches :

'Service of documents: companies to which sec on 690A appl ies . -- (1) This sec on appl ies to any company to which sec on 690A appl ies .

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(2) Any process or no ce requi red to be ser ved on a comp any to wh i ch thi s sec on appl i es in respect of the carrying on of the business of a branch registered by it under paragraph 1 of Schedule 21A is sufficient l y served i f--(a) addr essed t o any per son who se name has , in respect of the branch, been delivered to the registrar as a person falling within paragraph 3(e) of that Schedule, and (b) le at or sent by pos t to the addr ess for that per son wh i ch has been so delivered.

(3) Where--(a) a company to which this sec on appl ies ma kes def aul t, i n respect of a branch, in delivering to the registrar the par cul ar s me n oned i n par agr aph 3 ( e) of Schedule 21A, or (b) all the persons whose names have, in respect of a branch, been deliv-ered to the registrar as persons falling within paragraph 3 (e) of that Schedule are dead or have ceased to reside in Great Britain, or refuse to accept service on the company's behalf, or for any reason cannot be served, a document may be served on the company in respect of the carrying on of the business of the branch by leaving it at, or sending it by post to, any place of business established by the company in Great Britain.'

[2000] 4 All ER 371 at 374

The necessity imposed by para 3 of Sch 21A and s 694A for the claim to be in respect of the business of the branch is a new requirement in English law, and it is not immediately obvious why Parliament de-cided that all oversea companies with a branch should only be capable of being served with proceedings rela ng to the car ryi ng on of the bus i ness of the br anch wh i le comp ani es car ryi ng on bus i ness in the United Kingdom otherwise than at a branch are capable of being served with any kind of proceedings.

Happily, I do not need to express any view about that because there is no doubt that the defendant company in this case does have a branch. I am concerned with two ques ons onl y: (1) wh et her the ef - fect of the 1985 Act (as amended) is that service pursuant to s 694A is the only permissible method of service for oversea companies with a branch in the United Kingdom, or whether rules of court can pro-vide for an alterna ve me t hod of ser vi ce. The cl ai ma nt in thi s case accept s that its cl ai m does not rel at e to the carrying on of the business of the branch. If service in accordance with s 694A is the only permis-sible form of service, the service in this case will have to be set aside. (2) Whether, if the statutory provi-sions are not exclusive and alterna ve me t hods of ser vi ce ar e pos si bl e, CPR Pt 6 en tles the claiman t to serve these proceedings at the defendant's address in Duke Street W1 which the defendant accepts is a place where it carries on its ac vi es. That depends on t he answer to t he ques on whet her t he com- pany is to be treated as a company registered in England and Wales by virtue of having a branch in Lon-don and having (as required) delivered the relevant par cul ar s and docume nt s to the regi strar . If it is a company so registered, it can only be served (in accordance with Pt 6) at its principal office or a place of business with the jurisdic on wh i ch has a real connec on wit h t he claim. The Duke Street premi s es fall into neither of these categories. If on the other hand, the company is not so registered, it can be served at any place of business of the company within the jurisdic on and it is agr eed that the Duke St reet of - fice is such a pl ace. The claim

Page 5

The defendant is a company incorporated under the laws of Indonesia with its head office i n J akart a. It has approximately twenty branches worldwide, one of which is located at 35 Duke Street, Mayfair, Lon-don W1. The claimant is a company incorporated under the laws of the Bri sh Vi rgi n Isl ands .

The claimant is the holder of nine promissory notes each of which was made by the defendant in favour of Morgan Grenfell & Co Ltd, and each of which is payable in London in the sum of $US 1m. All of the promissory notes were dishonoured on presenta on at ma t ur i ty betwe en Decemb er 1997 and Ma r ch 1998. A claim form was issued on 2 September 1999.

The claimant originally sought to serve the claim form on the nominated representa ve for ser vi ce un- der Pt XXIII of the 1985 Act, one Marco Umbas, at his specified addr ess in Nor th London. Thi s ser vi ce was challenged by the defendant on the grounds that the claim in ques on wa s not ' in respect of the carrying on of the business of' the defendant's registered branch, in accordance with the provisions of s 694A(2) of the 1985 Act.

The claimant, on 18 October, then obtained an order from (as it happens) myself amending the defen-dant's address on the claim form to its Duke Street branch, being a place where the defendant carried on its ac vi es. Ther e t he claim f orm was subs equent l y served, and an acknowl e dgmen t of service was received by the court on 2 November. [2000] 4 All ER 371 at 375 (1) Exclusivity of s 694A

This is a short point. Mr Dicker for the defendant submi ed that the effect of ss 690B and 695( 1) was that the provisions about oversea companies which established a place of business within Great Britain were expressly prohibited from applying to the new concept of oversea companies with a branch within the United Kingdom. I accept that that is correct. Once one knows that one is dealing with an oversea company with a branch in England, one puts out of one's mind all the statutory provisions and the de-cided cases about service in rela on to over sea comp ani es wh i ch have establ ished a pl ace of bus i ness in Great Britain. It does not follow that the effect of the pr ovi si ons deal ing wi th over sea comp ani es wi th a branch in England is that service can only be affected pur suant to s 694A. That sec on does not so s ay i n terms. It says merely that process required to be served on a company with a branch in respect of the carrying on of the business of the branch is 'sufficient l y served' if addr essed t o t he per son who se par - cul ar s have been del iver ed to the Regi strar under par a 3 of Sch 21A. That does not pr event some ot her statutory provision (whether original or subordinate legisla on) from ma ki ng ot her pr ovi si on for ser vi ce. This the CPR have purported to do. Mr Dicker submits that, in so far as the new CPR purport to provide for service in rela on to over sea comp ani es wi th br anches in a ma nner di fferent from t hat provi ded by the 1985 Act, the new CPR are ultra vires. That could only be so if s 694A was the statutorily required method of service. I do not think it is. It is not mandatory, merely permissive. Nor is there any statutory provision providing that an oversea company with a branch in the United Kingdom can be sued only in respect of the carrying on of the business of a branch. Sec on 694A deal s wi th ser vi ce, not wi th jur i sdi c- on wh i ch is a wh ol ly di s nct ma er.

The existence of the alterna ve me t hods of ser vi ce set out in Pt 6 wa s first brought to t he no ce of t he profession by Mr Lawrence Collins QC in Saab v Saudi American Bank [1999] 4 All ER 321, [1999] 1 WLR 1861. In that case the claimant, who alleged that the defendant bank had falsely represented that its

Page 6

London branch would be ac vel y invol ved in ma rke ng t he shar es i n a devel opmen t compa ny, served the London branch pursuant to s 694A. The defendant sought to set that service aside on the grounds that the claim did not relate to the carrying on of the business of the branch. Tuckey J held that the claim form was validly served because the claim did relate 'in part' to the carrying on of the business of the branch and that was sufficient for the pur pose of s 694A. The compa ny appeal ed and, whi l e t he ap- peal was being argued by Mr Lawrence Collins on its behalf, he drew the a en on of the cour t to t he alterna ve me t hods of ser vi ce appar ent ly permi ed by Pt 6 of the CPR. Mr Gol dsmi t h QC f or the claim- ant did not seek to take immediate advantage of this revela on but reser ved the right to invoke Pt 6 if the court of Appeal reversed Tuckey J. In the event Tuckey J's decision was upheld and the court did not therefore have to consider Pt 6 in any detail, but it was never suggested by Mr Collins or by the Court of Appeal that the provision by CPR of an alterna ve me t hod of ser vi ce wa s beyond the powe rs of the rule-making body. Nor does Mr Collins so suggest in his authorial capacity (see Dicey and Morris on the Conflict of Laws (13th edn, 2000) vol 1 para 11-098 (p 298)). (2) Relevant provisions of the Civil Procedure Rules.

CPR 6.2(2) provides that a company may be served by any method permi ed under Pt 6 of the CPR as an alterna ve to thos e set out in, int er al ia, s 695 of [2000] 4 All ER 371 at 376

the 1985 Act (service on overseas companies) and s 694A of the Act (service on companies incorporated overseas and having a branch in Great Britain).

Boxes 4 to 6 of CPR 6.5(6) include the following as permi ed mo des of ser vi ce: ´Nature of party to be served Place of service [4] Corpora on i ncor por at ed i n Engl and

and Wales other than a company Principal office of the corpor a on; or any pl ace within the jurisdic on wh er e t he cor por a on carries on its ac vi es and whi ch has a r eal connec on wi th the cl ai m

[5] Company registered in England and Wales

Principal office of the compa ny; or any place of business of the company within the jurisdic on which has a real connec on wi th the cl ai m

[6] Any other company or corpora on Any place within the jurisdic on wh er e the co r-pora on car ri es on its ac vi es

The basis of service.

Mr Donaldson QC for the claimant submits it has effected ser vi ce in accor dance wi th the last ent ry or 'box' in CPR 6.5(6) which permits service at 'any place of business of the company within the jurisdic- on' . Thi s is appl icabl e in respect of 'Any ot her comp any' wh i ch, he submi ts, me ans any comp any ot her than a 'Company registered in England and Wales'.

Mr Dicker submits that the defendant is a company registered in England and Wales because its branch is registered pursuant to Sch 21A of the 1985 Act. He relies on the cer ficate of regi stra on whic h cer -

Page 7

fies that Ga r uda Indonesi a has been regi ster ed under Sch 21A as havi ng establ ished a br anch in Engl and and Wales. The cer ficate ass i gns bot h a compa ny numbe r and a branch numbe r . Mr Dic ker furt her points out that box 5 does not refer, as it could have done, to a company incorporated in England and Wales. Box 4 does use the word 'incorporated' whereas box 5 does not.

Mr Donaldson had a technical answer to the last point viz that 'incorpora on' of a comp any wa s a United Kingdom or Great Bri sh concept si nce the 1985 Ac t appl ies thr oughout the ki ngdom. The cor - rect concept for a series of rules applying only in England and Wales was registra on si nce comp ani es incorporated in the United Kingdom had to be registered in the separate jurisdic ons of Engl and (and Wales), Scotland and Northern Ireland.

There is, no doubt, considerable force in this submission but I do not consider it decisive. The real ques- on i s wh et her an over sea comp any wh i ch comp l ies wi th i ts obl iga ons to s ubmi t par cular s and documents and an address for service to the registrar because it has a branch in England and obtains a cer ficate of that branch r egi stra on i s a compan y r egi st ered i n Engl and. I do not t hink i t is. I t is a com- pany whose essence (whether one calls it registra on or incor por a on or wha t ever) is overseas. It is inapt to call such a company a company registered in England and Wales; it is and remains an overseas company and is not, to my mind, a company registered in England and Wales.

In Saab v Saudi American Bank [1999] 4 All ER 321 at 324-325, [1999] 1 WLR 1861 at 1866 (para 7) Clarke LJ said: [2000] 4 All ER 371 at 377

'The importance of the new rule is of course that it appears that the posi on has now re- verted to what it was before s 694A was enacted, namely that process can be served on a foreign company with a place of business in, say, London without the necessity for estab-lishing any link between the process and the business being conducted in London.'

Mr Dicker correctly submi ed that thos e rema r ks we r e not par t of the ra o of the Cour t of Appeal ' s decision and then invited me not follow them. That invita on I decl ine; I respec ull y agr ee wit h t hem and since, in my view, the claim form has been validly served I will dismiss the applica on. Applica on di smi ssed. James Wilson Barrister (NZ).

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*342 Dunlop Pneuma c Tyre Comp any, Limi ted v Ac en- Ges el l scha für Moto r und Motorfahrzeugbau Vorm. Cudell & Co.

In the Court of Appeal.

13 January 1902

[1902] 1 K.B. 342

Collins M.R., Romer and Mathew L. JJ.

1902 Jan. 13.

Prac ce—F or ei gn Cor por a on—Se rvice of Wri t wi t hin t he J uri sdi c on—For ei gn Compan y carrying on Business temporarily in England—Order IX., r. 8—Order LXX., r. 3.

The defendants, a foreign corpora on, wh o we r e ma nuf actur er s of mo t or -car s abr oad, hi red a “stand” at the Crystal Palace for the exhibi on of ar cles of thei r man uf act ure at a cycl e show, and exhibited at the show, which lasted for nine days, among other ar cl es , a mo t or -car fi ed with tyres, which were alleged by the plain ffs to be an i nfr ingemen t of thei r pat ent . The defendants' “stand” was in charge of a person employed by them as their representa ve, whose duty it was to explain the working of the ar cl es exhi bi ted, and to take or der s for and press the sale of the defendants' goods:—

Held, that, during the con nuance of the show, the def endant s we r e car ryi ng on bus i ness so as to be resident at a place within the jurisdic on, and ther ef or e coul d be ser ved ther e wi th a wr i t in an ac on by the pl ai n ffs for i nfri ngement of t heir patent under Orde r I X., r. 8.

APPEAL from an order of Channell J. at chambers refusing to set aside the writ and service of the writ.

The ac on wa s by the own er s of a pat ent for a pneuma c tyre agai nst a f oreign compa ny, for an injunc on to restrai n the def endant s f rom i nf ringi ng the pl ai n ffs' patent and f or damage s f or infringement of the same.

The defendants were incorporated according to the law of Germany, and carried on business in that country as manufacturers of motor-cars. Save as a er me n oned t hey had no place of bus i nes s i n England. They had hired a “stand” at the Crystal Palace for the exhibi on of ar cles of thei r manufacture at the Na onal Cycl e Show hel d ther e from Novemb er 22 to Novemb er 30, 1901. The defendants had during the show the exclusive use of the “stand,” upon which their name was affixed, and had exhi bit ed t her e, amon g other ar cles, a moto r -car fi ed wit h t yres, whi ch were alleged by *343 the plain ffs to be an i nfr ingemen t of thei r pat ent . The“stand” was i n t he char ge of a man named Struck, who was in the defendants' employ, and whose duty it was to explain the working of the ar cl es exhi bi ted, and to take or der s for and pr ess the sal e of the def endant s' goods . Struck was neither a director nor the secretary of the defendant company. He had an assistant under him named Müller, whose duty it was to take charge of the stand, and answer inquiries during the temporary absence of Struck. The writ in the ac on had, in the absence of St ruck, been ser ved on Müller at the defendants'“stand” on November 27, 1901. The defendants, who had entered a provisional appearance, applied to the learned judge at chambers to set aside the writ and service, the ground stated in the summons being that the defendants were a foreign corpora on res i dent out of the jurisdic on. The learned judge hel d that the def endant s we r e car ryi ng on bus i ness at a place within the jurisdic on at the me of servi ce of the wri t, and t her efore coul d be served under Order IX., r. 8. The defendants asked for leave to amend the summons so as to raise the further point that the service, being upon Müller, and not upon Struck, the head representa ve of the defendants, was not made on the right person under Order IX., r. 8, and was therefore irregular. 1 The learned judge refused leave to amend the summons on the ground that, if the defendants had raised this objec on di s nct l y at first, the defect migh t have been cured by s ervi ng St ruck, whic h was no longer possible. He therefore dismissed the defendants' applica on.

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Danckwerts, K.C., and R. B. D. Acland, for the defendants. In the first pl ace, the def endant s ought to have leave to amend their summons in order to raise the point that the service of the writ on Müller was irregular. The defendants are prepared to contend that even Struck was not a head officer of the defendants within the meaning of Order IX., r. 8, but clearly Müller was not such an officer. Secondly, the result of the *344 cases is that, in order to render a foreign corpora on liabl e to be served with a writ within the jurisdic on, they mu s t be car ryi ng on bus i ness wi thi n the jur i sdi c on at some fixed pl ace, wh i ch can be cons i der ed thei r pl ace of bus i ness, in such a ma nner that they can be deemed to be resident there. It is not contended that for this purpose there must necessarily be an inten on to car ry on bus i ness wi thi n the jur i sdi c on perman ent l y or for an i ndefinite me. I t may possibly be that under some circumstances, though there was only an inten on to car ry on bus i ness at some place within the jurisdic on for a limi ted per iod, a for ei gn cor por a on mig ht be deemed t o have been resident within the jurisdic on dur ing that per iod. But in each case al l the ci rcums tances under which the alleged business was carried on must be looked at, and it is an essen al el eme nt that it should be carried on for a period which makes some approach to permanency. The idea of residence involves a certain degree of permanency. It cannot be said in this case that the defendants carried on business in this country so that they can be deemed to have been for any period resident here. Their business is the manufacture of motor-cars, which they carry on abroad; and they cannot be considered as having resided in this country so as to render them liable to be served here with a writ merely because, by way of adver seme nt , they sent over some mo t or -car s to be exhi bi ted at a show for a period of nine days in charge of a servant of theirs, who had authority to take orders.

A “stand” at a show, such as the Na onal Cycl e Show, cannot be regarded as a pl ace of bus i ness occupied by the defendants. It is merely a space marked out which they are licensed to use for the purpose of exhibi ng thei r goods , but the Cr ystal Pal ace Comp any are the occupi er s of the wh ol e building, and the various exhibitors are subject to the regula ons and condi ons as to hour s of opening and closing and other ma er s under wh i ch the show i s car ried on. Suppose a for ei gn company sent a traveller to this country, who occupied a room at an hotel for nine days, and there displayed samples of, and took orders for, the company's goods. It could not in such a case be said that the company resided for nine days *345 within the jurisdic on, but subs tan all y ther e i s no differ ence betwe en that case and the pr esent .

[They cited Newby v. Van Oppen 2; La Bourgogne3; Haggin v. Comptoir d'Escompte de Paris 4; The Princess Clemen ne5 ; Badcock v. Cumberland Gap Park Co.6; Mackereth v. Glasgow and South Western Banking Co. 7]

R. M. Bray, K.C., and A. J. Walter, for the plain ffs, wer e not cal l ed upon.

COLLINS M.R.

I am of opinion that this appeal must be dismissed. The ques on i s wh et her , under t he circumstances of this case, the defendants, who are a foreign company, can be made amenable to the jurisdic on of the Hi gh Cour t i n thi s count ry. Two poi nt s have been rai sed in thi s Cour t, one being that the defendants, as a foreign corpora on res i dent out of the jur i sdi c on, coul d not be served within the jurisdic on at al l under Or der IX. , r. 8, and the ot her bei ng that , assumi ng that they could be served, the service in this case was not made upon the right person under the rule. The only objec on to the ser vi ce formu l at ed in the summo ns taken out by the def endant s wa s that the defendants were a foreign corpora on not res i dent wi thi n the jur i sdi c on, no poi nt bei ng mad e with regard to the service of the writ not having been upon the proper officer of the def endant s . The learned judge refused to set aside the service of the writ on the ground men oned in the summo ns , because the defendants were at the me of the ser vi ce car ryi ng on bus i ness in thi s count ry; and he refused to amend the summons so as to raise the point that Struck, and not Muller, was the person who should have been served.

The facts are as follows. The defendants appear to have hired premises at the Crystal Palace for the purpose of exhibi ng thei r wa res dur ing the Na onal Cyc l e Show; and t hey sent over a man i n t hei r employ, named Struck, whose duty it was on their behalf to look a er the ar cles exhi bit ed, and t o

Page3

push sales of the defendants' goods. They also sent over a *346 man named Müller to act as Struck's subordinate for the before-men oned pur poses , and the wr i t in the ac on was served upon Müller. The learned judge, as I have said, refused to allow the defendants to amend their summons. The defendants admit that they cannot raise the point that the service was upon the wrong person without an amendment of the summons, and they accordingly ask us now to allow an amendment, so as to enable them to raise this point. It is a ma er of di scre on whe t her such an amen dmen t should be allowed for the purpose of enabling the defendants to take a technical point of this kind, and I think that under the circumstances of this case it would be wrong for us to interfere with the exercise by the learned judge of his discre on in thi s respect.

The only ques on, ther ef or e, wh i ch rema i ns to be deal t wi th, is wh et her ther e wa s any powe r to serve the defendants with the writ under Order IX., r. 8. That rule, so far as material, provides that “in the absence of any statutory provision regula ng ser vi ce of pr ocess, ever y wr it of summo ns issued against a corpora on aggregat e ma y be ser ved on the ma yor or ot her head officer, or on t he town clerk, clerk, treasurer, or secretary of such corpora on. ” It appear s to me that , havi ng regard to the decisions on this rule, Struck must be considered as a head officer of the def endant s wit hin i ts meaning. He was a person sent over by the defendant corpora on as thei r repr esent a ve t o do f or them in this country business of theirs, which, not being a concrete en ty, they coul d not do for themselves like an ordinary individual, namely, the business of exhibi ng and vendi ng thei r wa res at the show at the Crystal Palace. It seems to me that service of the writ could properly have been made upon him, as their head officer, assumi n g t hat the def endant s coul d be served wit h t he wri t at all. In order to see whether they were liable to be so served, it is necessary to consider whether, upon the facts, they can be said to have been resident in England when the service was effected. It has been held in a number of cases, beginning with Newby v. Van Oppen 8 and ending with the case of *347 La Bourgogne9, that the true test in such cases is whether the foreign corpora on i s conduc ng its own bus i ness at some fixed place wit hin t he j uri sdi c on, t hat being t he only way i n which a corpora on can res i de in thi s count ry. It can onl y so res i de thr ough its agent , not bei ng a concrete en ty itsel f; but , if it so res i des by its agent , it mu s t be cons i der ed for thi s pur pose as itsel f residing within the jurisdic on. In sever al of the cases deci ded on thi s subj ect the di fficulty has been to determine whether the business carried on by an agent at a certain place within the jurisdic on was the business of the company itself carried on by that agent as represen ng them, or wa s real ly the business of the agent. With regard to that point very nice ques ons of fact have in some cases arisen. But in the present case we are relieved from any such difficul t y. The def endant s di d not resort, for the purposes of their business, to some person who was himself carrying on an independent business of his own at some place in this country; and therefore we are not called on in this case to consider the ques on wh et her a for ei gn cor por a on, mak i ng use, for thei r pur poses, of a person carrying on a business of his own, can under the circumstances be regarded as themselves carrying on their own business within the jurisdic on. A di fficult ques on of that ki nd ar ose i n the case of La Bourgogne. 10There a foreign company employed as their agent in this country a person who also acted as agent for two other companies, and transacted their business on the same premises; and we held that the defendants were through him carrying on business in such a way as to be resident within the jurisdic on. No such di fficulty ar ises here as arose i n that case. Here the defendants hired premises for their own exclusive use, and did not resort for their purposes to some person who was carrying on an independent business, but employed their own servant to conduct the business. The only difficul t y i n t his case ari ses from t he f act that the me d uri ng whi c h the defendants can be said to have carried on business in this country is limited to that of the dura on of the show at the Crystal Palace, namely, nine days. It was argued by the counsel for the defendants *348 that, in determining the ques on of res i dence or no res i dence, lengt h of me i s an essen al element. I agree that it is an element to be considered; but it was, as I understood, admi ed that , if a foreign corpora on we r e to announce thei r int en on of carr ying on t hei r own bus i nes s , and wer e to carry it on, at a certain place in this country for a limited period, the mere fact that they so carried it on only for a limited period would not prevent the company from being considered as resident

Page4

within the jurisdic on f or t hat per iod. The per iod of ni ne days i s not necessar i ly a negl igi bl e quan ty; it ma y in ma ny cases be a ver y subs tan al per i od. In t he case of an exhi bi on, s uch as t he show in the present case, which is largely resorted to by manufacturers for the purpose of exhibi ng a par cul ar cl ass of goods , and by cus tome r s des i rous of pur chasi ng such goods , as mu ch bus i ness in the kind of goods exhibited might probably be done in nine days as in as many months in an ordinary town. I do not think that, where a foreign company carries on business in this country so as in all other respects to fulfil the condi ons necessary to cons tute residence wi th in the j urisdic on, t hey can be said not to have so resided, merely because that residence was confined to a per iod such as nine days. In the present case I think we have in other respects all the elements necessary to cons tut e f or t hi s pur pose r es i dence by t he def endant s. I t appear s t o be suggested t hat t he defendants cannot be said to have carried on business in this country, because they did not carry on the whole of their business here. It was said that their business was that of manufacturers of motor-cars, and that manufacture was carried on abroad, and not at the Crystal Palace. It seems to me that it is only necessary to state that point in plain terms in order to confute it. It is clearly not necessary that a company should carry on the whole of its business in this country. A substan al part of the defendants' business was the selling of their manufactures, and that was during the show carried on here. Customers had during that period an opportunity of inspec ng the def endant s' wares, and prices were quoted, and orders accepted for them by the defendants. Nothing more could have been done with regard to the sale of the defendants' *349 wares at their place of business abroad. For these reasons I think the appeal must be dismissed.

ROMER L.J.

I agree. The result of the authori es appear s to me to be that , i f for a subs tan al per i od of me business is carried on by a foreign corpora on at a fixed place of bus i nes s i n t his count r y, through some person, who there carries on the corpora on' s bus i ness as thei r repr esent a ve and not mer ely his own independent business, then for that period the company must be considered as resident within the jurisdic on for the pur pose of ser vi ce of a wr i t. The facts of the pr esent case appear to me to bring the defendants within that proposi on. On that shor t ground I am of opi ni on that the appeal fails. With regard to the subsidiary point, I am also of opinion that leave to amend ought not to be given.

MATHEW L.J.

I agree. With regard to the technical point, that the service should have been on Struck and not Müller, I see no ground for overruling the exercise by the learned judge of his discre on as to an amendment of the summons. As to the other point, is there any doubt that, if the defendants were an English company, they could properly be said to have carried on business during the show at the “stand” hired by them for their exclusive use for the purposes of their business? I think that, on the facts of this case, all the condi ons we r e f ul filled by the def endant s , whi ch, according t o t he decisions, are necessary in order to cons tut e r es i dence wi thi n t he j ur i sdi c on by a f oreign corpora on. A cor por a on can, of cour se, onl y be s ai d t o r esi de anywhe r e i n a figura ve sense, and it has been held for the present purpose to reside in a place where it carries on its business.

Representa on

Solicitors for plain ffs: J. B. & F . Pur chase. Sol i citors for def endant s : Crueseman n & Rouse. Appeal dismissed. (E. L.)

________________________________________________________________________________________

. Order LXX., r. 3, provides that “where an applica on i s ma de to set asi de pr oceedi ngs f or irregularity, the several objec ons int ended to be ins i sted upon shal l be stat ed in the summo ns or no ce of mo on. ”

(1872) L. R. 7 Q. B. 293.

Page5

[1899] P. 1; [1899] A. C. 431.

(1889) 23 Q. B. D. 519.

[1897] P. 18.

[1893] 1 Ch. 362.

(1873) L. R. 8 Ex. 149.

L. R. 7 Q. B. 293.

[1899] P. 1; [1899] A. C. 431.

[1899] P. 1; [1899] A. C. 431.

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Page1

*1545 Lubbe and Others Appellants v Cape Plc. Respondent and related appeals

House of Lords

20 July 2000

[2000] 1 W.L.R. 1545

Lord Bingham of Cornhill, Lord Steyn , Lord Hoffma nn , Lor d Hope of Cr ai ghead and Lor d Hobhouse of Woodborough

2000 June 19, 20, 21, 22; July 20

Prac ce—S tay of pr oceedi ngs—J ur i sdi c on—So ut h Afr ican pl ain ffs clai ming damages i n Engl i s h ac ons agai ns t Engl ish comp any—C l ai ms for per sonal inj ur ies ar i si ng out of comme r ci al ac vi es i n South Africa of South African subsidiaries—Ac ons rai si ng subs tan al and compl ex i ssues proceedi ng as group ac on—F undi ng unavai labl e to pl ai n ffs in South Af r i ca—Def endant appl yi ng t o st ay ac ons and under taki ng to submi t to Sout h Af rican j ur i sdi c on—Re al and subst an al connec on with South Africa—Whether South African forum available to plain ffs—Wh e t her publ i c i nterest relevant factor—Whether ac ons to be stayed

In 1997 in a number of ac ons begun i n Engl and the pl ai n ffs, who were al most al l South African ci zens res i dent in Sout h Af ri ca, cl ai me d dama ges for per sonal inj ur y, and in some cases death, against the defendant, a company registered in England which owned a number of subsidiary companies in South Africa engaged in the mining and processing of asbestos and the sale of asbestos-related products. The plain ffs all eged t hat , in r espect of per i ods bef ore 1979, the defendant, while knowing of the injurious effect of exposur e to asbestos , had fai led, as the parent company, to take appropriate steps to ensure the adop on of pr oper wo r ki ng pr ac ces and safety precau ons thr oughout its subs i di ar y comp ani es and had ther eby acted in br each of a duty of care it owed to employees of its subsidiary companies or to those living in the area of their opera ons . The def endant , wh i ch had ceased to trade in Sout h Af ri ca and had no asset s there, sought to stay the first ac on and, on t he hear i ng of the appl i ca on, under t ook t o submi t to that jurisdic on. The judge gr ant ed the stay, concl udi ng that Sout h Af ri ca wa s the nat ur al forum and that jus ce di d not requi re hi m to or der ot herwi se. On the pl ai n ff's appeal , the Court of Appeal considered that the judge had failed to take into account that the South African forum was unavailable to the plain ffs un l the under t akings had been gi ven and t hat i ts availability remained condi onal on t hei r bei ng f ul filled. The cour t concl uded t hat the defendant had not shown South Africa to be clearly the more appropriate forum and allowed the appeal.

Therea er wr i ts in ni ne fur ther ac ons wer e i ssued by mor e t han 3,000 plain ffs, South Afr ic an ci zens res i dent i n Sout h Af rica, wh o ma de simi lar al lega ons agai nst the def endant . Those cases were ordered to proceed as a group ac on and the def endant appl ied for a stay of al l the proceedings against it. The judge, considering South Africa to be clearly the more appropriate forum and rejec ng the pl ai n ff's objec on that l egal ai d would not be avail able t o them t he re, concluded that there was no sufficient reason t o r efuse a stay and grant ed t he def endant ' s applica on. On t he pl ai n ff's appeal t he Cour t of Appeal , aware that l egal aid had been withdrawn from personal injury cases in South Africa, considered that the ac ons had thei r most real and substan al connec on t her e, that conveni ence and expense poi nted t o t hat forum and that considera ons of publ ic int er est *1546 supported that conclusion. The court, expressing confidence that l egal repr esent a on coul d be mad e avai l abl e t her e t o t he ext ent necessary to achieve proper considera on of the pl ai n ff's cases, dismiss ed t heir appeal .

On the defendant's appeal against the decision of the first Cour t of Appeal and the pl ai n ff's appeal against the decision of the second Court of Appeal:—

Held , (1) dismissing the defendant's appeal, that, where a plain ff sued a def endant as of right in the English court the defendant's applica on f or a s tay on t he ground of f or um non

Page2

conveniens could not succeed unless the court was sa sfied t hat ther e was anot her tribunal of competent jurisdic on in wh i ch the case mi ght be tri ed mo r e sui tabl y for the int er ests of al l the par es and for the ends of jus ce; that the def endant , in under t aki ng t o s ubmi t to t he Sout h African jurisdic on, had sufficientl y sa sfied the requi rement t hat the alt erna ve f orum was available and, since the undertakings were before the judge when he considered the issue of forum non conveniens, their mi ng wa s not a rel evant factor for the first Cour t of Appeal to have taken into account; but that, on the plain ff's case as then present ed, the first Cour t of Appeal's assessment of the balance between the issues rela ng to the respons i bi lity of the defendant parent company and the personal injury claims was not shown to be unreasonable or wrong and it was open to that court to conclude that South Africa was not clearly the more appropriate forum (post, pp. 1553H–1554A , 1556C–E , 1562B–E , 1565H–1566B , 1567D ).

Sim v. Robinow (1892) 19 R. 665 applied .

(2) Allowing the plain ff's appeal , that , given t he enhanced s igni ficance of t he personal i njur y issues a er the i ns tu on of t he ni ne f urther ac ons, both t he judge on the second s t ay applica on and the second Cour t of Appeal had cor rectly regarded Sout h Af ri ca as cl ear l y the more appropriate forum; but that since the proceedings could only be handled efficient l y, cost-effec vel y and expedi ousl y on a group basi s, since the pr epar a on and conduct of the personal injury issues, if the plain ffs succeeded on t he def endant ' s respons i bil ity i ssue, was a heavy and difficul t task requi r ing t he services or super vi sion of profess i onal lawye rs and t he obtaining of expert advice and evidence, and since no convincing evidence suggested the availability of appropriate funding in South Africa, whether by legal aid, con ngency f ee arrangements or otherwise, the probable effect of a stay wo ul d be to depr i ve the pl ai n ffs of the means of obtaining the representa on and evi dence essen al to t he j ust disposal of thei r claims, and in consequence would amount to a denial of jus ce; and that , accor di ngl y, in the unusual circumstances of the proceedings, lack of means in South Africa to prosecute the claims required the stay to be refused (post, pp. 1556F–H , 1557E , 1558E–F , 1559C–G , 1562B–E , 1567D ).

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460, H.L .(E.) and Connelly v. R.T.Z. Corpora on Pl c. [1998] A. C. 854 , H.L.(E.) applied .

(3) That the principles applied by the court on an applica on for a stay on the ground of for um non conveniens required it to exercise jurisdic on wh er e a pl ai n ff sued t he defendant as of right in England unless it was sa sfied t hat the case mig ht be t ried i n t he other forum mor e suitably for the interests of all the par es and t he ends of j us ce; and t hat , accordingl y, considera ons of publ ic int er est and publ ic pol icy wh i ch di d not rel at e to the pr i vat e int er ests of any of the par es and to secur ing the ends of jus ce i n t he par cular case shoul d be l e out of account in determining the applica on (pos t, pp. 1561E–G , 1566C–D ).

Decision of the Court of Appeal [1998] C.L.C. 1559 affirmed .

Decision of the Court of Appeal [2000] 1 Lloyd's Rep. 139 reversed .

*1547

The following cases were referred to in the opinions of their Lordships:

Clements v. Macaulay (1866) 4 Macph. 583

Connelly v. R.T.Z. Corpora on Pl c. [1996] Q. B. 361; [1996] 2 W. L. R. 251; [1996] 1 Al l E. R. 500, C.A. ; [1998] A.C. 854; [1997] 3 W.L.R. 373; [1997] 4 All E.R. 335, H.L.(E.)

Harrods (Buenos Aires) Ltd, In re [1992] Ch. 72; [1991] 3 W.L.R. 397 ; [1991] 4 All E.R. 334, C.A.

Page3

Holtby v. Brigham & Cowan (Hull) Ltd. [2000] 3 All E.R. 421, C.A.

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362; [1978] 1 All E.R. 625, H.L.(E.)

Oceanic Sun Line Special Shipping Co. Inc. v. Fay (1988) 165 C.L.R. 197

Piper Aircra Co. v. Reyno (1981) 454 U. S. 235

Sim v. Robinow (1892) 19 R. 665

Société du Gaz de Paris v. Société Anonyme de Naviga on “Les Ar ma t eur s Franéai s” 925 S. C. 332; 1926 S.C. (H.L.) 13, H.L.(Sc.)

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460; [1986] 3 W.L .R. 972; [1986] 3 All E.R. 843, H.L.(E.)

Tulloch v. Williams (1846) 8 D. 657

Union Carbide Corpora on Ga s Pl ant Di saster at Bhopal , Indi a in Decemb er 1984, In re (1986) 634 F.Supp. 842; (1987) 809 F.2d 195

The following addi onal cases we r e ci ted in ar gume nt :

AB v. John Wyeth & Brother Ltd. [1993] 4 Med.L.R. 1, C.A.

Adams v. Cape Industries Plc. [1990] Ch. 433; [1990] 2 W.L.R. 657; [1991] 1 All E.R. 929, C.A.

Agnew v. Länsforsäkringsbolagens A.B. [2000] 2 W.L.R. 497; [2000] 1 All E.R. 737, H.L.(E.)

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Askin v. ABSA Bank Ltd. (unreported), 29 January 1999; Court of Appeal (Civil Division) Transcript No. 86 of 1999, C.A.

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Bulmer (H. P.) Ltd. v. J. Bollinger S.A. [1974] Ch. 401; [1974] 3 W.L.R. 202; [1974] 2 All E.R. 1226, C.A.

Canea Catholic Church v. Greece (1997) 27 E.H.R.R. 521

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Chapman v. Chief Constable of South Yorkshire (1990) 134 S.J. 726

Connelly v. R.T.Z. Corpora on Pl c. (No . 2) , The Ti me s , 12 J ul y 1996; Cour t of Appeal ( Ci vi l Division) Transcript No. 590 of 1996, C.A.; [1998] A.C. 854; [1997] 3 W.L.R. 373; [1997] 4 All E.R. 335, H.L.(E.)

Connelly v. R.T.Z. Corpora on Pl c. (No . 3) (unr epor ted) , 4 Decemb er 1998 , Wright J. *1548 *1549

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Lubbe and Others (Respondents) v. Cape Plc. (Appellant)

Appeal from the Court of Appeal.

This was an appeal by the defendant, Cape Plc., with leave of the Appeal Commi ee of the House of Lords (Lord Browne-Wilkinson, Lord Hope of Craighead and Lord Mille ) gi ven on 30 March 2000, and vaca ng the or der of the Appeal Commi ee ( Lord Browne - Wil kinson, Lord Hope of Craighead and Lord Hu on) gi ven on 14 Decemb er 1998 ref us i ng leave to appeal from the judgment of the Court of Appeal (Evans, Mille and Aul d L. JJ.) on 30 Jul y 1998 al lowi ng an appeal by the plain ffs, Schal k Wi l lem B ur ger Lubbe ( sui ng as admi n is trator of the est ate of Rachel Lubbe) and four others, from Mr. Michel Kallipe s Q. C. , si ng as a deput y judge of t he High Court who, on 12 January 1998, had granted a stay of their ac on agai ns t the def endant .

The facts are stated in the opinion of Lord Bingham of Cornhill.

Lubbe and Others (Appellants) v. Cape Plc. (Respondent) and Related Appeals

Appeal from the Court of Appeal.

This was an appeal by the plain ffs, Schal k Wil lem B ur ger Lubbe ( sui ng as admi n is trator of the estate of Rachel Lubbe) and four others, Pauline Nel (suing as administratrix of the estate of Jacobus Nel), Hendrik Ismael Afrika and 1538 others, Elizabeth Cocks and six others,

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Ramathabathe Mphahlele and 374 others, Abraham Alexander and 99 others, Cecilia Beukes and 26 others, Frederick Van Wyk and 57 others, Fanani Bembe and 12 others, Bosole Abram Chidi and 127 others and Mokganyetji Lidah Angwadi and 851 others, with leave of the Appeal Commi ee of t he House of Lor ds ( Lor d Br own e-Wi lki nson, Lor d Steyn and Lor d Hope of Craighead) given on 7 February 2000, from the judgment of the Court of Appeal (Pill, Aldous and Tuckey L.JJ.) given on 29 November 1999 dismissing their appeals from Buckley J., who on 30 July 1999 had stayed their ac ons agai ns t the def endant , Cape Pl c.

The facts are stated in the opinion of Lord Bingham of Cornhill.

Representa on

Michael Beloff Q. C. , Lor d Br ennan Q. C. , Gr aham Read and Ni chol as Khan for the pl ai n ffs.

Brian Doctor Q.C. , Charles Gibson , Richard Coleman and Alan Dashwood for the defendant.

Their Lordships took me for cons i der a on.

Lord Bingham of Cornhill

20 July… My Lords, the central issue between the plain ffs and t he def endant in t hese interlocutory appeals is whether proceedings brought by the plain ffs agai nst the def endant should be tried in this country or in South Africa.

There are at present over 3,000 plain ffs. Each of them c laims damag es i n one of the 11 wri ts issued against the defendant between February 1997 and July 1999. All the plain ffs cl aim damages for personal injuries (and in some cases death) allegedly suffer ed as the resul t of exposure to asbestos and its related products in South Africa. In some cases the exposure is said to have occurred in the course of the plain ff's empl oymen t , in other s as a r esul t of l iving i n a contaminated area. The exposure is said to have taken place in differ ent pl aces in Sout h Af ri ca and over varying, but some me s lengt hy, per iods of me, endi ng f or claim p ur poses i n 1979. One of the plain ffs (Mrs . Paul i ne Nel , sui ng as per sonal *1550 representa ve of her deceased husband) is a Bri sh ci zen r esi dent in Engl and. All the other s are Sout h Afr ican c i zens r esident in South Africa. Most of the plain ffs are black and of mod es t mea ns. Inst ruc ons t o sue have been given to English solicitors by more than 800 addi onal cl ai ma nt s.

The defendant is a public limited company. It was incorporated in England in 1893 under the name Cape Asbestos Company Ltd., principally to mine and process asbestos and sell asbestos-related products. From shortly a er 1893 un l 1948 i t oper ated a blue asbes t os (or crocidolite) mine at Koegas and a mill at Prieska, both in the Northern Cape Province. In 1925 the defendant acquired the shares in two companies, both incorporated in 1916: these were Egnep Ltd. and Amosa Ltd., which operated a brown asbestos mine and mill at Penge in Northern Transvaal. For prac cal pur poses the head office of t hese compan i es was i n Cape Town. In 1940 a factory was opened at Benoni, near Johannesburg, to manufacture asbestos products. It was owned by a wholly-owned subsidiary of the defendant.

In 1948 the corporate structure of the defendant's group was changed. The mine at Koegas and the mill at Prieska were transferred to a newly-formed South African company, Cape Blue Mines (Pty.) Ltd. The shares in Cape Blue Mines, Egnep and Amosa were transferred to a newly-formed South African holding company, Cape Asbestos South Africa (Pty.) Ltd. (“CASAP”). The offices of all these companies were in Johannesburg. All the shares in CASAP were owned by the defendant. In 1979 CASAP sold its shares in Cape Blue Mines, Egnep and Amosa to an unrelated third party buyer, which shortly therea er sol d them on. The def endant con nued t o hol d an interest in the South African companies which operated out of the factory at Benoni un l 1989 (although the factory had been closed earlier). Since then the defendant has had no presence anywhere in South Africa, and when the first of the wr i ts in the cur rent pr oceedi ngs wa s ser ved

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the defendant had no assets in South Africa.

Although origina ng in Sout h Af ri ca, the def endant 's asbestos -rel at ed bus i ness has not been confined to that count ry. From 1899 the def endant oper at ed a numb er of factor ies in Engl and engaged in processing asbestos and manufacturing asbestos products. A factory at Barking was run by the defendant from 1913 un l 1962, and then by a wh ol ly- own ed subs i di ar y un l the factory was closed in 1968. Another subsidiary, incorporated in Italy, operated a factory in Turin which made asbestos products from 1911 un l 1968, wi th an int ermi ssi on dur ing the wa r year s.

Some of the claims made in these ac ons dat e back to mes whe n t he def endant was i tsel f opera ng in Nor ther n Cape Pr ovi nce. But the cent ral thr us t of the cl ai ms ma de by each of the plain ffs i s not agai nst the def endant as the empl oyer of that plain ff or as the occupi er of the factory where that plain ff wor ked, or as the i mme d i ate sour ce of the cont ami n a on i n the area where that plain ff li ved. Rat her , the cl aim i s mad e agai nst the def endant as a par ent company which, knowing (so it is said) that exposure to asbestos was gravely injurious to health, failed to take proper steps to ensure that proper working prac ces we r e fol lowe d and pr oper safety precau ons obser ved thr oughout the group. I n thi s wa y, i t i s al leged, the def endant breached a duty of care which it owed to those working for its subsidiaries or living in the area of their opera ons (wi th the resul t that the pl ai n ffs thereby suffer ed per sonal i njury and l os s). Some 360 claims are made by personal representa ves of deceased v i c ms. *1551 As reformulated during the first Cour t of Appeal hear ing the ma i n i ssue rai sed by the pl ai n ff's claim was put in this way:

“Whether a parent company which is proved to exercise de facto control over the opera ons of a (for ei gn) subs i di ar y and wh i ch knows , thr ough its di rector s, that those opera ons invol ve risks to the heal th of wo r ker s emp l oyed by the subs i di ar y and/or persons in the vicinity of its factory or other business premises, owes a duty of care to those workers and/or other persons in rela on to the cont rol wh i ch it exer ci ses over and the advice which it gives to the subsidiary company?”

The first of the wr i ts in these pr oceedi ngs wa s issued by Mr s. Lubbe and four ot her pl ai n ffs on 14 February 1997 (and when she died the ac on wa s con nued by Mr. Lubbe as her per sonal representa ve) . The def endant pr omp t ly appl ied to stay the pr oceedi ngs on the ground of forum non conveniens. This applica on came bef or e Mr . Mi chel Kal lipe s Q. C . si ng as a deputy judge of the Queen's Bench Division, who acceded to it. He sought to apply the principles authorita vel y lai d down by thi s House in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , and for reasons given in a lengthy and careful judgment dated 12 January 1998 he concluded that everything pointed towards South Africa as the natural forum for the trial of the ac on and that ther e wa s no pr essi ng ci rcums tance wh i ch wo ul d j us fy hi m i n deciding that the interests of jus ce requi red a tri al in thi s count ry ins tead of the nat ur al for um in South Africa.

The plain ffs appeal ed and on 30 J uly 1998 t he Court of Appeal (Evans, Mille and Aul d L. JJ.) allowed the appeal [1998] C.L.C. 1559 . Like the judge, the Court of Appeal also sought to apply the principles in the Spiliada case. But it reached a differ ent concl us i on, hol di ng that the judge had failed to give weight to the fact that the negligence alleged was against the defendant company as opposed to those persons or companies responsible for running its South African businesses from me to me, and t hat the j udge had f ail ed t o t ake account of the f act that the South African forum had been unavailable to the plain ffs un l the def endant offer ed undertakings during the hearing before the judge, the availability of the South African forum being condi onal upon those under taki ngs bei ng ful filled: see p. 1573. Taki ng t hose ma ers into account, the Court of Appeal (“the first Cour t of Appeal ”) hel d that the def endant di d not show that South Africa was clearly and dis nctly the mo r e appr opr iat e for um. In fai rness to the judge it should be observed that the second of these points was not raised before him (it was

Page8

indeed raised by the first Cour t of Appeal itsel f) and he coul d not ther ef or e be repr oached for failing to take it into account.

At that stage, therefore, the plain ffs wer e at l iber t y to pur sue t hei r ac on i n Engl and. Befor e either of these decisions the sole plain ff resi dent in Engl and ( Mrs . Nel ) had al so i ssued proceedings as personal representa ve of her husband, joi ni ng no ot her pl ai n ff. The defendant sought to challenge the decision of the first Cour t of Appeal but leave to do so wa s ref used by that court and, following an oral hearing, by your Lordship's House on 14 December 1998.

A er the ref usal of l eave by your Lor dshi ps in Decemb er 1998, wr i ts we r e i ssued by al l the remaining plain ffs i n t hese pr oceedi ngs . It i s unnecessary to summa r i se t he de t ai l ed procedural steps which followed. It is enough to note that the defendant applied to stay all the ac ons , *1552 including the Lubbe ac on, on grounds of for um non conveni ens and abuse of process, and direc ons we r e gi ven to consol idat e the var ious pr oceedi ngs (wi thout pr ej udi ce to the posi on of the Lubbe pl ai n ffs) i nto a group ac on.

The defendant's summons to stay came before Buckley J. who heard detailed submissions and considered copious documentary material. He gave a full judgment in wri ng [2000] 1 Lloyd's Rep. 139 , 141 on 30 July 1999. He concluded that South Africa was clearly and dis nctly the more appropriate forum for trial of this group ac on and that ther e we r e no sufficient r easons for nevertheless refusing a stay: see p. 151. In reaching this last opinion he considered and discounted a number of objec ons rai sed by the pl ai n ffs, i ncluding t he al leged unavai l abil i ty of legal aid in South Africa. Of that submission he said, at p. 150:

“In all the circumstances, I cannot find that legal ai d wo ul d not be gr ant ed, if appl ied for in South Africa. I readily accept there may be difficul es and some d elay but t hat, at least in part, must flow from the cl ai ma nt 's deci si on not to appl y for legal ai d in Sout h Africa and to issue proceedings here, when, as [the plain ff's sol i citor] wel l knew, the defendant would contest jurisdic on. ”

The judge accordingly ordered a stay of proceedings. He considered an argument advanced by the defendant that the proceedings were an abuse. The basis of this argument was that the solicitors represen ng the Lubbe pl ai n ffs had mi sl ed t he fir st Court of Appea l and t he House of Lords by failing to disclose their inten on, if jur i sdi c on i n Engl and was est abl i shed i n t he Lubbe case, to launch a mul -pl ai n ff group ac on, and al so that t he br i nging of a group ac on was oppressive and an abuse. The judge expressed cri ci sm of the sol ici tor s repr esen ng t he Lubbe plain ffs but st opped shor t of finding abuse of t he pr oces s: see p. 154. The j udge al so considered an argument, advanced by the defendant, sugges ng that ther e we r e publ ic int er est grounds for concluding that the proceedings should be tried in South Africa: the judge reached his decision independently of this argument (see p. 154), but considered that it reinforced his decision. He gave both sides leave to appeal.

Thus the ma er came bef or e the Cour t of Appeal (Pi ll, Al dous and Tuckey L. JJ., “the second Court of Appeal”) again [2000] 1 Lloyd's Rep. 139 , and in judgments given on 29 November 1999 the appeals were dismissed. Pill L.J. described the factors poin ng towa rds Sout h Af ri ca as the more appropriate forum as “overwhelming:” see p. 160. The ac on had the mo s t real and substan al connec on wi t h Sout h Af r ica and cons i der a ons of expense and conveni ence pointed strongly in that direc on: see p. 161. The publ ic int er est cons i der a ons suppor t ed t hat conclusion: see pp. 161–162. He was not persuaded by the argument that the South African High Court would be unable to handle these ac ons (see p. 162) , and wi th ref er ence to legal representa on he sai d, at p. 164:

“I have already referred to the high repute in which the South African courts are held. There is also in South Africa a legal profession with high standards and a tradi on of public service, though I do not suggest that lawyers in South Africa, any more than

Page9

those anywhere else, can be expected to act on a large scale without prospects of remunera on. Wh i le I wo ul d not be pr epared to appl y the second stage of the Spiliada test, so as to permit English li ga on, even i n t he *1553 absence of evidence that legal representa on wi ll b e a vai labl e, I a m u nabl e t o c oncl ude t hat i n t he circumstances it would not become available for claims in South African courts. Moreover, given the accessibility to the wealth of scien fic, techni cal and med i cal evidence available in this context, I am confident that it coul d be ma de avai labl e in a South African court to the extent required to achieve a proper considera on of the plain ff's cases. The ac on woul d by no mean s be novel or specul a ve”

Pill L.J. was not prepared to strike out the proceedings as an abuse of process: see pp. 164—165. He recorded that the plain ffs had not pur sued t hei r cont en on t hat ar cle 2 of the Brussels Conven on on Jur i sdi c on and t he Enf orcemen t of Judgmen t s i n Civil and Comme r cial Ma er s ( 1968) (Cmn d. 7395) depr i ved the Engl ish cour t of any di scre on t o s tay an ac on brought against a defendant domiciled here, since they did not wish the proceedings to be delayed while a reference was made to the European Court of Jus ce: see pp. 164—1 65. He considered that the bringing of the mul -pl ai n ff group ac on en tl ed the Cour t of Appeal t o reconsider the decision of the first Cour t of Appeal in the Lubbe ac on and t o r each a different conclusion: see p. 165. He dismissed the appeal.

Aldous L.J. agreed, while recording earlier reserva ons a bout t he a vai labi lity o f l egal representa on: see p. 166. He al so expr essed strong cri ci sm o f the sol i citors repr esen ng t he Lubbe plain ffs but agreed wit h Pil l L.J . that wha t had happened did not mea n t hat ther e was an abuse of process such that the group ac on and the Lubbe ac on shoul d be s tayed: see p. 167. Tuckey L.J. also agreed: he deprecated the acrimony caused by the Lubbe solicitor's failure to inform the Court of Appeal and the House of Lords of the plan to launch a group ac on and a ached less we i ght than the first Cour t of Appeal had done t o t he f act that the Sout h Afr ican forum had only become available because of the defendant's undertaking to submit: see p. 168. The second Court of Appeal refused leave to appeal, but leave was given by your Lordships to the plain ffs on 7 Febr uar y 2000. On 30 Mar ch 2000 your Lordshi ps al so vacated t he ear l i er order refusing leave to appeal in the Lubbe ac on and gave leave to the def endant to chal lenge the decision of the first Cour t of Appeal .

Reference should be made, final ly, t o an ac on whi ch i s not di r ect l y i nvol ved i n t hese proceedings. On 3 October 1997 proceedings were issued by Vincenzina Gisondi and three other plain ffs agai nst the def endant mak i ng claims on grounds simil ar to t hose r el i ed on by t he plain ffs i n t he proceedi ngs bef ore t he House. The s igni ficant difference i s that t hese pl ain ffs complain of exposure to asbestos and asbestos products not in South Africa but in Italy. Thus the plain ffs are r esi dent in a state whi ch i s a par t y to t he Brussel s Conven on and sue a defendant domiciled in England, another contrac ng stat e. It has not been suggested that the English court could under the Conven on decl ine jur i sdi c on i n f avour of an I tal i an f orum, and no applica on for a stay has been ma de by the def endant in that case. Ther e appear s to be no jurisdic onal obj ec on t o t he prosecu on of t hat ac on her e, and no appl i ca on has been made to strike out the claim as disclosing no cause of ac on.

The applicable principles

Where a plain ff sues a def endant as of right in t he Engl i sh cour t and t he def endant appl i es to stay the proceedings on grounds of forum non conveniens, the principles to be applied by the English court in deciding *1554 that applica on in any case not gover ned by ar cle 2 of the Brussels Conven on are not in doubt . They der ive from the judgme nt of Lor d Ki nnear in Si m v. Robinow (1892) 19 R. 665 , 668 where he said:

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“the plea can never be sustained unless the court is sa sfied t hat ther e i s some other tribunal, having competent jurisdic on, in wh i ch the case ma y be tri ed mo r e sui tabl y for the interests of all the par es and for the ends of jus ce. ”

Thus it is the interest of all the par es , not those of the pl ai n ff only or t he defendant only, and the ends of jus ce as judged by the cour t on al l the facts of the case bef or e i t, wh i ch mu s t control the decision of the court. In the Spiliada case [1987] A.C. 460 , 476 it was stated:

“The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is sa sfied t hat ther e i s some other avai l abl e f orum, having competent jurisdic on, wh i ch i s the appr opr iat e f or um f or the t ri al of the ac on, i .e. i n wh i ch the case ma y be tri ed mo r e sui tabl y for the i nt er ests of al l the par es and the ends of jus ce. ”

In applying this principle the court's first task is to cons i der wh et her the def endant wh o seeks a stay is able to discharge the burden res ng upon hi m not jus t to show that Engl and is not the natural or appropriate forum for the trial but to establish that there is another available forum which is clearly or dis nctly mo r e appr opr iat e than the Engl ish for um. In thi s wa y, pr oper regard is had to the fact that jurisdic on has been founded in Engl and as of ri ght : see the Spiliada case, at p. 477. At this first stage of the inqui ry the cour t wi ll cons i der wh at factor s ther e are wh i ch point in the direc on of anot her for um: see the Spiliada case [1987] A.C. 460 , 477; Connelly v. R.T.Z. Corpora on Pl c. [1998] A. C. 854 , 871 . If the court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the ac on, that is likel y to be the end of the ma er . But if the cour t conc l udes at that stage that ther e is some ot her available forum which prima facie is more appropriate for the trial of the ac on it wi ll or di nar i ly grant a stay unless the plain ff can show t hat ther e are ci rcums t ances by reason of whi ch jus ce requi res that a stay shoul d never thel ess not be gr ant ed. In thi s second stage the cour t will concentrate its a en on not onl y on f act ors connec ng t he pr oceedi ngs wi th the f orei gn or the English forum (the Spiliada case, at p. 478; the Connelly case, at p. 872) but on whether the plain ff wi l l obt ain j us ce i n the f orei gn j urisdic on. The pl ain ff wi ll no t ordi nar i l y di schar ge the burden lying upon him by showing that he will enjoy procedural advantages, or a higher scale of damages or more generous rules of limita on if he sues in Engl and; gener al ly speaki ng, the plain ff mus t take a f oreign f orum a s he finds i t, even i f it is in some r espect s less advantageous to him than the English forum (the Spiliada case, at p. 482; the Connelly case, at p. 872). It is only if the plain ff can est abl i sh t hat subs t an al j us ce wi l l not be done i n the appropriate forum that a stay will be refused (the Spiliada case, at p. 482; the Connelly case, at p. 873).

This is not an easy condi on for a pl ai n ff to sa sf y, and i t is not neces sar i l y enough t o show that legal aid is available in this country but not in the more appropriate foreign forum. Lord Goff of Chi evel ey sai d in the Connel ly case, at p. 873: *1555

“I therefore start from the posi on that , at least as a gener al rul e, the cour t wi ll not refuse to grant a stay simply because the plain ff has shown t hat no financi al assistance, for example in the form of legal aid, will be available to him in the appropriate forum, whereas such financi al assi stance wi ll be avai labl e t o hi m i n England. Many smaller jurisdic ons cannot afford a system o f legal aid. Suppose t hat the plain ff has been i njured i n a mot or acci dent in such a count r y, and succeeds i n establishing English jurisdic on on the def endant by ser vi ce on hi m i n thi s count ry where the plain ff is eli gible f or l egal aid, I cannot think that the absence of legal aid i n the appropriate jurisdic on wo ul d of itsel f jus fy the r efusal of a stay on t he ground of forum non conveniens. In this connec on i t shoul d not be for go en t hat financi al

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assistance for li ga on i s not necessari l y regarded as essen al , even i n sophi s cated legal systems. It was not widely available in this country un l 1949; and even si nce that date it has been only available for persons with limited means. People above that limit may well lack the means to li gat e, wh i ch pr ovi des one r eason f or t he r ecent legalisa on of c ondi onal fee agreemen t s . Even so, the avai l abi l ity of financi al assistance in this country, coupled with its non-availability in the appropriate forum, may excep onal ly be a rel evant factor in thi s cont ext . The ques on, howev er , remai ns whether the plain ff can est abl i sh t hat subs t an al j us ce wi l l not i n the par cular circumstances of the case be done if the plain ff has to proceed i n t he appr opr i ate forum where no financi al assi stance is avai labl e. ”

In the Connelly case a majority of the House held that the case before it was such an excep onal case. The nat ur e and comp l exi ty of the case we r e such that it coul d not be tri ed at all without the benefit of legal repr esent a on and exper t sci en fic assistance, avail able i n thi s country but not in the more appropriate forum, Namibia. That being so, the majority of the House concluded that the Namibian forum was not one in which the case could be tried more suitably for the interests of all the par es and for the ends of jus ce.

The present cases

The issues in the present cases fall into two segments. The first s egme nt concer ns t he responsibility of the defendant as a parent company for ensuring the observance of proper standards of health and safety by its overseas subsidiaries. Resolu on of thi s issue wi ll be likel y to involve an inquiry into what part the defendant played in controlling the opera ons of the group, what its directors and employees knew or ought to have known, what ac on wa s taken and not taken, whether the defendant owed a duty of care to employees of group companies overseas and whether, if so, that duty was broken. Much of the evidence material to this inquiry would, in the ordinary way, be documentary and much of it would be found in the offices of the parent company, including minutes of mee ngs, repor ts by di rector s and emp l oyees on vi si ts overseas and correspondence.

The second segment of the cases involves the personal injury issues relevant to each individual: diagnosis, prognosis, causa on (inc l udi ng the cont ribu on mad e t o a plain ff's condi on by any sources of contamina on for wh i ch the def endant wa s not respons i bl e) and speci al dama ge. Inves ga on of these i s sues wou l d necessari ly i nvol ve t he *1556 evidence and medical examina on of each pl ai n ff and an i nqui r y into the condi ons i n whi ch that pl ain ff worked or lived and the period for which he did so. Where the claim is made on behalf of a deceased person the inquiry would be essen al ly the same , al though pr obabl y mo r e di fficult.

In his review of the Lubbe case, which was alone before him, Mr. Kallipe s cons i der ed that the convenience of trying the personal injury issues in South Africa outweighed any benefit ther e might be in trying the parent company responsibility issue here. That was in my opinion a tenable though not an inevitable conclusion on the case as then presented. The two reasons given by the first Cour t of Appeal for di stur bi ng that exer ci se of judgme nt are not to my mi nd convincing. Mr. Kallipe s' s judgme nt does not suggest that he over looked the wa y in wh i ch the plain ffs put thei r case, al t hough he di d not express i t very cl ear l y ( per haps because t he pleading was not very clear). The first Cour t of Appeal thought it undermi ned the def endant 's applica on for a stay that the Sout h Af ri can for um onl y became avai labl e as a resul t of the defendant's undertaking to submit, but for reasons given by my noble and learned friend, Lord Hope of Craighead (with which I fully agree) this was not a factor which should have weighed in the balance either way. I would not accept the argument advanced by the plain ffs on t his point. I ques on wh et her the first Cour t of Appeal was j us fied in dis turbing Mr . K all i pe s' s

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conclusion and subs tu ng i ts own. But i ts own assessmen t of the bal ance bet wee n t he par ent company responsibility issue and the personal injury issues is not shown to be unreasonable or wrong. On the case as then presented there was room for the view that South Africa was not shown to be a clearly more appropriate forum. This is a fiel d in wh i ch di fferi ng concl usi ons can be reached by differ ent t ribunal s wi thout ei ther bei ng sus cep ble t o l egal chal l enge. The jurisdic on to stay is liabl e to be per ver ted if par es l i gate the i ssue at different l evels of the judicial hierarchy in the hope of persuading a higher court to strike a differ ent bal ance in the factors poin ng for and agai ns t a for ei gn for um.

The emergence of over 3,000 new plain ffs foll owi n g the deci sion of the first Cour t of Appeal had an obvious and significant effect on t he bal ance of the proceedi ngs . Whi l e t he par ent company responsibility issue remained very much what it had always been, the personal injury issues assumed very much greater significance. To inves gat e, prepar e and r esol ve t hese i ssues , in rela on to each of the pl ai n ffs, woul d pl ai nl y invol ve a caref ul , detai led and cumber some factual inquiry and, at least poten al ly, a ver y lar ge body of exper t evi dence. In thi s changed situa on Buckl ey J., appl yi ng the first stage of theSpi l iada t est , regarded Sout h Afr ica as clear l y the more appropriate forum for trial of the group ac on and the second Cour t of Appeal agreed. Both courts were in my view plainly correct. The enhanced significance of the per sonal injury issues pped the bal ance ver y cl ear l y in favour of Sout h Af ri ca at the first stage of the Spiliada exercise, and no effec ve cri cism ha s been made of t hat concl usion. The br unt of t he plain ff's argumen t on t hese appeal s to t he House has been dir ect ed not agai nst the deci sions of Buckley J. and the second Court of Appeal on the first stage of the Spi liada test but agai ns t their conclusion that the plain ffs had not shown t hat subs t an al j us ce would not be done i n the more appropriate South African forum. *1557 Funding

The plain ffs submi ed t hat l egal aid in South Af ri ca had been wi th drawn f or personal i njur y claims, that there was no reasonable likelihood of any lawyer or group of lawyers being able or willing to fund proceedings of this weight and complexity under the con ngency f ee arrangements permi ed in Sout h Af ri ca si nce Apr i l 1999 and that ther e wa s no ot her avai labl e source of funding open to the plain ffs. These wer e, they argued, proceedi ngs whi ch coul d not be effec vel y pr osecuted wi t hout l e gal re pr esent a on and ade quat e fundi ng. To st a y proceedings in England, where legal representa on and adequat e f undi ng are avai labl e, i n favour of the South African forum where they are not would accordingly deny the plain ffs any realis c pr ospect of pur sui ng thei r cl ai ms to tri al .

The defendant roundly challenged these asser ons . Rel iance wa s pl aced on the facts that the plain ffs had not appl i ed f or l egal aid i n Sout h Afr ica bef ore i ts wit hdr awal and had mad e no determined effor t to obt ai n fundi ng in Sout h Af ri ca. Even if legal ai d wa s no longer avai labl e in South Africa, con ngency f ee agreeme nt s we r e now permi ssi bl e and i t wa s unr eal is c to suppose that South African counsel and a or neys wo ul d be any less ready to act than Engl ish counsel and solicitors if the claims were judged to have a reasonable prospect of success. If con ngency fee ar rangeme nt s coul d not be ma de in Sout h Af ri ca because Sout h Af ri can counsel and a or neys di d not judge the cl ai ms to have a reasonabl e pr ospect of success, that di d not involve a denial of jus ce to the pl ai n ffs. I n any event t here were ot her poten al sources of assistance available to the plain ffs i n Sout h Afr ica.

The material placed before the House (and the lower courts) relevant to these issues is very extensive and cannot conveniently be summarised. The following conclusions are in my opinion to be drawn from it.

(1) The proceedings as now cons tut ed can onl y be handl ed efficientl y, cost- effec vel y and expedi ous l y on a group basi s. I t i s i mp os si bl e at thi s stage to pr edi ct wi th accur acy wh at procedural direc ons mi ght on that basi s be gi ven in fut ur e (al though the di rec ons coul d onl y relate to the conduct of proceedings in England). Obvious possibili es i nc l ude the tri al of a preliminary issue on the parent company responsibility ques on and the tri al of sel ected lead

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cases to test the outcome in differ ent factual si tua ons . It wou l d be very highl y des i rabl e, if possible, to avoid determina on of these cl ai ms on a pl ai n ff by pl ai n ff basis.

(2) The plain ff's claims rai se a seri ous l egal issue concerning t he dut y of the def endant as a parent company, and it would be necessary to decide whether that duty was governed by English or South African law. If a duty were held to exist, there would be a serious factual issue whether the defendant was in breach of it. If the plain ffs wer e success ful on t hese ques ons, the personal injury issues would have, even in the context of a group ac on, to be inves gat ed, prepared and quan fied. Thi s wou l d be a heavy and difficult t ask. I t could onl y be done by, or under the supervision of, professional lawyers. It would call for high quality expert advice and evidence, certainly on medical and industrial issues, very possibly on other issues also. I see no reason to ques on the judgme nt of a Sout h Af ri can a orney i nst ruct ed by t he def endant who swore:

“The magnitude and complexity of both the factual and legal issues will require the applica on in Sout h Af ri ca of cons i der abl e financi al resour ces and man power , if ther e is to be any reasonable prospect of addressing the plain ff's all ega ons mean i ngful ly.”

*1558 It is significant that Pr of essor Un t er hal ter , an independent exper t appr oached by the defendant, observed:

“Detailed expert evidence would be required on a number of aspects of the ma er . Without agreement between the par es as to how the issues mi ght be limi ted, I wo ul d venture no opinion as to the length and magnitude of this li ga on, save t o s ay that i t is likely to be drawn out and complex, and would almost certainly come before the Supreme Court of Appeal in due course.”

(3) A possibility must exist that the proceedings may culminate in se leme nt . The pl ai n ffs confident ly pr edi ct such an out come if they succeed on the parent comp any respons i bi lity issue. But the defendant has given no indica on that the cl ai ms wi ll not be ful ly cont ested. In the Spiliada case Staughton J. thought it right to decide the stay applica on on the assump on t hat there would be a trial, and it would seem to me wrong in principle to reject a submission that jus ce wi ll not be done in a for ei gn for um on the basi s of a specul a ve assump on t hat, i f a st ay is granted, proceedings in the foreign forum will culminate in a just se leme nt wi thout the need for a trial.

(4) In a le er dat ed 20 Sept emb er 1999 to Lei gh Day & Co. repr esen ng some of the plain ffs, the Legal Aid Board of South Africa wrote:

“It will however be of interest to you to note that on 13 September 1999 the Legal Aid Board resolved, because of the financi al cri si s faced by it, as per the a ached l e er t o the Minister of Jus ce, to excl ude from the oper a on of the l egal aid s cheme oper ated by the South African Legal Aid Board with effect from 1 Novemb er 1999 fundi ng i n respect of personal injury claims and all other claims sounding in the money.”

Other material before the House makes plain that before this decision the Legal Aid Board had experienced a period of extreme financi al stringency. Despi te sugges ons to t he cont r ary ther e is no convincing evidence to suggest that legal aid might be made available in South Africa to fund this poten al ly pr ot racted and expens i ve li ga on. Wri en submi s s i ons on behal f of the Republic of South Africa contain no hint that public funds might, excep onal ly, be ma de available to fund it.

(5) The South African Con ngency Fees Ac t (No . 66 of 1997) sanc oned a new r egi me s imil ar (although not iden cal ) to that gover ni ng condi onal fees i n t his count r y. It enabl es couns el and

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a or neys to under take wo r k for pl ai n ffs on t he basi s that i f the c l ai m is successf ul t hey wi l l receive a fee in excess of that ordinarily chargeable, and that they receive nothing if the claim fails. This regime does not apply to the fees of expert witnesses, who may not be engaged on the basis that they are paid only if the plain ff by whom t hey are cal l ed i s success ful. The defendant referred to an affidavi t swor n by very exper i enced Sout h Af r ican counsel who deposed:

“In my view, if a firm of a orneys wit h a r easonabl e i nfr ast ruct ure i s of the view t hat the claims of the present plain ffs are good, this wou l d mea n t hat the firm wo ul d be able to earn very substan al sums of mo ney by wa y of fees . At the same me, one should not lose sight of the fact that this case is likely to have a very high profile and that the plain ff's a orney( s ) wou l d be acc orded a g re at dea l of pos i ve *1559 publicity in the media. This would be a further inducement to take on a case of this nature. There is every reason to believe that there would be no shortage of firms of a or neys wh o wo ul d be des i rous of taki ng on such a case if they bel ieved that it had good prospects of success. Accordingly, if there are a or neys in Sout h Af ri ca wh o are as posi ve about the pr ospects of success as [the pl ai n ff's soli c itor] i s (as conveyed i n his affidavi t ), I feel sure t hat ther e wil l be no l ack of a orneys i n South Af ri ca prepar ed to represent these plain ffs under con ngency fee ar rangement s”

This very general asser on of bel ief by a me mb er of the Bar wa s flatl y cont r adi cted by a numbe r of other equally dis ngui shed counsel wh o pr ovi ded swo r n stat eme nt s to the pl ai n ffs, and counsel for the defendant indicated that he placed no reliance on it. More significant ly, i t received no support from any prac si ng a orney, and i t wou l d be a orneys who woul d be required, if these proceedings were undertaken for the plain ffs on a con ngency fee basi s, to finance the inves ga on of t he c l ai ms, the obtai ni ng and call i ng of evidence and t he conduct of the trial during a period which would inevitably last for months and, very much more probably, years. The clear, strong and unchallenged view of the a or neys wh o pr ovi ded stat eme nt s to the plain ffs was that no firm of Sout h Af ri can a orneys wi th exper se in t his field had t he means or would undertake the risk of conduc ng these pr oceedi ngs on a con ngency f ee bas i s. The defendant suggested that financi al suppor t and pr of essi onal assi stance mi ght be gi ven to the plain ffs by the Legal Res our ces Cent r e, but this sugges on was authori t a vely contradict ed. I n a recent affidavi t the pos s i bil ity was rai sed t hat assi stance mi g ht be f ort hcomi n g f rom t he European Union Founda on for Huma n Ri ght s in Sout h Af ri ca, but the evi dence di d not suppor t the possibility of assistance on the scale necessary to fund this li ga on.

(6) If these proceedings were stayed in favour of the more appropriate forum in South Africa the probability is that the plain ffs wou l d have no mea ns of obt aining t he pr ofess i onal representa on and the exper t evi dence wh i ch wo ul d be essen al if these cl aims wer e t o be justly decided. This would amount to a denial of jus ce. I n t he s peci al a nd unusual circumstances of these proceedings, lack of the means, in South Africa, to prosecute these claims to a conclusion provides a compelling ground, at the second stage of the Spiliada test, for refusing to stay the proceedings here.

(7) The conclusions on the funding issue reached by the second Court of Appeal did not in my opinion take account of the evidence, which did not permit the findi ng wh i ch the cour t ma de.

The plain ffs, as a ground f or chal l engi ng t he appr opr i atenes s of the Sout h Afr ican f orum, relied on the absence of established procedures in South Africa for handling group ac ons such as the present. They compared that situa on wi th the pr ocedur al si tua on her e, whe r e t he conduct of group ac ons i s gover ned by a recent ly- devel oped but now tried and establ ished framework of rules, prac ce di rec ons and subor di nat e l egi sla on. I do not r egar d thi s objec on, standi ng al one, as comp el ling. It invol ves the ki nd of pr ocedur al comp ar i son wh i ch the English court should be careful to eschew (the Spiliada case, at p. 482; the Connelly case, at

Page15

p. 872), and the evidence is clear that South African courts have inherent jurisdic on to adopt procedures appropriate to the *1560 cases they are called upon to handle. There is force in the observa ons of Pi ll L. J. [2000] 1 Lloyd's Rep. 139 , 162:

“I am en rel y unper suaded by ar gume nt s that the Sout h Af ri can Hi gh Cour t wo ul d be unable to handle these ac ons efficientl y ei ther on t he gr ound t hat t here ar e terri torial divisions within South Africa or because there is at present no procedure expressly providing for group ac ons . It is commo n ground that the law pot en all y to be appl i ed is the same throughout South Africa. In England, there has been a vast amount of li ga on by vi c ms o f asbest os dust with out r esor t to gr oup ac ons. Wheth er by a form of group ac on or ot herwi se, I have no doubt that the Hi gh Cour t of Sout h Af ri ca will be able to devise and adopt suitable procedures for the efficient despat ch of business such as this. None of the evidence or submissions on behalf of the plain ffs suggests any significant obs tacl e to that efficient despatch by t he court of cases befor e it.”

I do, however, think that the absence, as yet, of developed procedures for handling group ac ons in Sout h Af ri ca rei nf or ces the submi ssi ons ma de by the pl ai n ffs on t he f undi ng i ssue. I t is one thing to embark on and fund a heavy group ac on wh er e the pr ocedur es gover ni ng the conduct of the proceedings are known to and understood by experienced judges and prac oner s . It may be qui t e anot her whe r e t he exerci se i s novel and unt r ied. Ther e mus t then be an increased likelihood of interlocutory decisions which are conten ous , wi th the likel ihood of appeals and delay. It cannot be assumed that all judges will respond to this new procedural challenge in the same innova ve spi ri t. The exer ci se of jur i sdi c on by t he Sout h Afr ican Hig h Court through separate territorial divisions, while not a potent obstacle in itself, could contribute to delay, uncertainty and cost. The procedural novelty of these proceedings, if pursued in South Africa, must in my view act as a further disincen ve to any per son or body considering whether or not to finance the pr oceedi ngs.

Third par es

Both before Buckley J. and the second Court of Appeal it was contended by the defendant and accepted as a factorpoin ng towa rds the appr opr iat eness of the Sout h Af ri can for um that the defendant, if sued there, could make and enforce claims against third par es wh o coul d be shown to have contributed to the plain ff's condi on, wher eas i t migh t be di fficult to join such par es and enf or ce judgme nt s if the ac ons wer e pur s ued her e. The plain ffs have sought t o meet this point by ques oni ng wh et her , i n trut h, the def endant has di scl osed any pot en al claim against an iden fied t hir d par t y wit h assets or i nsurance sufficient t o meet any si gni ficant claim; by relying on Court of Appeal authority (see Holtby v. Brigham & Cowan (Hull) Ltd. [2000] 3 All E.R. 421 ) for the proposi on that a def endant i s onl y l iabl e for such pr opor on of a plain ff's damag e as he i s shown t o have caused; and by f ormal l y under t aki ng, in asbes t os (but not mesothelioma) cases, to limit their claim to compensa on f or l os s and dama ge f or asbestos-related disease to such sum as would reflect t he pr opor on of a pl ain ff's total asbestos exposure as was shown to be the defendant's responsibility. The courts below were in my judgment right to treat the third party considera on a s o ne s trengt heni ng t he appropriateness of the South African forum, but I am persuaded by the plain ff's response t hat the refusal of a stay will not expose the defendant *1561 to a significant ri sk of pr ej udi ce so long as any new claimants are admi ed to the group onl y upon thei r bi ndi ng thems el ves by the undertaking of the present plain ffs.

Ar cl e 6 of the Eur opean Conven on on Human Right s

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The plain ffs submi ed t hat t o st ay t hese pr oceedi ngs i n favour of t he South Af ri can f orum would violate the plain ff's right s guar ant eed by ar cle 6 of t he European Conven on for the Protec on of Huma n Ri ght s and Fundame nt al Freedoms (1953) (Cmd . 8969) si nce i t wo ul d, because of the lack of funding and legal representa on in Sout h Af ri ca, deny them a fai r tri al on terms of li gi ous equal ity wi th the def endant . For reasons al ready gi ven, I have conc l uded that a stay would lead to a denial of jus ce to the pl ai n ffs. Since, as t he Spiliada case [1987] A.C. 460 makes clear, a stay will not be granted where it is established by cogent evidence that the plain ff wil l not obt ain j us ce i n the f orei gn f orum, I cannot concei ve that t he court woul d gr ant a stay in any case where adequate funding and legal representa on of the pl ai n ff were judged to be necessary to the doing of jus ce and these we r e cl ear l y shown to be unavai labl e in the foreign forum although available here. I do not think ar cl e 6 suppor ts any concl us i on wh i ch is not already reached on applica on of Spiliada principles. I cannot, however, accept the view of the second Court of Appeal that it would be right to decline jurisdic on in favour of Sout h Af ri ca even if legal representa on we r e not avai labl e ther e.

Public interest

Both the plain ffs and t he def endant pl aced r el i ance on publ i c i nterest cons i der a ons as strengthening their conten ons that these pr oceedi ngs shoul d be tri ed in the for um for wh i ch they respec vel y cont ended. I agree wi th my nobl e and learned fri end, Lor d Hope of Cr ai ghead, for the reasons which he gives, that public interest considera ons not rel at ed to the pr i vat e interests of the par es and the ends of jus ce have no bear i ng on t he deci sion whi ch t he cour t has to make. Where a catastrophe has occurred in a par cul ar pl ace, the facts that nume r ous vic ms l ive i n t hat pl ace, t hat t he r el evant evi dence i s t o be f ound t her e and t hat s i te inspec ons are mo s t conveni ent ly and i nexpens i vel y car ried out ther e wi ll pr ovi de f actor s connec ng any ensui ng li ga on wi th the court exer ci si ng j urisdic on in that pl ace. These are ma er s of wh i ch the Spiliada test takes full account. It is important that the focus should remain on the principle so clearly stated by Lord Kinnear: in applying this principle ques ons of judicial amour propre and poli cal int er est or respons i bi lity have no par t to pl ay.

Ar cl e 2 of the Br us sel s Conven on

The House received and heard erudite argument on the applicability of ar cl e 2 of the Br us sel s Conven on to a case such as the pr esent . The pl ai n ffs submi e d that t he court was p recl uded by ar cl e 2 from gran ng a stay. The def endant argued t hat the j uri sdi c on of t he court to gr ant a stay in favour of a forum in a non-contrac ng s tat e wa s unaffect ed by ar cle 2. The correctness of the Court of Appeal decision in In re Harrods (Buenos Aires) Ltd. [1992] Ch. 72 was in issue. Both par es ar gued that the answe r for wh i ch they respec vel y cont ended was clearly correct. If it *1562 was not, the plain ffs i nvi ted t he House t o s eek a r ul i ng f rom t he European Court of Jus ce, a cour se wh i ch the def endant res i sted.

For reasons already given, I am unwilling to stay the plain ff's proceedi ngs i n t his count r y. It i s accordingly unnecessary to decide whether the effect of ar cle 2 i s to depr i ve t he Engl i sh cour t of jurisdic on to gr ant a stay i n a case such as thi s. Ha d i t been necessar y to resol ve that ques on, I wo ul d have thought it necessar y to seek a rul ing on the appl icabi lity on ar cle 2 f rom the European Court of Jus ce, si nce I do not cons i der the answe r to that ques on t o be c lear .

Conclusion

I would dismiss the defendant's appeal against the decision of the first Cour t of Appeal . I wo ul d

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allow the plain ff's appeal agai nst the deci sion of the s econd Cour t of Appeal and r emov e t he stay which that court upheld. The defendant must bear the costs of both appeals, and also the costs of the proceedings before Buckley J. and the second Court of Appeal.

Lord Steyn

. My Lords, I have had the advantage of reading in dra the speeches of my nobl e and learned friends, Lord Bingham of Cornhill and Lord Hope of Craighead. For the reasons they give I would also make the order which Lord Bingham of Cornhill proposes.

Lord Hoffma nn

. My Lords, I have had the advantage of reading in dra the speeches of my nobl e and learned friends, Lord Bingham of Cornhill and Lord Hope of Craighead. For the reasons they give, I would also make the order which Lord Bingham of Cornhill proposes.

Lord Hope of Craighead

. My Lords, I have had the advantage of reading in dra the speech of my nobl e and learned friend, Lord Bingham of Cornhill. I agree with it, and for the reasons which he has given I, too, would allow the claimant's appeals and dismiss the appeal by the defendant. I should however like to add some observa ons on two ma ers that wer e r ai sed i n t he cour se of the argumen t about the doctrine of forum non conveniens.

Available forum

It is clear that the decision of the first Court of Appeal [1998] C.L.C. 1559 to refuse a stay was much influenced by the vi ew wh i ch they forme d about the def endant 's submi ssi on that the South African courts were available to the plain ffs because i t had offered duri ng t he hear i ng before the judge to submit to the jurisdic on of those cour ts.

It was not suggested to the judge that there were any reasons for doub ng that thi s offer had removed the difficul t y that the def endant was not other wi s e subj ect to t he j uri sdi c on of t he South African courts as it was neither present nor had any assets in South Africa. But in the Court of Appeal it was contended that the offer wa s obj ec onabl e, for two r easons . The first was that the courts in South Africa were not available at the me wh en the pl ai n ffs brought their proceedings in England, as the defendant did not indicate its willingness to be sued in South Africa un l a er the proceedi ngs had been brought . The second was that the effect of trea ng the Sout h Af ri can cour ts as avai labl e in these ci rcums tances wa s to gi ve the def endant a choice of jurisdic on, enabl ing it to el ect for the cour t that wa s mo r e favour abl e to it and thus indulge in forum shopping. *1563 Evans L.J. did not go so far in his judgment as to say that the South African courts were not to be regarded as available in these circumstances. But he made it clear that in his opinion the fact that the South African courts were not available un l the defendant offer ed the under taki ngs, and that thei r avai labi lity rema i ned condi onal upon t hem, were factors which should be taken into account in the applica on to the case of the pr inc i pl es stated in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 . The implica on wa s that these were factors to be weighed in the balance against the defendant in the decision whether or not the ac on shoul d be stayed.

This is not a point that required to be considered in Connelly v. R.T.Z. Corpora on Pl c. [1998] A.C. 854 , and I think that counsel for the defendant was in error when he submi ed to the Court of Appeal in the present case that it could have been: [1998] C.L.C. 1559 , 1565f. In Connelly's case the two defendant companies, like the defendant in this case, were English companies which had their registered offices i n Engl and. But the bas i s upon whi ch t hey wer e being sued in England was that they were responsible, either directly in fact or vicariously in law, for defects in the health and safety arrangements at the mine which was operated in Namibia by a subsidiary of the first def endant by wh om the pl ai n ff was empl o yed whil e he was

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working there: see the issues which were iden fied i n t he Court of Appeal by Waite L.J. [1996] Q.B. 361 , 364b—d. The subsidiary, against which the plain ff had previ ous l y dir ect ed his claim at the sugges on of the first def endant , was present and avai l abl e t o be sued i n Nami b ia. It was common ground that Namibia was a forum that was available to the plain ff for his cl aim o f damages. No doubt this was on the view that for all prac cal pur poses no di s nc on was t o be drawn between the first def endant , wh i ch as my nobl e and l earned fri end, Lor d Hoffman n, observed [1998] A.C. 854 , 876g, was a mul na onal compa ny present almos t everywhe r e, and its subsidiary in Namibia.

In the present case the asbestos mines and mills in South Africa which were operated by the defendant's subsidiaries are all closed, and its subsidiaries are no longer present or available to be sued in that country. The ques on wh et her the Sout h Af ri can cour ts are avai labl e to the claimants is thus en rel y dependent upon the pr opos i on t hat the def endant i tsel f is subj ect to the jurisdic on of those cour ts. As the def endant has no pr esence in that count ry, and as it has no assets there which could be a ached to found j ur i sdi c on, the onl y ground on whi ch i ts courts could exercise jurisdic on agai ns t it is that of pr or oga on. The val i dit y of the def endant ' s undertakings is therefore cri cal to its ar gume nt that the Sout h Af ri can cour ts are avai labl e to the claimants as a forum in which their ac ons shoul d be tri ed.

The approach that is to be taken to this ques on has been exami ned in a numb er of Sco sh cases to which it may be helpful to refer, as the underlying principles which Lord Goff of Chieveley described in the Spiliada case were derived from the Sco sh aut hor i es.

In Clements v. Macaulay (1866) 4 Macph. 583 an objec on wa s taken to the jur i sdi c on of the Sco sh cour t s i n an ac on t o enfor ce a contr act enter ed i nto between t wo Amer i cans on t he plea of forum non competens. This was on the grounds that Texas where the agreement was entered into was the only proper forum for the dispute and that the Sco sh cour t was an inconvenient and improper forum. The Lord Jus ce- Cl er k, Lor d Ingl is, *1564 having concluded that the view that the courts of Texas would have jurisdic on wa s pl ai nl y unt enabl e, sai d, at p. 592:

“But then I am bound to inquire, if this is an inconvenient and incompetent forum, where is the proper forum? Apart from the sugges on of Texas, no ot her sugges on i s made, and I know no case of a plea of this kind being sustained, where the defender did not sa sfy the cour t that ther e wa s anot her cour t wh er e the cause coul d be tri ed with advantage to the par es and to the ends of jus ce. The def ender does seem t o have thought himself under obliga on to suggest wh at wa s the pr oper for um, but he has unfortunately suggested one which has no jurisdic on. ”

Lord Cowan said, at p. 594:

“Your Lordship has conclusively shown that there is no jurisdic on i n the cour ts of Texas, on the ground stated by the defender, to entertain this ac on. Wh er e, then, is the forum on which the defence is founded? When the court has given effect to such a plea, it has always been because another forum, specially referred to by the defender as that in which he undertakes to plead, has been regarded as the more convenient and preferable for securing the ends of jus ce. He r e the el eme nt s for di spos i ng of thi s defence, pleaded on this, its essen al ground, do not exi st.”

In Société du Gaz de Paris v. Société Anonyme de Naviga on “Les Ar ma t eur s Franĉai s” 1925 S.C. 332 , 347 the Lord Jus ce- Cl er k, Lor d Al ness, sai d that the resul t of the cases wa s that i t must be plain that “another forum is open to the par es . ” Hi s anal ysi s of the law wa s appr oved by Lord Dunedin, 1926 S.C. (H.L.) 13 , 18, in your Lordship's House. There is no indica on her e or in any of the other Sco sh cases that this ma er ought t o be approached on any other basi s

Page19

than that this is a requirement that must be sa sfied i n a prac cal mann er when t he ques on of forum non conveniens is being considered by the court.

In Clements v. Macaulay the defender did not offer an under taki ng to submi t to the jur i sdi c on of the Texas courts. But in Tulloch v. Williams (1846) 8 D. 657 two ac ons had been rai sed against the defender when he was on a visit to Scotland rela ng to hi s conduct wh i le ac ng as the pursuer's commissioner and a or ney in Jama i ca. He lodged wi th hi s def ences in each ac on a minute sta ng that he wa s ready and wi lling to answe r in the cour ts of Jama i ca to any wr i t or ac on that the pur suer mi ght br ing agai ns t hi m wi th ref er ence to that subj ect ma er. The Lord Ordinary said that he was not aware of any authority for taking the course desired by the defender, which was to decline to proceed with the case in the mean me l eavi ng i t to the pursuer to ins tut e pr oceedi ngs agai ns t the def ender in the cour ts of Jama i ca. In the absence of such authority he repelled the plea. But he invited the pursuer to consider the defender's offer as providing the most sa sfactor y and l east expens i ve wa y of havi ng j us ce admi n is tered between them, saying that to go on with the li ga on i n Scotl and coul d not fail to be produc ve of much delay and addi onal expense. I n the I nner House the pr ocess wa s si sted for thr ee months in the light of these observa ons to al low the pur suer an oppor tuni ty to br ing an ac on in the proper court in Jamaica. Lord President Boyle explained, at p. 659, that it was a ques on of convenience whether the case should go on in Jamaica or whether it should proceed in Scotland upon evidence of the law and custom of Jamaica.

*1565

It was not suggested in Tulloch v. Williams that the fact that the defender did not offer to submit to the jurisdic on of the cour ts of Jama i ca un l he l odged his def ences present ed any difficul t y, eit her on t he ground t hat the offer came t oo l ate or on t he gr ound t hat he ought not to be allowed to choose the jurisdic on in wh i ch he wa s to be sued. Hi s under taki ng wa s seen as the obvious solu on t o t he di fficulty that, alt hough t he most expedi ent course i n the interests of both par es wa s for the case to be deal t wi th not in Scot land but in Jama i ca, the defender was not otherwise subject to the jurisdic on of the Jama i can cour ts.

In Sim v. Robinow, 19 R. 665 the defender was sued in Scotland on the ground that he had been resident there for more than 40 days. He maintained that he was only a temporary visitor to Scotland, that he was domiciled in South Africa, that he intended to return to his business in that country and that the courts of that country were the proper forum for determining the ma er in di sput e as they rel at ed to transac ons bet wee n t he par es when t hey were both in South Africa. His plea that the Sco sh cour t s shoul d dec l i ne j uri sdi c on on t he gr ound of f orum non conveniens was repelled. Lord Kinnear, who delivered the leading judgment, said that he was not sa sfied t hat i t had been shown t hat ther e was anot her cour t i n whi ch t he ac on ought to be tried as being more convenient for all the par es and mo r e sui tabl e for the ends of jus ce. In regard to the ques on wh et her the cour ts of Sout h Af ri ca we r e avai labl e, he not ed that the defender had not offer ed the same under taki ng as wa s offered i n Tul l och v. Wil liams . All that he had said was that he intended to go to South Africa, as to which Lord Kinnear observed, at p. 669:

“I do not think that the pursuer can be asked to wait ll the def ender car ries out thi s inten on, or that he ought to be sent to a cour t wh i ch ma y be unabl e to exer ci se any jurisdic on over the def ender i n consequence of hi s con nued absence f rom S out h Africa.”

He described Tulloch v. Williams , at p. 669, as a very excep onal case and indi cat ed that i t ought not to be followed. But this was not because he thought that it was wrong for the court to proceed on the defender's undertaking to submit to the jurisdic on of the ot her cour t wh i ch he offer ed a er the ac on had been r aised. His cri cism of the decis i on in Tul loch's case was

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that the court ought not to have sisted the ac on for a shor t per iod to awa i t event s, but that it ought to have determined the ma er ei ther one wa y or the ot her ther e and then. Thi s wa s on the ground that, as he put it at p. 669:

“if this court is not a convenient forum for the trial of the cause, then the ac on ought to be dismissed, but, if this court is a convenient forum, then I can see no reason why the ac on shoul d not go on in the or di nar y wa y. ”

Under Scots procedure a decree of dismissal is a decree which is used when it is intended to decide that the par cul ar ac on s houl d not be al l owed t o proceed agai nst the def ender , but which is intended to leave it open to the pursuer to bring another ac on: Maclaren, Court of Session Prac ce (1916), p. 1093 .

In the light of these authori es I wo ul d have regarded the under taki ngs wh i ch we r e offered by the defendant in this case as sufficient to s a sfy the r equi r ement t hat t he al terna ve for um in South Africa was available because it had undertaken to submit to the jurisdic on of the cour ts of that country. Nothing turns on the me wh en the under taki ngs *1566 were given. It is sufficient that they wer e bef ore t he j udge whe n he was cons i der i ng t he ques on of f orum no n conveniens. As for the sugges on that the def endant wa s choos i ng i ts j ur i sdi c on and t hus indulging in a kind of forum shopping, this overlooks the fact that the issue as to forum non conveniens is for the court itself to resolve. It is not a ma er that i s le to t he choi ce of the defender. Furthermore the court resolves the issue by looking to the interests of all par es and the ends of jus ce. As the Lor d Jus ce-Clerk, Lord Al nes s , sai d i n Société du Gaz de Paris v. Société Anonyme de Naviga on “Les Ar ma t eur s Franĉai s” 1925 S. C. 332 , 347, it does not do so from the point of view of the defender only. The only purpose of the undertaking is to sa sfy the requirement that the other forum is available. The ground on which the jurisdic on of the courts in the other forum is available to be exercised is of no importance either one way or the other in the applica on to the case of the Spiliada principles.

Public interest

In my opinion the principles on which the doctrine of forum non conveniens rest leave no room for considera ons of publ ic i nt er est or publ ic pol icy wh i ch cannot be rel at ed to the pr i vat e interests of any of the par es or the ends of jus ce i n t he case whi ch i s bef ore t he cour t .

In Société du Gaz de Paris v. Société Anonyme de Naviga on “Les Ar ma t eur s Franĉai s” 1925 S.C. 332 , 361, where jurisdic on wa s establ ished over the def ender by an ar restme nt to found jurisdic on, Lor d Ander son rej ected the extreme argume nt that that case ought not to be li gat ed in Scot land at al l as it wa s an ac on bet wee n t wo f oreigner s . He sai d:

“Anyone who succeeds in founding jurisdic on in thi s wa y seems to me to be en tled, as of right, to invoke the exercise of the jurisdic on so founded, and the cour t can onl y refuse to exercise the jurisdic on i nvoked i f a def ence of for um non conveni ens i s established.”

In the House of Lords, 1926 S.C. (H.L.) 13 , 21 Lord Sumner was alluding to the same point when he said:

“Obviously the court cannot allege its own convenience, or the amount of its own business, or its distaste for trying ac ons wh i ch invol ve taki ng evi dence in French, as a ground for refusal… the court has to proceed un l the def ender obj ects, but , as agai ns t the pursuer's right, the defender has an equal right to plead forum non conveniens.”

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In MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , 822d, Lord Salmon said that he did not think that ma er s of gener al pol icy shoul d pl ay any part in deci di ng issues of thi s ki nd, and Lor d Keith of Kinkel made an observa on to the same effect , at p. 833d.

The proper approach therefore is to start from the proposi on that a cl ai ma nt wh o is abl e to establish jurisdic on agai ns t the def endant as of ri ght in thi s count ry is en tled t o cal l upon t he courts of this country to exercise that jurisdic on. So, i f the pl ea of for um non conveni ens cannot be sustained on the ground that the case may be tried more suitably in the other forum, in the words of Lord Kinnear in Sim v. Robinow, 19 R. 665 , 668, “for the interests of all the par es and for the ends of jus ce, ” the j uri sdi c on must be exer ci sed—how eve r desi r able it may be on grounds of public interest or public policy that the li ga on shoul d be conduct ed *1567 elsewhere and not in the English courts. On the other hand, if the interests of all par es and the ends of jus ce requi re that the ac on i n t his count r y shoul d be s tayed, a stay ought to be granted however desirable it may be on grounds of public interest or public policy that the ac on shoul d be tri ed her e.

I would therefore decline to follow those judges in the United States who would decide issues as to where a case ought to be tried on broad grounds of public policy: see Union Carbide Corpora on Gas Pl ant Di sas ter at Bhopal , Indi a in Decemb er 1984 (1986) 634 F.Supp. 842 and Piper Aircra Co. v. Reyno (1981) 454 U. S. 235 . I respec ull y agree wit h Deane J .' s observa on in Oceanic Sun Line Special Shipping Co. Inc. v. Fay (1988) 165 C.L.R. 197 , 255 that the court is not equipped to conduct the kind of inquiry and assessment of the interna onal as we l l as the domes c i mp l ica ons that wou l d be needed i f it wer e t o f oll ow t hat appr oach. Howev er temp ng i t ma y be to gi ve effect to concerns about the expense and i nconveni ence t o t he administra on of jus ce of l i ga ng ac ons such as t hese i n t his country on the one hand or i n South Africa on the other, the argument must be resolved upon an examina on of thei r effect upon the interests of the par es wh o are bef or e the cour t and secur ing the ends of jus ce i n their case. I would hold that considera ons of pol icy wh i ch cannot be deal t wi th in thi s wa y should be le out of account in the appl ica on t o t he case of the Spiliada principles.

Lord Hobhouse of Woodborough

. My Lords, for the reasons given by my noble and learned friends, Lord Bingham of Cornhill and Lord Hope of Craighead, I, too, agree with the order which Lord Bingham of Cornhill has proposed.

D. E. C. P.Representa on

Solicitors: Leigh Day & Co. ; Davies Arnold Cooper .

Page1

*600 Nima SARL v Deves Insurance Public Co Ltd.

Court of Appeal (Civil Division)

30 July 2002

[2002] EWCA Civ 1132

[2003] 1 C.L.C. 600

Po er and Keene L JJ and Sumn er J.

Judgment delivered 30 July 2002

Marine insurance—Conflict of laws —S er vi ce out of jur i sdi c on—Ph ant om s hi p—Ca r go of rice l oaded in Thailand under voyage charter—Cargo insured by Thai defendant under marine cargo policy incorpora ng Ins tute Car go Cl auses (A)—Ca r go never arr i ved at des na on—Cl ai mant obtai ned permission to serve claim form on defendant in Thailand—Whether risk ever a ached under policy—Effect of ‘wa r ehouse to wa r ehouse’ cl ause in Ins tute Car go Clauses (A)—Wh e t her seri ous issue to be tried on defendant's liability—Whether vessel was ‘phantom ship’—Whether England or Thailand appropriate forum—Marine Insurance Act 1906, s. 44.

This was an appeal by the defendant insurance company (a company incorporated and resident in Thailand) from a judgment of Andrew Smith J dismissing the defendant's applica on for an order se ng asi de t he ear l i er order of Toul son J gran ng permi ss ion t o the c l ai mant pursuant to RSC, O. 11, r. 1(1)(d)(iii) to serve the claim form on the defendant out of the jurisdic on on the basis that the contract sued upon, a marine insurance policy, was governed by English law.

The claimant (a company incorporated and resident in Mali) purchased from Central Rice Co Ltd of Thailand (‘Central’) under a CIF contract a cargo of some 5,500 tonnes of rice valued at about €1.5m shipped on a vessel bearing the name PRESTRIOKA (‘the vessel’) at Kohsichang in Thailand in March 1999 for carriage to Dakar in Senegal. The vessel was chartered by the sellers of the cargo on an amended Gencon voyage charter dated 24 February 1999. SGS inspected the vessel and cargo at loading, and shipment on board of the cargo was acknowledged by two Congen bills of lading dated Thailand 5 March 1999, naming the claimant as the no fy par ty and Dakar as the discharge port. The vessel did not in fact sail un l 28 Ma rch 1999 because she wa s undergoing engine repairs. The vessel never arrived in Dakar and no trace of her or her cargo had been found.

The cargo was insured under an all risks marine cargo policy issued in Bangkok (‘the policy’) incorpora ng the Ins tute Car go Clauses (A). The claiman t claimed f or loss of the cargo on t he basis that it resulted from a peril insured against under the terms of the policy. The policy was subject to English law and prac ce onl y as to al l ques ons of l iabi l ity. Under the pol i cy i nsurers waived any breach of the implied warranty of seaworthiness of the ship and *601 fitness of the ship to carry the subject-ma er i nsur ed to des na on, unl es s the assured or t heir servant s were privy to such unseaworthiness or unfitness.

Toulson J granted the claimant permission to issue and serve the claim form on the defendant out of the jurisdic on in Thai land. The def endant appl ied to set asi de the or der of Toul son J on the grounds that (a) there was no serious issue to be tried between the par es and (b) Thai land was the more appropriate forum for trying the claim.

The defendant first ar gued that the vessel wa s unseawo r thy. The cl ai ma nt ar gued that the car go had simply been stolen by the persons purpor ng to be the own er s of the vessel and that any loss was not caused by unseaworthiness or not caused by unseaworthiness to which the claimant was privy. The defendant contended that in that case the risk never a ached under the policy by virtue of s. 44 of the Marine Insurance Act 1906 because the ship never in fact sailed for the specified des na on. The c l ai mant argued t hat t he pr ovi s i ons and effect of s. 44 were avoided or displaced by reason of the incorpora on of the ICC and, in par cul ar, clause 8

Page2

which was a ‘warehouse to warehouse’ clause which provided for commencement of the risk before the commencement of the voyage as contemplated by s. 44.

The judge held that he could not be sure that this was a phantom vessel case and that the claimant had an arguable case, although he did not accept that the effect of s. 44 could be displaced by cl. 8 of the ICC. England was the appropriate forum because the case was liable to raise ques ons of Engl ish law and int er pr et a on. The def endant appeal ed argui ng t hat the onl y conclusion on the evidence was that this was a phantom ship case. The judge should therefore have held that by reason of s. 44 the risk never a ached and the cl ai m mu s t fai l. Ha vi ng once decided that the claimant had no real prospect of success on the s. 44 issue, the factual and eviden al cent re of gr avi ty of the di sput e wa s overwh el mi ngl y locat ed in Thai land, and that wa s the appropriate forum for the trial.

Held, allowing the appeal:

1 The Court of Appeal would admit further evidence on the phantom ship issue since it could not have been obtained with reasonable diligence for use before the judge and might be decisive.

2 The judge was right that ICC cl. 8 did not displace the provisions of s. 44. Despite the effec ve extension of the voyage insured ‘from’ the moment of sailing back to the moment of leaving the warehouse for the purposes of the a achme nt of ri sk, the over al l voyage or advent ur e assur ed was s ll pr oper l y character i sed as a voyage from A to B and, if that advent ur e wa s never in fact embarked upon, *602 the insurer would not be liable. It was clear from the authori es that where an insurer invoked s. 44, the court would conduct an ex post facto exercise to determine not simply the contractual, but the actual, des na on of the shi p at the me o f s ail i ng, whic h exercise depended upon the acts and inten ons of the own er s and/or ma ster at the me of its departure. If the court determined that, at the me of sai ling, vessel and cargo we r e in trut h bound for a terminus ad quem other than that iden fied i n t he pol i cy as defini ve of the voyage insured, then s. 44 would apply and the risk which prima facie a ached wh en the goods le the warehouse would in the event be held not to have a ached. Ther e wa s no ser ious pos si bi lity of the claimant succeeding on that issue at a trial in England or Thailand.

3 The judge was wrong that there was nonetheless a serious issue to be tried. The the wa s not realis cal ly in di sput e; the issue wa s wh et her or not it took pl ace in pur suance of a pl an on the part of the owners which existed from the outset of the voyage. All the probabili es we r e that it did. There was no triable issue that the vessel was a phantom ship and therefore, so far as the defendant's liability under the policy was concerned, there was no serious issue to be tried, in the sense that there was no real prospect of a findi ng for the cl ai ma nt at tri al .

4 On that analysis of the legal issues the judge might have changed his view on the forum issue. The connec ons of the wi tnesses and factual i ssues we r e overwh el mi ngl y Thai and the Thai courts would apply English law. The most significant pot en al obj ec on t o the case pr oceedi ng in Thailand, which was prima facie the more appropriate forum, was the availability in Thailand of a plea of limita on. The cl ai ma nt di d not act unr easonabl y in fai ling to comme nce pr ot ec ve proceedings in Thailand before expiry of the limita on per iod ther e. We r e i t not for the fact that the court had allowed the defendant's appeal, it would have stayed the proceedings on the defendant's undertaking to waive reliance on the defence of limita on in Thai land.

The following cases were referred to in the judgment:

Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50.

Compania Mari ma San Basi lio SA v Oc eanus Mu t ual Underwr i ng Ass oci a on ( Bermuda ) Ltd

Page3

(‘The Eurysthenes’) [1977] QB 49.

Ele her ia, The [1970] P 94 .

Everbright Commercial Enterprises v Axa Insurance Singapore [2001] 2 SLR 316.

George Kallis (Manufacturers) Ltd v Success Insurance Ltd [1985] 2 Lloyd's Rep 8.

Hamilton v Al Fayed [2001] EMLR 394.

Her or dshi re Investme nt s Ltd v Bubb [2000] 1 WL R 2318 .

Hewi v London Gener al Insur ance Co Ltd (1925) 23 Ll L Rep 243 . *603

Ladd v Marshall [1954] 1 WLR 1489.

Moles na v Pont on [2001] CLC 1412 .

Nam Kwong Medicines & Health Products Co Ltd v China Insurance Co Ltd [1999] 1216 HKCU 1 and 28 June 2002, Stone J.

Seaconsar (Far East) Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438.

Shell Interna onal Pet rol eum Co Ltd v Gi bbs (‘The Sal em’ ) [1982] QB 946 .

Simon Israel & Co v Sedgwick (1892) 62 LTMS 352; [1893] 1 QB 303 (CA).

Spiliada Mari me Cor p v Cansul ex Ltd [1987] AC 460 .

Swain v Hillman [2001] 1 All ER 91.

Three Rivers District Council v Bank of England (No. 3) [2001] UKHL 60.

Representa on

Graham Dunning QC and Claire Blanchard (instructed by Holman Fenwick & Willan) for the claimant/respondent.

Julian Malins QC and Simon Salzedo (instructed by Clyde & Co) for the defendant/appellant.

JUDGMENT

Po er LJ :

Introduc on

1 This is an appeal by the defendant insurance company (a company incorporated and resident

Page4

in Thailand) from the order and judgment of Andrew Smith J dated 29 November 2001 by which he dismissed the defendants' applica on for an or der se ng aside t he earl i er order of Toul son J dated 18 January 2000 gran ng permi ssi on to the cl ai ma nt s pur suant to RSC Order 11 rule 1(1)(d)(iii) to serve the claim form on the defendants out of the jurisdic on. The ground rel ied on for the grant of such permission was that the contract sued upon, a marine insurance policy, is governed by English law. Andrew Smith J refused permission to appeal. However, permission was subsequently granted by Clarke LJ on 27 December 2001.

2 The claimants (a company incorporated and resident in Mali) were purchasers from Central Rice Co Ltd of Thailand (‘Central’) under a CIF contract of a cargo of some 5,500 tonnes of rice valued at about €1.5 million shipped on a vessel bearing the name PRESTRIOKA (‘the vessel’) at Kohsichang in Thailand in March 1999 for carriage to Dakar in Senegal. The cargo was insured under an all risks marine cargo policy issued in Bangkok (‘the policy’) as follows:

‘NAME OF ASSURED: Central Rice Co. Ltd. VESSEL: PERESTRIOKA. VOYAGE: At and from Kohsichang … TO: Dakar Port in Transit … Insurance Cer ficate f or 110% o f CAF Free Out Dakar Value Covering All Risks. As per Ins tut e Cargo Cl auses (A) …’

*604 By an endorsement dated 10 March 1999 the defini on of the voyage t he subj ect of cover under the policy was amended to read:

‘From Kohsichang, Thailand to Dakar port, Senegal.’

The cargo never arrived at its des na on and has been t otal l y l ost in mys teri ous circums t ances. The claimants claim for loss of the cargo on the basis that it resulted from a peril insured against under the terms of the policy and in par cul ar under cl ause 1 of the Ins tute Car go Clauses (A) (‘ICC’) which provides inter alia that:

‘1. This insurance covers all risks of loss of or damage to the subject-ma er i nsur ed except as provided in Clauses 4, 5, 6, and 7 below.’ (None of those numbered clauses is relevant for the purposes of this appeal)

…

5.2 The Underwriters waive any breach of the implied warranty of seaworthiness of the ship and fitness of the shi p to car ry the Subj ect-ma er Insured t o des na on, unless the Assured or their servants are privy to such unseaworthiness or unfitness. ’

It was an express term of the policy that:

‘Notwithstanding anything contained herein or a ached her et o to the cont rar y, i t i s understood and agreed that this insurance is subject to English law and prac ce onl y as to all ques ons of l iabi lity for and se lemen t of any and al l claims ari sing under this Policy.’

I shall refer below to certain further clauses of the ICC which are relevant to the argument on this appeal.

The background

3 The following are the material facts so far as known when the ma er wa s bef or e the judge, as summarised by him.

4 The vessel was chartered by the sellers of the cargo on an amended Gencon voyage charter

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dated 24 February 1999. SGS inspected the vessel and cargo at loading, and shipment on board of the cargo was acknowledged by two Congen bills of lading dated Thailand 5 March 1999, naming the claimants as the no fied par t y and Dak ar as the dis char ge por t . The vessel did not in fact sail un l 28 Ma rch 1999 because she wa s under goi ng engi ne repai rs.

5 The normal passage me to Dakar is 32–35 days. Thus , the vessel shoul d have ar ri ved in the ordinary course at the beginning of May 1999. Faxed communica ons *605 concerning the progress of the vessel were received by the agents on paper bearing the le er head of ‘Prestrioka Mari me Ltd (Penang Repr esent a ve Offic e)’ and si gned by ‘Eddy’ of that office who stated that the owners were in touch with the vessel on a daily basis. On 22 April 1999, they advised she had been delayed owing to her speed and on 24 April 1999 gave an ETA at Dakar of 20/21 May 1999. On 13 May, the owners advised that the vessel would be in Dakar within 15/16 days, her main engine problem resul ng in an unf avour abl e speed. On 20 Ma y 1999 the owners advised that the vessel had not been heard from for seven days. The last message from the owners was received on 24 May 1999 repor ng the vessel 's pos i on as at 22 May and sta ng that the vessel 's ma i n engi nes had fai led. It con nued:

‘Vessel were dri ing sout hwa rd about for ty- four mi les a day due to strong wi nd rough to very rough sea she also rolling/pitching heavily some me . Shi p' s engi neer s are trying to have damaged parts repairs and es ma t ed anot her four -five days mor e. Radi o equipment have also problem and very difficul t to s end/ r ecei ve mes sages.

We will regularly keep you informed and we regret for this unexpected circumstance.’

6 The vessel never arrived in Dakar and no trace of her or her cargo has been found. All that is known with certainty is that the cargo was loaded on the vessel at the load port but did not arrive at the discharge port. On the face of it, therefore, the cargo was totally lost in circumstances prima facie covered by the all risks policy.

7 The claimants claimed for its loss under the policy on 19 May 1999. A er inves ga on, t he defendants declined liability on 17 August 1999 on the sole ground that the vessel was unseaworthy. The defendants ini al ly i ndi cat ed i n cor respondence that they wo ul d appoi nt solicitors to accept service within the jurisdic on. Howe ver , the def endant s then equi vocat ed. On 18 January 2000 Toulson J granted the claimants permission to issue and serve the claim form on the defendants out of the jurisdic on in Thai land wh er e ser vi ce wa s bel at edl y effect ed a er the docume nt s had been transmi ed t hrough diploma c channel s on 16 J uly 2001.

8 On 17 August 2001 the defendants applied to set aside the order of Toulson J on the grounds that (a) there was no serious issue to be tried between the par es and (b) Thai land wa s the more appropriate forum for trying the claim.

9 The principle point taken under ground (a) was one which was largely taken upon the basis of the claimants' own evidence in support of the applica on to ser ve out . In the wi tness stat eme nt of Mr Blows, the claimants' solicitor, dated 5 January 2001 under the heading ‘The Circumstances of Loss’, having set out the history of the loading aboard, and the voyage of, the vessel, he stated as follows: *606

‘22. In July 1999 my firm' s Par i s office was i nstr ucted by t he c l ai mant s in rela on to thi s ma er . I am i nf orme d by Ms Bor ssan of that office and bel i eve that she sought t o make enquiries in rela on to the car go, i n par cul ar, the m. v . PRESTRI OKA. Those enquiries have yielded the following informa on. From docume nt s suppl ied to the claimants by ICL Trading Co Ltd on 2 April 1999, it appeared that the vessel was registered in Honduras [p. 87]. Ms Borssan tells me, and I believe her, that she has endeavoured to make enquiries of the Honduras Registry in rela on to the vessel but they have repeatedly failed to respond, the company which purports to own the vessel, Prestrioka Mari me Co Ltd, appear s f rom t he char ter par ty [ p. 68] t o be

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Malaysian company. However, I am informed by Ms Borssan and believe that she asked my firm' s Si ngapor e office to make enqui r i es i n rela on to the company ; t heir response, having instructed local lawyers, was that no record of it could be found at the Malaysian Companies Registries [p. 88]. Ms Borssan thus informs me, and I believe, that it has proved impossible to find any recor d of the vessel or her own er s. I al so a ach a copy of a fax from the same local emp l oyer s, confirmin g t hat the vessel is not registered in Malaysia [p. 89].

23. In the light of the above, I consider it likely that the Claimants has been the vic m of a fraud by the shipowners, or by persons purpor ng to be the shi pown er s. It ma y be that the vessel on which the cargo was loaded was not the mv PRESTRIOKA at all, but some vessel purpor ng to be that vessel . But i t appear s wh at ever be the det ai led circumstances of loss, that the cargo has been stolen. I a ach a f ax f rom t he ICC-Interna onal Ma r i me Bu r eau confirming t ha t t he per son i nv ol ved i n the ‘PRESTRIOKA’ has disappeared [p. 90]’.

10 The le er exhi bi ted stat ed:

‘We came across [Prestrioka Mari me Ltd] wh i lst inves ga ng an unconnect ed ma e r .

Mr Eddy Ng or a person with this false iden ty wa s invol ved in a case wh er e the vessel has gone missing with the cargo. At that me the addr ess used by Eddy Ng wa s — Room 1, 2nd Floor, Wisma Boon San Tong, 49B, Wield Quay, Penang, 10300. Our inves gat or vi si ted thi s addr ess in Ma y 1999. Mr Eddy Ng had rent ed thi s room for a short period and had moved on. Our inves gat or found some faxes rel a ng t o MV PRESTRIOKA at that address.

MV PRESTRIOKA has all the hallmarks of a phantom vessel. She is not actually registered in Honduras. We have been unable to locate Eddy Ng.’

It appears that a ‘phantom’ ship or vessel is a term used within the Interna onal Ma r i me Bureau to describe a vessel which has no valid classifica on, is not regi stered wi t h any recognised ship registry and is usually operated by criminals. It is *607 employed as a vehicle for fraud on cargo owners, the modus operandi being that, as part of a pre-arranged scheme to which the owners and/or master are party, shortly a er leavi ng the por t of shi pme nt os tens i bl y bound for the port to which the vessel's cargo is contracted to be delivered, delays en route are reported during which the phantom vessel in fact proceeds to a new loca on to di scharge her cargo and achieve her disappearance, usually by assuming a new iden ty. Phant om shi p frauds are a phenomenon well known in Far East shipping circles: see for instance Everbright Commercial Enterprises v Axa Insurance Singapore [2001] 2 SLR 316 and Nam Kwong Medicines & Health Products Co Ltd v China Insurance Co Ltd, High Court of Hong Kong. The la er case is reported at [1999] 1216 HKCU 1 in rela on to an int er locut or y appl ica on. A t ranscri pt of the substan ve deci si on of Stone J at first inst ance on 28 J une 2002 has also been provi ded t o us.

11 The case advanced by the claimants was summarised in this way:

‘First, and as set out above, I believe it likely that the cargo had simply been stolen by persons purpor ng to be the own er s of the mv PRESTRI OKA. If that be ri ght , any los s was not caused by the unseaworthiness of the mv PRESTRIOKA (or of the vessel which purported to be that vessel). Secondly, even if the loss was caused by the unseaworthiness of the vessel, there is no reason to suppose that the Claimant or, for that ma er , Cent ral , wa s pr i vy to such unseawo r thi ness. ’

In those circumstances, while maintaining their defence that the vessel was unseaworthy at the

Page7

me of sai ling, the def endant s cont ended that it wa s pl ai n from the evi dence bef or e the cour t that the risk under the policy never a ached by vi rtue of s. 44 of the Marine Insurance Act 1906 which provides:

‘Where the des na on i s speci fied i n the poli cy, and t he ship, i nstead of s ail i ng f or t hat des na on, sai l s for any other des na on, t he ri sk does not a ach. ’

12 The defendants relied before the judge upon a number of ma er s ma de cl ear by the evidence before him as establishing that the claimants had indeed been the vic ms of a ‘phantom ship’ fraud. They were as follows. Despite inves ga on by As s oci ated Mar i ne Surveyors (Thailand) Ltd (‘AMS’) and lawyers for the defendants and by English and Far East lawyers for the claimants, no record of a vessel called PRESTRIOKA nor any record of a company called ‘Prestrioka Mari me Ltd’ has been found i n any regi ster or ot her official source. The single document available in the name of the PRESTRIOKA which the owners provided to the agents for the vessel was in the form of a provisional registry cer ficate of Hondur as i n whi ch the place of issue and the address of the owner had not been stated. However, the vessel is not in fact registered in Honduras and the form used was out of date. Prestrioka Mari me Ltd gave an address in Malaysia on the charterparty but the company was not registered in Malaysia and the address given was simply a room rented by Mr Eddy *608 Ng for a short period in which was discovered, a er he had vacat ed, some faxes rel a ng t o t he PRESTRI OKA. The I CC had reported that Mr Ng was involved in another case in which the vessel had disappeared with its cargo, also being inves gat ed by the ICC. Pr estrioka Ma r i me Ltd had given i ntermi ent r epor t s of the progress of the vessel un l 20 Ma y 1999. Ther ea er al l mes sages had ceased and no report was made to cargo interests as to what had happened to the vessel. The vessel had since disappeared without any record of a casualty being reported or found. The claimants had themselves reached the conclusion that the cargo was stolen by the owners of the vessel. The defendants argued that since the claimants had never suggested that they considered any other explana on for the los s to be pl aus i bl e, or that it int ended to car ry out fur ther inves ga ons, there was no real prospect that the trial judge could reach any other conclusion than that suggested by the Interna onal Ma r i me Bur eau i .e. that the vessel was a ‘ phant om s hi p’ whi ch was never intended by its owners and/or master to be sailed to Dakar, but rather to ‘disappear’ at sea. There was therefore no good arguable case or real issue to be tried.

13 In response, the claimants did not advance any posi ve case beyond that deposed to by Mr Blows. Their posi on wa s as set out in the second wi tness stat eme nt of Mi ss Tayl or , Mr Bl ows ' assistant, who stated:

‘16. The claimant does not and does not need to advance a posi ve case that the car go was stolen by the vessel owners. S ll less does the cl ai ma nt need to advance a case that such a the took pl ace pur suant to a pl ot deci ded upon as the vessel le the l oad port. The claimant's case is as appears in the Par cul ar s of Cl ai m, name l y that the los s was by insured perils …

17. Mr Melbourne asserts that it is ‘plain’ that the vessel never intended to sail for the contractual discharge port … On the basis of the present factual informa on and the uncertainty as to the actual cause of the loss, this is not a conclusion which can be reached with any confidence. These ma ers are proper l y i nves gated at t rial .

18. The ship le the load por t os tens i bl y for Dakar and di d not ar ri ve. It is, ther ef or e, and must be for the Defendant to show that, at the me of sai ling, the shi pown er s di d not intend to go to Dakar if the s. 44 point is to be relied on. Further, the Defendant needs to discharge that burden to the high standards required in the context of an allega on of crimi nal ac vity i n a ci vil case. The Cour t is i nvi ted t o find t hat t he Defendant has not done so.’

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14 So far as ground (b), the issue of ‘forum conveniens’, was concerned, the defendants relied upon the fact that, despite its subsequent assignment to the claimants (who are a company registered in Mali), the contract on which the ac on wa s based wa s ma de in Thai land betwe en two Thai en es for the i nsurance of a cargo whi ch was l ying i n a Thai por t . It was cont ended that despite the fact that the *609 policy provided that it should be subject to English law and prac ce onl y, the cont rac ng par es woul d natural l y have contempl a t ed Thai j uris dic on in the event of a dispute. It was asserted that all the factual issues in the case concerning the loading and inspec on of the car go, the sai ling of the vessel , its stat e of repai r and the ci rcums tances surrounding its u lisa on, sai l ing and di s appear ance wou l d be mor e conveni ent l y t r ied i n Thailand than in England and reliance was placed upon the concession of Mr Blows in his affidavi t that ‘the bul k of evi dence may have t o be obt ained f rom T hai l and’ .

15 For the claimants, it was argued that the provisions and effect of s. 44 were avoided or displaced by reason of the incorpora on of the ICC and, i n par cul ar, cl ause 8 whi ch, in t he sec on headed ‘Dur a on’ , and accompa ni ed by a side- not e ‘ Transi t Clause’ provi des :

‘8.1 This insurance a aches from the me t he goods l eave t he war ehouse or place of storage at the place named herein for the commencement of the transit, con nues during the ordinary course of transit and terminates either

8.1.1 On delivery to the Consignees or other final wa rehouse or pl ace of stor age at the des na on named her ein,

8.1.2 On delivery or any other warehouse or place of storage, whether prior to or at the des na on named her ein, whi ch t he Ass ured elect to use eit her

8.2.1 For storage other than in the ordinary course of transit or

8.1.3 For alloca on or di stribu on,

or

8.1.4 On the expiry of 60 days a er comp l e on of dis char ge …

whichever shall first occur …’

It is not necessary to quote the remainder of clause 8, nor clause 9. However, clause 10, described by a side heading as a ‘Change of Voyage Clause’; provided as follows:

‘10. Where, a er a achmen t of this i nsurance, the des na on is changed by the Assured, held covered at a premium and on condi ons to be ar ranged subj ect to prompt no ce bei ng gi ven to the Underwr i ter s. ’

16 The claimants' argument before the judge, put shortly, was that, clause 8 was a ‘warehouse to warehouse’ clause which clearly provided for commencement of the risk at a me ear l ier and/or differ ent from that cont emp l at ed by s. 44 (i.e. the *610 commencement of the voyage). Thus, clause 8 takes precedence over and/or avoids the applica on of s.44 so that the ‘All Risks’ cover, having a ached at the poi nt wh en the goods le the war ehouse f or the comme n cemen t of the transit, it could not become ‘una ached’ upon the vessel sai ling for anot her des na on. Second, the claimants submi ed that , they havi ng establ ished the l os s of the car go i nsur ed under an all risks policy, the burden lay upon the defendants to show loss by a cause for which they were not liable, and the reliance upon Mr Blow's recogni on of the likel ihood of a fraud by the shipowners (see paragraph 9 above) was not sufficient for the pur pose. Even i f the defendants were correct in their asser on that , despi te the wa rehouse to wa rehouse cl ause, s. 44 was poten al ly appl icabl e by wa y of def ence, the bur den rema i ned upon the def endant s to

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demonstrate that the shipowners and/or Master had intended that the vessel should sail for a differ ent des na on prior to the start of the voyage; otherwise the requirements of s. 44 would not be made out. Thus, so far as the defendants' reliance on s. 44 was concerned, the claimants contended that there were plainly issues of fact and law to be tried which could not be resolved by the judge.

17 In rela on t o f or um conveni ens , t he cl ai ma nt s cont ended t hat Engl and wa s t he mo s t appropriate forum in that the English court was obviously a preferable forum to decide the various issues of marine insurance law which arose in the proceedings, not least because the points taken on the proper construc on of the Marine Insurance Act and the ICC were not yet authorita vel y det ermi ned. In any event , it wa s uncer tai n how far the Thai cour ts wo ul d respect and apply the par es ' choi ce of Engl ish law. Fur ther , as wa s not in di sput e, the cl ai m in Thai land would be me - bar red under a two - year me l i mit comme n ci ng wi t h t he dat e of loss . The claimants also pointed out that, while a number of poten al wi tnesses we r e locat ed in Thai land, others were not and, in any event, overseas witnesses could give evidence by video link where their oral evidence was required. Further, so far as the documents relevant to the case were concerned, the vast majority were in English (a few in French) and would need to be translated if the case were tried in Thailand. There would also be considerable work involved in transla on of the expert reports and cases relied on in rela on to Engl ish l aw as we l l as the need for interpreta on of E ngl ish l awy er s' e vi dence. S o f ar a s r el evant s ur veyor s' r epor ts we r e concerned they were in English rather than in Thai.

The judgment of Andrew Smith J

18 Andrew Smith J stated that he found both the ques on wh et her the cl ai ma nt s had shown a sufficient l y strong case t o j us fy servi ce of proceedi ngs i n Thai l and and whet her t hey had shown that England was the appropriate forum ‘finel y bal anced’ . He ref er red to Seaconsar v Bank Markazi [1994] 1 AC 438 and in par cul ar the obs er va on of Lord Goff of Chievel ey t hat i n rela on to the me r i ts of an appl ica on t o s erve out s ide t he j uri sdi c on, t he c l ai mant s must show ‘a serious issue to be tried’ in respect of each cause of ac on f or wh i ch he seeks permission. He proceeded for the purposes of his decision upon the acceptance of the par es of the correctness of *611 the statement of Colman J in Moles na & Or s v Pont on & Or s [2001] CLC 1412 to the effect that :

‘Applica on of the over ridi ng obj ec ve may , in t his field, as i n the appl i ca on of CPR 3.4(2) and 24.2 , involve a slight qualifica on t o Lord Goff' s test of a seri ous i ssue t o be tried: that is to say, if the law is in issue, and there is no serious issue to be tried in rela on to any concei vabl y rel evant fact, ther e ma y, in some cases , be good reason to determine the ques on of law at the appl ica on s tage and decl i ne permis si on t o s erve out, rather than imposing upon a foreign defendants the inconvenience and expense of applying to strike out the claim under CPR3.4(2) or 24.2.’

19 The judge referred to the defendants' ‘strong argument’ that the loss resulted from the of the cargo pursuant to a scheme to steal formed by the me that the shi p sai led. He then tur ned to the merits of the legal argument as to the poten al appl ica on of s. 44 in the light of clause 8 of the ICC which I have summarised above.

20 So far as the effect of s. 44 in isola on wa s concer ned, the judge rel ied on the obi ter di cta of Lord Denning MR in Shell Interna onal Pet rol eum Co Ltd v Gi bbs (‘The Sal em’ ) [1982] QB 946 at 985, a case in which a cargo of oil loaded in Kuwait and ostensibly bound for Italy was diverted to South Africa in breach of an embargo on oils supplies to that country pursuant to a fraudulent plan hatched before the vessel sailed from Kuwait. The principal issue related to whether the cargo was the subject of a ‘taking at sea’ and s. 44 of the Marine Insurance Act

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1906 was not relied on. However, in the course of his judgment, Lord Denning said as follows:

‘In this case “the des na on speci fied i n the poli cy” was Nort h Europe. That was t he des na on speci fied as t he pl ace to whic h the cargo was t o be carri ed.

On the facts as I see them, instead of “sailing for” that des na on, the shi p “sai l ed f or” Durban. As soon as she moved off from Mi na al Ahma di (Kuwa i t) her Ma ster int ended to take her to Durban and discharge the oil there. Durban was the place to which the shipowners and the Master intended to carry the oil and deliver it there.

… Shell never relied on the “held covered” clause and never gave no ce of i t to the underwriters. They did this for tac cal r easons — because t hey di d not wa nt t o concede that the vessel ever sailed for Durban. Their case was that she sailed for North Europe and a erwa rds changed cour se for Dur ban. If they had conceded that she had sailed for Durban, they would have been defeated by sec on 44. ’

21 In considering the effect of the ‘wa rehouse to wa rehouse’ pr ovi si on in ICC cl ause 8 the judge observed that, while it was not necessary for him final ly to *612 determine the point, he found it ‘very difficul t ’ to i nterpret clause 8 r ead wit h c lauses 9 and 10 as displ aci ng t he provi sion of s. 44. In this respect he referred to a passage in Arnould's Law of Marine Insurance and Average (16th ed) vol. III at para 253 in rela on to cl ause 8. 1 to the effect that :

‘The risk will not a ach, even i f the goods l eave the wa rehouse f or the i nt ended des na on, if they do not proceed on “the t ransi t” cont empl ated by the pol i cy. If the insured venture is for carriage in a named vessel, and the goods are never appropriated by a contract of carriage to the insured voyage but are shipped by some other vessel, the policy will not a ach; nei ther the openi ng paragraph of the Tr ans i t clause nor clause 8.3 can avail the assured in such circumstances (no ques on of transshipment or devia on or of the exer ci se of any liber ty gr ant ed to the shi pown er can arise).’

22 In rela on to that pr opos i on a f oot not e i n Arnoul d c ites the deci sions i n Simon Israel & Co v Sedgwick [1893] 1 QB 303 and Kallis (Manufacturers) Ltd v Success Insurance Ltd [1985] 2 Lloyd's Rep 8. Having referred to those authori es , t he j udge apparent ly accept ed t hei r cogency, because he observed:

‘Miss Blanchard has not persuaded me that there is anything in the submission that s. 44 is displaced which should lead me to the view that her clients have a real prospect of success on the claim.

I must therefore turn to the ques on wh et her on the evi dence bef or e me I can be sufficient l y confident as t o how t h e l oss came a bout t o deci de t hat t here i s no r eal prospect of succeeding … if I conclude that it is fanciful to suppose that the loss occurred any way other than that which the defendant suggests, the claimants would not sa sfy me that they have a sufficient case. ’

23 Having reviewed the evidence upon that ques on and the ma ny suspi ci ous and unexpl ai ned circumstances surrounding the origins, registra on, own er shi p and oper a on of the vessel , the judge stated his conclusion as follows:

‘Of course, the difficul t y of traci ng t he vessel and t he owne r compa ny i s suspi c ious . It may well be that the trial judge here or in Thailand will have more informa on than I have. It may be that, when the ma er come s to tri al , ther e wi ll be evi dence from or about the company shown on the Memorandum of Agreement of the sale of the vessel

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as the seller to PML. It may be that enquiries about the crew list, which is in evidence before me, will provide more informa on to suppor t, or go towa rds answe r ing the defendants’ conten ons . But I have reached the concl us i on that it wo ul d be wr ong to allow the suspicions which inevitably are raised by the material put before me by the defendants to drive me to the conclusion that this a “phantom vessel” case, and any other conten on stands no reasonabl e pr ospect of success, or real pr ospect of success, or that there is no serious issue to be tried.

*613 I add that, even if the absence of registra on and the di fficulty in tr acing t he vessel and the company cast doubt (as it appears to do so) on the bona fide of those opera ng the vessel i n some gener al wa y, Mi ss Bl anchard [for the cl ai ma nt s] ri ght ly points out that it does not necessarily follow that they were not intending to deliver the cargo or to sail for Dakar when the vessel le por t.’

24 Certain subsidiary issues were raised before the judge, none of which affected the ma i n ques on of wh et her , i n the l ight of the ‘ phant om vessel ’ def ence rai sed, the cl ai ma nt s had failed to show an arguable case. First, the defendants argued that if the vessel was not a phantom ship as they contended, then her loss was probably for reasons of unseaworthiness resul ng from the di fficul es exper i enced wi t h her main engine bef or e s ai l i ng, which del ayed her departure. Counsel for the defendants submi ed that , si nce bot h the or i gi nal assur ed and the claimants knew of those difficul es i t was probabl e that t hey had been pr i vy to such unseaworthiness on sailing. The judge rightly rejected the leap of reasoning involved in that proposi on and ther ef or e concl uded that , so far as the def endant s' submi ssi on of ‘no ar guabl e case’ was concerned, all turned upon the s. 44 point. Second, the claimants themselves raised a ques on wh et her or not the pol icy cont ai ned an endor seme nt i ncor por a ng an ‘ I ns tutes Classifica on Clause’ the t erms of whi ch mig ht give r ise t o a def ence on t he par t of the i nsurers and themselves provided evidence to show that it was not in fact incorporated. Third, the judge men oned the pos si bi lity (barel y rai sed or di scus sed) of an issue of wh et her s. 45 of the Marine Insurance Act 1906 applied or whether it was disapplied by clause 10 of the ICC. However, we have been informed on this appeal that neither party now considers that such an issue arises on the facts of the case. Finally, there was a likely issue as to the right of the claimants to recover as damages certain financi ng charges as we l l as thei r cl ai m for or di nar y int er est.

25 Following his decision on ‘arguable case’ as quoted in paragraph 22 above, the judge turned to the ques on of for um. He star ted by cons i der ing the si gni ficance of the f act that the claim was governed by English law, observing that that ma er wa s not necessar i ly det ermi na ve of the appropriate forum: see Amin Rasheed Shipping Corpora on v Kuwa i t Insur ance Co [1984] AC 50. In par cul ar , he obser ved t hat t her e wa s no agreeme nt as t o j ur i sdi c on. Hav i ng reviewed the evidence as to the law and prac ce of Thai land so far as a cl ai m of thi s ki nd wa s concerned he found that the claimants had not shown, that there was any real likelihood that a Thai court would not apply English law if the case were tried in Thailand other than in respect of limita on. He tur ned to cons i der the ques on of Engl i sh l aw a nd cons t ruc on whic h ar ose for considera on obser vi ng that thi s wa s an issue of cent ral imp or tance because, gi ven that in any case

‘it is an inconvenience and expense for par es to have to adduce Engl ish law thr ough expert evidence in a foreign court, the number and complexity of the ques ons determines the weight to be given to this considera on. ’

*614

26 Turning to the ques ons (i) wh et her the effect of s. 44 is displaced by the clause 8 ICC and (ii) whether the effect of s. 44 applies to a ‘phantom vessel’ case, he said:

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‘With regard to the first, thi s is ul mat ely a ques on of t he i nter pr et a on of speci fic contractual provisions rather than an intricate ques on of Engl ish law. Howe ver , i t i s an obvious advantage that an English court should interpret a document wri en i n English and governed by the law of England. Although I have already stated a view on this point and in doing so indicated that it does not seem to me a par cul ar ly di fficult ques on, never thel ess it is a live ques on of cent r al impo r t ance t o t he disput e.

With regard to the second ques on — wh et her s. 44 appl ies in such ci rcums tances — it does not seem to me that there is any cogent basis for dispu ng wh at wa s sai d by Lor d Denning [in The Salem at 985–986] and Miss Blanchard has advanced no argument which I regard as cas ng any doubt upon the cor rectness of hi s obser va on. ’

27 The judge then adverted to the subsidiary issues which I have men oned at paragraph 23 above. He said:

‘… Mr Salzedo leaves open the ques on as to wh et her Cent ral 's knowl edge or pr i vi ty to unseaworthiness is relevant … there is possibly a ques on as to wh et her s. 45 of the Marine Insurance Act applies in this case and whether it has been disclosed by clause 10 … there is a possible ques on as to the incor por a on of the classi fica on cl ause … Moreover, Miss Blanchard … observed that the claim is not confined to the val ue of the lost cargo and suggests that might raise an issue between the par es . Mr Sal zedo has not suggested otherwise. It remains to be seen whether or not that is an issue.

I emphasise that I recognise at least four ques ons , or some of them, mi ght we l l not be live issues. But Miss Blanchard's submissions on this point sa sfy me that ther e i s a realis c pr ospect of ques ons about Engl i sh l aw, such as these f our , ari sing at trial, which have not been the subject of submissions on the ques ons cons i der ed …

I conclude, on this part of my considera on of the case, that , al though the var ious ques ons of Engl ish l aw t o wh i ch I have r ef er red are not par cul arl y obs cure, undeniably this case is liable to raise ques ons of Engl ish law and int er pr et a on of an English document, and there is obvious advantage in an English court dealing with such ques ons . ’

28 Having considered and rejected two further arguments raised by the claimants, the judge concluded: *615

‘Thirdly, [Miss Blanchard] refers to the documents, observing that both of them are in English, a few in French, and none (so far as the evidence before me goes) is in Thai. It is likely, Mr Salzedo accepts, that some will need to be translated if the case is heard in Thailand. This is a considera on of some imp or tance, in my mi nd. If docume nt s are to be translated, not only is there an obvious ques on of expense and inconveni ence, but also, inherently, a risk of misunderstanding or lack of clarity in transla on. ’

29 The judge then considered and accepted the argument of the defendants that the factual enquiry would be about Thailand, and that the evidence would have to be obtained in Thailand, to which Thai witnesses would speak. He also accepted that the insurers, sellers, shippers, shippers' agents, and the repairers and surveyors, who repaired and inspected the vessel before loading, were all Thai corpora ons and that the shi pown er s (wh o wo ul d cl ear l y not be avai labl e to the par es) we r e repr esent ed by Thai agent s. He obser ved:

‘These are, I acknowledge, powerful points. But, the witnesses who have thus far been iden fied, it i s fair to s ay that ther e i s no i ndi ca on t han any does not speak Engl i sh. Nor is there any sugges on that any of the wi tnesses wo ul d be unwi lling to gi ve

Page13

evidence by way of a statement, or unwilling to come to England, if necessary. Moreover, the problems of transport and witnesses having to come to England are the less in view of the increasing custom of this court to receive evidence by video link. The nature of the evidence likely to be given in this case is not such … that it would be unsuitable or inappropriate to receive the evidence by video link.

There is a further point which seems to me of some significance. As I have obser ved. The surveyors wrote their report in English, and so did Captain Duarte. Insofar as their evidence is in dispute (and the significance of the need for them to a end at trial supposes that it will be) it is realis c t o suppose t hat a s i gni ficant pat of thei r cross-examina on wi ll be by ref er ence to thei r repor ts. Ther e are di fficul es in a witnesses being cross-examined in one language about the consistency of his evidence with a report wri en in anot her language.

It seems to me, therefore, that, while I accept that a number of witnesses are in Thailand and would have to give evidence at an English trial either by travelling to this country or, more realis cal ly, by vi deo link, the di fficul es do not s eem t o me as great as Mr Salzedo submi ed. I have not over looked the inher ent connec on of this pol i cy with Thailand, but Miss Blanchard rightly observes that it is in the nature of the policy of this kind that it has something of an interna onal flavour , and t hat i t i s to be expected that such polices will be assigned. Indeed, claims are payable under this policy not in Thailand, but in Senegal.

*616 I have already stated that I consider this a finel y bal anced ques on, but , in t he end, I have concluded that the claimants have shown that England is the appropriate forum, and done so with the necessary clarity in accordance with the guidance given by Lord Goff.’

30 Finally, the judge indicated that he considered it unnecessary to determine a further ques on ar gued betwe en the par es, namel y whe t her , if he had acceded t o t he def endant s ' applica ons , he shoul d onl y have done so on the basi s of a requi reme nt that they under take not to rely upon the limita on per iod in Thai land. The def endant s al though wi lling if necessar y to offer such under taki ng, submi ed t hat they shoul d not be r equi r ed t o do s o because t he claimants had acted unreasonably in not bringing protec ve pr oceedi ngs in Thai land (see the guidance provided in The Spiliada at [1987] AC 483E–484E). In this connec on the judge stat ed:

‘it was apparent before the expiry of the Thai me limi t of two year s that ther e wa s a real possibility of a jurisdic on poi nt ar i si ng, and the def endant s had ma de it cl ear in correspondence that they might well be taking a point that ma er shoul d be tri ed in Thailand and not in this country.

For my part, I need say [no] more than that I have not been convinced that it was a reasonable course not to issue protec ve pr oceedi ngs i n t hese c i rcums tances . Certainly, I do not consider that solicitors can be confident t hat , i f pr ot ec ve proceedings are not brought in comparable circumstances, the court would necessarily require an undertaking from the defendants that it would not take a me limi t poi nt in a foreign court if a similar case were to come before this court.’

The judge le the ma er ther e.

The defendants' grounds of appeal

31 The defendants' grounds of appeal may be shortly stated. (i) It is said that the judge was right

Page14

when he held that, if the cause of the loss was that the owners of the vessel operated a ‘phantom vessel’ fraud at the expense of the claimants and never intended to deliver the cargo to Dakar before she sailed, then by reason of s. 44 the risks never a ached and the cl ai m mu s t fail. However, it is complained that he was wrong to hold that he could not be sa sfied t o t he requisite standard (i.e. ‘no real prospect’ of a contrary findi ng at tri al ) that the cause of the los s was a ‘phantom vessel’ fraud, the evidence of such fraud being overwhelming. Reliance is placed upon the fact that evidence of such fraud was originally put forward by the claimants, presumably before they appreciated the s. 44 point, and that the claimants never suggested that any further or contrary evidence was being sought or likely to emerge at trial. (ii) As to forum conveniens, it is said that the judge erred in giving weight to the poten al issues of law which he iden fied as requi r ing r esol u on; he shoul d have *617 given effect to hi s vi ew that none of them had any serious likelihood of causing difficul es f or any court trying t he ac on and, in par cul ar , that wh at he iden fied as ‘ the essen al ques on’ in the ac on ( i .e. the s. 44/clause 8 issue) was an issue of law on which he had rightly indicated that the claimants had no real prospect of success. Since that was so, and since the judge had rightly found that the factual and eviden al cent re of gr avi ty of the di sput e wa s overwh el mi ngl y locat ed in Thai land, he should have found that Thailand was the appropriate forum for the trial.

The claimants' conten ons

32 In suppor ng the judgme nt of Andr ew Smi th J, the cl ai ma nt s do not accept that the judge formally decided the s. 44/clause 8 argument against them, so that his decision as to ‘arguable case’ rested solely upon his doubt as to whether, on the facts, a s. 44 defence existed. Mr Dunning points out that, despite the judge's expression of view favourable to the defendants (see paragraphs 20–21 above), when dealing with forum conveniens he treated it as ‘a live ques on of cent ral imp or tance to the di sput e’ (see par agraph 24 above) . Shoul d the cour t take a contrary view, Mr Dunning sought permission to appeal against the judge's decision on that point. We indicated that he was at liberty to argue it in any event.

33 Mr Dunning's argument may also be shortly stated. It is that clause 8 of the ICC provides that the risk a aches wh en the car go l eaves the wa rehouse. That bei ng so, i t does not cease to a ach wh en the vessel sai ls. The r i sks encount er ed once the car go l eaves the wa rehouse include the by the own er s in wh at ever ma nner . Mr Dunni ng poses the ques on ‘ Wha t i f the cargo had been stolen by a third party en route for the warehouse?’ He answers it by saying that the loss would plainly be covered. He submits that the posi on can be no di fferent i f the shipowner is the thief. As to the issue whether the defendants have sufficient l y est abl i shed t hat the cause of the loss was a ‘phantom vessel’ fraud, he emphasises, as is not disputed, that the claimants having established the loss as a fortuity prima facie within the All Risks policy, the burden of proof lies upon the defendants and that the judge cannot be faulted for trea ng the ma er as one of strong suspi ci on onl y, f al ling shor t of t he necessar y l evel of pr oof ( see paragraph 23 above).

34 So far as the ques on of for um i s concer ned, the cl ai ma nt s suppor t the reasoni ng of the judge and assert that the factors which he took into account and the balancing exercise which he conducted were a proper exercise of his discre on. Mr Dunni ng remi nds the cour t of the observa ons of Lor d Temp l ema n in The Spi liada at [1987] 1 AC 465F that :

‘… the resolu on of di sput es about the rel a ve mer i ts of trial in Engl and and t rial abroad is pre-eminently a ma er for the tri al judge. Comme r ci al Cour t judges are ver y experienced in these ma er s. In near ly ever y case evi dence is on affidavi t by wi tn esses of acknowledged probity. I hope that in future the judge will be *618 allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff in thi s in the qui et of hi s room wi thout expense to the par es; that he wil l

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not be referred to other decisions on other facts; and that submissions will be measured in hours and not days. An appeal should be rare and the appellate court should be slow to interfere.’

35 In addi on, Mr Dunni ng advances the fol lowi ng reasons , not expr essl y rel ied upon by the judge, as to why the judgment should be upheld. Again, we permi ed hi m to advance these reasons without the need for a respondent's no ce.

(1) The case involves points arising under the Marine Insurance Act 1906 to which the English court can be relied on to apply its own law more reliably than a foreign court as ‘a ma er of common sense’: see The Ele her ia [1970] P 94 at 104.

(2) The policy provides that it shall be subject to English law and prac ce onl y, thus expr essl y excluding reference to any other law or prac ce (e. g. as to cl ai m se lemen t ) . Consequent l y England is the natural forum in which to hear a dispute under the contract. In this connec on it is to be noted that the policy is not exclusively connected with Thailand in that it expressly makes claims payable in Dakar and provides that no ce of cl ai m mu s t be gi ven to, and a summary report provided by, a firm of sur veyor s in Dakar .

(3) It was common ground between the experts that the Thai court will not apply English law if to do so would be contrary to public order and good morals. It is not known what issues may develop in rela on to wh i ch thi s rul e mi ght be appl icabl e. Howe ver , ther e i s no di sput e between the experts that the Thai court would apply its own me bar to the cl ai m.

(4) Not all of the witnesses likely to be involved appear to be resident in Thailand. For instance the claimants' general manager, Mr Ba who witnessed the vessel for part of the loading opera on is res i dent in Ma l i. If fur ther wi tnesses from the crew avai labl e by the me of trial, they are unlikely to be Thai: see the statement of Mr Aung referred to at paragraph 39 below.

(5) It is not clear where the true centre of gravity of the case is to be found. In serving their costs schedule below, the defendants included a claim for me spent a endi ng on Engl i sh reinsurers who may well be the persons effec vel y pul l ing t he s trings i n t he l i ga on.

(6) Mr Dunning submits that the effect of the Thai law evi dence bel ow wa s, cont rar y to the findi ng of the j udge, that the Thai cour t coul d not be rel ied on to appl y Engl ish l aw. The claimant applies for permission to cross-appeal the judge's findi ng in thi s regard on the basi s that, so far as forum is concerned, the claimant ought not to be forced to li gat e i n a jurisdic on wh er e ther e is doubt as to wh et her it wi ll appl y the par es' cont r act ual choi ce of law.

*619

Fresh evidence

36 In findi ng as he di d upon the ‘phant om vessel ’i ssue, the judge comme nt ed upon the hel p which he might have derived from evidence which in fact he lacked in rela on to (a) the sea and weather condi ons affec ng t he voyage of t he vessel when l ast hear d of i n mi d- May 1999 ( b) evidence from or about Min Yang Shipping, the company which appeared to have sold the vessel (then named the ‘Nikoula’) to Prestrioka Mari me Ltd and (c) evi dence der i ved from the crew list placed before the court. The defendants accordingly went off to seek such evi dence and they apply to adduce the evidence they have obtained on this appeal. As to (a) they seek to adduce a report from Professor Roger Mo e, a me t eor ol ogi cal exper t (exhi bi ted to the thi rd witness statement of Mr Melbourne) which it is submi ed s hows t hat t he pur por ted

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informa on from the vessel wa s not a true descrip on of the wea t her and sea condi ons at t he me , wh i ch we r e in fact good. As to (b) they seek to adduce hear say evi dence of a conver sa on between Sarawak correspondents of the defendants' solicitor's Singapore office and Mr Ting ( a director of Min Yang) and Mr Lau (its former auditor). It is said of Mr Ting that he was ‘unhelpful and evasive’ and of Mr Lau that he could find no docume nt s rel evant to the sal e of the vessel in December 1998 and said that he could not further assist.

37 As to (c), the posi on is as fol lows . By hi s first statemen t of 5 Mar ch 2002 Mr Mel bour ne stated that, so far as he was aware, no crew list for the vessel on the relevant voyage (as opposed to its previous voyage) was available to the par es in the case. Howe ver , by a four th statement of 20 March 2002, Mr Melbourne exhibited two e-mails dated 8 and 19 March 2002 respec vel y from the def endant s' Thai lawy er s, sent wi thout pr ior wa rni ng, wh i ch set out the substance of informa on jus t recei ved from Capt ai n Duar te, wi th wh om those lawy er s we r e in contact in rela on to hi s par t i n super vi si ng repai rs to the vessel bef or e she sai led. Capt ai n Duarte stated that evidence was available from Mr Aung, a former member of the crew of the vessel whose name appeared in the crew list which had been in evidence before the judge. He had been recruited to the crew by Captain Duarte at the request of the ship's agents at Kohsichang and was in a posi on to gi ve evi dence as to the event s of the voyage.

38 The status of the e-mails as evidence was no more than a compila on of hear say upon hearsay which failed properly to dis ngui sh betwe en such evi dence as Mr Aung coul d gi ve, Captain Duarte's interpreta on of i t, and hear say evi dence and/or specul a on avai l abl e f rom Captain Duarte himself. However, in the course of the appeal before us, a statement signed by Mr Aung has been placed before us which it was agreed cons tut es the cont ent of hi s evi dence to which we should have regard, should we decide to admit it.

39 The statement of Mr Aung, who is himself Burmese, is to the effect that , havi ng been recruited to the crew by Captain Duarte when the vessel was under repair, he remained aboard as one of a crew of 17 when she sailed on 28 March under an Indian *620 captain called Ray. The crew was made up of three na onal i es, Indi an, Burmes e and I ndones i an. Mr Aung l ear ned from Indian crew members (who were mostly officers) that the vessel was to go t o I ndi a t o unload. A need for further repairs developed and the vessel berthed at Port Keng near the Malacca Strait. During repairs, another vessel, the M.V. Mariner berthed alongside. Mr Aung learned that it was headed for Burma to unload its cargo. A er fur ther br eakdown and repai rs in its onward journey, the vessel reached India and berthed about 50 miles from Bombay Port, where the Captain was replaced and the vessel subsequently sailed to Dubai. At that me , Mr Aung learned from Indian crew members that there was no consignee for the goods in India and thus the vessel must travel somewhere else. The engine again failed and the vessel was towed to Dubai, arriving in July 1999 where it unloaded alongside the M.V. Mariner which had already berthed there. Mr Aung also stated that the PRESTRIOKA changed its name en route in the Indian Ocean and that he was informed by the Captain that the vessel was to be destroyed following unloading. He said that the voyage condi ons we r e reasonabl y good thr oughout and there had been no storms.

40 The defendants, in making their applica on to adduce fur ther evi dence, and the cl ai ma nt s in resis ng it, have recogni sed the aut hor i ty of the obser va on of Lord Phi l lips MR i n Hami l ton v Al Fayed [2001] EMLR 394 to the effect that , wh en cons i der ing wh et her speci al grounds have been demonstrated for the admission of further evidence, the court is no longer in the strait-jacket of previous authority, although the old cases remain powerful persuasive authority as illustra ng the a emp t s of the cour ts to stri ke a fai r bal ance betwe en the need for concl uded li ga on t o be determina ve of di sput es and the des i rabi lity that the judi ci al pr ocess shoul d achi eve the right results, such task being in accordance with the overriding objec ve: see the gui dance to be found in the judgment of Hale LJ in Her or dshi re Investme nt s v Bubb [2000] 1 WL R 2318 at 2325E–H. Having referred to the familiar three-fold test for introducing fresh evidence on

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appeal as propounded in Ladd v Marshall [1954] 1 WLR 1489 at 1491 by Denning LJ, the Master of the Rolls stated:

‘13. These principles have been followed by the Court of Appeal for nearly half a century and are in no way in conflict wi th the over ridi ng obj ec ve. In par cular i t wi ll not normally be in the interests of jus ce to re- open a concl uded tri al i n or der to introduce fresh evidence unless that evidence will probably influence the resul t.

…

40. The principles established by pre-CPR authori es , wh i ch we have cons i der ed above do not have to be slavishly followed. They are to be applied insofar as they advance the overriding objec ve of the CPR. The cri cal ques on i s wha t is requi r ed t o deal just l y with the case.’

*621

41 Mr Dunning QC for the claimants acknowledges that we are not here dealing with the case of a concluded trial. However, he objects to the admission of the evidence on the general ground that the defendants could, and ought reasonably to, have obtained the evidence if they wished to rely upon it for the purposes of the jurisdic on appl ica on. He submi t s that the t rue pos i on is that, having had ample opportunity to present such evidence as they saw fit bef or e the judge and having lost on the basis that such evidence was inadequate, the defendants are now seeking to have an impermissible second bite at the cherry. He complains that the analysis of weather condi ons comp i led by Pr of essor Mo e, though prepar ed i n Febr uar y 2002 was not produced to the claimants un l 7 Ma rch 2002 and poi nt s out that var ious voyage cal cul a ons i n it were based on an erroneous assump on that the vessel 's voyage comme nced on 4 Ma rch and not 28 March 1999 as was the case. Mr Dunning also complains that the report did not comply with the requirements of the Prac ce Di rec on i n r ela on t o expert evidence; i t contai ns no statement of the Professor's material instruc ons , or that he had under stood hi s dut y to the court.

42 In rela on to the evi dence of Mr Aung, Mr Dunni ng obj ects that hi s stat eme nt is unt ested and raises more ques ons than it answe r s (see fur ther at paragraph 61 bel ow) .

43 For the defendants, Mr Malins QC accepted that before the judge the defendants had proceeded on the basis that the evidence which I have recounted at paragraph 12 above would be sufficient to gi ve r i se t o t he concl usi on r ather than t he suspi c ion t hat the vessel was a phantom vessel used as an instrument of fraud. Having obtained leave to appeal the judge's contrary decision, the defendants thought it appropriate to seek to obtain evidence in those areas which the judge indicated might have enabled him to come to a posi ve concl us i on. Mr Malins accepted that evidence along the lines of the report of Professor Mo e coul d have been obtained earlier. Similarly, the previous owners of the Nikoula/PRESTRIOKA could have been approached if it had been considered they might give evidence of assistance. However, in rela on to the evi dence of Mr Aung, Mr Ma l ins submi ed t hat (as mad e clear in t he wit nes s statement of Mr Melbourne) such evidence could not reasonably have been obtained earlier. Neither the addresses of, nor any informa on rel a ng t o, the membe r s of the crew wer e known to the defendants; it was only upon Captain Duarte having recently seen Mr Aung and informed the defendants' lawyers of his availability, that his evidence became known to the defendants. Indeed, Mr Aung had been at sea un l 14 Apr i l 2002.

44 In my opinion the further evidence should be admi ed upon the hear ing of thi s appeal . So far as the first condi on l aid down i n Ladd v Marshall is concerned, it seems clear to me that the most significant evi dence, that of Mr Aung, coul d not have been obt ai ned wi th reasonabl e diligence for use before the judge, for the reasons explained by the defendants. The same cannot be said of the report of Professor Mo e or the conver sa ons wi t h t he di r ect or and

Page18

auditor of Min Yang. Nonetheless, they *622 have now been obtained as part of a corpus of evidence which the judge said he would have valued when considering what conclusion to reach. In the case of the Min Yang evidence, it furnishes no informa on of subs tance. Howe ver , its value lies in demonstra ng that no evi dence hel pf ul to ei ther si de is likel y to be avai labl e at trial from that quarter.

45 As to the second condi on in Ladd v Marshall, I am sa sfied t hat , if taken i nto account , the evidence would have had an important influence on the resul t of the case bef or e the judge, because he indicated the nicely balanced state of his mind in rela on to the ‘phant om shi p’ evidence, and his desire in this connec on for evi dence of the ki nd now ma de avai labl e. As I read his judgment and, in par cul ar , the passage quot ed at paragraph 23 above, and on my own view of the overall effect of the evi dence as now augme nt ed, the j udge wo ul d have been sa sfied t hat the claiman t s had i ndeed been t he vic ms o f a ‘phant om sh ip’ f raud ( s ee f urther below). As to the third condi on in Ladd v Marshall, the evidence of Professor Mo e and Mr Aung seems to me apparently credible in rela on to the ma ers for whi ch i t i s rel i ed on, whe n considered with various ma er s al ready in evi dence bef or e the judge (see paragraph 12 above and paragraphs 60–62 below). I acknowledge the force of Mr Dunning's ‘second bite of the cherry’ argument in a case of this kind. In the context of an appeal on jurisdic on, the ref usal to admit further evidence is not ordinarily apt to do las ng or final injus ce to a defendant whos e applica on is ref used, because he is not ther eby depr i ved of an oppor tuni ty to rel y on the new evidence at a later stage in the proceedings. However, if the admission of the new evidence is sufficient to mak e clear that , in t ruth, the cl aiman t s have no good arguabl e case agai nst the defendants, then it is wrong that foreign defendants should be brought to this jurisdic on against their will, simply as par es to a cont ract wh i ch (al bei t gover ned by Engl ish law) cont ai ns no jurisdic on cl ause. Thi s seems to me to be al l the mo r e the case if the evi dence is such that , if required to contest the ac on her e, the def endant s wo ul d imme di at el y be in a pos i on t o seek summary relief under CPR 24.2(a)(i); c.f. the observa on of Col ma n J quot ed at paragraph 18 above, with which I agree. I consider that to be the case here, and that to admit the evidence upon this appeal is consistent with the overriding objec ve.

Sec on 44 and ICC cl aus e 8

46 I consider the judge was right in the view he expressed on what he described as the central issue of importance before him.

47 It is common ground that the policy in this case is a ‘voyage policy’ as defined in s. 25 of the 1906 Act, the contract being one ‘to insure the subject ma er [the car go] … from one pl ace [Kohsichang] to another [Dakar]’. Nor is it in dispute that by rule 2 of the ‘Rules for the Construc on of Pol icy’ in the First Schedule to the 1906 Act, save where the context otherwise requires: *623

‘Where the subject ma er is insur ed “f rom” a par cul ar place, the r isk does not a ach un l the shi p star ts on the voyage assur ed. ’

48 That said, however, it seems to me plain that since the policy incorporates a warehouse to warehouse clause, in this case ICC clause 8, which provides that:

‘The insurance a aches f rom the me t he goods l eave t he war ehouse or pl ace of storage’

the context does otherwise require in any case where the voyage assured takes place. However, the provision as to the a achme nt of r i sk does not di vest t he pol icy of i ts character or classifica on as a mar i ne i nsurance pol i cy on t he one hand or, mor e par cular ly, a voyage poli cy

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on the other. As to the first cl assi fica on, s. 2(1) of the 1906 Act makes clear that:

‘A contract of marine insurance may, by its express terms … be extended so as to protect the assured against losses on … any land risk which may be incidental to any sea voyage.’

The modern warehouse to warehouse ‘Transit’ clause exemplified by cl ause 8 i n the var ious forms of Ins tut e Cargo Cl auses (A) (B) and (C) affords the l eadi ng exampl e of such ext ens i on. However, it does not alter the fundamental nature of the marine insurance policy as being a policy covering the interests of the assured in a marine adventure which is defined in the case of a voyage policy (as opposed to a me pol icy) by its two ma r ine termi ni : see Ar noul d vol 1 para 461. This transit clause is headed ‘Dura on’ . I t oper at es on the assump on t hat the i nsured adventure takes place and on that basis addresses the ques on of the comme nceme nt and termina on of the ri sk. As to the second cl assi fica on, i t has l ong been accepted t hat, i n the case of a voyage policy (i.e. ‘a policy to insure the subject ma er “at and from” or from one place to another’: s. 25):

‘If the substance of the policy is the mari me ri sk … the character of the pr el imi nar y conveyance before the ship is reached must be determined by that of the voyage on which the goods were actually shipped, and that the goods must, un l shi pme nt , be taken to have started for the voyage for which they were a erwa rds in fact shipped …’ (my italics)

per Wright J in the Simon Israel case at first ins tance (1892) 62 LTMS 352 at 353–4.

49 That case involved a voyage policy ‘at or from the Mersey or London to any port in Portugal or Spain … including all risks whatever from the me of leavi ng the wa rehouse in the Un i ted Kingdom, and all risks of every kind un l saf el y del iver ed at the wa rehouse of the cons i gnee’ . The consignors United Kingdom warehouse was in Bradford. At the me of the cons i gnor ' s declara on of goods t o be shi pped f or *624 Seville and their dispatch from Bradford to Liverpool for that purpose, he believed and intended that the goods would go by ship to Seville and that belief con nued un l a er t he vessel on whic h the goods were shipped had sai l ed. Following loss of the vessel with the goods aboard it was discovered that her voyage was not to Seville or any port within the range permi ed under the insur ance. Wr ight J stat ed:

‘… I think that in substance this is a marine insurance from the Thames or Mersey to a port on the west coast of Spain. Terminal risks, including risks of land transit in Spain, are included, but the substance of the risk undertaken appears to me to be the voyage as above described, and the other risks are undertaken only as supplementary to that … The ship so far as these goods are concerned, sailed on a differ ent voyage, and one for which the assured had no right under the policy to ‘declare’ them.’

50 That decision was upheld without qualifica on or cri cism i n the Cour t of Appeal .

Bowen LJ stated:

‘We all know by this me the gener al hi stor y of the extens i on of the pr ot ec on whi ch the policy provides for the goods by the enumera on of r i sks sl ight ly out si de the transit. It has been by slow growth that risks outside the sea journey have been swept, so to speak, within the shelter of the policy. But in construing the whole of the obliga ons and pr ot ec ons whi ch t he pol i cy creat es, you mus t first get dis nctly in your mind the defini on of the voyage, and t hen appl y the defini on of the voyage t o the enumera on of the ri sks. In the pr esent case the goods star ted from Br adf or d, and it has been contended that the moment they started from Bradford they were upon

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the insured voyage. If the goods had started for the insured voyage it seems to me that the risk during the me that they we r e betwe en Br adf or d and Li ver pool wo ul d have been covered as incidental to and supplementary to the insured voyage. But we have here a conclusive fact that the goods never started upon the insured voyage. Accordingly the risk between Bradford and Liverpool never could be incidental or supplementary to it. It is not necessary to decide what would have been the case supposing the goods, a er havi ng been speci fical l y appr opr i ated by a cont r act of carriage to the insured voyage, had been injured or lost during the transit between Bradford and Liverpool. It is not necessary to decide that case. In this case the facts here show conclusively that the goods were never specifical ly appr opr iat ed to the insured voyage, because the person who had the control of the goods — the person who had the power of fixi ng the voyage on wh i ch the goods the goods we r e ul mat ely to go — fixed the voyage out si de the pol icy; and if that is so, the pol icy never a ached …’

*625 A L Smith LJ said:

‘The defence is, that the goods never were upon the voyage insured, and so were never covered by the policy — in other words that the policy never a ached … as I read this policy, when you once get the goods upon the voyage in ques on, then the risk which the underwriter undertakes is the risk from the warehouse to the ship in this country, during the voyage, and from the ship to the warehouse in the other country. But unless you get the goods started upon or allocated by contract, as Bowen LJ said — and I adopt that phrase — to the insured voyage, in my judgment this policy does not a ach. I t i s sai d t hat t hi s pol icy a ached no ma er on what voyage t he goods ul ma t el y mi ght go, imme di at el y they star ted from Br adf or d. I do not read the pol icy in that way at all. Un l you get the goods upon the cont emp l at ed voyage, i n my judgment this policy does not a ach, and it is a mi stake to say that thi s pol icy is at and from Bradford to the west coast of Spain. It is at and from the Mersey to the west coast of Spain; and when you get the goods upon that voyage, then it is that the risk a aches to the goods between Bradford and the Mersey.’

51 In Kallis Manufacturers v Success Insurance [1985] 2 Lloyd's Rep 8, the Judicial Commi ee of the Privy Council, observing that the decision in the Simon Israel case was the founda on of s. 44 of the 1906 Act (see also Chalmers, The Marine Insurance Act 1906 (1st ed) 1907 pp 61–62), applied and approved its reasoning in a case where, although onboard bills of lading (the only contract of affrei ght me nt to wh i ch the buyer s we r e par es) stated t hat the goods wer e on board the Ta Shun for carriage to Limassol, they were in fact shipped on a differ ent vessel and were lost en route. Having quoted with approval from the words of Bowen LJ which I have set out at paragraph 48 above, Lord Diplock stated:

‘Here the goods were never “appropriated by a contract of carriage for the insured voyage”, to use Lord Jus ce Bowe n' s wo r ds , si nce the insur ed voyage wa s, as al ready stated, from Hong Kong to Limassol under a shipped onboard bill of lading on Ta Shun. The opening paragraph of the warehouse to warehouse clause does not therefore help the appellants.’

52 Mr Dunning has sought to argue that those decisions are in fact of assistance to him. He places reliance upon the observa ons of Bowe n LJ that , on the facts of the Simon Israel case ‘the goods were never specifical ly appr opr iat ed t o t he i nsur ed voyage’ ( c. p. A L Smi th LJ ‘allocated by contract … to the insured voyage’). He points out that these were the words

Page21

emphasised by Lord Diplock in the George Kallis case. He argues that the ques on of wh et her the insured voyage has commenced must be considered at the point when the goods leave the warehouse and not at the later stage of sailing. Provided that the goods are appropriated or allocated by the consignor to the insured voyage when they leave the warehouse and/or there is no inten on at that stage on the par t of the cons i gnor for the goods to go anywh er e ot her than on the *626 insured voyage, the risk a aches . Mr Dunni ng encapsul at ed thi s submi ssi on by saying: the ques on i s: we r e the ri ght ar rangeme nt s ma de, not wh et her the car go in fact went on the right voyage. In this case, he submits, all the evidence is to the effect that the goods did leave the warehouse to go on the insured voyage and that they were appropriated to the insured voyage when they le the wa rehouse and/or at lat est wh en they we r e loaded on board the vessel iden fied i n t he pol i cy. Whe n t hat occurr ed, the ‘ all risks’ pol i cy i ncept ed.

53 I do not accept that argument. I consider that it is the plain import of the judgment in the Simon Israel case that, despite the effec ve ext ens i on of the voyage i nsured ‘ from’ the momen t of sailing back to the moment of leaving the warehouse for the purposes of the a achme nt of risk, the overall voyage or adventure assured is s ll pr oper l y character i sed as a voyage from A to B and, if that adventure is never in fact embarked upon, the insurer will not be liable. I do not accept Mr Dunning's argument that, if the goods have been appropriated by the hand and act of an innocent seller or shipper to carriage in the vessel named in the policy which he believes and intends will occur, that is sufficient to avoi d t he effect of s. 44 if the vessel in fact sails on a differ ent voyage. I cons i der that it is cl ear from the aut hor i es that whe r e an i nsurer invokes s. 44, the court will conduct an ex post facto exercise to determine not simply the contractual, but the actual, des na on of the shi p at the me o f s ail i ng, whic h exer ci se depends upon t he acts and inten ons of the own er s and/or ma ster at the me of its depar t ure.

54 If the court determines that, at the me of sai ling, vessel and cargo we r e in trut h bound for a terminus ad quem other than that iden fied i n t he pol i cy as defini ve of the voyage i nsured, then s. 44 will apply and the risk which prima facie a ached wh en the goods le the war ehouse will in the event be held not to have a ached. The pos i on i s to be cont r ast ed wit h t hat whe r e the prior inten on is me r el y to devi at e. In that event , pr ovi ded the termi nus ad quem rema i ns unaltered, the policy will a ach; howe ver , at the poi nt wh en devi a on occurs (wit hout lawf u l excuse) the insurer will be discharged from liability: see Hewi v London Gener al Insur ance Co Ltd (1925) 23 Ll L Rep 243 and s. 46 of the 1906 Act.

55 Academic texts dealing with the effects of a ‘wa rehouse to wa rehouse’ cl ause appear to bear this out, albeit they do not consider the point in any detail: see the passage in Arnould referred to by the judge and quoted at paragraph 20 above. Although that passage deals with a voyage on a vessel other than that named in the policy, the named port of des na on i s equal l y an essen al ingredi ent of the defini on of t he voyage contempl a t ed by t he poli cy. See al so I vamy: Marine Insurance (4th ed) p.117 where it is stated without qualifica on t hat :

‘As in the case of policies on ship, the risk will not a ach i f the vessel on wh i ch the goods are loaded sails from a port not specified in the pol icy or sai ls for a di fferent des na on. ’

*627 See also: Thomas: The Modern Law of Marine Insurance, 1996:

‘A modern cargo policy, incorpora ng the Trans i t cl ause (cl ause 8) i n wh i ch the two specified termi ni happen to be por ts wi ll mo s t pr obabl y … fal l wi thi n sec on 43 and 44.’

56 The ques on posed by Mr Dunni ng as to the pos i on i n r espect of goods l ost or stolen en route between the warehouse and the ship's rail, raises an interes ng pr obl em me n oned by Bowen LJ but le unr esol ved in the Simon Israel case. It may be that the short answer in such a

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case is that, since the vessel has not in fact sailed for another des na on at the me o f t he l oss or the , s. 44 has no applica on and the ri sk wh i ch pr ima faci e a aches to t he goods on l eavi ng the warehouse should not be subject to ex post facto invalida on as a resul t of an event (i.e. the commencement of the voyage) which has not occurred at the me of the los s. Howe ver , i t i s not necessary to answer the problem posed for the purposes of a decision in this case and I say no more upon that topic. I would uphold the views expressed by Andrew Smith J upon the s. 44/clause 8 issue and proceed on the basis that it should not be regarded as a live legal issue in any future proceedings, whether here or in Thailand.

57 Thus, the ques on become s wh et her the judge' s vi ew that ther e wa s nonet hel ess a ser ious issue to be tried is sustainable on the facts, taking into account the further evidence now available, bearing in mind that it has not been the subject of cross-examina on and, gi ven that , in the light of its late produc on, the cl ai ma nt s have had no chance thems el ves to pr oduce evidence to answer it.

A phantom ship?

58 The judge rightly took the view that mere suspicion, or even strong suspicion, that the vessel was a ‘phantom ship’ was insufficient to demon s t rate t hat ther e was no t riabl e i ssue. The burden of proof at trial lay upon the defendants under the policy and, in deciding whether the claimants had established a serious issue to be tried, the judge was faced with deciding whether, at the preliminary stage of an applica on to set asi de, the evi dence bef or e hi m wa s so cogent as to sa sfy hi m that the def endant s we r e bound to succeed on the basi s of a conc l us i on to be drawn by way of inference from limited facts. In such cases, it is both unusual and imprac cabl e for the cour t to seek to form a vi ew on the me r i ts. In the or di nar y wa y, it shoul d refrain from doing so. This is because, if the jurisdic on of the cour t i s es tabl ished and i t i s clearly the appropriate forum for the dispute, the resolu on of the me r i ts of the di sput e is a ma er for the tri al pr ocess at a lat er stage. Nonet hel ess, in the cour se of appl yi ng to ser ve out of the jurisdic on, a cl ai ma nt is or di nar i ly obl iged, at least in out l ine, to appr i se the cour t of the relevant background of ma er s of wh i ch he i s awa re wh i ch go to the gener al me r i ts of the ac on, to say br iefly how t he case i s put , and t o mak e r eference t o t he nat ure of any def ence likely to be advanced. If in the course of doing so he or (upon applica on to set asi de) the defendant, demonstrates the virtual certainty of *628 defeat for the claimant by reason of the facts and circumstances which the court is sa sfied wil l be est abl i shed at trial, then i t i s open t o the court to hold that the claimant has failed to demonstrate a serious issue to be tried for the purpose of the exercise of the court's discre on.

59 In this respect, the judge was content to proceed on the basis that he must be sufficient l y confident as to how the los s came about to deci de ther e wa s ‘no real pr ospect of succeedi ng’ . He equated this with concluding that ‘it is fanciful to suppose that the loss occurred in any way other’ than a pre-conceived plan to proceed to a port other than Dakar in order to discharge the cargo (c.f. Swain v Hillman [2001] 1 All ER 91 at 92 per Lord Woolf MR, considering CPR 24.2). I am content to proceed on the basis that the ‘fanciful’ test was appropriate to the facts of this case, because neither party has submi ed the cont rar y. Mr Ma l ins has submi ed t hat , whe t her or not the judge was correct in his view on the evidence before him, the addi onal evi dence now available would have been sufficient to p the s cal es i n the defendant s' favour and t hat this court is now in a posi on to take the vi ew that it wo ul d be fanci ful to suppose that the los s occurred in any other way. I consider that Mr Malins is correct. On the basis of the posi on as summarised by the defendants before the judge (see paragraph 12 above), I consider the case was one, not merely of suspicion, but of very strong suspicion and Mr Dunning has not sought to argue otherwise. In my view, faced at trial with the evidence now available, the court would be able to reach only one conclusion as to the cause of loss, namely a fraud by the shipowners or by persons purpor ng to be the shi pown er s (see paragraph 23 of Mr Bl ows ' affidavi t quot ed

Page23

at paragraph 9 above), the PRESTRIOKA bearing the hallmarks of a ‘phantom vessel’ des ned before departure for disappearance and/or destruc on havi ng car ried i ts car go to a por t far from that an ci pat ed by the car go own er s. I t i s pl ai n that wh at i nhi bi ted the j udge from a decision to that effect wa s the pauci ty of ‘hard’ evi dence at wh at wa s a pr el imi nar y stage of proceedings before him, in par cul ar the l ack of evi dence on the thr ee aspects wh i ch he men oned mi ght become avai labl e to the judge at tri al . Such evi dence, assumi ng its rel iabi lity, is now available.

60 Taken at face value at least, the evidence of Professor Mo e confirmed t he l i kel y bogus nature of the final me ssage recei ved from the vessel wi th its repor t of strong wi nds and rough to very rough seas. The evidence as to the lack of co-opera on and avai labl e inf orma on f rom the previous owners of the PRESTRIOKA indicates that no further useful informa on wi ll be available, or at least forthcoming, from them at trial. Above all, however, the evidence of Mr Aung appears clearly to indicate that the vessel in fact set out in order to discharge its cargo in India rather than Dakar and that, having failed to do so, sailed for Dubai a er a fur ther name change, discharging its cargo there. Mr Aung's evidence is of par cul ar imp or tance because (if correct) it demonstrates not only what happened to the vessel, being the account of a crew member now returned from the voyage in ques on, but that the me ssages repor ted to have been sent by the vessel and relayed on by Mr Eddy Ng on *629 behalf of the owners were also bogus. The fact that Mr Aung was informed that the vessel was proceeding to India to discharge final ly remo ves any sugges on ( in my view f ar- fetched f rom t he out set) that the t he migh t have been the product of a spontaneous plan to steal, conceived only a er the vessel had sailed, rather than being the execu on of a pr e- concei ved pl an by own er s of an unr egi ster ed vessel opera ng f rom a bogus addr ess vi a an i ndi vi dual known to the I nt er na onal Mar i ne Bureau to have been involved in another ‘phantom vessel’ case. The ques on ther ef or e ar i ses whether it is safe or proper to rely on the further statement of Mr Aung, untested by cross-examina on, to resol ve the doubt s fel t by the judge as a resul t of the gaps in the ear l ier evidence. It seems to me that it is.

61 Having failed as a result of their own inves ga on t o come t o any conc l usi on other than t hat expressed by Mr Blows, the posi on of the cl ai ma nt s has from the out set been, and con nued before us to be, that set out in the second witness statement of Miss Taylor quoted at paragraph 13 above. Mr Dunning has, in my view, been unable to assert any persuasive grounds on which the ma er s spoken to by Mr Aung shoul d be di sbel ieved. Hi s appr oach has simp l y been to say that the statement raises more ques ons than it answe r s. Fi rst, he poi nt s out that it appears from Mr Aung's passport that, during the relevant period, he was only admi ed to Thailand on 14 March 1999, whereas he speaks of being introduced to Captain Duarte as a prospec ve me mb er of the vessel 's crew in January 1999 and that he assi sted in repai rs pr ior to leaving in March 1999. Nor does he speak to having been one of the crew on the inward journey as suggested by the crew list before the judge. As to the first poi nt , the passpor t pages exhi bi ted to Mr Aung's statement are incomplete (they are pages 10, 16 and 17 only). As to the second, the defendants believed before the judge that the crew list which they exhibited was indeed for the previous voyage. It is now far from clear that that is so. However, the important point as to Mr Aung's involvement, as it seems to me, is that Mr Aung's passport clearly bears a ‘Departed’ stamp, endorsed ‘MV Prestrioka’ and dated 28 March 1999, which is agreed to be the date on which the vessel departed from Kohsichang.

62 Mr Dunning also raises a number of ques ons di rected to a mo r e det ai led el uc i da on of the movements of the vessel and of the MV Mariner than appears in Mr Aung's statement. However, these ques ons seem to me lar gel y bes i de the poi nt ; they do not hi ng to answe r the essen al ques on whe t her the t he , whi c h i t is common gr ound occurred i f and when t he cargo was diverted and/or discharged elsewhere than Dakar, was commi ed pur suant to a preconceived plan or as a result of a spontaneous decision taken a er the vessel sai led. As to that, the ques on is simp l y wh et her or not ther e is reason to di sbel ieve or suspect Mr Aung' s

Page24

asser on that he wa s tol d the vessel wa s to sai l to Indi a, wh i ther it then sai led, onl y to mo ve on a er it wa s found that ther e wa s no cons i gnee for the goods in Indi a. As to that asser on, and the circumstan al account wh i ch Mr Aung gi ves of the voyage of the vessel wh i ch is cons i stent with it, Mr Dunning has advanced no good reason to regard it is other than genuine or why Mr Aung should misstate the posi on. F ur ther , Mr Aung' s a ccount t hat h e r et ur ned t o *630 Thailand from Dubai on 5 August 1999 is supported by an entry stamp on his passport.

63 Mr Dunning makes two further general points. He suggests that the evidence of Mr Aung lacks the ring of truth because it is inherently unlikely that owners would purchase a vessel for US$ 350,000, repair her, provide a crew, and supply and repair her for 4/5 months at sea all for a cargo worth €1.5 million. Second, he says that now Mr Aung has been traced, the claimants should be affor ded the oppor tuni ty to trace the 12 crew me mb er s wh o Mr Aung says accompanied him back from Dubai in August 1999 in order to see whether their evidence accords with that of Mr Aung.

64 The first poi nt seems to me devoi d of subs tance. In fact, ther e is no evi dence as to wh et her the vessel was ever fully paid for (the memorandum of sale makes clear that the seller was to deliver the vessel against a deposit of $50,000, the remainder of the purchase price being en rel y unsecur ed and not payabl e un l 14 days a er deli very) ; nor i s it evident t hat t he r epai r s were paid for. It appears to be a complaint of Captain Duarte that he was not paid. There is certainly no reason to suppose that it was an ci pat ed that the repai rs wh i ch we r e car ried out were not adequate to get the vessel to India without incident. Equally, no doubt, it was not an ci pat ed that no cons i gnees for the car go wo ul d be found in Indi a, so that the vessel had to con nue its voyage and event ual ly had to be towe d to Dubai . Al though the account of Mr Aung suggests that the planned venture went wrong, the circumstances do not in my view suggest that the diversion of the cargo was not intended at the me of depar tur e; i ndeed, on the evidence as a whole I consider it fanciful so to suggest. As to Mr Dunning's asser on that the claimants should be given the opportunity to trace Mr Aung's fellow crew members, we received no clear indica on that it wa s in fact the cl ai ma nt s' int en on t o do so; nor coul d Mr Dunning give us any reason to suppose why, if traced, their evidence would be likely to differ from that of Mr Aung.

65 I regard the evidence from Professor Mo e and the pr evi ous own er s as subs i di ar y to that of Mr Aung, but suppor ve of my over al l concl us i on. The er ror of Pr of essor Mo e as to t he star ng dat e of the voyage is i rrel evant to the pur pos e for wh i ch hi s evi dence is rel ied upon, namely the ques on of wh at wa s the true stat e of the we at her betwe en 12 and 22 Ma y 1999 in the area where the vessel was reported by the owners to be. On that point Professor Mo e exhibits publicly available charts and meteorological data and makes clear what they show. Since receiving his report the claimants have had me to obt ai n cont rar y exper t evi dence if they wished, but have not sought to do so. Professor Mo e' s evi dence as to the we at her off Sout h Africa during the relevant period is to the effect that the vessel wo ul d have been in the mi ddl e of an area of high pressure with light southerly winds and slight seas, the winds being of a direc on appr opr iat e to cause her to dr i nor t h, rather than s out h as stated i n t he owne r s ' final telex. Those are not points which Mr Dunning has been able to gainsay or has sought to contradict.

*631

66 Finally, the minimal informa on suppl ied and the a tude exhi bi ted by t he pr evious owner s and their auditor, indicate that no further informa on is likel y to be for thcomi ng concer ni ng the original acquisi on of the shi p, or indeed the ques on of whe t her i t was pai d f or.

67 Returning to Mr Dunning's asser on that the cl ai ma nt s shoul d be afforded t he oppor t uni t y to seek evidence from other crew members than Mr Aung, approached realis cal ly it seems to me that, rather than indica ng a ser ious issue to be tried, the request is for the cour t to permi t the ma er to pr oceed in thi s jur i sdi c on i n t he hope t hat somet hing may turn up i n a s itua on

Page25

where no posi ve case or reason has been put for wa rd to suggest wh y it shoul d. The cl ai ma nt s' case remains that, while they accept that they have been the vic m of a del iber at e fraud by the owners, they wish to put the insurers to proof in a situa on wh er e ther e i s now bef or e the court evidence from a crew member which, considered with the rest of the evidence, permits of no other inference than that the fraud was one dependent upon prior planning, without any inten on that the vessel shoul d ever sal e f or Dakar . Mr Dunni ng has ref er red to the hi gh standard of proof required in a case alleging a criminal offence. He r e, howe ver , ther e is no real controversy that a criminal offence has been commi ed. The i ssue i s whe t her the cour t is sa sfied t hat the cri min al intent to divert the cargo was formed f rom t he out s et (as the overal l evidence clearly indicates), or only subsequently in the course of the voyage, which is inherently improbable and contrary to the statement of Mr Aung.

68 I bear in mind the now well known observa ons of Lor d Hope on the cri ter i a to be appl ied under CPR 3.2 and 24.2 in the case of Three Rivers District Council v Bank of England (No 3) [2001] UKHL 60 at paras 90–95 as affor di ng an anal ogous appr oach in a case of thi s ki nd to the ques on wh et her a cl ai ma nt has demo ns trat ed a ser ious issue to be tri ed. In par cul ar I bear in mind that, in commen ng on the scope of the inqui ry, Lor d Hope sai d:

‘… more complex cases are unlikely to be capable of being resolved … without conduc ng a mi ni -tri al on t he docume nt s wi thout d i scover y a nd wi thout o r al evidence.’

However, in the sense referred to, it does not seem to me that the relevant issue here is a complex one. The the is not real is cal l y i n disput e; the i ssue i s whe t her or not i t took place i n pursuance of a plan on the part of the owners which existed from the outset of the voyage. All the probabili es are that it di d. The stat eme nt of Mr Aung put s flesh and subs t ance upon t he previous outline of decep on and di sappearance. Thi s i s not a case wh er e t her e i s any substan ve reason to suppose that ther e ma y become avai labl e, at tri al , evi dence to assi st the claimant. Nor is the issue in ques on one wh er e t he norma l pr ocesses of di scover y and interroga on as betwe en the par es (who are bot h at one r emov e f rom t he event under inves ga on) wi l l shed any f urt her l i ght on t he ma er. In these very unusual circumst a nces and, having received *632 evidence which was not available to the judge, I would hold that, so far as the defendants' liability under the policy is concerned, there is no serious issue to be tried, in the sense that I am sa sfied t her e i s no r eal prospect of a finding f or t he c l ai mant s at trial.

69 Having come to that conclusion, it is strictly unnecessary for me to deal with the aspect of forum conveniens. However, I propose to do so briefly in the light of the ar gume nt s addr essed.

Forum conveniens

70 Mr Malins has argued that, even upon the approach which the judge took to the proceedings, namely that the s. 44/clause 8 construc on issue rema i ned live for det ermi na on at trial, his decision that this country was the appropriate forum for the li ga on was i n err or for the reasons I have shortly summarised at paragraphs 14 and 31(ii) above. Mr Malins submits that the defendants' arguments below acquire added force if this court decides (as I would decide) in his favour upon the issue of construc on, t hus r emo vi ng any room f or exper t disagreement on the ma er at tri al . He poi nt s out that the j udge regarded the ques on of forum as turning largely upon the number and complexity of the issues of English law to be determined, given the obvious advantages of having an English court determining them (including avoidance of the need for interpreters at trial and the necessary transla on of a lar ge number of documents in connec on ther ewi th) . He invi tes us to hol d that , wi th the s. 44/clause 8 plank of the claimants' legal argument removed, (a) the residual issue is a factual one only,

Page26

namely whether the vessel was in fact a phantom ship and/or whether a fraudulent inten on existed prior to the sailing of the vessel. It is not in dispute that that issue is more closely connected with and convenient for determina on in Thai land than Engl and; (b) the rema i ni ng issues of law adverted to by the judge are unlikely to be produc ve of subs tan al exper t disagreement as to the law to be applied, and thus are well suscep bl e of det ermi na on by a Thai court on the basis of such evidence.

71 Those remaining issues were as follows. First, the s ll live ques on of whe t her Cent r al wer e ‘privy’ to the unseaworthiness of the vessel. As to this, the meaning of that phrase has been authorita vel y and uncont rover si al ly defined i n The Eurysthenes [1977] QB 49 in par cul ar by Roskill LJ at 76D–G, in terms which there is no reason to suppose that a Thai court could not understand and readily apply, whilst enjoying the added advantage of familiarity with local condi ons and pr ac ces. Second, an argumen t as to t he appl i cabi l ity of s. 45/ I CC c lause 10 ; this is no longer relied on. Third, the further ques on of the i ncor por a on of the c l assi fica on clause; this appears in substance to be an issue of fact as to whether or not the relevant endorsement had been sent, or its contents otherwise communicated, to the claimants. Fourth, the issue whether, in addi on to the val ue of the car go los t, the cl ai ma nt s are en tled t o c laim for the ‘extraordinary’ costs of their financi ng ar rangeme nt s i n *633 addi on to a cl ai m for ‘ordinary’ interest over the period concerned. There might be some room for disagreement between expert witnesses upon this ques on; howe ver , t he concept s and i ssues i nvol ved should be explicable to and able to be resolved by a Thai court.

72 Finally, it is right to note that, whereas in his judgment the judge observed that counsel for the claimants had persuaded him that there was a realis c pr ospect of addi onal ques ons of English law arising at trial, such ques ons have not been t he subj ect of any a empt ed iden fica on by Mr D unni ng who has been content s imply to endor se the j udge' s vi ew t h at, if such issues did arise, ‘there is obvious advantage in an English court dealing with such ques ons ’ .

73 Upon Mr Malins' above analysis of the legal issues, which I accept, I would have come to a differ ent concl us i on from that of the judge on the ques on of forum, given wha t I regard as the overwhelmingly Thai connec ons of the def endant s, the var ious agenci es invol ved, al mo s t al l the poten al wi tnesses and the rel evant event s and factual i ssues ; these connec ons wer e indeed recognised by the judge. However, in the light of the broad discre on avai labl e to the judge in assessing the ma er of over al l conveni ence, and of the stri ctur es of Lor d Temp l ema n in The Spiliada at 465G to the effect that an appel lat e cour t shoul d be sl ow to int er fer e, that al one is insufficient reason t o r everse t he j udge' s deci sion. Nonet hel ess , upon t his appeal , as i t seems to me, the situa on has resol ved to an extent wh i ch mi ght we l l have al ter ed the judge' s own view in the light of the fact that it was his assessment of the number and complexity of the ques ons of law wh i ch det ermi ned the we i ght to be gi ven to the need to cal l exper t evi dence of English law if the case were tried in Thailand (see paragraph 25 above). In this connec on, he highlighted the ques ons of cont ractual cons truc on, and i n par cular , the r el a onshi p and interlocking effect of s. 44 and s. 45 of the 1906 Act on the one hand and ICC clauses 8 and 10 respec vel y on t he ot her . Bot h t hose aspects are now gone ( one deci ded and t he ot her abandoned). The court is le wi th the issues I have enume r at ed in paragraph 71 above wh i ch present li le di fficulty and, on anal ysis, essen al ly involve appl i ca on of uncont r oversi al l egal principles to the facts as found at trial.

74 The judge was expressly sa sfied t hat the Thai cour t s wou l d appl y Engl i sh l aw a nd, in my view, he was correct to be so sa sfied on t he evi dence bef ore him. The cont r ary sugges on was more in the way of a query than an asser on (see the second wi tness stat eme nt of Sarah Tayl or , para 38) appropriately answered in the second witness statement of Mr Melbourne (paras 8–12), with an unconvincing rebu al i n the second wi tness stat eme nt of Mr Bl ows . The onl y concrete example produced of a likely applica on of Thai law at the expense of Engl ish law wa s

Page27

the applica on of the limi ta on per i od of two year s under s. 5 of the Thai Act on Conflict of Law (see paragraphs 32–33 of Miss Taylor's second witness statement). However, it was also the evidence of Mr Blows (see paragraph 10 of his second witness statement) that the waiver of a me limi t a er i ts expi r y wou l d be val i d under Thai law. In t his respect , *634 the defendants formally offer ed to wa i ve the Thai me bar (see par a 7 of Mr Mel bour ne' s second wi t nes s statement) if the court saw fit to requi re it to do so, and that offer has been r epeat ed i n t his court.

75 Mr Malins has relied heavily upon the considerable similari es betwe en the pos i on i n t his case and that in the Amin Rasheed case in which, despite deciding that the adapted form of Lloyd's policy in that case was governed by English law, the House of Lords upheld the view of Bingham J at first ins tance that Kuwa i t wa s the appr opr iat e for um on the basi s that the cent ral issue in the li ga on was one of fact , the pri nci pal wit nes ses wer e Saudi Arabi an, Indi an and Bangladeshi and the factual issues could be as well, and probably be er , det ermi ned in Kuwa i t by a Kuwai judge:

‘… [who] would be likely to have greater familiarity even than the Commercial Court in England with the sort of thing that goes on in purely local trading in the Arabian Gulf …’ (per Lord Diplock at 67B)

Every case is of course differ ent upon i ts facts and i n rel a on t o t he det ai l s whi ch ari se f or considera on wh en for um conveni ens i s i n issue. Howe ver , that obser va on seems to me of universal validity and considerable weight in this case.

76 Times have of course moved on since the Amin Rasheed decision. In par cul ar , the judge gave weight to the considera on that , now that the vi deo l ink i s avai labl e as a me ans of securing ‘live’ evidence from a far off pl ace, the pot ency of the cons i der a on of the r esi dence of individual witnesses and the inconvenience involved in travel is reduced. Nonetheless, while the existence of such a facility may be relied on to overcome difficul es i n rela on to a par cular witness or witnesses in a case of need, the broad proposi on that evi dence ma y now be gi ven by video link seems to me to be a rela vel y mi nor factor in the over al l task of the cour t to:

‘take into account the nature of the dispute, the legal and prac cal i ssues invol ved, such ques ons as l ocal knowl edge, avai labi lity of wi tnesses and thei r evi dence and extent.’ (per Lord Wilberforce ibid at 72C)

77 In my view, the most significant pot en al obj ec on t o the case pr oceedi ng i n Thai l and whic h I regard as prima facie its natural home, is the availability in Thailand of a plea of limita on. In this respect it cannot be said that the claimants acted unreasonably by promptly commencing their ac on in Engl and, bear ing in mi nd the jur i sdi c on avai l abl e t o t hem u nder Order 11 rule 1(1)(d)(iii). The ques on bef or e the judge wa s wh et her they acted unr easonabl y in fai ling to commence protec ve pr oceedi ngs in Thai land bef or e the expi ry of the limi ta on per i od t her e. Upon the evidence, they did not do so as a ma er of del iber at e tac cs, but rather because of their failure to appreciate the existence of the me limi t of two year s. In the light of the judge' s decision upon forum, he did not have to determine the ques on wh et her *635 it was appropriate to require an undertaking from the defendants to waive reliance upon limita on in Thailand (which they offer ed, i f necessar y, to do) : cf . the obser va ons of Lord Goff in The Spiliada at 487B–488A.

78 It seems clear from the last paragraph of his judgment that the judge was not persuaded by the claimants that it was reasonable for them not to issue protec ve pr oceedi ngs in the light of the warning which they had received some five mo nt hs a er the l oss of thei r cargo i n a l e er dated 21 October 1999 from the defendants' Thai solicitors. Having stated that they had contacted Clyde & Co and were wai ng for confirma on f r om t h e defendant s as t o whet her t o

Page28

instruct them the solicitors said:

‘At this moment we are reserve (sic) our client's right on the issue of English Court jurisdic on over the case. We are now accep ng t hat onl y Thai cour t s can appl y the jurisdic on over the case. ’

79 Therea er , in the absence of confirma on as promi se d, t he c l ai mant s made t heir appl i ca on to the English court and, in the course of a very extended process of service abroad, permi ed the passing of a two-year me bar in Thai land, of wh i ch they we r e unawa re.

80 It is clear that, in The Spiliada, Lord Goff treat ed the ques on of the r easonabl enes s of a claimant's conduct in permi ng a f oreign me b ar t o pass as hi ghly relevant t o the ques on whether the court should, as a condi on of the gr ant of a stay, requi re an under taki ng from the defendant not to rely upon such me bar . He di d not , as I read the rel evant passage of hi s speech, treat that ques on as necessar i ly det ermi na ve of the cour t ' s deci sion. It seems to me that when, in the course of considering the various factors going to the exercise of his discre on, a judge finds himse l f incl i ned t o grant a s tay but for the exi stence of a f oreign me bar, and the defendant seeking that stay offer s if necessar y to wa i ve rel iance upon it, it wi ll onl y excep onal ly be a ppr opr iat e f or t he c our t t o g r ant a s tay wi thout r equi ring s uch a n undertaking. If the failure of the claimant to bring protec ve pr oceedi ngs amo unt s in al l the circumstances to a glaring error or want of care, as plainly would be the case if the limita on point had been specifical ly dr awn to hi s or hi s sol ici tor s' a en on by t he ot her s ide, t hat i s one thing. But if the case is less than clear, then it seems to me that it will usually be unnecessary in the interests of jus ce for the cour t to conduct a pos t mo r tem upon the reasonabl eness or otherwise of the ac ons of the cl ai ma nt or hi s sol ici tor s in al l the ci rcums tances of the case.

81 Were it not for my conclusion that the defendants' appeal should be allowed on the grounds already stated, I would regard it as appropriate to order that, upon the defendants' undertaking to waive reliance upon the defence of limita on in Thai land, ther e shoul d be a stay of these proceedings.

*636

Conclusion

82 I would allow the appeal and order that the order of Mr Jus ce Toul son dat ed 18 January 2000 permi ng t he claiman t s to s erve t he claim f orm o n t he def endant s out of the j uri sdi c on be set aside and that the proceedings be dismissed. Whilst I agree in principle with the point taken in ground 4 of the respondents' cross-appeal rela ng t o wa i ver of t he me bar in Thailand, in the light of my decision that the appeal should be allowed I would also dismiss the cross-appeal.

Keene LJ:

83 I agree

Sumner J:

84 I also agree

(Appeal allowed. Cross-appeal dismissed)*637

Page1

*398 The Abidin Daver

House of Lords

26 January 1984

[1984] 2 W.L.R. 196

[1984] A.C. 398

Lord Diplock,Lord Edmund-Davies,Lord Keith of Kinkel, Lord Brandon of Oakbrook AndLord Templeman

1983 Dec. 19, 20; 1984 Jan. 26

Admiralty—Prac ce—S tay of pr oceedi ngs—A c on i n r em—C o l l ision bet wee n Cuban and Tur ki sh ships in Bosphorus—Turkish proceedings started—Arrest of Turkish ship in England—Whether Admiralty proceedings to be stayed

Ships' Names—Abidin Daver

In March 1982 a collision occurred in the Bosphorus, an interna onal wa t erwa y, betwe en two ships owned by the Cuban plain ffs and t he Turki sh def endant s respec vely. The Cuban vessel was arrested in Turkish territorial waters at the suit of the defendants, who in April 1982 began proceedings in a Turkish court claiming damages against the plain ffs. In J une 1982 t he plain ffs brought an ac on i n rem i n the Admi r a lty Cour t agai nst the defendant s for damage caused by the collision, the writ being served within the High Court jurisdic on on t he defendants' sister ship, which was released a er secur i ty had been gi ven. On the def endant s' mo on to stay the Engl ish pr oceedi ngs, Sheen J. hel d that the Tur ki sh cour t wa s a for um i n which jus ce coul d be done betwe en t he par es at subs t an al ly less i nconveni ence and expense, that a stay would not deprive the plain ffs of a l egi mate per sonal or j ur idi cal advantage and he ordered a stay. On appeal by the plain ffs, the Cour t of Appeal all owed t he appeal.

On appeal by the defendants: -

Held, allowing the appeal, that where a suit concerning a par cul ar subj ect ma er bet wee n a plain ff and a def endant was al r eady pendi ng i n a f oreign cour t whi ch was a nat ural and appropriate forum for the resolu on of the di sput e betwe en them, and the def endant in the foreign suit sought to bring as plain ff an ac on i n Engl and about t he s ame ma e r to whi ch the person who was plain ff in t he f oreign sui t was mad e def endant , then t he addi onal inconvenience and expense resul ng from al lowi ng two set s of legal pr oceedi ngs to be pur sued concurrently in two differ ent count ries , coul d onl y be jus fied i f the woul d- be pl ai n ff could establish objec vel y by cogent evi dence that ther e wa s some per sonal or j udi ci al advant age that would be available to him only in the English ac on that wa s of such imp or tance that i t would cause injus ce t o h i m t o d epr i ve h i m o f i t ( pos t, p p. 4 11G - 412A,414G,415C-E,420D-F,425F); and that, accordingly, in the circumstances, the Admiralty judge had rightly exercised his discre on i n s tayi ng t he Engl ish pr oceedi ngs ( pos t, pp. 414F-G,415C-E,416C,420A-D,421B,G,422C-D,425F).

The Atlan c S tar [ 1974] A. C. 436 , H.L.(E.); The Tillie Lykes [1977] 1 Lloyd's Rep. 124; MacShannon v. Rockware Glass Ltd. [1978] A.C. 795, H.L.(E.) and Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50 H.L.(E.) considered.

Per Lord Diplock, Lord Edmund-Davies, Lord Keith of Kinkel and Lord Templeman. The essen al change in the a tude of the Engl i sh cour t s to pendi ng or prospec ve l i ga on in f orei gn jurisdic ons that has been achi eved as a resul t of the successi ve deci si ons *399 of the House of Lords in The Atlan c Star , MacShannon v. Rockware Glass Ltd. and Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. is such that the me is now ripe to acknowl edge that the fiel d of law wi th wh i ch the pr esent appeal is concer ned is indi s ngui shabl e f rom t he Sco sh

Page2

legal doctrine of forum non conveniens (post, p. 411F-G).

Decision of the Court of Appeal [1983] 1 W.L.R. 884; [1983] 3 All E.R. 46 reversed.

The following cases are referred to in their Lordships' opinions:

Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50; [1983] 3 W. L. R. 241; [1983] 2 All E.R. 884, H.L.(E.)

Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119, C.A.

Atlan c Star , The [1973] Q. B. 364; [1972] 3 W. L. R. 746; [1972] 3 Al l E. R. 705 , C.A.; [1974] A.C. 436; [1973] 2 W.L.R. 795; [1973] 2 All E.R. 175, H.L.(E.)

Janera, The [1928] P. 55

London, The [1931] P. 14

Lucile Bloomfiel d, The [1964] 1 Ll oyd' s Rep. 324

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362; [1978] 1 All E.R. 625, H.L.(E.)

Madrid, The [1937] P. 40; [1937] 1 All E.R. 216

Monte Urbasa, The [1953] 1 Lloyd's Rep. 587

Quo Vadis, The [1951] 1 Lloyd's Rep. 425

St. Pierre v. South American Stores (Gath & Chaves) Ltd. [1936] 1 K.B. 382, C.A.

Soya Margareta, The [1961] 1 W.L.R. 709; [1960] 2 All E.R. 756

Tillie Lykes, The [1977] 1 Lloyd's Rep. 124.

The following addi onal cases we r e ci ted in ar gume nt :

Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557; [1980] 3 W.L.R. 991; [1981] 1 All E.R. 143, H.L.(E.)

Cohen v. Rothfiel d [1919] 1 K. B. 410, C. A.

European Asian Bank A.G. v. Punjab and Sind Bank [1982] 2 Lloyd's Rep. 356, C.A.

Trendtex Trading Corpora on v. Cr edi t Sui sse [1980] Q. B. 629; [1980] 3 W. L. R. 367 ; [1980] 3 All 721, C.A.

Wladyslaw Lokietek, The [1978] 2 Lloyd's Rep. 520

APPEAL from the Court of Appeal.

This was an appeal by leave of the House of Lords by the appellants, the owners of the Abidin Daver, from the judgment dated 17 May 1983 of the Court of Appeal (Sir John Donaldson M.R., Dunn and Purchas L.JJ.) allowing an appeal by the respondents, the owners of the Las Mercedes, from the judgment dated 4 May 1983 of Sheen J. staying an ac on in rem br ought by the respondent s in the Admiralty Court in England.

The appeal arose out of a collision in the Bosphorus on 23 March 1982 between the Las Mercedes owned by a Cuban state corpora on and the Abidin Daver owned by a Turkish state corpora on. Both ships were damaged and each blamed the other for the collision. The appellants commenced

Page3

an ac on in Tur key agai ns t the respondent s on 16 Apr i l 1982 *400 and obtained security for their claim. On 29 June 1982 the respondents commenced an ac on in rem in the Admi ral ty Cour t wh i ch was served on 2 July 1982 on a sister-ship, and thus obtained security for their claim. On 28 July 1982 the appellants issued a no ce of mo on seeki ng t o have t he r espondent s ' ac on s t ayed on t he grounds "(1) that there is another forum ... in which jus ce can be done betwe en the par es . .. at substan al ly less inconveni ence and expense; and (2) that a stay of thi s ac on wil l not depr i ve t he plain ffs her ein of a l egi mate personal or j uridi cal advantage avai l able to them i n Engl and. "

The facts are set out in their Lordships' opinions.

David Steel Q.C. and Nigel Teare for the appellants. The fundamental ques on in thi s appeal is the extent to which an English court is en tled to take int o account pr evi ous pr oceedi ngs in a for ei gn jurisdic on in det ermi ni ng the ques on of a stay. In t he Cour t of Appeal , Sir John Donal dson M.R . held that this ques on wa s deci si ve of the appeal . Sheen J., to wh om the appl ica on was mad e, hel d that there was an overwhelming case in favour of Turkish jurisdic on on the grounds of conveni ence and expense. The appellants' ship was a Turkish ship proceeding to a Turkish port and all the members of the crew were Turkish. It was conceded in the Court of Appeal that the crew were based in Istanbul. It has been accepted by the Court of Appeal that the existence of the Turkish proceedings was a relevant considera on wh i ch shoul d be gi ven we i ght , but ther e is no rul e of law that it should be given very li le we i ght and no ground for the Cour t of Appeal rever si ng Sheen J. on the ground that he had given this factor far too much weight. The fact that there are previous proceedings is a relevant factor and the ques on of cos t i s al so r el evant . The pos si bi lity of inconsistent decisions if the stay is not granted is also a relevant factor: see The El Amria [1981] 2 Lloyd's Rep. 119, 128, per Brandon L.J. True, that was an exclusive jurisdic on case but the pr inc i pl e there adumbrated is equally valid in a case such as the present. There is no reason why the risk of inconsistent decisions should be regarded as poten al ly an imp or tant factor in one type of stay case and regarded as irrelevant in another.

The appellants do not base their conten on for a stay on any "first come, first served" principl e, but they do contend that where there are other proceedings on foot they are not to be disregarded but the weight that should be a ached to thi s fact wi ll var y accor di ng to the ci rcums tances of the case. There is a further relevant considera on wh i ch is onl y appl icabl e to col lisi on cases . It is the Engl ish prac ce to gi ve onl y one judgme nt on liabi lity. If the cl ai ms are for ver y subs tan al sums i t i s very important that they should be tried in the same jurisdic on to pr event two limi ta on ac ons.

In exercising his discre on Sheen J. appl ied the pr inc i pl es set out in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795. Such an approach evinces no error of principle. The Court of Appeal based its decision in part upon The Tillie Lykes [1977] 1 Lloyd's Rep. 124, 127, where Brandon J. held that "the mere existence of other proceedings abroad, the mere existence of a mul pl ici ty of pr oceedi ngs, is not to be taken into account *401 at all as a disadvantage to the defendant." That decision is wrong, or alterna vel y, is no longer a cor rect gui de to the exer ci se of the di scre on t o s tay f or the r easons stated above.

The Court of Appeal in the present case [1983] 1 W.L.R. 884, 892B has decided that the fact that other proceedings are on foot in another jurisdic on i s not to be treat ed l ike any ot her rel evant factor but is to be the subject of a special rule, namely "save in excep onal ci rcums tances , rel a vel y li le we i ght shoul d be gi ven (to it)." But it is undes i rabl e to have sub- rul es to the pr inc i pl e of The Atlan c Star [1974] A. C. 436 . It would lead to a lack of flexi bi lity and lead to the ini a on of f urther sub-rules. It could lead to confusion as to the rela ve we i ght to be gi ven to the var ious factor s in any given case, and there would be a tendency for there to be appeals in all these cases. The weight to be given to a par cul ar f act cannot be t he subj ect of a r ul e of l aw but wi ll depend on t he circumstances of the case and therefore will vary from case to case. Sir John Donaldson M.R. was wrong to say that there was a lacuna in the MacShannon principles [1978] A.C. 795.

The Court of Appeal in reaching its decision relied heavily on The Tillie Lykes [1977] 1 Lloyd's Rep. 124. One of the striking features in that case was the relevance of the convenience of the English

Page4

court over that of the court of Balboa. But since the decision of this House in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 it is right to be cau ous of the appr oach adopt ed in The Tillie Lykes [1977] 1 Lloyd's Rep. 124, since the development of the law on this topic has been taken a stage further in the MacShannon case [1978] A.C. 795, for the words "oppressive" and "vexa ous " no longer play any part in the formula on of the pr inc i pl es on wh en the cour t shoul d or der a stay.

The Tillie Lykes [1977] 1 Lloyd's Rep. 124 was decided a er the deci si on of thi s House in The Atlan c Star [1974] A.C. 436 but before the decision in MacShannon la Rockware Glass Ltd. [1978] A.C. 795. Although Lord Wilberforce in The Atlan c S tar [ 1974] A. C. 436 , 469-470, referred without disapproval to the line of authority upon which The Tillie Lykes [1977] 1 Lloyd's Rep. 124 is based, the decision in the MacShannon case [1978] A.C. 795, as stated above, developed the law a stage further. In the light of that development cases decided by reference to the old formula on of the relevant principles no longer affor d any usef ul gui dance: see The Wellamo [1980] 2 Lloyd's Rep. 229, per Sheen J. The judge should merely apply the principles set out in the MacShannon case [1978] A.C. 795 to the facts of the case before him. That is what the judge did in the present case. Had the Court of Appeal merely applied the principles set out in MacShannon [1978] A.C. 795, it is plain from the judgment of Sir John Donaldson M.R. that the decision of Sheen J. gran ng a stay wo ul d have been affirmed .

In summary, the Court of Appeal have interfered with the judge's discre on on the ground that he gave "very full weight" to the fact that other proceedings were on foot in Turkey whilst the Court of Appeal considered that "rela vel y l i le wei ght " shoul d be gi ven t o t hat fact . Thi s i s not a val i d reason for interfering with his discre on. The Cour t of Appeal sought to jus fy thei r i nterf erence by holding that he erred in principle. But there can be no rule of law saying that "rela vel y l i le *402 weight" should be accorded to one of the many factors relevant to the exercise of the court's discre on to stay.

Dunn L.J. [1983] 1 W.L.R. 884, 892, stated that Sheen J., when addressing himself to which jurisdic on wa s "cl ear l y the mo r e appr opr iat e" for um, had asked hi ms el f the wr ong ques on. The use of that phrase by the judge did not evidence an error of principle. He was manifestly aware that the relevant principles were those set out in the MacShannon case [1978] A.C. 795. As to the extent to which the English Admiralty Court is the obvious and natural forum: see The Atlan c Star [1974] A.C. 436, 463 et seq., 479 per Lord Wilberforce and Lord Kilbrandon respec vel y. Al though the appellants accept that the plain ffs her e wer e en t led t o invoke the Engl i sh j urisdic on the onl y relevant connec on wi th Engl and wa s the ar rest of the si ster shi p.

As to the sugges on of Dunn L. J. [1983] 1 W.L.R. 884, 894C, that the appellants were seeking to deprive the Cuban plain ffs of a j uri dical advant age, the answer i s that whi l e a l i gant may pref er t o be a plain ff rather than a count erclaimin g def endant , in f act the dis nc on makes no di ffer ence t o a court's ability to decide a case fairly and justly. This is par cul ar l y so in a shi p col lisi on ac on whe r e who is "plain ff" as opposed t o "count ercl aiman t " i s i nvar i abl y a ma er of chance.

Finally, the appellants also seek to ques on the obser va ons of Sir John Donal dson M.R . [1983] 1 W.L.R. 884, 889E-F, in which the Master of the Rolls adverts to the far greater experience in mari me di sput es of t he Engl ish Admi ral ty Cour t t o t hat of t he Tur ki sh cour ts. But unl ess a comparison suggests that a party would be deprived of a fair trial or denied jus ce thi s i s not a factor to be weighed in the balance in determining whether there should be a stay. In The El Amria [1981] 2 Lloyd's Rep. 119, 126 the Court of Appeal held that it was inconsistent with the mutual respect which courts of friendly states owed to each other to make comparisons between the courts of one state and those of another. Consistent with the approach of the Court of Appeal in that case the Master of the Rolls ought to have regarded the Turkish court as competent to try the dispute before it fully and fairly. The fact that one court may have a more interna onal or extens i ve experience than another should therefore be disregarded: see Amin Rasheed Shipping Corpora on v. Kuwait Insurance Co. [1984] A.C. 50 where this House held that the Commercial Court was not to be regarded as possessing a special status above the courts of other countries. The same is true of

Page5

the Admiralty Court.

If and so far as the House consider that both Sheen J. and the Court of Appeal erred in principle then it is for the House to exercise the discre on af resh. [Ref er ence wa s al so ma de to Ar cles 1, 3, and 7 of the Interna onal Conven on For The Uni fica on Of Ce rtai n Rul es Rel a ng To The Ar r est of Seagoing Ships, 1952 (Singh, Interna onal Ma r i me Law C onven ons ( 1983) , vol, 4, pp. 3101- 3103) and Ar cl e 1 of t he I nt er na onal Conven on On Cer t ain Rul es Concer ni ng Ci vi l Jur isdic on In Ma er s Of Col lisi on, 1952 (Si ngh, , vol . 4, p. 3107) ; The Wellamo [1980] 2 Lloyd's Rep. 229; European Asian Bank A.G. v. Punjab and Sind Bank [1982] 2 Lloyd's Rep. 356 and Trendtex Trading Corpora on v. Credit Suisse [1980] Q.B. 629.]

*403

Bernard Rix Q.C. and Elizabeth Blackburn for the respondents. It is proposed first to deal wi th the applicable principles. These are well known and are the subject of three decisions of this House: The Atlan c Star [1974] A. C. 436 ; MacShannon v. Rockware Class Ltd. [1978] A.C. 795 and Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557. Reliance is placed on the following proposi ons : (i) the overall principle is to ensure that the reten on of Engl ish jur isdi c on does not cause i njus ce. ( ii ) The essen al bur den of pr ovi ng that the ret en on of Engl i sh j uri sdi c on woul d pr oduce i njus ce is on the party seeking a stay. (iii) The relevant considera ons rel a ng t o t he cour t ' s power s to order a stay are contained in two so-called rules. In The Atlan c Star [1974] A. C. 436 , the House approved the statement of principle by Sco L. J. in St. Pierre v. South American (Gath & Chaves) Stores Ltd. [1935] 1 K.B. 382, 398, provided the words "oppressive or vexa ous " ar e int er pr et ed in a new, mo r e liberal and morally neutral sense. In MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 this House considered that the me had come to dr op the wo r ds "oppr essi ve or vexa ous " al t oget her but otherwise con nued i ts suppor t for the stat eme nt of Sco L.J . so amen ded. As reformul ated t he statement of principle could be expressed thus: "(1) a mere balance of convenience is not a sufficient ground f or depr i ving a plain ff of the advant ages of pr osecu ng his ac on i n an Engl i sh court if it is otherwise properly brought. The right of access to the [Queen's] court must not be lightly refused. (2) In order to jus fy a stay two condi ons mus t be sa sfied, one pos i ve and the other nega ve: (a) the def endant mu s t sa sfy the cour t that ther e i s anot her forum t o who se jurisdic on he i s ame nabl e in wh i ch jus ce can be done bet wee n t he par es at subst an al ly less inconvenience or expense, and (b) the stay must not deprive the plain ff of a l egi mate personal or juridical advantage which would be available to him if he invoked the jurisdic on of the Engl ish court." See per Lord Diplock (pp. 811F-812B) with whom Lord Fraser of Tullybelton agreed (p. 822H). To similar effect wa s Lor d Sal mo n wh o wo ul d ref ormu l at e rul e 2( a) and (b) above in terms of the avoidance of injus ce to bot h par es (p. 819F- G). (iv) If rule 2(a) is not sa sfied then a s tay wi l l not be granted and the ma er stops ther e. If, howe ver , rul e 2( a) is sa sfied but r ule 2( b) i s not s a sfied then the cri cal equa on has to be s truck. It i s axi oma c that t o st ay an Engl i sh ac on ot her wi se properly brought it has to be a special case: see The Atlan c Star [1974] A. C. 436 , 453C, 465H et seq., 476H.

Cases involving an exclusive jurisdic on cl ause or R.S.C., Ord. 11, are very differ ent from the pr esent for in those cases it is the plain ff in Engl and who seeks a stay. It foll ows that cases of that char act er are not helpful in the present case: see Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A.C. 50, 67-68, 72; The El Amria [1981] 2 Lloyd's Rep. 119, 129 and The Atlan c Star [1974] A.C. 436, 469D.

When a plain ff in Engl and i s a def endant in proceedi ngs abroad t he Engl i sh cour t s have alway s been par cul ar l y cau ous i n appr oachi ng t he s tayi ng of the Engl i sh proceedi ngs because t o confine such a plain ff to bei ng a count erclaimin g def endant abroad i s to depr i ve him o f cont r ol of his own ac on. The imp or tance of pr ior pr oceedi ngs is deal t wi th by Br andon J. in The Tillie Lykes [1977] 1 Lloyd's Rep. 124. On the general *404 reluctance of the English courts to order a stay: see Dicey & Morris, The Conflict of Laws , 10t h ed. (1980) , vol . 1, pp. 250- 251 and Cheshi re and Nor th, Pr i vat e Interna onal Law, 10t h ed. (1979) , p. 117. In Cohen v. Rothfiel d [1919] 1 K. B. 410 , 414, Scru on L. J.

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said, "where the plain ff in t he f oreign ac on i s not plai n ff, but def endant , i n the Engl ish ac on, the case against interference is even stronger, for the person to be stayed has not himself ini at ed two proceedings. He has ini at ed one, and has been comp el led to appear in anot her over wh i ch he has, as defendant, no control."

In Admiralty the courts are even more reluctant to stay an English ac on si nce the Admi ral ty Cour t is prima facie a natural and appropriate forum in which to bring an ac on of t hi s k i nd: s ee MacShannon v. Rockware Glass Ltd. [1978] A.C. 795, 811F, per Lord Diplock. See also Ar cl e 1 of The Interna onal Conven on On Cer t ain Rul es Concerning Civil Juri sdi c on I n Ma e r s Of Co lli s ion 1952. In The Wladyslaw Lokietek [1978] 2 Lloyd's Rep. 520, 540, Brandon J. applied Lord Wilberforce's approach in The Atlan c Star [1974] A. C. 436 , where Lord Wilberforce referred to the interna onal reputa on of the Admi ral ty Cour t (469E- F) and stat ed that "a ver y cl ear case is needed to jus fy a stay" in such circumstances (p. 469H). Even where the Admiralty jurisdic on is not invol ved Engl ish courts have not regarded it as sufficient to j us fy a st ay f or t he defendant of t he Engl i sh pr oceedi ngs to show that both he and the subject ma er are local ly based near the for ei gn for um: Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50 , 66H - 67A.

There remains for considera on the factor s rel a ng t o r ule 2(a); the f act ors rela ng t o rule 2( b) and those rela ng to the cri cal equa on.

Factors rela ng to rul e 2( a) . Loca on of the col l ision can affect the l aw ap pl i cabl e to any subsequent proceedings but this is not so in the present case for the collision took place in the Bosphorus which is an interna onal wa t erwa y. Ther ef or e thi s factor does not favour Tur ki sh jur i sdi c on. Mor eover , it is agreed that English collision law and Turkish collision law is the same and therefore it is conceded that this factor does not favour the English Admiralty Court. [Reference was made to Bri sh Shi ppi ng Laws, vol. 8, 2nd ed. (1973), pp. 1525, 1526]. There is no special local factor rela ng to the col lisi on which is relevant in the present circumstances. The ease of obtaining local evidence in ma er s of this kind is not generally regarded as important: see The Tillie Lykes [1977] 1 Lloyd's Rep. 124 and The Wladyslaw Lokietek [1978] 2 Lloyd's Rep. 520. It is for the defendants to the English ac on to establish that to refuse a stay would produce injus ce; MacShannon v. Rockware Glass Ltd. [1978] A.C. 795, 818H, per Lord Salmon.

As to the cost and convenience to the par es , Cubans are ver y fami liar wi th Engl ish legal pr ocedur e and not with Turkish. Cubans understand the English language but not Turkish. Geographically England is easier and cheaper of access than Turkey. The present respondents have offer ed to pay the Turkish witnesses' expenses to come to London. If the Turkish witnesses come to London the Cuban witnesses do not have to be flown to Tur key. Under rul e 2( a) the test is the rel a ve cost of the respec ve pr oceedi ngs. Thi s factor favour s the respondent s: see The Atlan c St ar [1974] A. C. 436. As to the ques on of mu l pli city of sui t s, the r espondent s *405 do not contend that this is a factor which is never relevant; it certainly can be. But the mere fact of mul pl ici ty of pr oceedi ngs is not relevant: see The Tillie Lykes [1977] 1 Lloyd's Rep. 124, 126. The approach of Brandon J. in that case was correct. As to the me factor , the Engl ish ac on was comme n ced t wo and a hal f mon t hs a er the ins tu on of t he Turki sh ac on in 1982. Very l i le progress was ma de i n t he Tur kish ac on even 10 months a er the comme nceme nt of the Engl ish ac on and no progr ess at all was mad e i n the first two and a hal f mo nt hs of the ins tu on of t he Turki sh pr oceedi ngs. Finall y, on t his issue, i t is to be noted that in proceedings in Turkey the costs of the Turkish court have to be borne by the par es .

The factors rela ng to rul e 2( b) . The respondent s wo ul d be depr i ved of a l egi mat e per sonal or juridical advantage if the English proceedings are stayed. In England the respondents will not have to pay the 15 per cent. deposit to pay the costs of the Turkish court. Further, it is an advantage for the Cubans to have the proceedings conducted in the English language and for them to have the exper se of the Engl ish Admi ral ty Cour t. Mo r eover , in the Engl ish pr oceedi ngs the Cubans wi ll be plain ffs and not def endant s . Final l y, the affidavit evidence di scl oses that t he Tur ki sh Bar i s not as independent as the English Bar.

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The cri cal equa on. The appel l ant s have f ail ed t o mee t the bur den placed upon t hem u nder rule 2(a). If that be the case, rule 2(b) does not arise for considera on. But i n any event , ther e are substan al advant ages to the respondent s wh i ch they wo ul d be depr ived of under rul e 2( b) and therefore the appellants fail under rule 2(b). In any event, Sheen J. never reached the stage of performing the cri cal equa on because t he j udge was wro ng on r ule 2(a) and/or rule 2(b). In t erms of principle, authority and jus ce the equa on cannot be deci ded agai nst the r espondent s . If thi s were otherwise there could never be a case of a stay of proceedings in England which involved a local ship in territorial or local waters unless there were very special circumstances. But this approach is against the whole line of authority including The Atlan c Star [1974] A. C. 436 and MacShannon v. Rockware Glass Ltd. [1978] A.C. 795.

Sheen J. considered the convenience of the Turkish defendants to the English proceedings as paramount. This is contrary to the proper approach on the authori es and ignor es rul e 1. The judge proceeded on the basis that The Tillie Lykes [1977] 1 Lloyd's Rep. 124 was no longer good law. This was a fundamental misconcep on and, as stat ed above, ignor es rul e 1.

Steel Q.C. was not called upon to reply.

Their Lordships took me for cons i der a on.

26 January 1984. LORD DIPLOCK.

My Lords, shortly before midnight on 23 March 1982 there was a collision between a Turkish ship the Abidin Daver and a Cuban ship Las Mercedes. It happened in the Bosphorus just outside the Turkish port of Buyukdere where both vessels had anchored to shelter from high winds and strong currents. The Turkish ship is owned by a Turkish state corpora on ("the Tur ki sh shi pown er s") . She was on a *406 voyage from Braila in Roumania to Iskenderun in Turkey laden with a cargo of petroleum prospec ng pi pes . The Cuban shi p is own ed by a Cuban stat e cor por a on ( "the Cuban shipowners"). What the voyage was on which she was engaged at the me of the col lisi on does not appear from the evidence before your Lordships. Both vessels sustained damage in the collision.

Although naviga on i n the Bosphor us by me r chant vessel s of ot her na onal i es i s subj ect to an interna onal conven on ( "the Mon t r eal Conven on") , the pl ace wher e the col l i sion t ook pl ace i s situated in Turkish territorial waters. The Turkish shipowners accordingly took prompt steps in the District Court of Sariyer, the Turkish court which exercises admiralty jurisdic on in the area in wh i ch Buyukdere is situated, to have the Cuban ship arrested and to start an ac on in that cour t ("the Turkish ac on" ) agai ns t the Cuban shi pown er s as def endant s for dama ges for negl igence i n the naviga on and ma nageme nt of the Cuban shi p. The Cuban shi pown er s, or thei r P. and I. insur er s on their behalf, put up security to obtain the release of their ship, but they do not appear to have taken any other ac ve step i n the Tur ki sh ac on. Un l 2 Jul y 1982, t he Turki sh ac on was p roceedi ng normally in accordance with the Turkish Code of Civil Procedure under which the Cuban shipowners would have been en tled to br ing a cros s-cl ai m agai ns t the Tur ki sh shi pown er s if they had wi shed to do so.

The Turkish Code of Civil Procedure was introduced in 1927 as part of the Westernisa on of Tur ki sh law ins tut ed by Kema l At at ur k. I t i s based on the ci vi l pr ocedur e code of the Swi ss Cant on of Neuchatel of 1922. At the date of the Turkish law reforms this had been the most recently dra ed of procedural codes in use in those European countries which follow the system of the civil law. Consequently, it is one in which the court itself plays a more ac ve inves gat ory role t han does a judge under the English system of civil procedure. The substan ve comme r ci al law of Tur key wh i ch has been in force since the reforms of the 1920's for similar reasons has its basis in the German Commercial Code of 1895. It is not suggested that as respects collisions at sea Turkish substan ve law differ s in any rel evant respect from Engl ish law.

On 2 July 1982, some three months a er the comme nceme nt of the Tur ki sh ac on i n whi ch t hey were defendants, the Cuban shipowners took advantage of the presence in an English port of a sister ship of the Abidin Daver to arrest her and commence an ac on in rem agai ns t the Tur ki sh

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shipowners as defendants ("the English ac on" ) cl ai mi ng dama ges for thei r negl igence in caus i ng the collision at Buyukdere on 23 March 1982, which was the subject of the Turkish ac on in wh i ch the Turkish shipowners were plain ffs and t he Cuban shi powne r s def endant s . Securi ty was dul y provided to obtain the release of the sister ship.

It is in proceedings on a mo on by the Tur ki sh shi pown er s to stay the Engl ish ac on t hat this appeal to your Lordships is brought. Sheen J. granted the stay upon an undertaking that was offer ed by the Turkish shipowners to provide security for any cross-claim that the Cuban shipowners might decide to make in the Turkish ac on. He regarded the case for exer ci si ng hi s di scre on i n t his way as a clear one and refused leave to appeal; but leave was granted by Purchas L.J. and subsequently the *407 judge's exercise of his discre on wa s rever sed and the stay remo ved by a unani mo us Cour t of Appeal (Sir John Donaldson M.R., Dunn and Purchas L.JJ.) [1983] 1 W.L.R. 884. Leave to appeal from the Court of Appeal's judgment was granted by this House.

My Lords, it is I hope not unfair to say that the decision of the narrow majority of this House in The Atlan c Star [1974] A. C. 436 was ini al ly accept ed wi th rel uctance, par cul arl y by t he j udges of those English courts, Admiralty and Commercial, to which foreigners so o en vol unt ar i ly resor t for resolu on of thei r legal di sput es . It wa s treat ed at first as havi ng been deci ded on i ts own speci al facts rather than being of wider import. This is not surprising since it may not be possible to recognise as such a decision that will turn out to have provided a landmark in the development of English law, un l me has exposed t o view t he l egal lands cape t hat l ies beyond t he deci sion. Looked at in the perspec ve of the 10 year s that have now el apsed si nce the deci si on in The At lan c Star, it has become readily iden fiabl e not as a mer e deci sion upon i ts own excep onal f acts but as a landmark case.

The decisions of English courts during the hundred years between the passing of the Judicature Acts, the relevant star ng poi nt , and the hear ing in thi s House of The At lan c Star, are anal ysed i n s ome detail in four of the speeches in that case. The effect of those deci si ons wa s the subj ect of a scat hi ng summary by Lord Reid, at p. 453:

"They support the general proposi on t hat a f or ei gn pl ai n ff, who can es t abl i s h jurisdic on agai ns t a for ei gn def endant by any me t hod recogni sed by Engl ish l aw, i s en tled to pur sue hi s ac on i n t he Engl i sh cour t s i f he genui nel y thinks that that wil l be to his advantage and is not ac ng me r el y vexa ous l y. Nei t her the par es nor t he subject ma er of the ac on need have any connec on wi th Engl and. There may be proceedings on the same subject ma er i n a f or ei gn cour t. I t ma y be a f ar mo r e appropriate forum. The defendant may have to suffer g reat e xpense a nd inconvenience in coming here. In the end the decisions of the English and foreign courts may conflict. But never thel ess the pl ai n ff has a ri ght t o obtai n the deci s i on of an English court. He must not act vexa ous l y or oppr essi vel y or in abuse of the pr ocess of the English court, but these terms have been narrowly construed."

A er ref er ring to an obser va on of Lord Denni ng M.R . [1973] Q.B. 364, 381G, 382C adulatory of the administra on of jus ce by Engl i sh cour t s, Lord Rei d s ai d:

"My Lords, with all respect, that seems to me to recall the good old days, the passing of which many may regret, when inhabitants of this island felt an innate superiority over those unfortunate enough to belong to other races"

- or, as Kipling more forthrightly phrased it, "lesser breeds without the law."

The last sentence in Lord Reid's summary of the general proposi on to be extracted f rom the previous authori es is der ived from the stat eme nt of Sco L.J . in St. Pierre v. South American Stores (Gath & Chaves) Ltd.[1936] 1 K.B. 382 as to the applicable rule which is cited in full in the speeches

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of Lords Morris of Borth-y-Gest, Wilberforce and Kilbrandon. I shall refer to this as "the 1936 rule."

The approach adopted by the majority of this House to the reexamina on of wh at Lor d Rei d had described, at p. 453G, as "the rather insular doctrine" as he had stated it in the passage that I have cited, followed the step-by-step technique that is typical of the way in which principles that have informed the common law of England undergo development by judicial decision so as to enable jus ce to be done in the changi ng ci rcums tances in wh i ch the commo n law fal ls to be appl ied. In The Atlan c Star [1974] A. C. 436 the par cul ar devi ce emp l oyed wa s to gi ve to the wo r ds "vexa ous " and "oppressive" in the 1936 rule a more flexi bl e or l iber al appl ica on t han wou l d have accorded with the interpreta on that had been pl aced on these expr essi ons as terms of legal ar t in any of the previous authori es or , as Lor d Ki lbr andon poi nt ed out , wo ul d be ascribed to them i n or di nar y speech. How "flexi bl e" and how "l iber al " thi s appl ica on was to be i t was l e to subsequent cases t o show.

The next significant pace f or wa rd i n t he step- by- step appr oach wa s t aken f our year s l at er i n MacShannon v. Rockware Glass Ltd. [1978] A.C. 795. In three of the four reasoned speeches expounding the unanimous decision of this House the con nued use of the wo r ds "vexa ous " and "oppressive" in expressing the principles on which the court's discre on to gr ant a stay of Engl ish proceedings was exercised was specifical ly depr ecat ed and abandoned.

MacShannon was not a case where li ga on on t he same subj ect ma er between t he s ame p ar es was simultaneously proceeding in any jurisdic on ot her than Engl and; nor had The At lan c Star been treated as a case in which there was lis alibi pendens between the same par es , al though technically the plain ffs i n t he Engl i sh ac on had t aken a precau onary step in the Bel gi an court t o forestall a me bar oper a ng agai nst them i n t hat count r y i f they wer e t o be prevent ed f rom proceeding with their ac on in Engl and.

Accordingly, in MacShannon when I ventured to re-state the 1936 rule in amended form, I was not concerned to deal with what account should be taken of the existence of lis alibi pendens in exercising a discre on to gr ant a stay of pr oceedi ngs br ought in Engl and in the capaci ty of pl ai n ff by a person who is defendant to an ac on wi th the same subj ect ma er whi ch i s bei ng ac vely pursued against him in a foreign court that is unques onabl y one of comp et ent jur i sdi c on. In St. Pierre v. South American Stores (Gath & Chaves) Ltd. [1936] 1 K.B. 382 there was in fact a lis alibi pendens, but this had been brushed aside by Sco L. J. and is not ref er red to in hi s stat eme nt of the rule that un l the deci si on of thi s House in The Atlan c St ar [1974] A. C. 436 has been so o en ci ted and applied with the words "vexa ous " and "oppr essi ve" bei ng used in thei r liter al sense.

In the interval between the judgments of this House in The Atlan c St ar and those in MacShannon [1978] A.C. 795 the ques on of the we i ght , i f any, to be gi ven to l is al ibi pendens f el l to be determined by my noble and learned friend Lord Brandon of Oakbrook (then Brandon J.) in The Tillie Lykes [1977] 1 Lloyd's Rep. 124. Founding himself on certain *409 passages in the speech of Lord Wilberforce in The Atlan c Star he reached the concl us i on wh i ch he expr essed, at p. 127, i n the following words to which I have supplied the emphasis: "the mere existence of a mul pl ici ty of proceedings, is not to be taken into account at all as a disadvantage to the defendant." He later qualified that cat egor i cal stat eme nt by acknowl edgi ng that ther e mi ght be excep onal cases whe r e the bringing of the second ac on in Engl and wh i le the for ei gn ac on was proceedi ng mig ht cause an unusual hardship to a par cul ar def endant ; but as a gener al rul e the fact that to permi t the Engl and ac on to be pur sued wo ul d resul t in concur rent ac ons on t he same subj ect ma er proceedi ng i n two differ ent jur i sdi c ons coul d not be sufficient t o jus fy depr ivi ng the plai n ff of the advant age t o which he was en tled, if an Engl ish cour t of comp et ent jur i sdi c on coul d be f ound, to choos e i t as the forum in which he preferred to li gat e the ma er.

My Lords, in the instant case, Sheen J. was of opinion that the minimal importance a ached by Brandon J. in The Tillie Lykes to the avoidance of concurrent ac ons betwe en the same par es and about the same subject ma er i n two di fferent cour t s of compe t ent juri sdi c on was no l onger consonant with the general approach to the ques on of stayi ng pr oceedi ngs in Engl ish cour ts that

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had been adopted by this House in MacShannon. It was because the members of the Court of Appeal took the view that Sheen J.'s assessment of the effect of the speeches i n MacShannon disclosed an error of law that they felt jus fied i n s e ng as i de the Admir al ty judge' s exerci se of hi s discre on in favour of stayi ng the Engl ish pr oceedi ngs and in assumi ng a di scre on of thei r own, which they proceeded to exercise in the opposite way. This conflict of judi ci al opi ni on, as it seems to me, makes it incumbent upon your Lordships to provide guidance as to the extent to which the existence of lis alibi pendens ought to influence a judge in exer ci si ng hi s di scre on whe t her or not to impose a stay upon an ac on wh i ch it is sought to br ing in Engl and on the same subj ect ma er by a person who is already a defendant in the foreign ac on.

Before turning to this topic, however, it may be convenient to draw a en on t o t he other fact ors that point to Turkey as the forum in which jus ce can be done betwe en t he par es at l ess inconvenience and expense than in England. Neither of the par es has any connec on wit h Engl and, nor has the subject ma er of the ac on. The col l ision t ook pl ace i n Tur ki sh t err i tori al wat ers between a Turkish ship manned by a Turkish crew, who reside in the vicinity of the Bosphorus, and a Cuban ship manned by a Cuban crew that had been piloted by a local Turkish pilot to the place at which she was brought to anchor at some me pr evi ous to the col lisi on. Sur veyor s appoi nt ed by the Turkish court made a report on the collision within a few days of its occurrence and the damage to the Turkish ship was surveyed a er the col lisi on in a Tur ki sh por t in the local ity. So far as wi tnesses on the Turkish side are concerned, the convenience and economy of having the ac on tri ed in the nearby Turkish court of admiralty jurisdic on as comp ared wi th havi ng it tri ed in Engl and are al l one way: while so far as the convenience of witnesses on the Cuban side is concerned, there is li le to choose between England and Turkey, except for a sugges on that the ma ster and first officer of the Cuban ship *410 might be able (though perhaps unwise) to give their evidence in the English language instead of in their na ve tongue, wh i ch is Spani sh. In my vi ew as in that of Sheen J., not only was Turkey the country with which the ma er li gat ed had t he closest connec ons, but al so the natural and appropriate forum from the point of view of convenience and expense has, from the outset, been and s ll rema i ns : the Di stri ct Cour t of Sar i yer i n Tur key, wh er e pr oceedi ngs we r e promptly started by the Turkish shipowners against the Cuban shipowners as defendants and were proceeding with all due despatch when the writ in the English ac on wa s i ssued by the Cuban shipowners. I may add that there is no evidence to suggest that the costs of li ga on, as represented by the total amount of court and lawyers' fees, are greater in admiralty cases tried in Turkey than they are in similar cases when they are tried in England. One thing, however, is self-evident; it must be more expensive to li gat e about l iabi lity f or the same col lisi on i n two jurisdic ons than it wo ul d be to li gat e i n one alone.

True it is that by arres ng the si ster shi p of the Abidin Daver in an admiralty ac on i n rem i n England, the Cuban shipowners obtained security for their claim in respect of the collision in the Bosphorus of 23 March 1982. In some cases this may well be a decisive judicial advantage to be gained by a plain ff by pur sui ng an admi r al t y ac on i n Engl and, r at her t han i n some f orei gn jurisdic on wh i ch wo ul d ot herwi se be mo r e appr opr iat e but in wh i ch secur i ty cannot be obt ai ned by arres ng the shi p invol ved in the col lisi on or a si ster shi p. But secur i ty wh er e, as is usual , it has been put up by P. and I. insurers, is readily transferable from one jurisdic on to anot her . In the ins tant case it does not appear from what source the security to obtain the release of the Turkish sister ship was provided; but the Turkish shipowners undertook before Sheen J. to put up security in the District Court of Sariyer for any counterclaim the Cuban shipowners may wish to pursue in that court. So the advantage of security for the respec ve cl ai ms of the Tur ki sh and Cuban shi pown er s arising out of the collision has no effect i n l ng t he balance i n favour of con nuing the Engl i s h ac on by the Cuban shi pown er s.

My Lords, both Sheen J. and the Court of Appeal avowedly refrained from embarking upon a comparison of the quality of jus ce obt ai nabl e in a col lisi on case conducted in a Tur ki sh cour t wh i ch adopted a procedural system that is followed in civil law in other countries and that obtainable in a similar case conducted in an English court under the common law system of procedure. The Court of

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Appeal had expressed a similar view in the judgment of Brandon L.J. in Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119 . This House, too, in Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50 , 67, has very recently endorsed the view that it is quite inappropriate for English judges to undertake any such supposed comparison or to allow the exercise of their discre on to stay an Engl ish ac on t o be i nfluenced by i t .

In the same case this House also made it clear that the balancing of advantage and disadvantage to plain ff and def endant of permi ng li ga on t o pr oceed i n England r at her t han, or as well as , in a foreign forum is to be based upon objec ve standards suppor ted by evi dence. *411 Unlike the rule as it was stated by Lord Reid to have been applied before The Atlan c St ar [1974] A. C. 436 , a mere belief, however genuinely held by a would-be plain ff or his l egal advi sers that i t wou l d be t o his advantage to pursue an ac on in the Engl ish cour t rat her than to par cipat e i n proceedi ngs i n wha t would appear to be the more natural and appropriate forum is insufficient to j us fy refusal of a st ay, unless the belief is supported by objec ve evi dence.

The possibility cannot be excluded that there are s ll some count ries in wh ose cour ts ther e is a ri sk that jus ce wi ll not be obt ai ned by a f or ei gn l i gant in par cular kinds of s ui ts whet her f or ideological or poli cal r easons , or because of i nexper ience or i nefficiency of t he j udic i ary or excessive delay in the conduct of the business of the courts, or the unavailability of appropriate remedies. But where there is already a lis alibi pendens in a foreign jurisdic on wh i ch cons tutes a natural and appropriate forum for the resolu on of the di sput e, a pl ai n ff in an Engl i sh ac on, i f he wishes to resist a stay upon the ground that evenhanded jus ce ma y not be done to hi m in that par cul ar for ei gn jur i sdi c on, mus t assert this candi dly and suppor t his all ega ons wi th posi ve and cogent evidence. In the instant case the affidavi t fil ed on behal f of t he Cuban shi powner s in opposi on to the stay cont ai ned no cogent evi dence of thi s ki nd. I t confined i tsel f to t enuous innuendoes that Turkish lawyers might prove to be mo r ous advocat es in a sui t agai ns t a Tur ki sh state-controlled corpora on. The cont ent s of thi s par t of the affidavi t are most aptl y descr i bed by quo ng the comp l et e coupl et of Al exander Pope, of wh i ch the first l ine whe n c ited on i ts own i s too familiar to have escaped banality: "Willing to wound, and yet afraid to strike, Just hint a fault, and hesitate dislike."

So I turn to the crucial ques on of wh at influence upon t he exerci se of his dis cre on whet her t o grant a stay of the English proceedings or not the judge should have a ribut ed to the fact that at the me the stay wa s appl ied for ther e wa s al ready pr oceedi ng in a nat ur al and appr opr iat e for um, the District Court of Sariyer, li ga on bet wee n t he same par es about t he s ame s ubj ect ma e r in whi ch the roles of plain ff and def endant wer e r eversed.

My Lords, the essen al change i n the a tude of t he Engl i sh court s to pendi ng or prospec ve li ga on i n f oreign j uri sdi c ons t hat has been achi eved s t ep-by-s tep duri ng t he l ast 10 years as a result of the successive decisions of this House in The Atlan c Star [1974] A. C. 436 ; MacShannon [1978] A.C. 795 and Amin Rasheed [1984] A.C. 50, is that judicial chauvinism has been replaced by judicial comity to an extent which I think the me is now ripe to acknowl edge frankl y is, in the field of law with which this appeal is concerned, indis ngui shabl e from the Sco sh l egal doct r i ne of forum non conveniens.

Where a suit about a par cul ar subj ect ma er bet wee n a pl ain ff and a def endant i s already pending in a foreign court which is a natural and appropriate forum for the resolu on of the di sput e between them, and the defendant in the foreign suit seeks to ins tut e as pl ai n ff an ac on in England about the same ma er to wh i ch the per son wh o i s pl ai n ff in the f orei gn sui t is made defendant, then the addi onal inconveni ence and expense wh i ch mu s t resul t from al lowi ng two set s of legal proceedings to *412 be pursued concurrently in two differ ent count ries wh er e the same facts will be in issue and the tes mo ny of the same wi tnesses requi red, can onl y be jus fied i f the would-be plain ff can est abl i sh obj ec vely by cogent evi dence that t here i s some p ersonal or juridical advantage that would be available to him only in the English ac on t hat i s of such importance that it would cause injus ce to hi m to depr i ve hi m of it.

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Quite apart from the addi onal i nconveni ence and expense, i f the two ac ons are al l owed t o proceed concurrently in the two jurisdic ons the cour ts of the two count ries ma y reach conflic ng decisions, a possibility which (pace Sir John Donaldson M.R.'s use of the adjec ve in the ins tant case) is far from being merely "theore cal " in a case of a col lisi on betwe en two shi ps , wh er e the me asur e of liability of one ship to the other is dependent upon the court's view of the compara ve faul t of each ship. Since the District Court of Sariyer would be recognised by the English High Court as a court of competent jurisdic on, any judgme nt gi ven by i t agai ns t the Cuban shi pown er s wo ul d be enforceable in England by ac on; so an unseeml y race to be the first to obt ain j udgmen t in t he jurisdic ons in wh i ch the Tur ki sh shi pown er s and the Cuban shi pown er s respec vel y are plain ffs might well ensue; and novel problems rela ng to estoppel per rem judi cat am and issue estoppel , which have not hitherto been examined by any English court, might also arise. Comity demands that such a situa on shoul d not be permi ed t o occur as bet wee n cour t s of two c ivil ised and f riendl y states. It is a recipe for confusion and injus ce.

Faced with such a daun ng pr ospect it ma y we l l be that a def endant on bei ng ref used a stay of the concurrent ac on br ought agai ns t hi m subsequent ly in Engl and wi ll feel dr i ven to se le upon t erms more favourable to the other party than he would if the li ga on had proceeded i n t he f orm o f claim and cross-claim in the court of competent jurisdic on i n wh i ch he has al ready i ns tuted proceedings as plain ff; or, if a empt s at se l ement f ai l will become a counter - cl aimant i n the English proceedings instead of con nui ng wi th hi s for ei gn ac on. The f ail ure of judges i n any of the decided cases to embark upon an examina on of t he i nevi tabl e i nconveni ences , expense and injus ces that mi ght resul t if concur rent ac ons bet wee n t he same par es aris ing out of t he s ame collision did in fact con nue to be fought out to the bi er end, suggest s that those j udges act ed upon the assump on that the par es i n t hei r own comme r cial interest s wou l d never all ow t his to happen. The assump on, al though pr obabl y real is c, has nevert hel ess remai ned t aci t un l it was ar cul at ed in the ins tant case in the judgme nt of Si r John Donal dson M. R. wh er e he sai d [1983] 1 W.L.R. 884, 892:

"If there is any serious inconvenience to the Turkish shipowners in being involved in two sets of proceedings, they have their remedy. They can transfer their claim here where it will be dealt with in the same proceedings as that of the Cubans."

My Lords, in his judgment in the instant case Sheen J. considered that those factors to which I have already referred and are set out in greater detail in the speech of Lord Brandon of Oakbrook, pointed ineluctably to the District Court of Sariyer as the forum in which the li ga on bet wee n *413 the par es ar i si ng out of the col lisi on can be mu ch mo r e conveni ent ly tri ed and that the Cuban shipowners would not suffer any jur idi cal di sadvant age from tri al at Sar i yer . In hi s reser ved judgment he did not lay par cul ar stress upon t he i ncrease i n i nconveni ence, expense or the poten al conf us i on wh i ch wo ul d resul t from Tur ki sh and Engl ish ac ons bei ng pur sued concurr ent l y; but that these considera ons we r e amo ng those that we r e in hi s mi nd as we l l as those to wh i ch he referred expressly, is evident from his rejec on of the submi ssi on that the i nt er pr et a on pl aced upon The Atlan c Star [1974] A. C. 436 in The Tillie Lykes [1977] 1 Lloyd's Rep. 124, if it were understood as sugges ng that ver y li le wei ght shoul d be a ached t o the f act of t here being l i s al ibi pendens, could survive the ra o deci dendi of the speeches in thi s House in MacShannon [1978] A.C. 795.

On appeal from this exercise by the judge of his discre on, Si r John Donal dson M. R. in hi s judgme nt , which was extempore, expressed his own opinion that, if one ignored the fact that there was already a Turkish ac on on foot , the factor s in favour of the Tur ki sh and the Engl ish cour ts respec vel y as the more convenient forum in which to carry on li ga on about the col l ision, amon g whi ch he included the greater experience of the English Admiralty Court of collision cases, would be fairly evenly balanced. Consequently it would seem, though this is not explicitly spelt out in the judgment, he did not think that the Turkish shipowners as defendants in the English ac on had sa sfied t he

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court that there was another forum to whose jurisdic on they we r e ame nabl e in wh i ch jus ce coul d be done between them and the Cuban shipowners at substan al ly less inconveni ence or expense. The Turkish shipowners thus, in his opinion, did not sa sfy the first and pos i ve condi on in the restatement to be found in MacShannon of the 1936 rule. Such a balancing of the weight to be a ached to di fferent fact ors i n f avour of one f orum r ather than anot her i s of the very essence of discre on and wi th the wa y in wh i ch it has been exer ci sed by a judge of first inst ance an appel l ate court is not en tled to int er fer e except on pr inc i pl es that have been so o en s tated by this House that I need not repeat them here.

The jus fica on f or exer ci si ng t heir own d i scre on in subs t u on f or t hat of t he Admi r al t y judge and with the opposite result that was relied upon by all three members of the Court of Appeal was that Sheen J. had erred in law in thinking, as it was inferred he had, that the effect of the speeches in this House in MacShannon [1978] A.C. 795 was that the fact that Turkish ac on wa s in exi stence and was being ac vel y pur sued wi th due di spat ch shoul d be gi ven mo r e than that mi ni ma l we i ght that it had been said in The Tillie Lykes [1977] 1 Lloyd's Rep. 124, ought to be ascribed to the existence of the lis alibi pendens that existed in that case. If this can be correctly classified as a ques on of law a t all, it will be evident from what I have previously said that I think the judge rightly iden fied t he s tep forward from The Atlan c St ar [1974] A. C. 436 that had been taken in MacShannon. If, as I think would be more accurate, the ques on i s cl assi fied as one of di s cre on, t he j udge' s exer ci se of i t could only be reversed if it could be credibly said that no reasonable judge who had not misunderstood the evidence before him could have reached *414 the conclusion that the English ac on ought to be stayed. Thi s, howe ver , wa s not a ground rel ied upon by the Cour t of Appeal .

Dunn L.J., with whose judgment as well as that of Sir John Donaldson M.R., Purchas L.J. expressed his own agreement, considered that the Admiralty judge had also erred in law in failing to treat as a legi ma t e jur idi cal advant age of wh i ch the Cuban shi pown er s wo ul d be depr ived if pr event ed from pursuing their ac on in Engl and, the fact that they wo ul d, as pl ai n ffs, be i n contr ol of t he Engl i sh ac on wh er eas in Tur key they wo ul d be count er cl ai mi ng as def endant s. So the second and nega ve condi on of the MacShannon re-statement of the 1936 rule, as well as the first and pos i ve condi on, wa s not comp l ied wi th.

My Lords, in my own prac ce at the Bar , I wa s not cons ci ous of any handi cap to my cl ient s i n obtaining jus ce, even under the Engl ish adver sar ial system, in consequence of thei r appear ing as counterclaimants in an ac on rat her than as pl ai n ffs. My o wn p r ac ce, i t i s right t o say, di d not embrace ac ons about col lisi ons ei ther at sea or on l and; but wh en as a Queen' s Bench j udge, par cul ar l y on ci rcui t, I acqui red cons i der abl e fami liar i ty wi th ac ons about col l isions on l and, it never crossed my mind that the outcome of the ac on bef or e me coul d be influenced by whi ch party was plain ff and whi ch def endant and count erclaiman t . But the dis advant ages, if any, of bei ng counterclaimant instead of plain ff in an Engl i sh Admi r al t y ac on ar e besi de t he point . The j uridi cal disadvantage to the Cuban shipowners which Dunn L.J. was contras ng wi th the advant age of bei ng plain ff in t he Engl i sh ac on, i s bei ng count er cl ai mant i n the Turki sh ac on; and t her e i s no evidence that in that jurisdic on, wh er e ci vi l l aw pr ocedur e i s adopt ed, a count er cl ai ma nt i n a mari me col lisi on case labour s under any di sadvant age comp ared wi th a pl ai n ff, except as r egar ds security. If the lodging of security be a safeguard that is of any significance in an ac on i n a Tur ki sh court against a Turkish state corpora on that accor di ng to the Cuban shi pown er s' wr i t in the Engl ish ac on oper at es a fleet of not less than 58 vessel s , this ma er i s di sposed of by t he Turki sh shipowners' offer to pr ovi de in the Tur ki sh ac on securi ty f or the Cuban shi powne r s ' count erclaim. An undertaking to this effect can be emb odi ed in the or der gr an ng a stay of the Engl i sh ac on.

For all these reasons I would allow the appeal and restore the stay of the English ac on grant ed by the Admiralty judge, incorpora ng in the or der the under taki ng pr offered by the Turki sh shi powne r s to put up security for any counterclaim in the Turkish ac on that the Cuban shi pown er s ma y br ing, the amount of the security in default of agreement by the par es to be se led by the Admi r al t y Registrar.

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Since preparing this speech I have had the opportunity of reading in dra the speech wh i ch wi ll be delivered by my noble and learned friend, Lord Brandon of Oakbrook, with which, as will become evident, I am in complete agreement.

LORD EDMUND-DAVIES.

My Lords, upon comple ng my readi ng of the rel evant ma t er ial pr eparat or y to hear ing thi s appeal , I wrote the words "Wasn't he right?" alongside the following passage in the brief reserved judgment of Sheen J.: *415

"I am le in no doubt that the Sar i yer Di stri ct Cour t is cl ear l y a mo r e appr opr iat e for um than this court ... [Counsel for the plain ffs] was unabl e t o poi nt to any j uri dical advantage of which the plain ffs wou l d be depr i ved i f I grant a stay. [She] submi ed that this court has an almost overwhelming advantage of experience of collision ac ons . It is true that thi s cour t has cons i der abl e exper ience of col lisi on ac ons , but I must not allow myself to be drawn into making comparisons between the ability of this court and the ability of another court in a friendly state to do jus ce in such cases . Since I have formed the view that the li ga on bet wee n t he par es t o thi s ac on arising out of the collision can be much more conveniently tried in the District Court of Sariyer and that the plain ff wi l l not suffer any j uridi cal disadvantage f r om t r i al at Sariyer, it follows that jus ce dema nds that thi s ac on be s tayed. "

My Lords, the subsequent hearing of the appeal convinced me that the proper answer to my ini al ques on is an affirma v e one. The r easons l eading me to that concl us i on ar e t hose f ul ly expounded in the speeches of the noble and learned Lords, Lord Diplock and Lord Brandon of Oakbrook, both of which I gratefully adopt.

I therefore concur in allowing the appeal and in the order they propose.

LORD KEITH OF KINKEL.

My Lords, I agree that this appeal should be allowed for the reasons given in the speech of my noble and learned friend, Lord Diplock, to which I would add only a few supplementary observa ons .

In MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 I sought to analyse the speeches of Lord Reid and Lord Wilberforce in The Atlan c Star [1974] A.C. 436, and observed that a dis nc on was to be drawn between a case where England is the natural forum for the plain ff to bri ng his ac on and a case where it is not. By "the natural forum" I mean that with which the ac on had the mo s t real and substan al connec on. In t he present case i t i s abundant l y pl ain, havi ng r egard t o t he f eat ures which are very fully described in the speech of my noble and learned friend, Lord Brandon of Oakbrook, that Turkey is, and England is not, the natural forum.

I said in MacShannon, at p. 829:

"Where, however, the defendant shows that England is not the natural forum and that if the ac on we r e con nued t her e he wou l d be i nvol ved i n subs t an al ( i.e. more than de minimis) inconvenience and unnecessary expense, or in some other disadvantages, which would not affect hi m in the nat ur al for um, he has ma de out a pr ima faci e case for a stay, and if nothing follows it may properly be granted. The plain ff may , however, seek to show some reasonable jus fica on f or hi s choi ce of f orum i n the shape of advantage to him. If he succeeds it becomes necessary to weigh against each other the advantages to the plain ff and t he di s advant ages to t he def endant , and a stay will not be granted unless the court concludes that to *416 refuse it would involve injus ce to the def endant and no inj us ce t o t he plain ff."

The last sentence should be read with the inser on of the wo r ds "the gr ant wo ul d invol ve" bef or e

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the words "no injus ce to the pl ai n ff."

In this case the defendants would, if required to meet the plain ffs' claim i n an Engl i sh r ather than i n a Turkish court, plainly be involved in substan al i nconveni ence and unnecessar y expense. The dependence in the Sariyer District Court at Buyukdere in Turkey of the proceedings ins tut ed by the defendants, in which the plain ffs' cl aim i s capabl e of bei ng deal t wi t h, has the effect that t he inconvenience and expense would be compounded. The plain ffs ha ve en r ely fai led t o demonstrate any reasonable jus fica on f or t heir choi ce of t he Engl i sh forum i n the shape of a legi ma t e for ens i c or per sonal advant age. It fol lows that , on a pr oper appl ica on of the pri nci ple I have set out, Sheen J. correctly concluded that a stay should be granted and that the Court of Appeal wrongly reversed his decision.

LORD BRANDON OF OAKBROOK.

My Lords, on 23 March 1982 a collision took place in the Bosphorus off the por t of Buyukder e between two ships, the Las Mercedes and the Abidin Daver. The Las Mercedes is a Cuban ship owned by a Cuban state corpora on, wh o are the respondent s in thi s appeal . The Abi di n Daver is a Turkish ship owned by a Turkish state corpora on, wh o are the appel lant s. Each shi p bl ame s the other for the collision, and each of the owners claims to be en tled to recover dama ges from the other in respect of it.

Following the collision, the Turkish owners obtained immediately from the local court, the Sariyer District Court, an order for the deten on of the Las Mercedes. On 16 April 1982 the Turkish owners as plain ffs began proceedi ngs agai nst the Cuban owne r s as def endant s i n t he s ame Turki sh cour t , in which they claimed damages in respect of the collision. Turkish lawyers ac ng for the Cuban owners performed the equivalent of acknowledging service in the Turkish ac on, so pu ng t heir clients in a posi on to def end that ac on. The Cuban owne r s furt her provi ded such s ecuri ty f or the Turkish owners' claim as enabled the Las Mercedes to be released from deten on.

On 29 June 1982 the Cuban owners as plain ffs began an ac on i n rem i n the Admi r a lty Cour t i n England against the Abidin Daver and 57 sister ships of hers, in which they also claimed damages in respect of the same collision. On 2 July 1982 the Cuban owners served the writ in the English ac on on the ship Gazi Osman Pasha, one of the sister ships of the Abidin Daver, which was then in a Welsh port, and arrested her there. English lawyers ac ng for the Tur ki sh own er s acknowl edged service of the writ and the Turkish owners provided such security for the Cuban owners' claim as enabled the Gazi Osman Pasha to be released from arrest.

On 28 July 1982 the Turkish owners issued a no ce of mo on i n t he Engl i sh ac on i n whic h they applied for a stay of it, broadly on the ground that both the claim of the Turkish owners and the cross-claim of the Cuban owners should be adjudicated on by the Turkish court, and the Turkish court alone.

*417

Affidavi ts rela ng t o the appl i ca on for a stay of the Engli s h ac on wer e fi l ed by both si des and the mo on lat er came on for hear ing bef or e Sheen J. on 28 and 29 Apr i l 1983. On 4 Ma y 1983 the judge, a er del iver ing a reser ved j udgme nt , ma de an or der by wh i ch he gr ant ed the Tur ki sh own er s' applica on for a stay wi th cos ts and ref used the Cuban own er s leave to appeal .

Subsequently the Cuban owners applied to the Court of Appeal for leave to appeal from the order of Sheen J. and to adduce further affidavi t evi dence i n suppor t of thei r case. The appl i ca ons were heard and granted by a division of the Court of Appeal consis ng of Si r John Donal dson M. R. and Dunn and Purchas L.JJ., which then proceeded to hear the substan ve appeal . By an or der dat ed 17 May 1983 the Court of Appeal allowed the Cuban owners' appeal with costs and removed the stay. By a further order dated 25 May 1983 the Court of Appeal refused an applica on by the Tur ki sh owners to appeal to your Lordships' House. Leave for them to do so was, however, later granted by the Appeal Commi ee.

My Lords, it is not in dispute that both the Sariyer District Court in Turkey, and the Admiralty Court

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in England, are courts of competent jurisdic on to try and det ermi ne the ques on of l iabi l ity f or the collision and to assess the damages payable by the one side or the other. So far as the Admiralty Court in England is concerned, jurisdic on to hear and det ermi ne the Cuban own er s' cl ai m in an ac on in rem is conf er red on it by sec ons 20 and 21 of the Supr eme Cour t Ac t 1981 . It does not, however, necessarily follow that, because an English court has jurisdic on to try and det ermi ne a par cul ar cl ai m, i t i s al wa ys and in al l ci rcums tances obl iged to exer ci se that jur i sdi c on. On t he contrary, so far as the High Court in England (including the Admiralty Court) is concerned, the court has power, even though it has jurisdic on to try and det ermi ne a par cul ar ac on br ought befor e i t , to decline to exercise that jurisdic on, and ins tead to gr ant a stay of the ac on, eit her of its own mo on or on the appl ica on of any per son, whe t her a par t y to t he ac on or not. That power t o st ay is part of the inherent jurisdic on of the Hi gh Cour t, expr essl y pr eser ved by sec on 49( 3) of the Act of 1981.

The exercise of the High Court's power to grant a stay under that sec on i s a ma er for the discre on of the cour t. Such di scre on i s not , howev er , unf e ered. On t he contr ary, i t is a di scre on which has to be exercised with great cau on i n accor dance wi th pr inc i pl es wh i ch have been established by judicial authority over the years.

My Lords, un l two recent deci si ons of your Lor dshi ps ' House, the pr inc i pl es gover ni ng the exer ci se of the High Court's power to grant a stay of an ac on even though i t had jur i sdi c on t o t ry and determine it, were accepted as being those laid down by Sco L. J. in St. Pierre v. South American Stores (Gath & Chaves) Ltd. [1936] 1 K.B. 382. In that case Sco L. J., ref er ring to the powe r to gr ant a stay under sec on 41 of theSupr eme Cour t of Judi cat ur e (Consol ida on) Act 1925 ( the predecessor of sec on 49( 3) of the Ac t of 1981) , sai d, at p. 398:

"The true rule about a stay under sec on 41, so far as rel evant to thi s case, ma y I thi nk be stated thus: (1) A mere balance of convenience is not a sufficient ground f or depriving a plain ff of the advant ages *418 of prosecu ng hi s ac on i n an Engl i sh court if it is otherwise properly brought. The right of access to the King's court must not be lightly refused. (2) In order to jus fy a stay two condi ons mus t be s a sfied, one posi ve and the ot her nega ve: (a) the def endant mus t sa sfy the court that t he con nuance of the ac on wou l d wor k an i njus ce because i t woul d be oppr es si ve or vexa ous to hi m or wo ul d be an abuse of the pr ocess of the cour t in some ot her wa y; and (b) the stay must not cause an injus ce to the pl ai n ff. On both the burden of proof is on the defendant. These proposi ons are, I t hi nk, c ons i stent wi th and supported by the following cases: McHenry v. Lewis (1882) 22 Ch.D. 397; Peruvian Guano Co. v. Bockwoldt (1883) 23 Ch.D. 225; Hyman v. Helm (1883) 24 Ch.D. 531; Thornton v. Thornton (1886) 11 P.D. 176 and , 150, 151."

The applica on of these pr inc i pl es oper at ed i n pr ac ce i n such a way as to mak e i t ext remel y difficul t for a def endant to obt ain a stay of an ac on br ought i n the Hi gh Cour t i n Engl and, otherwi se than where the bringing of it was of itself an abuse of the process of the court. The reason for this was that it was extremely difficul t for a def endant to s a sfy the court that t he con nuance of the ac on wo ul d wo r k an inj us ce t o him b ecause i t wou l d be oppr ess i ve or vexa ous t o hi m in the opprobrious sense which these epithets were generally regarded as having in the context in which they were used.

It is not now, and was not in the past, infrequent, following a collision between two ships, A and B, for two ac ons to be br ought in respect of it, one by the own er s of shi p A as pl ai n ffs agai nst the owners of ship B as defendants in a foreign court of competent jurisdic on, and the ot her by the owners of ship B as plain ffs agai nst the owne r s of shi p A as def endant s i n t he Admi r al t y Cour t in England, which is, of course, precisely what has happened in the present case. In such cases it also occurred from me to me t hat the owne r s of shi p A wou l d appl y to t he Admi r al t y Cour t her e f or a stay of the ac on bef or e i t, on the ground that bot h cl ai m and cros s-cl ai m coul d and shoul d be

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decided by the foreign court concerned. The situa on un l 1973, howev er , was that such applica ons we r e invar iabl y di smi ssed, the br oad ground for ref us i ng a stay bei ng that the br ingi ng and con nuance of the ac on her e was not , mer ely by reason of the co-exi stence of the ac on abroad, so oppressive or vexa ous to the own er s of shi p A as to wo r k them an inj us ce. Repor t ed examples of such cases include: The Janera [1928] P. 55; The London [1931] P. 14; The Madrid [1937] P. 40; The Quo Vadis [1951] 1 Lloyd's Rep. 425; The Monte Urbasa [1953] 1 Lloyd's Rep. 587; The Lucile Bloomfiel d [1964] 1 Ll oyd' s Rep. 324 and The Soya Margareta [1961] 1 W.L.R. 709. The result in prac ce ther ef or e wa s that , al though the cour t in such cases had, and recogni sed that i t had, a discre on to gr ant or ref use a stay, i t i nvar iabl y exer ci sed such di scre on ( so f ar as any reported applica ons are concer ned) in the same wa y, name l y, by ref us i ng a stay.

My Lords, I said that this was the situa on un l 1973. In t hat year the pri nci ples i n accordance wit h which a court should exercise its discre on to stay an ac on proper l y brought bef ore i t came t o be considered for the *419 first me i n your Lordshi ps' House i n The Atlan c St ar [1974] A. C. 436 . Some four years later they came to be considered a second me in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795.

It would not, I think, serve any useful purpose to go into the facts of these two cases, which differ ed from each other and from those in the present case, although The Atlan c Star had some feat ur es analogous to the la er . Al l that I cons i der that i t i s usef ul to do i s to expr ess my vi ew of the combined result of these two decisions, so far as the principles governing the exercise by a court of its discre on to gr ant or ref use a stay are concer ned. That resul t can, i n my opi ni on, be put int o three separate, but interconnected, compartments.

First, the need for an applicant for a stay to sa sfy the cour t that the con nuance of the ac on against him would work him injus ce because it wo ul d be oppr essi ve or vexa ous to him n o l onger exists. In The Atlan c Star [1974] A. C. 436 , it was said that the words "oppressive" and "vexa ous " were not terms of art and must be given a much broader and much less rigid sense than had been given to them in the past. In MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 the process in the development of the law which had been begun in The Atlan c Star wa s car ried a long step fur ther : it was said that it would be be er for the fut ur e, in or der to avoi d conf us i on, to get rid al toget her , in the formula on of the rel evant pr inc i pl es , of the wo r ds "oppr essi ve" and "vexa ous , " and wit h t hem of the opprobrious concepts which their ordinary and natural meaning necessarily evoked.

Secondly, with these two opprobrious epithets out of the way, the second part of the test laid down by Sco L. J. in St. Pierre v. South American Stores (Gath & Chaves) Ltd. [1936] 1 K.B. 382, 398 could be reformulated as follows:

"(2) In order to jus fy a stay two condi ons mus t be sa sfied, one pos i ve and the other nega ve: (a) the def endant mu s t sa sfy the cour t that ther e i s anot her forum t o whose jurisdic on he is ame nabl e in wh i ch jus ce can be done bet wee n t he par es at substan al ly l ess i nconveni ence or expense, and (b) the stay mu s t not depr i ve the plain ff of a l egi mate personal or j uridi cal advantage whic h woul d be avai l able to hi m if he invoked the jurisdic on of the Engl ish cour t."

The reformula on jus t ci ted, wh i ch omi ts si gni ficant l y, in r ela on t o (b), any r efer ence to burden of proof, is contained in the speech delivered in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 by my noble and learned friend, Lord Diplock, at p. 812. I venture to think, however, that it accorded with the opinions of all the other members of the Appellate Commi ee in that case.

Thirdly, and this concept emerges most clearly from the speech of Lord Wilberforce in The Atlan c Star [1974] A.C. 436, the exercise of the court's discre on in any par cul ar case necessari l y i nvol ves the balancing of all the relevant factors on either side, those favouring the grant of a stay on the one hand, and those milita ng agai ns t i t on the ot her . Such bal anci ng ma y be a di fficult proces s and some cases may be very near the line.

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*420

My Lords, as I indicated earlier, the decision whether to allow or refuse an applica on for the stay of an ac on, even though the cour t has jur i sdi c on t o t ry and det ermin e i t, is a dis cre onar y deci s i on for the judge of first ins tance to wh om the appl ica on i s mad e. It foll ows that , whe r e t he j udge of first ins tance has exer ci sed hi s di scre on i n one way or the other , the grounds on whi ch an appel l ate court is en tled to i nt er fer e wi th the deci si on wh i ch he has ma de are of a l imi ted character . I t cannot interfere simply because its members consider that they would, if themselves si ng at first instance, have reached a differ ent conc l us i on. I t can onl y i nt er fer e i n thr ee cases : (1) wh er e the judge has misdirected himself with regard to the principles in accordance with which his discre on had to be exercised; (2) where the judge, in exercising his discre on, has taken int o account ma ers which he ought not to have done or failed to take into account ma er s wh i ch he ought to have done; or (3) where his decision is plainly wrong. That being the posi on, I tur n to cons i der how Sheen J. dealt in his judgment with the applica on for a stay wh i ch wa s bef or e hi m in the pr esent case, and, since the Court of Appeal thought fit to rever se hi s deci si on, to see wh et her any of the three permissible grounds en tl ing them to do so are establ ished.

I consider, first, wh et her t he j udge di rected hi ms el f cor rectly wi th r egard t o t he pr inc i pl es i n accordance with which he was obliged to exercise his discre on. So far as thi s is concer ned onl y an affirma ve answer i s poss i bl e. He began hi s judgment by s ayi ng:

"On this mo on counsel for the def endant s mo ves for an or der that thi s ac on be stayed on the ground that there is another forum to whose jurisdic on the def endant s are amenable, namely the Sariyer District Court at Buyukdere in Turkey, in which jus ce can be done betwe en t he par es at subs t an al ly less i nconveni ence and expense and that a stay of this ac on wi ll not depr i ve the pl ai n ffs of a l egi mate personal or juridical advantage available to them in this court."

It is clear that the judge derived this passage from the formal grounds for the grant of a stay set out in the Turkish owners' no ce of mo on dat ed 18 J uly 1982. It i s equal l y clear that who ever dra ed those grounds was seeking to adapt as closely as possible to the present case the reformula on of the relevant principles in the speech of my noble and learned friend, Lord Diplock, in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795, 812, which I cited earlier.

In rela on to the first and pos i ve ques on formul at ed by my no bl e and l earned f r i end, Lord Diplock, the judge went on to say:

"The first ques on whi ch I mus t answer i s whe t her ther e i s anot her juri sdi c on whic h is clearly more appropriate than England for the trial of the ac on. The def endant s must sa sfy me of the exi stence of such ot her jur i sdi c on. "

Later in his judgment, a er deal ing wi th the first ques on and answeri ng i t in the affirma ve, he said this about the submissions made to him by Mrs. Blackburn, who appeared as sole counsel for the Cuban owners before him: "Mrs. Blackburn was unable to point to any juridical *421 advantage of which the plain ffs wou l d be depr i ved i f I grant a stay. " I n t his connec on i t is necessary to men on that the Tur ki sh own er s had al l al ong offered t o provi de securi ty f or any count erclaim which the Cuban owners might wish to raise in the Turkish ac on if a stay of the Engl ish ac on wer e granted, and your Lordships were told that this offer s l l stands . Ther e was accordingl y no r isk that , if the Cuban owners were compelled, by a stay of their ac on her e, to br ing a count er cl ai m in the Turkish court, they would be deprived of adequate security in respect of it.

The passages which I have quoted from the judge's judgment support the view which I expressed earlier that the ques on wh et her the judge di rected hi ms el f cor rectly wi th regard to the pr inc i pl es according to which he was obliged to exercise his discre on coul d onl y be answe r ed i n t he

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affirma ve.

I consider, secondly, whether the judge, in exercising his discre on, took i nt o account the ri ght ma er s and not the wr ong ma ers . He began by taki ng i nto account the f oll owi n g numer ous ma er s wh i ch he regarded as favour ing a stay. Fi rst, that the col lisi on occur red in Tur ki sh wa t er s. Secondly, that one of the two ships involved, the Abidin Daver, was a Turkish ship manned by a Turkish crew resident in Turkey. Thirdly, that the Las Mercedes had been led to her anchorage shortly before the collision by the Turkish pilot whose evidence was material. Fourthly, that any members of the crew of the Las Mercedes who might be required to a end the tri al coul d a end the Turkish court without any more inconvenience than they would be subjected to by having to come to London. Fi hl y, that , if the case wa s tri ed by the Tur ki sh cour t, the Tur ki sh wi tnesses wo ul d be away from their homes for a much shorter period, and that for that reason there would be less disrup on caused to thei r wo r k. Si xthl y, that , under the system of jus ce admi n is tered i n Tur key, the Turkish court had appointed a surveyor who had already interviewed relevant witnesses and prepared a report for the court. Seventhly, that the li ga on had no connec on wi th Engl and, except for the arrest of one of the sister ships of the Abidin Daver in an English port.

The judge went on to consider the following further ma er s put for wa rd by counsel for the Cuban owners as milita ng agai ns t a stay. Fi rst, that the Cuban wi tnesses wh om it wo ul d be necessar y to call could speak English but not Turkish. Secondly, that the Cuban owners chose to sue in England because they understood English procedure but might not understand Turkish procedure. And, thirdly, that the Cuban owners wished to make progress with the ac on.

Subject to one point to which I shall refer later, it seems to me that the judge took into account all the right ma er s and di d not take int o account any wr ong ma ers .

I consider, thirdly, whether it could be said that the judge's decision was plainly wrong. With regard to this he said, a er ref er ring to the first four of the seven f act ors whi ch he r egarded as favour i ng a stay: "There is thus an overwhelming balance of convenience for the witnesses if the trial takes place in Turkey rather than in London." Later, a er ref er ring to the ma ers put forwar d by counsel for the Cuban owners as milita ng agai ns t a stay, he sai d: *422

"I have come to the conclusion that I should give very li le we i ght indeed to any of these points. The first and second are bal anced by the facts that def endant s' wi tnesses speak the language of the Turkish court and the defendants understand Turkish procedure. As to the third point I have no reason to think that the Turkish shipowners do not want to press on with this li ga on. "

Finally, in the last paragraph of his judgment, the judge said:

"Since I have formed the view that the li ga on bet wee n t he par es t o thi s ac on arising out of the collision can be much more conveniently tried in the District Court of Sariyer and that the plain ff wi l l not suffer any j uridi cal disadvantage f r om t r i al at Sariyer, it follows that jus ce dema nds that thi s ac on be s tayed. "

I set out earlier the factors on either side which the judge took into account. The assessment of the weight to be given to those factors, and the balancing of the factors on one side against those on the other, were ma er s en rely f or the j udge t o deal wit h. On t he f oo ng, t heref or e, t hat he di rected himself correctly with regard to the principles in accordance with which he had to exercise his discre on, and that he took i nt o account the ri ght factor s and not the wr ong ones , i t i s, i n my opinion, impossible to say that the decision which he reached was plainly wrong. On the contrary, it appears to me to have been plainly right.

My Lords, I now turn to examine the grounds on which the Court of Appeal, whose decision is reported in [1983] 1 W.L.R. 884, thought it right to reverse the judge's conclusion. A study of the

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judgments of Sir John Donaldson M.R. and Dunn L.J., with both of whom Purchas L.J. agreed, shows that they considered that Sheen J. had erred in principle in regarding, as he undoubtedly did, the co-existence of the Turkish ac on as a deci si ve factor i n the exer ci se of hi s di scre on. Si r John Donaldson M.R. said, at pp. 891, 892:

"Further, I think it is clear that Sheen J., in balancing the various factors, was giving very full weight - as, indeed, he was en tled to do on the vi ew he took of the law - to the fact that there were already proceedings on foot in Turkey. But I have come to the conclusion that Sheen J. erred in principle ... It is a factor of which account should be taken, but it is not a factor which, of itself, is of sufficient wei ght to displ ace t he r ight of a plain ff to choose his own f orum a nd, of itsel f , to creat e a lt in the ot her di rec on."

Dunn L.J. said, at p. 892:

"At the outset of his judgment the judge asked himself the ques on wh et her the Turkish court or the English court was the more appropriate forum for the trial of this ac on, and hel d on a bal ance of conveni ence that the Tur ki sh cour t wa s cl ear l y the more appropriate. With respect to Sheen J., that was the wrong ques on to ask. The Atlan c Star ... and MacShannon v. Rockware Glass Ltd. ... show that the English Court of Admiralty, whose jurisdic on has been invoked in rem, is pr ima faci e the nat ur al and appropriate forum in which to bring an ac on of thi s ki nd, and is recogni sed as such by interna onal conven on. A mer e bal ance of conveni ence i s *423 not a sufficient ground for depriving the plain ffs of the advant ages of pur sui ng t hei r ac on i n the Admiralty Court. The fact that there is a claim by the defendants against the plain ffs already pending in Turkey is not of itself a bar to the plain ffs claimin g i n t his count r y against the defendants for damages arising out of the same collision as is being li gat ed in Tur key ..."

Both Sir John Donaldson M.R. and Dunn L.J., in expressing the views which they did, appear to have placed considerable reliance on an earlier decision made by me when si ng as a j udge of first instance in the Admiralty Court. That case was The Tillie Lykes [1977] 1 Lloyd's Rep. 124, and both the members of the Court of Appeal referred to appear to have regarded my judgment in that case as authority for the proposi on that , in cases of the ki nd her e concer ned, l i le or no i mpo r t ance should be a ached to the co- exi stence of anot her ac on r ela ng t o the s ame s ubj ect ma e r in a foreign court.

The Tillie Lykes was decided a er the deci si on of your Lor dshi ps ' House in The Atlan c Star [1974] A.C. 436 but before its later decision in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795. In my judgment in The Tillie Lykes I had directed myself by reference to statements in the speech of Lord Wilberforce in The Atlan c Star , at p. 469, i n wh i ch he had sai d that the di sadvant age to the defendant, in order that it should be taken into account at all, must be serious, and in par cul ar that it must involve more than the mere disadvantage of mul pl e sui ts. A er cons i der i ng wha t I regarded as all the relevant factors on either side in that case, the facts of which were materially differ ent from those of the present case, I concluded that there was no sufficient l y seri ous dis advant age t o the defendants, apart from and addi onal to the me r e di sadvant age of mu l ple sui t , to j us fy a st ay of the ac on agai ns t them. I di d not pur por t to lay down any pr inc i pl e of law at al l; I onl y sought to apply to the par cul ar facts of the case bef or e me the pr inc i pl e of law lai d down by Lor d Wi lber for ce in the passage from his speech in The Atlan c Star to wh i ch I have ref er red.

With great respect to the members of the Court of Appeal in the present case, I think that they have fallen into error by giving insufficient wei ght to t he epi t het "mer e" i n t he express i ons "mer e bal ance of convenience" and "mere disadvantage of mul pl ici ty of sui ts, " as these expr essi ons , or ot her expressions similar to them, are used in the authori es . Me r e bal ance of conveni ence cannot , of

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itself, be decisive in l ng t he sc al es; but st rong, and a f or ori over whel mi ng , bal ance of convenience may easily, and in most cases probably will, be so. Similarly, the mere disadvantage of mul pl ici ty of sui ts cannot of itsel f be deci si ve in l ng t he s cal es; but mul plici ty of suits involvi ng serious consequences with regard to expense or other ma er s, ma y we l l do so. In thi s connec on i t is right to point out that, if concurrent ac ons i n respect of the same subj ect ma er proceed together in two differ ent count ries , as seems likel y i f a stay is ref used in the pr esent case, one or other of two undesirable consequences may follow: first, ther e ma y be two conflic ng j udgment s of the two courts concerned; or, secondly, there may be an ugly rush to get *424 one ac on deci ded ahead of the other, in order to create a situa on of res judi cat a or issue estoppel in the la er.

In my judgment the cri ci sm ma de by the Cour t of Appeal , that Sheen J. er red in pr inc i pl e in trea ng the co-existence of the Turkish ac on as a deci si ve factor on the facts of the pr esent case, is not jus fied. It was not a case of mer e bal ance of conveni ence; it was an overwhe l min g case. It was not a case of mere disadvantage of mul pl ici ty of sui ts, it wa s a case wh i ch wa s liabl e to cause, if bot h ac ons con nued, muc h difficulty and t r oubl e. On the foo ng that the Cour t of Appeal were wr ong in holding that the judge erred in principle in the way that they thought there was, in my opinion, no valid ground for their interfering with the exercise of the discre on vested in hi m as the judge of first ins tance.

My Lords, Mr. Rix Q.C., who appeared before your Lordships as leading counsel for the Cuban owners, submi ed that the judge had fai led to take int o account a ma er whi ch was i n evi dence before him, namely that, if the Cuban owners were compelled, by a stay of their ac on her e to counterclaim in the Turkish ac on, the pr ocedur e of the Tur ki sh cour t wo ul d requi re them to deposit in advance, as security for the costs of the court, a propor on, pr obabl y about 15 per cent ., of the amount of their counterclaim. It is only right to say that there is no reference in the judge's judgment to this ma er as a factor to be taken int o account as mi lita ng agai nst a stay. In my view, however, there are two reasons why this circumstance should not be regarded as in any way vi a ng his j udgmen t . The first reason i s that, although t he j udge di d not men on thi s ma er in his judgment, it does not follow that he did not have it in mind and take it into account. The evidence before him was confined to thr ee affidavi t s onl y, and i t is unl i kely that t he j udge woul d have overlooked anything which appeared in them. The second reason was given by Sir John Donaldson M.R. at p. 49 of his judgment, when he pointed out that the Cuban owners would probably have to give security for costs under English procedure if their ac on her e we r e al lowe d to con nue, so t hat their liability in respect of security for costs might well be the same, or something like the same, in the one court as in the other.

My Lords, there are two further ma er s wi th wh i ch I feel that it is necessar y to deal .

The first ma er i s that the j udge express l y decl i ned t o ent er into any compa r i son bet wee n t he capaci es of the Tur ki sh and Engl ish cour ts to try jus tly and sa sfact ori l y the disput e bet wee n t he par es . In doi ng so he wa s fol lowi ng obser va ons mad e by me whe n s i ng in the Court of Appea l i n The El Amria [1981] 2 Lloyd's Rep. 119, 126-127, observa ons wh i ch appear to me to accor d wi th the views of your Lordships' House, as recently expressed by my noble and learned friend, Lord Diplock, in Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50 , 67.

I hope that I shall not be thought discourteous to Sir John Donaldson M.R. if I say that, while paying lip service to the avoidance of any comparisons of that kind, his heart was not really in what he felt obliged to concede. Thus on p. 889 of his judgment he said this:

"I share en rel y the rel uctance of Sheen and Br andon JJ. to expr ess any vi ew as to the rela ve me r its of par cul ar cour t s. That mus t be *425 a ma er of subj ec ve j udgmen t which I, as a judge of an English court, and an ex Admiralty judge, do not feel that I should make. What I think can be said - and I doubt whether it would be controverted by anybody - is that the English Admiralty Court has a vast amount of interna onal mari me exper ience in thi s field goi ng back over the cent uri es. Whi l e I do not doubt for one moment that the Turkish courts have long mari me exper ience, I doubt ver y

Page22

much whether it is as interna onal or extens i ve. Thi s is not a cri cism, and shoul d not be taken as a cri ci sm, of the Tur ki sh cour ts; it is an acci dent of geography. The Engl ish courts are situated on an island off Eur ope. That has led, as a ma er of his tory, to t hei r being involved in far more mari me di sput es than Tur key or any count ry simi lar l y situated."

The Master of the Rolls will, I trust, forgive me if I say that, having paid lip service to the need to avoid comparison between English and foreign courts, he then proceeded to make just such a comparison.

The second ma er ar i ses from cer tai n paragraphs in the affidavi t sworn in suppor t of his cl i ents ' case by a solicitor in the dis ngui shed firm o f sol i citors ac ng f or t he Cuban owner s in thi s case. Paragraphs 13 and 14 of his affidavi t are drawn i n such a way as to cast asper s ions on t he capaci ty of the Turkish court to try the Turkish ac on pr oper l y, and on the independence from the execu ve of any Turkish lawyer ac ng for the own er s of a for ei gn shi p agai ns t the own er s of a Tur ki sh shi p. No sufficient grounds are given f or these asper s ions , and t hey shoul d, in my opi nion, never have been made.

Having dealt with those two further ma er s, i t onl y rema i ns for me to say that , for the reasons which I have given earlier, I would allow the appeal with costs here and below, and restore the order of Sheen J. dated 4 May 1983, save in so far as it refuses the Cuban owners' applica on for leave to appeal. I would, however, vary the order in one respect, by making the stay condi onal on the provision by the Turkish owners within 28 days of sufficient and s a sfactory secur i t y for any counterclaim of the Cuban owners in the Turkish court. If there should be any dispute about the amount or nature of such security, it should be referred to the Admiralty Registrar for decision.

LORD TEMPLEMAN.

My Lords, for the reasons given by my noble and learned friends, Lord Diplock and Lord Brandon of Oakbrook, I too would allow this appeal.

There was ample material from which Sheen J. came to the conclusion that the Sariyer District Court of Turkey is a forum in which jus ce can be done betwe en t he par es at subs t an al ly less inconvenience and expense and that a stay of the English proceedings will not deprive the Cuban owners of a legi ma t e per sonal or j ur i sdi c onal advant age whi ch wi l l be avai l abl e t o t he Cuban owners if they invoke the jurisdic on of the Engl ish cour t. In ot her cases , wh er e these condi ons are not sa sfied, Engl i sh proceedi ngs wil l not be s tayed mer ely because of the danger s and difficul es of concurrent ac ons . Ther e is amp l e scope for a li gant to choose t he exerci se of Engl i sh j uri sdi c on of which Sir John Donaldson M.R. is justly proud, notwithstanding that proceedings have already been *426 ins tut ed under a for ei gn jur i sdi c on provi ded t hat the event s whi ch happen pri or to the hearing of an applica on for a stay of the Engl ish pr oceedi ngs do not demo ns trat e that the foreign forum is to be preferred on grounds of convenience and expense. An ugly rush to get one ac on deci ded ahead of the ot her is not to be repl aced by an ugl y rush to issue pr oceedi ngs in one country before the issue of proceedings in another. Most collision cases are collisions between insurance companies. They can by agreement avoid or put an end to concurrent ac ons . An insurance company should not endeavour to insist on choosing a forum by reference to the na onal flag of the insur ed vessel or the na onal i ty of the i nsured owne r s i n t he hope t hat pat r io sm wi ll affect the resul t. In the pr esent case, howe ver , Sheen J. ri ght ly came to the concl us i on that ther e was no jus fica on f or i nflic ng Engl i sh proceedi ngs on the Tur ki sh owners i n addi on to t he Turkish proceedings.

Representa on

Solicitors: Holman, Fenwick & Willan; Richards, Butler & Co.Appeal allowed. (J. A. G. )

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*772 Galaxy Special Mari me Ent er pr ise v Pr ima Ceyl on Ltd (MV Ol ymp i c Ga l axy)

Court of Appeal (Civil Division)

3 May 2006

[2006] EWCA Civ 528

[2006] 1 C.L.C. 772

Mummery, Buxton and Longmore L JJ.

Judgment delivered 3 May 2006

Conflict o f l aws —S ervi ce o ut o f j ur isdi c on—Sh i ppi ng—Ge ner al av erage—Fo rum n o n conveniens—Grounding of vessel off S r i L anka—V essel s al vaged—I ssue o f L l oyd' s a verage bond—Materiality of bond even if governed by English law—Whether England appropriate forum—Materiality of proceedings in Sri Lanka which were likely to con nue—C onnec ons wit h Sri Lanka stronger than those with England—Balance came down in favour of se ng asi de Engl i sh proceedings in favour of proceedings in Sri Lanka.

This was an appeal by the defendant cargo owner, Prima, against the refusal of its applica on to set aside an order giving the claimant shipowner, Galaxy, leave to serve the claim form out of the jurisdic on at Pr ima ' s addr ess in Sr i Lanka.

The claim arose from the grounding of Galaxy's vessel while under pilotage off Tr incoma l ee, Sr i Lanka. The vessel was carrying a cargo owned by Prima for delivery at Trincomalee. Galaxy's claim was principally for declara ons that Pr ima wa s liabl e to ma ke a cont ribu on i n r espect of general average and/or salvage charges.

Prima had already brought proceedings against Galaxy in Sri Lanka, claiming that without no ce, without authority and ac ng unr easonabl y Ga l axy had ent er ed i nt o a sal vage agreeme nt i n Lloyd's Open Form with Greek salvors and that, therea er , in or der to obt ai n di scharge of i ts cargo, Prima had had to give security by way of a Lloyd's Average Bond (LAB) and an average guarantee to the managers of the vessel. Subsequently, Prima sought damages on the basis that the grounding of the vessel was caused by negligence and/or ac onabl e br each of dut y of the owners; and that Prima was under no liability to make contribu on i n respect of gener al average and/or salvage charges or any payment under the LAB.

The vessel had been sold during the voyage to Sri Lanka and the transfer of ownership took place three days before the grounding with the result that the LAB was the only contract between the par es . Ga l axy submi ed t hat the LAB was subj ect to Engl i sh l aw s ince Engl i sh l aw was the law governing the contemplated adjustment. Prima conceded that the law of the adjustment was English law but did not accept that the law of the adjustment necessarily *773 governed the underlying legal rela onshi p betwe en the par es. Pri ma f urt her sai d t hat Sri Lanka rather than England was the natural forum for the resolu on of al l the di sput es .

The deputy judge held that Galaxy was making its claim under or pursuant to the LAB and that the LAB was governed by English law. Jurisdic on pur suant to CPR, r. 6.20(5)(c) was, therefore, established and he went on to decide as a ma er of di scre on t hat the proceedi ngs shoul d not be set aside because England was the forum in which the case could most suitably be tried for the interests of the par es and for the ends of jus ce.

On appeal Prima accepted that there was a good arguable case that the LAB was governed by English law but argued that the judge was wrong to have accepted Galaxy's argument that the par es ' rel a onshi p as a who l e was governed by Engl i sh l aw mer ely because t he LAB was i tsel f arguably governed by English law; and that once it was appreciated that the rights and wrongs of the general average claim were not going to be determined by English law, there was no advantage in those rights being determined by the English courts since all other factors pointed to Sri Lanka and away from England.

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Held, allowing the appeal and se ng asi de servi ce out of the j uri sdi c on:

1 The judge had erred in accep ng Ga l axy' s ar gume nt that the LAB wa s gover ned by Engl ish law and that the disputes rela ng to the groundi ng and the decl ar a on of gener al average wou l d, therefore, have to be determined by English law. There was a substan al ar gume nt that , even if the LAB was itself governed by English law, the rights and wrongs of the claims and cross-claims for general average contribu on and indemn i ty for bei ng exposed to gener al aver age or sal vage claims would fall to be determined in accordance with Sri Lankan law where the adventure ended and/or without the incorpora on of the Ha gue Rul es . The judge appeared not to have fully appreciated that argument when exercising his discre on. Even if it we r e ri ght that Engl ish law undoubtedly applied to the general average claims, it should not necessarily follow that the disputes should be determined in England. The English law factor was one factor among many to be considered and not the decisive factor.

2 The judge, in coming to his discre onary deci si on, al so appeared not t o have gi ven appropriate weight to the fact that, subject to any applica on ma de by Ga l axy to stay Pr ima ' s ac on, the Sr i Lankan pr oceedi ngs wo ul d con nue i n any event . They wer e t he proceedi ngs first ins tut ed and had not been star ted me r el y t o demo ns trat e t hat a comp e ng j uri sdi c on existed. If the English proceedings con nued, ther e wa s a ri sk that di fferent deci sions mig ht be made. That was not unavoidable in the circumstances. Galaxy needed to show some juridical advantage only available in the English ac on that wa s of such imp or tance that it wo ul d cause injus ce to depr i ve Ga l axy of it. The LAB di d *774 not, necessarily, envisage that its law would apply to determine the underlying dispute about liability to general average and, even if it did, the advantage of having the dispute determined by reference to English law was not only available in the English ac on. The deput y judge had not accor ded the Sr i Lankan pr oceedi ngs their proper weight and his exercise of discre on wa s flawed on t hat ground also. (The Abidin Daver [1984] AC 398 applied.)

3 Exercising the discre on af resh, the bal ance came down subs tan all y i n f avour of se ng aside the English proceedings and their service, thus enabling the Sri Lankan proceedings to determine the rights and liabili es of the par es. The f act s of the disput e had l i le to do wi th England and everything to do with the grounding off Tr incoma l ee in Sr i Lanka and the si gni ng of the salvage agreement in Sri Lanka; proceedings were con nui ng i n Sr i Lanka and, i n the absence of a successful applica on for the pr oceedi ngs to be stayed, we r e likel y to con nue; an important witness, viz. the pilot, was in Sri Lanka; other witnesses of fact were not in England; the par es we r e not connected wi th Engl and; Pr ima wa s Sr i Lankan. The few factor s favour ing English jurisdic on we r e not sufficient t o outweig h t hose consi dera ons.

The following cases were referred to in the judgment of Longmore LJ:

Abidin Daver, The [1984] AC 398.

Compania Naviera Micro SA v Shipley Interna onal Inc (The Parout h) [1982] 2 Ll Rep 351.

Seaconsar (Far East) Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438.

Spiliada Mari me Cor p v Cansul ex Ltd (The Spi liada) [1987] AC 460 .

Union of India v EB Aaby's Rederi A/S (The Evje) [1975] AC 797.

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Representa on

Lionel Persey QC and Emmet Coldrick (instructed by Howard Kennedy) for the appellant.

Julian Flaux QC and David Lewis (instructed by Ince & Co) for the respondent.

JUDGMENT

Longmore LJ:

Introduc on

1 The general average claim in these proceedings is unusual in that ownership of the vessel changed during the voyage and before the occurrence of the act in respect of which general average is claimed. It is the consequence of that change of ownership that has complicated this applica on to ser ve pr oceedi ngs out of the jur i sdi c on.

2 The posi on is that Mr Ar thur Ma r rio QC s i ng as a Deput y J udge of the Commer c i al Court has refused an applica on by the def endant s Pr ima Ceyl on Ltd *775 (‘Prima’) to set aside an order of Colman J of 25 January 2005 made pursuant to CPR 6.20(5)(c) and/or CPR 6.20(6), giving the claimants, the new vessel owners, Galaxy Special Mari me Ent er pr i se (‘Ga l axy’ ) leave to serve the Claim Form, the Par cul ar s of Cl ai m and rel at ed docume nt s upon Pr ima out of the jurisdic on at Pr ima ' s addr ess i n Sr i Lanka. As an al ter na ve, Pri ma asked t hat the cl aim b e stayed.

The facts

3 The claim arises from the grounding of the claimants' vessel OLYMPIC GALAXY (‘the vessel’) while under pilotage off Tr incoma l ee, Sr i Lanka on 10 Jul y 2004. The vessel wa s car ryi ng a car go of some 61,160 metric tonnes of Australian wheat owned by Prima, from Fremantle in Western Australia for delivery at Trincomalee. Galaxy's claim is principally for declara ons that Pr ima is liable to make a contribu on in respect of Gener al Aver age and/or sal vage charges and is liabl e to pay the sum to be cer fied i n due cour se by Average Adj ust ers as the cont r ibu on due f r om the cargo-owners.

4 There are also proceedings brought by Prima against Galaxy in the High Court of Sri Lanka, commenced by a Writ of Summons dated 11 January 2005. Ini al ly, Pr ima cl ai me d, that wi thout no ce, wi thout a ut hor i ty a nd a c ng unr easonabl y, Ga l axy ha d ent ered i nto a sa l vage agreement in Lloyd's Open Form (LOF) with the Greek salvors Tsavliris Russ, on 12 July 2004; and that, therea er , in or der to obt ai n di scharge of thei r car go, Pr ima had had to gi ve secur i ty by way of a Lloyd's Average Bond (‘LAB’) on 14 July 2004 and an Average Guarantee on 16 July 2004 to the managers of the vessel.

5 Subsequently, Prima sought, in its Pe on t o t he Sr i Lankan cour t dat ed 2 J une 2005, declara ons that the groundi ng of the vessel wa s caused by negl igence and/or ac onabl e breach of duty of the owners of the vessel or those for whom they were responsible; that Prima is en tled to l os s, dama ge, cos t and expenses on account of the groundi ng of the Ol ymp i c Galaxy; that Prima is under no liability to make contribu on i n respect of Gener al Aver age and/or salvage charges; and is not liable to pay any sum cer fied as the cont r ibu on due f r om the cargo interests, or any payment under the LAB. Prima have also sought judgment in the sum of US$1,890,000, or such other sum found to be due as loss, damage, cost and expenses incurred by Prima, arising from the making of the salvage agreement by the owners of the

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vessel, purportedly on cargo-owners' behalf, and from the tendering of security to procure the delivery of the cargo.

6 The cargo, 44,000 metric tonnes of Australian standard white wheat and 17,160 metric tonnes of Australian hard wheat, was shipped under two Austwheat bills of lading by AWB (Interna onal ) Ltd dat ed 29 June 2004 and issued at Me l bour ne. Pr ima wa s the no fy par t y and the bills were consigned to order and contained the following provisions: *776

‘freight for the same as per the below-men oned “Aus twh eat 1990” char ter par ty, as amended, all the terms, condi ons , c l auses and excep ons i ncl udi ng Cl ause 33 (arbitra on) in wh i ch char ter par ty are her ewi th incor por at ed.

This bill of lading is to have effect subj ect to the pr ovi si ons of the Rul es cont ai ned in Schedule 1 to the Australian Carriage of Goods by Sea Act 1991, as applied by that Act and any subsequent amendments thereto, … the ship owners are to be en tled to the benefit of the pr i vi leges , ri ght s and immu ni es conf err ed upon t he carr ier by such Act , and the said Schedule 1 thereto, as if the same were herein specifical ly set out . Gener al Average (if any) shall be se led accor di ng to the Yor k- Ant we r p Rul es 1974 as ame nded 1990.’

7 The Austwheat charterparty referred to was entered into at Melbourne, on 14 April 2004 and, inter alia, provided as follows:

‘29 General Average shall be se led and payabl e in London accor di ng to the New Yor k Antwerp Rules 1974 as amended 1990 or any modifica on t her eof for the me b eing in force …

33 (a) Any dispute arising under this Charterparty from events which occur in Australia shall be se led by arbi tra on at the Aus t ral i an Cent r e of Interna onal Commer c i al Arbitra on, Me l bour ne i n t he Stat e of Vi ctor i a, Aus tral ia i n accor dance wi th t he provisions of the commercial Arbitra on Ac t 1 984 ( Vi ctor i a) o r a ny s tat ut or y modifica on or re-enactmen t ther eof for the me b eing i n force…

33 (b) Any dispute arising out of this Charterparty or any Bill of Lading issued hereunder other than provided for in paragraph (a) hereof shall be referred to arbitra on in London, one arbi trat or bei ng appoi nt ed by each par ty in accor dance wi th the Arbitra on Ac ts 1950 and 1979 or any statutory modifica on or reenactmen t thereof for the me bei ng in for ce…’

8 The Austwheat charterparty was made between Nobel Chartering AG as disponent owners and AWB Australia Ltd as charterers. When the cargo was shipped, the vessel was owned by a Panamanian company Arapey Financiera Panama SA (‘Arapey’) but the vessel was sold by Arapey during the voyage to Sri Lanka by a bill of sale dated 7 July 2004 to Galaxy. This only became known to Messrs Ince & Co, the claimants solicitors at about the end of October 2004; and only became known to Prima as a consequence of the first wi tness stat eme nt of Mr Grieveson of Ince & Co made on 21 January 2005 in support of Galaxy's applica on f or permission to serve Prima out of the jurisdic on, wh en that wi tness stat eme nt wa s ser ved on Prima.

9 The LAB dated 14 July 2004 was addressed to the agents of the vessel and signed by Prima. It iden fied Freman t l e as the por t of shi pmen t , Tri ncomal ee as *777 the port of des na on and the bills of lading pursuant to which the cargo had been shipped. It relevantly provided:

‘In considera on of the del iver y to us or to our or der , on payme nt of the frei ght due, of the goods noted above, we agree to pay the proper propor on of any sal vage and/or general average and/or special charges which may hereina er be ascer tai ned to be

Page5

due from the goods or the shippers or owners thereof under an adjustment prepared in accordance with the provisions of the contract of [affrei ght me nt ] gover ni ng the carriage of the goods or, failing any such provision, in accordance with the law and prac ce of the pl ace wh er e the commo n ma r i me advent ure ended, and whi ch i s payable in respect of the goods by the shipper or owners thereof.

We also agree to: (i) furnish par cul ar s of the val ue of the goods , suppor ted by a copy of the comme r ci al invoice rendered to us or, if there is no such invoice, details of the shipped value and

(ii) make a payment of such sum as is duly cer fied by the average adj ust ers to be due from the goods and which is payable in respect of the goods by the shippers or owners thereof.’

10 The Average Guarantee was given on 16 July 2004 in the form approved by the Associa on of Average Adjusters and the Ins tut e of London Underwr i ter s. The Aver age Adj us ter s are Harvey Ashby Ltd of Colchester, Essex. The adjustment has yet to be completed. It is thought that, since the values of the ship and the cargo are fairly evenly balanced, the actual monetary claim brought by Galaxy against Prima would not, when the adjustment is final ised, tur n out to be par cul ar l y lar ge.

11 By a fax of 23 July 2004 addressed to Springfiel d Shi ppi ng Co Panama SA as ma nager s, Pr ima gave no ce that they wo ul d seek to recover al l thei r los ses as a resul t of the br each of aut hor i ty in the making of the LOF with the salvors and in respect of losses arising from the consequences of the grounding itself. This no fica on l ed ul matel y t o the gi ving of a le er of undert aki ng (‘LOU’) of 2 August 2004, from West of England, Galaxy's P & I Club, to:

‘The Owners and/or those en tled to sue and/or underwr i ter s ( col lec vel y “Car go Interests”) of the cargo of approximately 61,000 m/t of wheat laden on board the Olympic Galaxy.’

12 The LOU was in relevant parts as follows:

‘Claim for an indemnity for Cargo's liability to Salvors, including liability for interest and Salvors' costs and/or indemnity for any amounts payable by cargo *778 interests in General Average and/or Cargo shortage/damage/loss in value and/or addi onal frei ght charges and/or for a declara on that Cargo are not l iabl e to cont ribut e i n Gener al Average.

IN CONSIDERATION of and upon condi on that you ref rai n from ar res ng or other wi s e detaining the above vessel or any other vessel or property in the same or associated Ownership, Management, possession or control of the owners of the OLYMPIC GALAXY to secure the above claim and/or to establish jurisdic on and that you ref rai n from commencing and/or prosecu ng l egal or arbi tra on pr oceedi ngs (other wi s e t han before the court and/or tribunal referred to below) against the Owners of the above vessel, their servants or agents WE HEREBY uncondi onal ly and irrevocabl y under take to pay to you or to Dolphin Mari me & Av i a on Servi ces Limit ed or to any Sol i citor you may appoint any sum nor (sic) exceeding US$2,000,000 plus interest and costs and interest on costs which may be either agreed between the par es to be due to you in respect of the above claim(s) or which may be adjudged to be due to you in respect of the above claim(s) from the Owners of the above vessel by a final and unappeal abl e judgment of a court or tribunal of competent jurisdic on or bot h.

Furthermore:

…

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2. We undertake that we will, within 7 days of a request from you to do so, instruct solicitors in England (and to advise you of their iden ty) on behal f of the above name d ship and/or her owners to accept service of court proceedings or no ce o f appointment of an arbitrator.

3. In the event that the claim is brought in London, we mutually agree that the claim will be arbitrated in London as per clause 33b of the charterparty between Noble Chartering and AWB dated 14th April 2004.

4. In the event that the Courts of Sri Lanka issue service of proceedings in Sri Lanka, we will instruct Messer's Murugesu & Neelakzandan, A or neys-at law & Not ar ies Publ ic, P.O. Box 749, M & N Building (Level 5), No. 2, Deal Place, Colombo – 00300. Sri Lanka to accept such service of proceedings from the Sri Lanka Courts, without prejudice to any rights which the owners of the OLYMPIC GALAXY have to contest and dispute jurisdic on of the cour ts of Sr i Lanka, to hear and det ermi ne thi s ma er.

5. It is expressly agreed that in the event that addi onal sal vage secur i ty is requi red from cargo interests, or cargo loss or damage is suffer ed, or los ses of any nat ur e are suffer ed by car go i nt er ests, car go i nt er ests ret ai n the ri ght to ar rest for addi onal security. Cargo interests agree to accept the addi onal secur i ty by wa y of We st of England Le er of Under taki ng.

*779 6. We agree that this undertaking shall be governed by and construed in accordance with English law and we agree to submit to the English High Court of Jus ce for any di sput es or any enf or ceme nt pr oceedi ngs in respect of thi s under taki ng. We confirm that our addr ess for ser vi ce is Towe r Br idge Cour t, 224–226 Towe r Br idge Road, London, SE1 2UP.

This le er of under taki ng is gi ven wi thout pr ej udi ce to al l ri ght s and def ences wh i ch may be available to owners and/or any rights of limita on of l iabi lity accor di ng to interna onal conven ons or appl i cabl e l aws. Furt hermor e, not hing her ein i s to be construed as an admission of liability.’

13 It will be noted that the ‘court and/or tribunal referred to below’ before which the opera ve part of the LOU proceedings are allowed to be brought is either the arbitra on tribunal in cl ause 3 or the courts in Sri Lanka in clause 4. The reference to ‘court proceedings’ in clause 2 does not, in my view, contemplate substan ve cour t pr oceedi ngs in London but onl y cour t pr oceedi ngs ancillary to the arbitra on cont emp l at ed in cl ause 3.

14 Subsequently, on 14 October 2004, Galaxy sought to invoke the provisions of the arbitra on clause (33(b)) of the Charter Party by making a reference to arbitra on i n London and appoin ng Mr Br uce Ha r ri s as t hei r arbi trat or . Pr ima , wi thout pr ej udi ce t o t hei r pos i on, nominated Mr William Packard as their arbitrator, but it was then thought that, by virtue of the change of ownership of the vessel, there was no contractual nexus which en tled the par es to proceed under the arbitra on agreeme nt . Ac cor di ngl y, not hi ng f ur ther happened and t he arbitra on wa s described to the deput y judge as mo r ibund.

15 On 16 February 2005, following a hearing in London under the LOF salvage agreement, the Arbitrator Mr John Reeder QC awarded and adjudged that Galaxy should pay to Tsavliris Russ US$2,787,675 plus interest for the salvage services, an amount which was reduced by Mr Nigel Teare QC on appeal to US$2,423,040. Cargo-owners' propor on of that awa rd wa s det ermi ned to be US$1,252,560 plus interest and costs.

16 Given the transfer of ownership of the vessel on 7 July 2004, three days before the grounding, it is common ground that the LAB is the only contract between the par es ; the claimants submit that the LAB is subject to English law since English law is the law governing the

Page7

contemplated adjustment. Mr Persey QC for Prima conceded that on the authority of the House of Lords in Union of India v EB Aaby's Rederi [1975] AC 797, the law of the adjustment is English law. However, he did not accept that the law of the adjustment necessarily governed what he termed ‘the underlying legal rela onshi p’ betwe en the par es; and t he Pe on in the Sr i Lankan proceedings is made on the basis that Sri Lankan law applies to that rela onshi p.

*780

17 As to the LOU, it is said by Prima that the LOU is a strong indica on that Sr i Lanka is (and England is not) the natural forum for the resolu on of al l the di sput es cont emp l at ed by it as to the consequences of the grounding, once it is accepted that no arbitra on agreeme nt exi sts between the par es .

The judgment

18 The judge held that Galaxy were making their claim under or pursuant to the LAB and that the LAB was governed by English law. Jurisdic on pur suant to CPR r. 6.20(5)(c) was, therefore, established and he went on to decide whether, as a ma er of hi s di scre on, the proceedi ngs should be set aside. He directed himself in accordance with familiar authority such as Spiliada Mari me Cor p v Cansul ex Ltd [ 1987] AC 460 and Seaconsar (Far East) Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 in apprecia ng that i t wa s for the cl ai ma nt to establ ish that England was the forum in which the case could most suitably be tried for the interests of the par es and for the ends of j us ce. He deci ded t hat Gal axy had di s char ged t hat bur den primarily because he agreed with Mr Flaux QC for Galaxy that the dispute between the par es would have to be determined under English law since English law was the proper law of the LAB, the only contract between the par es , see the end of paragraph 32 and the begi nni ng of paragraph 33. He added, at the end of paragraph 33:

‘I also consider that there is a clear juridical advantage to having this case disposed of by this court, namely the certainty of having these disputes decided by the applica on of English law as envisaged by the par es in thei r cont ract (the LAB) .’

The submissions

19 Prima accepted that Galaxy were en tled to br ing a cl ai m under the LAB and that ther e wa s a good arguable case that the LAB was governed by English law. That sufficed t o est abl i sh jurisdic on but they a acked t he exerci se of dis cre on and submi e d: (1) the judge was wrong to have accepted Galaxy's argument that the par es ' rel a onshi p as a whole was governed by English law merely because the LAB was itself (arguably) governed by English law;

(2) the LAB would normally have the same law as the contract of affrei ght me nt pur suant to which it was issued and it was the law of that contract of affrei ght me nt wh i ch gover ned the par es ' rel a onshi p; in t he present case t her e was no cont r act of affreightment between cargo-interests and the new owners of the vessel because the ownership had changed during the voyage a er the issue of the bi lls of ladi ng by or on behal f of the pr evi ous own er s;

(3) the rela onshi p betwe en the car go int er ests and the new own er s wa s ther ef or e *781 not governed by the law of any contract of affrei ght me nt and coul d not be gover ned by the law of a subsequently agreed LAB; in par cul ar , si nce ther e wa s no cont ract betwe en the par es there was no room for any incorpora on of the Ha gue Rul es ; car go- own er s we r e, ther ef or e, en tled, as a ma er of the gener al law o f gener al average, to r el y on t he shi powne r s ' def aul t in rela on to the groundi ng and Ga l axy coul d not respond by rel yi ng on Ar cle I V 2(a) of the

Page8

Hague Rules;

(4) once it was appreciated that the rights and wrongs of the general average claim were not going to be determined by English law, there was no advantage in those rights being determined by the English courts;

(5) even if it was arguable that English law did govern the par es ' rel a onshi p, the Sri Lankan courts were able to apply English law as well as the English courts;

(6) English law could not, therefore, be a decisive factor and should be regarded as a neutral factor. All other factors pointed to Sri Lanka and away from England. Those factors included:

(a) the existence of the Sri Lanka proceedings and the consequent risk of conflic ng judgments;

(b) the absence of either party having any connec on wi th Engl and;

(c) the convenience of witnesses;

(d) the absence of any security in respect of English proceedings in the le er of under taki ng;

(7) The judge's discre on wa s vi ated by:

(a) his acceptance of the argument that the whole of the par es ' rel a onshi p was governed by English law;

(b) his apparent failure to consider that the Sri Lankan proceedings would have to con nue in any event;

(8) This court should, therefore, exercise its discre on anew and, rel yi ng on the factor s in (6) above should allow the appeal and set aside the proceedings in England, for which Colman J ini al ly gave leave.

20 Galaxy supported the judge submi ng:

(1) the LAB itself provided that the par es ' ri ght s and obl iga ons wer e t o be ascert ained i n accordance with the provisions of the contract of affrei ght me nt wh i ch wa s itsel f gover ned by English law; *782

(2) it was, in any event, strongly arguable that English law governed the par es ' rel a onshi p, even if there was no contract of affrei ght me nt betwe en them;

(3) even if there was no contract of affrei ght me nt , Ga l axy we r e bai lees or sub- bai lees of the cargo; the bailment would be a bailment governed by English law and would be on Hague Rules' terms; an important feature of English law was England's accession to the Interna onal Salvage Conven on of 1989 and sec on 224 of the Me r chant Shi ppi ng Ac t whereby the shipowner was deemed to have the actual authority of the cargo-owners to enter into salvage agreements on their behalf;

(4) the judge was therefore right to say that the par es envi saged Engl ish law appl yi ng to thei r rela onshi p and that it wa s ther ef or e be er that the Engl i sh cour t s rather than t he Sri Lankan courts determine their rights and obliga ons ;

(5) it was impossible to imagine that the judge was ignorant of the fact that the Sri Lankan proceedings were going to con nue in any event ;

(6) his exercise of discre on wa s not vi ated by any err or and shoul d be mai ntained.

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The Average Bond and the general average claims

21 It is clear to me that the judge did accept Galaxy's argument that the LAB was governed by English law and that the disputes rela ng to the groundi ng and the decl ar a on of gener al average would, therefore, have to be determined by English law. That was Mr Flaux' argument and he accepted it. He, therefore, never appreciated the contrary argument. That argument is a formidable one. It is that, in the absence of any contract of affrei ght me nt , t her e wa s no agreement between the par es int o wh i ch it wo ul d be pos si bl e to incor por at e the Ha gue Rul es . It is by no means self-evident that there was a bailment or sub-bailment on terms which would incorporate the Hague Rules and, if there was not, Galaxy could not rely on the Ar cl e IV of r. 2(a) excep on for acts and negl ects of ma ster pi lot and crew to excuse wh at mi ght ot herwi se be such default as would preclude Galaxy from claiming general average. In any event owners' personal default is placed in issue in the Sri Lankan proceedings. Mr Flaux seeks to rely on the terms of the LAB (which undoubtedly does cons tut e the onl y cont ract betwe en the par es) to say that general average is to be ascertained by an adjustment,

‘prepared in accordance with the provisions of the contract of affrei ght me nt gover ni ng the carriage of the goods.’

But this must also be doub ul , si nce the bond goes on:

‘or failing any such provision in accordance with the law and prac ce of the pl ace where the common mari me advent ur e ended. ’

*783

22 These are all ma er s of some di fficulty and i t woul d be i nappropri ate for t his court , on t his interlocutory applica on, to expr ess any (even pr el imi nar y) vi ew about them. The poi nt for present purposes is that there is a substan al ar gume nt that , even if the LAB is itsel f gover ned by English law, the rights and wrongs of the claims and cross-claims for general average contribu on and indemn i ty for bei ng exposed to gener al aver age or sal vage cl ai ms wi ll fal l to be determined in accordance with Sri Lankan law where the adventure ended and/or without the incorpora on of the Ha gue Rul es . The deput y judge appear s not to have ful ly appr eci at ed that there was this substan al ar gume nt but rat her to have been begui led by Mr Fl aux int o agreei ng with the proposi on that al l ma ers i n di sput e bet wee n t he par es woul d necessari l y be determined by English law. He was, in my view, wrong to be so beguiled and the main plank for the exercise of his discre on wh er eby he deci ded that i t wa s r i ght f or the pr oceedi ngs to con nue in Engl and thus di sappear s.

23 I would add that, even if it were right that English law undoubtedly applied to the general average claims, it should not necessarily follow that the disputes should be determined in England. The Sri Lankan courts are well used to applying English law, on which their own law in mercan le ma ers i s mod el l ed and Gal axy mad e no sugges on t hat t he court s of Sri Lanka either would not or would not be capable of applying English law. In such circumstances the English law factor will be one factor among many to be considered and, seldom, the decisive factor.

The Sri Lankan proceedings

24 It is not apparent that the judge, in coming to his discre onary deci si on, has gi ven appropriate weight to the fact that, subject to any applica on ma de by Ga l axy to stay Pr ima ' s

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ac on, the Sr i Lankan pr oceedi ngs wi ll con nue i n any event . They wer e t he proceedi ngs first ins tut ed and they are necessar y pr oceedi ngs because (in the inevi tabl e absence of arbi tra on proceedings) they are the proceedings to which the Club's LOU will respond in the event of Prima being successful. If the English proceedings con nue, t her e i s a r i sk t hat di fferent decisions may be made on the factual issues that are going to arise. That is not a sa sfactor y situa on; some mes i t i s an unavoi dabl e s itua on. Here i t is not.

25 I would accept Mr Flaux' submission that the deputy judge was fully aware of the existence of the Sri Lankan proceedings; indeed the passage already cited in para. 18 above has a conscious echo of the important words of Lord Diplock in The Abidin Daver [1984] AC 398 at 411–412 (itself a case where proceedings had been ins tut ed first in t he f oreign j uri sdi c on):

‘Where a suit about a par cul ar subj ect ma er bet wee n a plain ff and a def endant i s already pending in a foreign court which is a natural and appropriate forum for the resolu on of the di sput e betwe en them, and the def endant in the for ei gn sui t seeks to ins tut e as pl ai n ff an ac on in England about t he same ma er to which t he per son who is plain ff in t he f oreign sui t i s mad e def endant , then *784 the addi onal inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two differ ent count ries wh er e the same facts will be in issue and the tes mo ny of the same wi tnesses requi red, can onl y be jus fied i f the wou l d-be pl ain ff can est abl ish obj ec vel y by cogent evi dence t hat there is some personal or juridical advantage that would be available to him only in the English ac on that is of such imp or tance that it wo ul d cause inj us ce t o him t o depr i ve him of it.’

For the deputy judge there was cogent evidence of a juridical advantage available only in the English ac on in the form of

‘the certainty of having these disputes decided by the applica on of Engl ish l aw as envisaged by the par es in thei r cont ract (the LAB) .’

The LAB, however, as I have sought to explain did not, necessarily, envisage that its law would apply to determine the underlying dispute about liability to general average and, even if it did, the advantage of having the dispute determined by reference to English law is not only available in the English ac on.

26 Relying on Dicey and Morris, Conflict of Laws (13th ed) para 12–030, Mr Flaux argued that the effect of Lor d Di pl ock' s speech in Abidin Daver had been subsequently diluted by Spiliada. But as I read that passage any such dilu on is confined t o cases whe r e f oreign proceedi ngs have not passed beyond the stage of being ini at ed and have been star ted me r el y for the sake of demonstra ng that a comp e ng j uri sdi c on exis ts. That i s not t he posi on her e and whi le the existence of prior foreign proceedings is not, by itself, decisive, it deserves weight especially in a case such as the present where Prima's claim is considerably larger than Galaxy's appears to be. I am reluctantly driven to conclude that the deputy judge has not accorded the Sri Lankan proceedings their proper weight and that his exercise of discre on is flawed on t his ground also. That being so, it is necessary for the court to exercise its discre on af resh.

Discre on

27 If my brethren agree with me thus far, it falls to the court to exercise its own discre on. In this connec on the fol lowi ng factor s are imp or tant : (1) the facts of the dispute have li le to do wi th Engl and and ever ythi ng to do wi th the grounding off Tr incoma l ee in Sr i Lanka and the si gni ng of the sal vage agreeme nt in Sr i Lanka;

Page11

(2) proceedings are con nui ng in Sr i Lanka and, in the absence of a successful appl ica on f or the proceedings to be stayed, are likely to con nue to do so; *785

(3) a poten al ly imp or tant wi tness vi z the pi lot is in Sr i Lanka; ot her wi tnesses of fact are not in England;

(4) the par es are not connected wi th Engl and; Pr ima is Sr i Lankan.

28 Conversely, there are some factors favouring English jurisdic on in that : (1) English law is likely to have some influence on the out come of the di sput es par cul arl y since Sri Lankan law and English law are likely to be the same, save in rela on t o t he incorpora on of the Int er na onal Sal vage conven on 1989;

(2) Galaxy's P & I Club has strong connec ons wi th Engl and; al though the aver age guarant ee has been put up by or on behalf of Singapore insurers they are likely to have connec ons wi th the English market;

(3) expert witnesses on naviga on and ma nageme nt of the vessel are l ikel y to be readi ly available in England, but are, of course, available elsewhere.

29 Bearing in mind (1) that the onus is on Galaxy to show that the English proceedings should con nue and (2) that the speech of Lor d Di pl ock in Abidin Daver s ll repr esent s the law, I have li le doubt that the bal ance come s down subs tan all y i n f avour of se ng as i de the Engl i s h proceedings and their service, thus enabling the Sri Lankan proceedings to determine the rights and liabili es of the par es.

30 Naturally enough Mr Flaux relied on the dicta of Lord Templeman in Spiliada at page 465G that an appeal about the rela ve me r its of tri al in Engl and and tri al abr oad shoul d be rare and the appellate court should be slow to interfere. I respec ul ly agree and me mb er s of thi s cour t are rightly slow to grant permission to appeal in such cases. Once permission is granted, however, any resul ng appeal mu s t be deci ded in accor dance wi th the law. If it can (in a rare case) be shown that the court's discre on has been exer ci sed on wr ong pr inc i pl es , thi s cour t has to exercise its own discre on. It nat ur al ly pays great def er ence to the wa y the comme r ci al judge has exercised his discre on but i t wi ll occasi onal ly di sagree and be bound t hen t o interfere. Even the greatest commercial judges have been held to have been wrong on this very ques on and have been rever sed, see Comp ani a Na vi er a Mi cro SA v Shi pl ey Int er na onal Inc [1982] 2 Ll Rep 351.

Conclusion

31 I would, therefore, allow this appeal and set aside the without no ce or der of Col ma n J whereby he gave permission to issue and serve these proceedings on Prima.

*786

Buxton LJ:

32 I agree.

Mummery LJ:

33 I also agree.

(Appeal allowed)*787

Page1

*860 Cleveland Museum of Art v Capricorn Art Interna onal SA & Anor .

Queen's Bench Division (Commercial Court)

2 October 1989

(1989) 5 B.C.C. 860

Hirst J.

Judgment delivered 2 October 1989

Oversea company—Service of documents on oversea company—Panamanian company loaned reliquary to US museum—Reliquary dispatched from London premises—Whether London premises were place of business established by Panamanian company in Great Britain—Companies Act 1985, sec. 695(2).

This was an applica on under R.S.C., O. 12, r. 8 for an order se ng asi de servi ce of a wri t under sec. 695(2) of the Companies Act 1985.

The first def endant comp any, regi ster ed in Panama , agreed in 1984 to loan a rel iquary to the plain ff mu s eum f o r di spl ay. In 19 85 t h e r e l i quar y wa s co l l ect ed f r om p r emi s es i n *861 London, packed for shipment and dispatched to the museum by the second defendants. Part of the reliquary was missing when it was unpacked and in 1987 the first def endant star ted proceedings in Ohio against the museum and the packers. In 1989, when a trial date had been fixed pr ovi si onal ly in Oh i o, the mu seum issued a wr i t in Engl and and ser ved i t at the London premises on the basis that that was a place of business established by the first def endant in Great Britain within sec. 695(2). The first def endant appl ied for ser vi ce of the wr i t to be set aside and for the English proceedings to be stayed on the grounds of lis alibi pendens in Ohio.

Held, staying the English ac on as agai ns t the first def endant compa ny:

1 Service of the writ was good service. The evidence demonstrated substan al stor age by the first def endant comp any of wo r ks of ar t at the pr emi ses and it wa s al so cl ear that the pr emi ses were used for viewing works of art stored there. Storage and viewing were important aspects of an art dealer's business and were carried on at the premises on a sufficient l y subs t an al scal e to demonstrate an established place of business of the company.

2 The Ohio court was another available forum which was clearly the more appropriate forum for the trial of the ac on. ( Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460, appl i ed .)

The following cases were referred to in the judgment:

Abidin Daver, The [1984] A.C. 398.

Oriel Ltd., Re [1986] 1 W.L.R. 180; (1985) 1 BCC 99, 444.

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 .

Representa on

Mr. Nicholas Stewart Q.C. and Mr. David Halpern (instructed by Reynolds Porter Chamberlain) for the plain ff.

Mr. Simon Tuckey Q.C. and Miss Sarah Harman (instructed by Elborne Mitchell) for the first

Page2

defendant.

JUDGMENT

Hirst J.:

Introduc on

There are before the court a number of applica ons , wh i ch I shal l shor tly describe i n mo r e detail, in rela on to the ser vi ce of pr oceedi ngs by the pl ai n ffs Cl evel and Muse um of Art (“CMA”) against the defendants Capricorn Art Interna onal SA ( “Capr i cor n”) , wh o are a company registered in Panama, in an ac on to wh i ch an Engl ish comp any, T. Roger s & Co. (Packers) Ltd. (“Rogers”) are also joined as second defendants.

Capricorn are the owners of a very valuable reliquary which is an important piece of ancient Pakistan art of the Gandhara period, da ng from the first cent ury AD. The peopl e of Gandhar a were descendants of the ancient Greeks who se led t her e and became Buddhi sts a er Alexander the Great's invasion in the first cent ur y BC. Thi s r el iquary stupa i s a ver y fine specimen of this par cul ar type of ar t, about 78 cm in hei ght and of ver y good qual ity and in fine condi on. Par t of the r el i quar y cons i sted of a gol d i nscri p on pl aque whic h refer red t o the fourteenth year of a par cul ar Ga ndhara ki ng, enabl ing the exper ts to dat e it pr ec i sel y.

By an agreement in wri ng wi th CMA dat ed 13 January 1984 Capr i cor n agreed to l oan the reliquary to CMA for display at an exhibi on to be hel d in Cl evel and, Oh i o and el sewh er e in the USA. For a period of about a year immediately prior to its dispatch to the USA it had been held by Capricorn in a secure vault at 72A Carlton Hill, St. John's Wood, London NW8 (“Carlton Hill”). The status of these premises, which are the address at which the writ was served or purportedly served, is at the heart of one of the main issues of fact I have to decide in the present proceedings. In late September 1985 *862 Rogers collected the reliquary in its six cases from Carlton Hill to pack for shipment, and in October it was dispatched by Rogers to CMA in Cleveland. A er it had been unpacked in Cl evel and the pl aque wa s found to be mi ssi ng.

Various inves ga ons , incl udi ng one by the FBI , fail ed t o t race i t or to di s cover the place or circumstances of its disappearance.

On 15 September 1987 Capricorn commenced proceedings against CMA and Rogers in Cuyahoga Country, Cleveland, Ohio, claiming against CMA breach of the loan agreement by failing to return the plaque and failure to insure, breach of duty as a bailee for failure to return the plaque and negligence in failing to insure and in handling and unpacking. The two other claims were made jointly against CMA and Rogers as bailees and/or for negligence in handling the reliquary, on the foo ng that CMA and Roger s we re pr inc i pal and agent respec vel y i n t he shipping of the reliquary. CMA deny the plain ffs' al l ega ons as t o the c i rcumst a nces of t he loss, and also contend that Rogers were the agents not of CMA but of Capricorn.

The amount claimed is about $400,000, represen ng the di mi nu on of val ue of the r el i quar y minus the plaque. During the intervening period of two years the Ohio proceedings have gone through lengthy interlocutory stages, including discovery of documents and oral discovery involving the examina on of sever al wi tnesses on bot h si des . The case in Oh i o is now ready or virtually ready for trial. On 19 January 1989 CMA applied for and obtained a stay of the ac on in Ohio pending its a emp t to begi n Engl ish pr oceedi ngs. Al though the stay has not been forma l ly li ed, the tri al has now been fixed, or at least provi sional l y fixed, t o begi n on 27 October 1989 (“provisionally”, no doubt, as both counsel agree, pending the outcome of these present proceedings in this court).

Page3

On two occasions Rogers have sought to dismiss the ac on agai ns t them on j ur i sdi c onal grounds, but both applica ons fai led on the strengt h of Roger s' pr evi ous bus i ness deal ings in the state of Ohio, which led the court to determine that it did have jurisdic on over Roger s. Following the failure of the second applica on, on 28 Jul y 1988, Roger s' Oh i o lawy er s no fied the court that they would decline to submit to the jurisdic on, and wo ul d t ake no par t whatsoever in the trial either through the provision of documents or through the a endance of witnesses. The evidence shows that the refusal of Rogers' two applica ons ma y be the subj ect of an appeal in Ohio, but that apparently such an appeal cannot be heard un l a er the t rial. It is common ground before me that if the first ins tance deci si ons stand, any judgme nt in Oh i o against Rogers will be effec ve and enf orceabl e, but that on t he other hand, if an appeal is lodged and succeeds it will not.

CMA's claim as plain ffs i n t his Engl i sh ac on by wr it issued on 4 Apri l 1989 i s as f ollows. (1) Against Capricorn for the appropriate propor on of CMA ' s al leged wa sted expendi tur e in carriage and insurance totalling approximately $1,600, on the foo ng that Capr i cor n or Roger s (as Capricorn's agents) were responsible for the loss of the plaque. Since, however, the reliquary was in fact exhibited, albeit minus the plaque, CMA realis cal ly accept that the measure of damages on their claim against Capricorn would be minuscule, perhaps even be er me asur ed in cent s rat her than dol lar s.

(2) Against Rogers on the foo ng (wh i ch CMA deny) that Roger s we r e in fact CMA ' s agent s. This is of course poten al ly a ver y subs tan al cl aim, amou n ng i n effect t o an i ndemni t y should CMA be held liable to Capricorn.

The writ was served by post at Carlton Hill on the basis that this address cons tut ed a pl ace of business established by Capricorn as an overseas company in Great Britain, *863 thus rendering such service valid under sec. 695(2) of the Companies Act 1985, Capricorn not having registered with the registrar of companies the name and address of a person resident in Great Britain who was authorised to accept service on their behalf pursuant to sec. 691(1) (b) (ii) of the Act. These sec ons are in the fol lowi ng terms :

Sec on 691 (Documents to be delivered to registrar):

“(1) When a company incorporated outside Great Britain establishes a place of business in Great Britain, it shall within one month of doing so deliver to the registrar of companies for registra on-

…

(b) a return in the prescribed form containing-

…

(ii) a list of the names and addresses of some one or more persons resident in Great Britain authorised to accept on the company's behalf service of process and any no ces requi red to be ser ved on it …”

Sec on 695 (Service of documents on oversea company):

“(1) Any process or no ce requi red to be ser ved on an over sea comp any is sufficientl y served if addressed to any person whose name has been delivered to the registrar under preceding sec ons in thi s Par t and le at or sent by pos t to t he addr ess whi ch has been so delivered.

(2) However-

Page4

(a) where such a company makes default in delivering to the registrar the name and address of a person resident in Great Britain who is authorised to accept on behalf of the company service of process or no ces , or

(b) if at any me al l the per sons wh ose name s and addr esses have been so delivered are dead or have ceased so to reside, or refuse to accept service on the company's behalf, or for any reason cannot be served,

a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in Great Britain.”

Capricorn now apply under O. 12, r. 8 for the service of the writ to be set aside on the ground that Carlton Hill did not cons tut e a pl ace of bus i ness establ ished by Capr i cor n in Gr eat Br i tai n, with the result that there was no need to register under sec. 691, and no good service there under sec. 695(2). Alterna vel y, if the ser vi ce at Car lton Hi ll wa s good, Capr i cor n seek a stay on the ground effec vel y of lis alibi pendens in Ohio.

CMA of course resist both applica ons , and fur ther ri pos te wi th an al ter na ve appl i ca on f or leave to serve the writ out of the jurisdic on under O. 11, r. 1(1)(c), on the ground that the claim is brought against Rogers, who were duly served within the jurisdic on, and t hat Capricorn is a proper party thereto. Capricorn deny O. 11 jurisdic on and i n the al ter na ve contend that this is not a proper case for O. 11 leave in the exercise of the court's discre on.

CMA frankly acknowledge that the English claim against Capricorn is a contrivance (but they submit a legi ma t e cont ri vance) to shi the cent r e of gravi t y of this who l e l i ga on fr om Ohi o to England, with the object of obtaining a permanent stay of the Ohio proceedings which will force Capricorn to abandon their claim in Ohio, and to pursue their remedy by counterclaiming here.

In view of the impact of the present applica ons on the Oh i o pr oceedi ngs, I announced my decision at the conclusion of the hearing on 8 September and I am now giving my reasons, the judgment being in open court as seemed appropriate to all par es .

*864

Service in England

There is no dispute between the par es as to the cri ter i a wh i ch mu s t be appl ied as a ma er of law in determining whether an overseas company has established a place of business in Great Britain, and they are well summarised in the current edi on of Pal me r ' s Comp any Law (24t h ed. , 1987), p. 1658:

“A company has an established place of business in Great Britain if it has a specified or iden fiabl e place at whi ch i t carr ies on bus i nes s , “a l ocal habi t a on of i ts own, ” e. g. an office; ther e mus t be some “vi sible s ign or phys i cal indi ca on” t hat t he compan y has a connec on wi th par cul ar premi s es. It i s not sufficient f or the company t o car ry on business through an agent; nor has a foreign parent company which carries on business in Great Britain through a subsidiary company merely as the result of that fact an established place of business here, nor a foreign company which carries on business from an occasional place of business in Great Britain, such as an hotel at which one of its directors regularly resides on his visits to Great Britain. The requirement of an established place of business is only sa sfied i f the speci fied or i den fiable habi ta on

Page5

of the company is intended to have more than flee ng char act er. Oli ver L.J . sai d i n Re Oriel Ltd. (in liquida on) :

‘Speaking for myself, I think also that when the word “established” is used adjec vel y, … i t connotes not only the se ng up of a place of bus i nes s at a speci fic loca on, but a degree of permanence or recognisability as being a loca on of a comp any' s bus i ness. … The concept , as it seems to me, is of some more or less permanent loca on, not necessar i ly own ed or leased by a company, but at least associated with the company and from which habitually or with some degree of regularity business is conducted.’

If a company incorporated outside Great Britain has a locality sa sfyi ng thi s test in thi s country, it has an ‘established place of business’ here even if it does not carry out its main ac vi es at that local i ty but rest ricts i ts ac vi es there t o ma er s inci dental t o its main business.”

Re Oriel Ltd. [1986] 1 W.L.R. 180; (1985) 1 BCC 99,444 is perhaps the most apposite case in the present context and during other passages in his judgment Oliver L.J. (as he then was) made it clear in addi on: (1) that a visible sign or physical indica on is not essen al, though i ts absence i s a f act or to be taken into account, and

(2) that the sec on assume s that ther e is goi ng to be some readi ly iden fiable point of me at which it can be said that a company has established a place of business here, because of the obliga ons imp osed in the imme di at el y pr ecedi ng sec ons to del i ver documen t s and mak e returns by a specified dat e.

Turning now to the facts, it is clear on the evidence, and not disputed, that Carlton Hill belongs to a company called Races SA, which is an associate company of Capricorn. It is in fact a disused church, converted into premises which are used at least inter alia for domes c pur poses (wi th bedrooms and bathroom and kitchen facili es ) and wh i ch have been occupi ed as the London residence of Signor Mario Tazzoli, who is a wealthy and important art dealer, part of whose very large private collec on has been on show in the extens i ve gal ler y in the house. The house al so contains a secure vault, fi ed wit h bot h combi na on l ocks and key l ocks , whic h was i nser ted or at least remodelled in 1984 under the supervision of Lloyd's insurers' surveyors. There is no outward sign of any kind on the building in any way associa ng it wi th Capr i cor n.

The curator of Indian and south-east Asian art for CMA, Dr. Stanislaw Czuma, visited the gallery in October 1984 to examine the reliquary, by arrangement with Signor *865 Massimo Mar no, who describes himself in the documents in the Ohio proceedings as an officer of Capr i corn, the reliquary being displayed in assembled form on a table.

The original standpoint evinced by Capricorn in their evidence was clear and categoric. In her affidavi t , thei r sol i citor, Oon agh Swan of Elbor ne Mit chel l , states as fol l ows on i nforma on and belief:

“(5) I am informed by Mr. William Coughlan, Capricorn's legal adviser in Cleveland, that Capricorn is resident in Switzerland and its business is primarily conducted there, or in the country in which a work of art with which it is dealing is situated. However, all company records are held in Switzerland and nego a ons for the sal e and/or loan or works of art take place in Switzerland.

(6) I am further informed by Mr. Coughlan that the address upon which the writ was purportedly, served is a house in St. John's Wood, London, which has the benefit of a

Page6

secure vault. Capricorn had an informal arrangement, not reduced to wri ng, wi th the owner or leaseholder of the building, under which it was permi ed t o stor e t he reliquary in the vault to enable prospec ve pur chaser s or bor rowe r s to inspect it, but Capricorn has no office t her e, no i nterest in t he proper t y and no other connec on wi th that address. I am also informed by Mr. Coughlan that access to the house is not controlled by Capricorn.”

Signor Mar no in hi s affidavi t states as f ollows:

“(4) Capricorn used the vault at Carlton Hill for the purpose of storing the reliquary only because it happened to be in England. Capricorn has, as Miss Swan states in para. 6 of her affidavi t , an i nformal arr angemen t wit h Races SA, the owne r of 72A Car l ton Hill. A housekeeper named Maria Rezio, who lives on the premises, controls access to the house. Ms. Rezio is not an employee of Capricorn. She holds the keys to the vault and when the reliquary was stored in the vault she followed my instruc ons concerning access to the reliquary (for example, in permi ng Roger s to r emov e i t for shipment to Ohio). She did this, I presume, because she had received instruc ons from her employer which reflected the agreeme nt betwe en Races SA and Capr i cor n.

The premises at Carlton Hill are a private house, not an art gallery of any kind.”

From this evidence one would glean no inkling that any Capricorn object other than the reliquary had ever been present in the premises, and in the light of the other evidence to which I am about to refer, this tes mo ny is, to say the least, incomp l et e.

First, and perhaps most important, there is the evidence of Mr. John Henry Phelps, who is a foreman employed by Rogers, who states as follows:

“In the course of my du es as an emp l oyee of T. Roger s & Co. (Packer s) Ltd. I have been to number 72A Carlton Hill, St. John's Wood, London on about 50 or 60 occasions since about 1980, either to deliver or pick up works of art. On these occasions my instruc ons have ei ther been to pr oceed to 72A Car l ton Hi ll, or to pr oceed to Capr i cor n at this address.

72A Carlton Hill, St. John's Wood is a converted church. The premises are looked a er by a resident housekeeper, Maria, who knows me and my men by sight. She usually opens the door for us when we ring the bell at the outer door where there is an entry phone. I have also o en seen Mr . Ma r no t her e and on some occasi ons Mr. Tazzol i . I know this address as being the premises of Capricorn, a company which to my knowledge imports and exports works of art.

As one enters the premises at 72A Carlton Hill, through the front door there is an interior courtyard. Then there is an iron, firepr oof f ront door wh i ch l eads i nt o an *866 entrance hall. This is a large room and its leads off to a ki tchen on the ri ght and what I take to be a study on the le . As one pr oceeds one come s acros s an iron screen which obliges one to pass either on the le or the ri ght , leadi ng int o a lar ge open- pl an room, in which there is an iron spiral staircase leading to an upper gallery.

There are built-in cupboards around the walls of the large room on the ground floor on which approximately ten statues are placed. These are mainly of Indian or south-east Asian origin. There is also a large pain ng by Franci s Bacon near the stai rcase.

Towards the le rear of thi s open- pl an room is a wa l k- in saf e, or vaul t, used for saf e storage of certain works of art. At the right rear of this room there is a passage leading to a toilet and out to the garden. There is also a pla orm at the rear of thi s room wi th built-in cupboards and shelves, on which many items of sculpture and other objects of

Page7

art are displayed.

As one proceeds up the spiral staircase there is an iron walkway which runs right across the large room. At the rear of the upper gallery there are two very large carved wooden statues and an enormous carved German cupboard. There is also a carved figur e of a Hi ndu god wi th si x arms . At the front of the upper gal ler y ther e is an open sec on (rat her like a bal cony) wh er e a few commo des and rugs are usual ly di spl ayed. This balcony leads off to a bedr oom on the le . If one proceeds through t he bedr oom one finds a li giving access to t he t op floor and al so down t o the gr ound floor near t he kitchen. I remember on one occasion delivering some drawings to the top level of the premises.

During the course of my many calls at 72A Carlton Hill over the years, I have on occasion collected works of art intended for export from Capricorn at that address and also delivered works of art which were imported by Capricorn and stored temporarily in my employer's warehouse, at that address.

The procedure followed in T. Rogers & Co. (Packers) Ltd. is that I am given wri en instruc ons on wo r ksheet s. Wh en I have been so ins tructed to pr oceed to 72A Car l ton Hill, my wri en i ns truc ons have been ei t her to proceed t o Capr i corn, or to 72A Carlton Hill, St. John's Wood, which I have always considered to be the address at which Capricorn carries on business in this country. I have associated this address with Capricorn ever since I have been going there-for as long as I can remember.

To the best of my recollec on my l ast vi si t to Capr i cor n at 72A Car l ton Hi ll wa s i n March of this year. I had instruc ons then to pi ck up cer tai n i tems , bei ng pi ctur es , mirrors and candelabra. These goods filled about ei ght packi ng cases in al l. I reme mb er that I had to return to these premises on the following day to pick up a large, heavy marble table-top which my employer's van had not been able to accommodate on the previous day. My instruc ons we r e that al l these goods we r e to be pi cked up from Capricorn for export. I have no doubt that this was a job for Capricorn. It has always been my understanding that 72A Carlton Hill, St. John's Wood, is a place of business of Capricorn, which I believe to be a business name used by Mr. Tazzoli or Mr. Mar no. On occasions I have seen another Italian gentleman at the premises but I cannot recall his name at present.”

Let me say at once that it would be wrong to assume from this evidence that the works of art on display belonged to Capricorn. But that s ll leaves for cons i der a on t he evi dence of ext ens i ve deliveries and collec ons , wh i ch we r e cl ear l y to a subs tan al ext ent on Capr i corn' s account .

*867

In addi on the evi dence pr esent ly bef or e the cour t shows that :

(1) For the years 1984–85 and 1985–86 Capricorn placed insurance policies at Lloyd's up to a limit of £1.1m on any one loss while at the Carlton Hill premises, the property insured being, “pain ngs, pi ctur es , scul pt ur es , an que f urni t ure and/or obj ect s of art and/ or all interests incidental to the assured's opera ons as ma y be agreed by the underwriters.”

The address of Capricorn as the assured was described in the schedule to the policy as 72A Carlton Hill, London NW8.

(2) Capricorn's own pleading in the Ohio proceedings states as follows: “During the period from the spring of 1983 through late September 1985 the reliquary was stored in London, England in a vault in a house owned by a Swiss company, access to which is

Page8

controlled by Capricorn.”

(3) Signor Mar no is one of the per sons wh o knows the comb i na on numbe r s of the vaul t , with the housekeeper being in charge of the keys.

Evalua ng thi s evi dence, I am sa sfied and hold that, as Mr. Stewar t submi e d, i t demonst r ates substan al stor age by Capr i cor n of wo r ks of ar t on the pr emi ses . Mr . Tuckey sought to cri cise Mr. Phelps' evidence on the ground that, as is shown in the Ohio evidence, Capricorn was not incorporated un l 1983, so he mu s t be wr ong in da ng any connec on of Capr i corn wi th the premises as far back as 1980. This cri ci sm i s cor rect so far as i t goes , but does not i n my judgment seriously impair his evidence, which shows clearly that he has made a large number of deliveries to and collec ons from the pr emi ses on Capr i cor n' s account , and, mo s t imp or tant ly, that he regards the premises as being Capricorn's. The striking number of items dealt with in his last visit in March this year, which he describes in the final paragraph quot ed above, comp r i ses a wide variety of works of art, all or at least some of which, one presumes, were stored in the vault for safekeeping prior to their removal.

The substan al scal e of t hi s stor age i s i n my j udgme nt cor robor at ed by t he scal e of t he insurance placed by Capricorn, and the wide descrip on of the wo r ks of ar t insur ed. I am unabl e to accept Mr. Tuckey's submission that a policy up to a limit of £1.1m for any one item, and with this wide variety of categories of work, could have related simply and solely to the reliquary, whose value when intact is (on Capricorn's figur es) about $750, 000.

It is also clear, and indeed accepted by Mr. Tuckey, that these premises are used for viewing works of art stored there by Capricorn, as occurred on Dr. Czuma's visit.

The passage quoted above from Capricorn's own Ohio pleading is not en rel y cl ear , but even if Mr. Stewart is wrong in interpre ng it as me ani ng that Capr i cor n cont rol access to the house, it is at least crystal clear that they control access to the vault.

The address on the insurance policy is also consistent with the premises being Capricorn's established business premises, though I do not put great weight on that aspect taken in isola on, si nce the schedul e i s an underwr i ter ' s docume nt , though no doubt comp i led from informa on gi ven in the pr oposal form.

Storage and viewing are very important aspects of an art dealer's business, par cul ar l y i n London or any of the other main world centres for dealing in works of art. Mr. Tuckey, while accep ng t hat t he case i s near t he bor der l ine, s ubmi ts t hat s tor age and vi ewi ng i s not demonstrated on the evidence with a sufficient degr ee of regul ari ty to cons tute an es tabl i s hed place of business, and that his case is reinforced by the fact that *868 there were many other art objects on display at the premises which did not belong to Capricorn.

However, I have reached the firm conc l us i on that CMA , on wh om the bur den of cour se rests, have demonstrated a sufficient l y subs t an al scal e of t hese two v ery impor t ant ac vi es to make good their case that Capricorn had at the date of service an established place of business on the premises. Mr. Phelps provides the evidence up to March 1989 (only shortly before service) and shows a steady pa er n of user from at l east 1984, wh en the first insurance was placed, indica ng establ ishme nt from about that dat e onwa rds .

The fact that other works of art not belonging to Capricorn were also on the premises does not seem to me in any way to affect that concl us i on; nor , I wo ul d add, does the absence of any outward sign of Capricorn on the premises have any significance, si nce i t wo ul d sur el y be uncharacteris c for ar t deal er s in obj ects of thi s hi gh qual ity to pl ace conspi cuous name pl at es or the like on their premises. I should add by way of postscript that, in view of the conclusions reached above, I have not found it necessary to resolve a factual dispute between Dr. Czuma

Page9

and Signor Mar no as to the cour se of ot her di scus si ons on the occasi on of hi s vi si t to the premises.

It follows that I hold that the service of the writ at Carlton Hill was good service.

Stay of proceedings-lis alibi pendens

The principles which apply are enshrined in the two leading House of Lords cases of The Abidin Daver [1984] A.C. 398, and Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 .

Ini al ly Mr . Stewa r t submi ed t hat the appr oach i n The Abidin Daver had been superseded by Spiliada, but in his final submi ssi ons he accept ed Mr . Tuckey' s cont en on t hat ther e i s no conflict betwe en the two .

In The Abidin Daver, Lord Diplock in the leading speech in the House of Lords stated as follows at p. 411 E:

“So I turn to the crucial ques on of wh at influence upon t he exerci se of his dis cre on whether to grant a stay of the English proceedings or not the judge should have a ribut ed to the fact that at the me t he s tay was appl i ed f or ther e was al r eady proceeding in a natural and appropriate forum, the District Court of Sariyer, li ga on between the same par es about the same subj ect ma er in whi ch t he r oles of plain ff and defendant were reversed.

My Lords, the essen al change i n the a tude of t he Engl i sh court s to pendi ng or prospec ve l i ga on i n for ei gn j ur isdic ons t hat has been achi eved st ep-by- st ep during the last 10 years as a result of the successive decisions of this House in The Atlan c Star [1974] A. C. 436 ; MacShannon [1978] A.C, 795 and Amin Rasheed [1984] A.C. 50, is that judicial chauvinism has been replaced by judicial comity to an extent which I think the me is now ripe to acknowl edge frankl y is, in the field of law wit h which this appeal is concerned, indis ngui shabl e from the Sco sh l egal doct r i ne of forum non conveniens.

Where a suit about a par cul ar subj ect ma er bet wee n a plain ff and a def endant i s already pending in a foreign court which is a natural and appropriate forum for the resolu on of the di sput e betwe en them, and the def endant in the for ei gn sui t seeks to ins tut e as pl ai n ff an ac on in England about t he same ma er to which t he per son who is plain ff in t h e f o reign su i t i s ma d e de f endant , th en t h e ad di onal inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two differ ent c ount ries wh er e t he *869 same facts will be in issue and the tes mo ny of the same wi tnesses requi red, can only be jus fied i f the wou l d-be plain ff can est abl ish obj ec vel y by cogent evi dence that there is some personal or judicial advantage that would be available to him only in the English ac on that i s of such imp or tance that i t wo ul d cause inj us ce t o him t o deprive him of it.

Quite apart from the addi onal i nconveni ence and expense, i f the two ac ons are allowed to proceed concurrently in the two jurisdic ons t he cour ts of t he t wo countries may reach conflic ng deci sions , a pos s i bil ity whi ch ( pace Sir John Donal dson M.R.'s use of the adjec ve in the ins tant case) is far from bei ng me r el y ‘theor e cal ’ in a case of a collision between two ships, where the measure of liability of one ship to the other is dependent upon the court's view of the compara ve faul t of each shi p. Si nce the District Court of Sariyer would be recognised by the English High Court as a court of competent jurisdic on, any judgme nt gi ven by it agai ns t the Cuban shi pown er s wo ul d be enforceable in England by ac on; so an unseeml y race to be the first to obt ain judgment in the jurisdic ons i n wh i ch t he T ur ki sh s hi pown er s and t he Cuban

Page10

shipowners respec vel y are pl ai n ffs mi gh t well ensue; and novel problems r ela ng to estoppel per rem judicatam and issue estoppel, which have not hitherto been examined by any English court, might also arise. Comity demands that such a situa on should not be permi ed to occur as betwe en cour ts of two ci vi lised and fri endl y stat es . It is a recipe for confusion and injus ce.

Faced with such a daun ng pr ospect it ma y we l l be that a def endant on bei ng ref used a stay of the concurrent ac on br ought agai ns t hi m subsequent ly in Engl and wi ll feel driven to se le upon terms mo r e favour abl e to the ot her par ty than he wo ul d i f the li ga on had proceeded i n t he f orm o f claim a nd c ross -claim i n t he cour t of compe t ent jurisdic on in wh i ch he has al ready ins tuted proceedi ngs as plain ff; or, i f a empts a t se leme nt fai l wi ll become a count er -cl ai ma nt in the Engl ish pr oceedi ngs ins tead of con nui ng wi th hi s for ei gn ac on. ”

In Spiliada, Lord Goff of Chi evel ey , in the leading speech laid down the following general principle at p. 476C:

“The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is sa sfied t hat ther e i s some other avai l abl e f orum, having competent jurisdic on, wh i ch i s the appr opr iat e f or um f or the t ri al of the ac on, i .e. i n wh i ch the case ma y be tri ed mo r e sui tabl y for the i nt er ests of al l the par es and the ends of jus ce. ”

In the present case there are a number of factors which are relied upon by Mr. Tuckey which in my judgment point very strongly indeed in favour of Ohio as the more appropriate forum for the trial of these disputes, viz.: (1) The case has already been under way in Ohio for over two years and is now ready for trial.

(2) Capricorn have, as is not disputed, already expended $75,000 in legal costs in those proceedings. Mr. Stewart sought to argue that within that figur e I shoul d di sregard that par t (unspecified) wh i ch rel at ed to Roger s' appl ica ons for dismi s sal of the claim a gai nst them, but I disagree, seeing that in resis ng those appl ica ons Capr i corn was ac ng r easonabl y, and i n fact as much in CMA's interest as in their own. Mr. Stewart also submi ed that par t of the costs will not have been wasted anyway, since they would not be duplicated here, but I very much doubt whether that is the case save in respect of a very small propor on. I am ther ef or e sa sfied t hat i f the ac on pr oceeded here, and *870 CMA achieved their object of stopping the Ohio proceedings, a very considerable propor on of the $75, 000 al ready expended by Capricorn would turn out to have been wasted.

(3) There will be substan al del ay i n t he r esol u on of Capr i corn' s cl aim, on t he s ame hypothesis.

(4) The law of Ohio is the proper law of the loan agreement, as is now (albeit only as a result of a concession made during the hearing) common ground for the purposes of this applica on.

(5) Ohio is the more convenient forum for the witnesses. The pre-trial oral discovery shows that CMA are calling 11 witnesses concerning the unpacking etc. of the reliquary, all of whom are based in Ohio, and of course Capricorn have always been willing and anxious to bring their witnesses to Ohio.

(6) Issues arise about insurance in America which do not arise in the English proceedings.

(7) Capricorn's original choice of venue in Ohio was in all respects appropriate. It was

Page11

convenient for witnesses; the contract was for loan for exhibi on in the US ; a ver y subs tan al part of the facts were connected with Ohio, and were by no means outweighed by the connec on wi th Engl and because the rel iquary wa s packed in and despat ched from London. Above all, Ohio is CMA's home base and one can imagine CMA's response had Capricorn sought in 1987 to issue proceedings out of the jurisdic on in Engl and under O. 11.

Against this very formidable case Mr. Stewart places in the forefront of his argument a number of considera ons wh i ch can be conveni ent ly described comp endi ous l y as “the Roger s factor s”. These are: (1) Rogers' refusal to par ci pat e in the Oh i o pr oceedi ngs, so that ther e wi ll be no di scover y from them and no par ci pa on i n t he hear i ng by thei r wit nes ses who , Mr. Stewar t cont ends , are cri cal as to the ci rcums tances of the los s.

(2) Rogers' possible appeal which will not be heard un l a er the t rial, and whi ch wou l d, if Rogers succeed, result in Rogers not being bound by the Ohio proceedings, with the consequence that CMA would have no alterna ve but to sue Roger s in Engl and, wi th the ri sk of differ ent findi ngs her e.

Let me dispose of the second point first. I t seems to me that the pos si bi lity of a successful appeal in Ohio is not a ma er to wh i ch I shoul d gi ve we i ght ; ther e mu s t be at least an equal likelihood that the first ins tance deci si on, rei ter at ed a er a second appl i ca on by Roger s, will be upheld if an appeal is mounted; indeed, as I understand the posi on, t he i ssue t ur ns substan al ly on the extent of Roger s' ant ecedent bus i ness connec on wi t h Ohi o, whi ch i s a ques on of fact. I t wo ul d be qui te wr ong i n my j udgme nt for the cour t to a ach s i gni ficant importance to a pure con ngency of thi s ki nd. Taki ng Mr . Stewa r t' s first fact or, a numbe r of points arise:

(1) It would, as Mr. Stewart himself accepts, have been open to him to seek to obtain Rogers' evidence in England under an order pursuant to the Evidence (Proceedings in Other Jurisdic ons ) Ac t 1975 and R.S.C., O. 70. This CMA elected not to do, and it is Mr. Stewart's case that to take the evidence in this way would have been completely unsa sfactor y in the present case, which, he suggests, requires the a endance of Roger s' wi tnesses at the tri al in person in the interests of jus ce. I accept that the 1975 Ac t pr ocedur es are less sa sfact ory than viva voce evidence but I do not agree that in a case like the present such alterna ve procedure is by any means wholly unsa sfactor y, and indeed in *871 many cases it is o en the only recourse available to a court. At least that procedure has the advantage that a witness is open to cross-examina on, i n cont rast to a wi tness wh o has been subpoenaed without a proof.

(2) I think Mr. Tuckey is right when he says that Rogers' non-a endance is pr ima r i ly Roger s' problem rather than CMA's or Capricorn's. It will be open in Ohio to both CMA and Capricorn to lead all the evidence from their respec ve wi tnesses as to the care they took of the pl aque at all material me s , wi thout the a endance of Roger s , and i f the concl usi on i s reached t hat neither of them lost the plaque, then the inference must be that Rogers lost it. If once that conclusion is reached, the outcome of the case will then turn on the issue of agency, which depends almost en rel y on the docume nt s and not on Roger s' evi dence. It wa s al wa ys open to CMA to claim over against Rogers in Ohio, but they have not done so.

While therefore I accept that it would have been preferable all round, and in par cul ar for CMA ,

Page12

if Rogers had par ci pat ed in the tri al in Oh i o, and that ther ef or e thi s is a cons i der a on t o be taken into account on forum conveniens, in my judgment the Rogers factors carry nothing like the weight a ribut ed to them by Mr . Stewa r t and are wh ol ly i nsufficient t o outweig h t he factors on the other side to which I have referred above.

Mr. Stewart raises other objec ons , name l y:

(1) The Ohio court may have problems with Rogers' reliance on their standard printed terms, par cul ar l y shoul d any issue ar i se under the Unfair Contract Terms Act 1977. How much these points will figur e in the Oh i o pr oceedi ngs wo ul d seem uncer tai n, seei ng that Roger s wi ll be absent therefrom; but in any event it does not seem to me that it will create undue difficul t y for an American court to evaluate the criteria, in par cul ar t he c ons i der a ons of reasonableness, which are laid down by the 1977 Act.

(2) Mr. Stewart points out, rightly, that the ac on rai ses issues of imp or tance for the mu seum, and in par cul ar thei r anxi et y not to have a findi ng agai nst them t hat they wer e r espons i ble for a serious loss of part of a valuable work of art, thus en tl ing them to have the ac on resolved in the best possible way. For the reasons already given, it seems to me that the absence of Rogers will in no way affect thei r abi lity to def end thems el ves so far as thei r own personal blameworthiness is concerned, and most ins tu ons of this kind wou l d prefer such responsibility to be determined on their own home ground rather than in a foreign jurisdic on. Any ques on whi ch may ari se as to t hei r vicarious liability, on the foo ng that Rogers as their agents were to blame, would not seem to impinge upon CMA's reputa on, seeing that Rogers, although retained by CMA, were nominated as carriers by Capricorn.

Taking all these considera ons int o account , I am sa sfied and I hold that f urther pursui t of t he English ac on wo ul d resul t i n subs tan al addi onal expense, i nconveni ence and delay of t he kind described by Lord Diplock in The Abidin Daver. Furthermore, although it is on the cards that (if I allowed the English ac on to pr oceed) a perma nent stay wo ul d be gr ant ed in Oh i o, thi s is by no means certain, since it is obvious that any such applica on to the Oh i o cour t to vacat e the prospec ve tri al dat e i n Oc tober or to imp ose a perma nent stay, wo ul d be ver y strenuous l y resisted by Capricorn and might well therefore be refused. In that event, there would be two concurrent proceedings in two jurisdic ons wi th al l the fur ther gr ave di sadvant ages described by Lord Diplock in the final passage quot ed above from The Abidin Daver.

All in all, following the approach ordained in Spiliada, I am sa sfied t hat the Ohi o cour t is another available forum, having competent jurisdic on, wh i ch i s c l ear l y t he *872 more appropriate forum for the trial of this ac on, i .e. one i n wh i ch the case ma y be tri ed mo r e suitably for the interests of all the par es and the ends of jus ce.

In consequence, I shall grant Capricorn's applica on for a stay of the Engl ish ac on agai nst them. This of course has no effect on CMA ' s cl ai m agai ns t Roger s in the Engl ish ac on.

Order 11

In view of my decision on the stay, the O. 11 applica on become s academi c, seei ng that on the discre onary aspects under O. 11 the burden of proof rests on CMA and not on Capricorn, with the result that they would be bound to fail, a for or i . I t i s ther ef or e unnecessar y for me to consider whether the O. 11 criteria are sa sfied and I shal l mer ely confine myse l f to obser vi ng that, while there is no shade of a reflec on upon CMA' s mo ves, I shoul d have f ound t he greatest possible difficul t y i n uphol ding t hat , in a cont r ived proceedi ng of the present kind; CMA were proper par es to the cl ai m agai ns t Roger s, wh i ch i s mo r eover br ought on assump ons

Page13

that Rogers were responsible for the loss and that Rogers were CMA's agents, both of which CMA themselves expressly deny in their own points of claim.

(Ac on stayed as agai ns t first def endant s ) *873

© 2011 Sweet & Maxwell

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*460 Spiliada Mari me Cor por a on Appel l ant s v Cansul ex Ltd Res pondent s

House of Lords

19 November 1986

[1986] 3 W.L.R. 972

[1987] A.C. 460

Lord Keith of Kinkel , Lord Templeman , Lord Griffiths , Lord Mac kay of Clashfern , and Lord Goff of Chieveley

1986 July 7, 8, 9; Nov. 19

Prac ce—Wr it—A ppl ica on t o s et asi de—Sh i powne r s bri ngi ng ac on i n Engl and al leging damage t o vessel caused by shipping wet sulphur cargo—Shippers carrying on business in Bri sh Columbia—Whether case suitable for service out of jurisdic on—R el evance of cl ai m bei ng me barred in Bri sh Col umb i a— R.S.C., Ord. 11, r. 4(2)

Ships' Names—Spiliada

In 1980 a Liberian owned vessel was chartered to carry a cargo of bulk sulphur from Vancouver, Bri sh Col umb i a, to Indi an por ts. The shi pown er s al leged that the car go wa s we t wh en loaded and as a result caused severe corrosion to the vessel. They obtained leave ex parte to serve proceedings on the shippers in Vancouver or elsewhere in Canada on the ground that it was an ac on to recover dama ges for br each of a cont ract gover ned by Engl ish law. The shi pper s issued a summons under R.S.C., Ord. 12, r. 8 , asking that the ex parte order be discharged on the ground, inter alia, that the case had not been shown to be "a proper one for service out of the jurisdic on" under R.S.C., Ord. 11, r. 4(2)1 . At the hearing of the applica on Staught on J., wh o had already started to hear the trial of a similar ac on for dama ges invol vi ng the same shi pper s in respect of another ship, the Cambridgeshire considered, inter alia, the availability of witnesses, poten al mu l pli city of proceedi ngs and t he f act that the accumul ated exper i ence of counsel and solicitors derived from their par ci pa on i n t he Cambridgeshire ac on wo ul d lead to savings of me and mo ney. He di smi ssed the appl ica on.

On the shippers' appeal, the Court of Appeal held that it was impossible to conclude that the factors considered by the judge, when taken together, showed that the English court was dis nctly mo r e sui tabl e for the ends of j us ce, and t hat a f urt her fact or, not cons i der ed by Staughton J., that if the present proceedings were set aside the shipowners would be faced with a defence of limita on in Br i sh Col umbi a, was a neut r al fact or. The Cour t of Appeal al l owed the appeal and set aside the writ.

On appeal by the shipowners:-

allowing the appeal, that in order to determine whether a case was a proper one for service out of the jurisdic on under R. S. C. , Or d. 11, r. 4( 2) the cour t had, as in appl ica ons for a s tay of proceedings founded on the ground of forum non *461 conveniens where the ac on wa s as of right by service on a defendant within the jurisdic on, to iden fy i n whi ch f orum t he case coul d most suitably be tried for the interests of all the par es and for the ends of j us ce; that , accordingly, the judge having iden fied t he corr ect test and cons i der ed t he r elevant fact ors , including the advantages of efficiency, expedi on and economy i n br inging t he ac on in England following the Cambridgeshire ac on, the Cour t of Appeal had had no grounds for int er fer ing with the exercise of his discre on (pos t, pp. 464F, G, 465G - 466A, 480F-G, 484E- F, 485F - 486B) .

Dictum of Lord Kinnear in Sim v. Robinow (1892) 19 R. 665 applied.

Ilyssia Compania Naviera S.A. v. Bamaodah [1985] 1 Lloyd's Rep. 107 , C.A. approved.

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , H.L.(E.) considered.

Dicta of Lord Diplock and Lord Wilberforce in Amin Rasheed Shipping Corpora on v. Kuwa i t

Page2

Insurance Co. [1984] A.C. 50 , 65, 72, H.L.(E.) and of Stephenson L.J. in Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 L loyd' s Rep. 119 , 129, C.A. explained.

Per curiam. Had the point arisen, the shipowners had not acted unreasonably in failing to commence proceedings in Bri sh Col umb i a bef or e the expi ry of the limi ta on per i od t her e. Had the judge erred in the exercise of his discre on, the pr oceedi ngs wo ul d onl y have been set asi de on condi on that the shi pper s wa i ved thei r ri ght to rel y on the me bar in Bri sh Columbi a (post, pp. 464F, 465G - 466A, 487G - 488A).

Per Lord Templeman. The solu on of di sput es about the rel a ve mer i ts of trial in Engl and and trial abroad is preeminently a ma er for the tri al judge, bef or e wh om submi ssi ons shoul d be measured in hours not days. An appeal should be rare and the appellate court should be slow to interfere (post, p. 465E-G).

Decision of the Court of Appeal [1985] 2 Lloyd's Rep. 116 reversed.

The following cases are referred to in the opinion of Lord Goff of Chi evel ey:

Abidin Daver, The [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R. 470; [1984] 1 Lloyd's Rep. 339, H.L.(E.) .

Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50; [1983] 3 W. L. R. 241; [1983] 2 All E.R. 884, H.L.(E.) .

Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119, C.A. .

Atlan c Star , The [1973] Q. B. 364; [1972] 3 W. L. R. 746; [1972] 3 Al l E. R. 705 , C.A.; [1974] A.C. 436; [1973] 2 W.L.R. 795; [1973] 2 All E.R. 175, H.L.(E.) .

Blue Wave, The [1982] 1 Lloyd's Rep. 151

Britannia Steamship Insurance Associa on Ltd. v. Aus oni a As si cur azi oni S. p. A. [1984] 2 Ll oyd' s Rep. 98, C.A. .

B.P. Explora on Co. (Li bya) Ltd. v. Hunt [1976] 1 W. L. R. 788; [1976] 3 Al l E. R. 879

Clements v. Macaulay (1866) 4 Macph. 583

Credit Chimique v. James Sco Engi neer ing Gr oup Ltd. 1982 S. L. T. 131

European Asian Bank A.G. v. Punjab and Sind Bank [1982] 2 Lloyd's Rep. 356, C.A. . *462

Hadmor Produc ons Ltd. v. Hami lton [1983] 1 A. C. 191; [1982] 2 W. L. R. 322; [1982] 1 Al l E. R. 1042, H.L.(E.) .

Hagen, The [1908] P. 189, C.A. .

Ilyssia Compania Naviera S.A. v. Bamaodah [1985] 1 Lloyd's Rep. 107, C.A. .

Longworth v. Hope (1865) 3 Macph. 1049

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362; [1978] 1 All E.R. 625, H.L.(E.) .

Page3

Sim v. Robinow (1892) 19 R. 665

Société du Gaz de Paris v. Société Anonyme de Naviga on "Les Ar ma t eur s Françai s, " 1926 S. C. 13, H.L.(Sc.) .

Société Génerale de Paris v. Dreyfus Brothers (1885) 29 Ch.D 239

Trendtex Trading Corpora on v. Cr edi t Sui sse [1982] A. C. 679; [1981] 3 W. L. R. 766; [1981] 3 Al l E.R. 520, H.L.(E.) .

Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo) [1949] A.C. 326; [1949] 1 All E.R. 294, H.L.(E.) .

Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo)

Union Industrielle et Mari me v. Pet rosul I nt er na onal Ltd. (The Ros el i ne) (unr epor t ed) , 23 March 1984

The following addi onal cases we r e ci ted in ar gume nt :

Adolf Warski, The [1976] 1 Lloyd's Rep. 107 ; [1976] 2 Lloyd's Rep. 241, C.A. .

Bruce (W.) Ltd. v. J. Strong [1951] 2 K.B. 447; [1951] 1 All E.R. 1021; [1951] 2 Lloyd's Rep. 5, C.A. .

Can er i Na val i Ri uni S.p.A. v. N.V. Omne J us a [1985] 2 Lloyd's Rep. 428, C. A. .

Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557; [1980] 3 W.L.R. 991; [1981] 1 All E.R. 143, H.L.(E.) .

Indian Fortune, The [1985] 1 Lloyd's Rep. 344

Maharani Woollen Mills Co. v. Anchor Line (1927) 29 Ll.L.Rep. 169, C.A. .

Media, The (1931) 41 Ll.L.Rep. 80 .

Shiloh Spinners Ltd. v. Harding [1973] A.C. 691; [1973] 2 W.L.R. 28; [1973] 1 All E.R. 90, H.L.(E.) .

Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803; [1978] 1 Lloyd's Rep. 1, H.L.(E.) .

Ward v. James [1966] 1 Q.B. 273; [1965] 2 W.L.R. 455; [1965] 1 All E.R. 563; [1965] 1 Lloyd's Rep. 145, C.A. .

Appeal from the Court of Appeal.

Page4

This was an appeal by the plain ffs, Spi l iada Mar i me C orpora on, by leave of the House of Lords from an order of the Court of Appeal [1985] 2 Lloyd's Rep. 116 (Neill and Oliver L.JJ.) allowing an appeal from the order of Staughton J. of 16 November 1984 whereby he had dismissed the applica on of the def endant s, Cansul ex Ltd. , under R.S.C., Ord. 12, r. 8 to set aside service of proceedings upon them in Bri sh Col umb i a, and al ter na vel y f or a s tay of the proceedi ngs , and whereby he accordingly refused to discharge the ex parte order of Neill J. on 10 October 1983 giving leave to the plain ffs to s erve proceedi ngs upon t he def endant s pur suant to R.S.C., Ord. 11, r. 1(1)(f)(iii) .

The facts are set out in the opinion of Lord Goff of Chi evel ey.

*463

Kenneth Rokison Q.C. and Nicholas Legh-Jones for the plain ffs. The t rial judge appl i ed t he corr ect test as to whether the case was a proper one for service out of the jurisdic on. He exer ci sed hi s discre on i n accor dance wi th t hat t est and t her ef or e t he Cour t of Appeal ought not t o have intervened and subs tut ed i ts own di scre on: see Amin Rasheed Shipping Corpora on v. Kuwa i t Insurance Co. [1984] A.C. 50 , 65-68, per Lord Diplock. The way in which Lord Diplock's speech has been interpreted in Britannia Steamship Insurance Associa on Ltd. v. Ausoni a As si cur azi oni S. p. A. [1984] 2 Lloyd's Rep. 98 and Ilyssia Compania Naviera S.A. v. Bamaodah [1985] 1 Lloyd's Rep. 107 is correct - that the list of relevant factors is not exhaus ve and the cour t has to car ry out a bal anci ng act of all the factors. [Reference was also made to Can er i Na val i Ri uni S.p.A. v. N.V. Omne J us a [1985] 2 Lloyd's Rep. 428] . The Court of Appeal was only en tled to int er vene and int er fer e wi th the judge's discre on in the ci rcums tances set out by Lor d Br andon of Oa kbr ook in The Abidin Daver [1984] A.C. 398 , 420, namely where (1) the judge had misdirected himself with regard to the principles in accordance with which his discre on had to be exer ci sed; (2) the judge, in exer ci si ng hi s discre on, had taken int o account ma ers whi ch he ought not to have done or fail ed t o t ake i nto account ma er s wh i ch he ought to have done; or (3) hi s deci si on wa s pl ai nl y wr ong. Fur ther , i n Shiloh Spinners Ltd. v. Harding [1973] A.C. 691 , 728, Lord Simon of Glaisdale commented that the fact that the appellate court would give differ ent we i ght to the var ious cons i der a ons assessed by the first ins tance cour t wa s not a reason to int er fer e. The judge had not onl y appl ied the cor rect test, but he had taken into account all relevant ma er s and cannot be sai d to have been "pl ai nl y wrong." Indeed, the judge was in the best posi on to we i gh the rel evant factor s and in the par cul ar the relevance and importance of the fact that the Cambridgeshire ac on had been ful ly pr epared and fought in London (although it subsequently se led in the cour se of the tri al ). In the event that such circumstances were sa sfied i n t he present case so t hat the Cour t of Appeal was en t led t o consider the ma er af resh and subs tute i ts own dis cre on, t hen t he f act that t he defendant s coul d rely on a me bar in Br i sh Col umbi a was not , as the Cour t of Appeal suggest ed, a neut r al fact or, but a powerful one which ought to have been weighed in the balance in the plain ffs' favour . See Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557 ; The Adolf Warski [1976] 1 Lloyd's Rep. 107 , 110; [1976] 2 Lloyd's Rep. 241 ; The Blue Wave [1982] 1 Lloyd's Rep. 151 and Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119 .

Robert Alexander Q.C. and Peter Goldsmith for the defendants. The correct test to be applied is that of Lord Diplock in Amin Rasheed [1984] A.C. 50 , 68: "The exorbitance of the jurisdic on sought to be invoked ... is an important factor to be placed in the balance against gran ng leave. It is a factor that is capable of being outweighed if the would-be plain ff can s a sfy the Engl i sh court that j us ce either could not be obtained by him in the alterna ve for um; or coul d onl y be obt ai ned at excessi ve cost, delay or inconvenience." That passage provides an exhaus ve list of the ci rcums tances in wh i ch a plain ff can *464 sa sfy the bur den upon hi m of showi ng that the case is a pr oper one for ser vi ce out of the jurisdic on. The pl ai n ffs in the pr esent case coul d not s a sf y that burden. [ Refer ence was made to MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 as to the weight to be applied to a preference for representa on by l awy er s in one jur i sdi c on r ather than anot her ; and t o Ward v. James [1966] 1 Q.B. 273 , 293, as illustra ng the cor rect appr oach to wh et her an appel lat e cour t

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may interfere with the exercise of discre on by a tri al judge. ] In the pr esent case the Cour t of Appeal was right to review the exercise of the judge's discre on: [Det ai led ref er ence wa s ma de to the judgments and factual material]. The Court of Appeal was also right to hold that the me - bar poi nt was a neutral factor: see: Maharani Woollen Mills Co. v. Anchor Line (1927) 29 Ll.L.Rep. 169 ; W. Bruce Ltd. v. J. Strong [1951] 2 K.B. 447 ; The Media (1931) 41 Ll.L.Rep. 80 and The Indian Fortune [1985] 1 Lloyd's Rep. 344 . The existence of a me - bar wa s onl y gi ven si gni ficance i n The Blue Wave [1982] 1 Lloyd's Rep. 151 - a case which turned very much on its facts.

Rokison Q.C. in reply. In determining whether a case is a proper one for service out of the jurisdic on, one star ts wi th the bal anci ng exer ci se, and onl y at a lat er stage does one mo ve on to the considera ons set out by Lor d Di pl ock in the passage rel ied upon by the def endant s at [1984] A.C. 50 , 68, There, Lord Diplock was merely illustra ng by ref er ence to examp l es the wa y a pl ai n ff seeking to invoke the English jurisdic on coul d sa sfy the bur den pl aced upon him. Ther e i s no differ ence betwe en that speech and that of Lor d Wi lber for ce at p. 72. It is one and the same test - correctly applied in the Britannia case [1984] 2 Lloyd's Rep. 98 and the Ilyssia case [1985] 1 Lloyd's Rep. 107 . The present is not a case where one can say that there is a natural forum. On the me - bar point, all the cases relied upon by the defendants were cases with an "exclusive jurisdic on" cl ause and where the same me - bar appl ied abr oad as in Engl and. They are not , ther ef or e, of assi stance.

Their Lordships took me for cons i der a on. 19 Nov embe r . LORD KEI TH OF KINKE L.

MY Lords, I have had the benefit of readi ng in dr a the speech t o be del i vered by my nobl e and learned friend Lord Goff of Chi evel ey. I agree wi th it and for the reasons he gi ves wo ul d al low the appeal and restore the order of Staughton J.

LORD TEMPLEMAN.

MY Lords, in these proceedings par es to a di sput e have chosen to li gat e i n order to det ermin e where they shall li gat e. The pr inc i pl es wh i ch t he c our ts of t hi s c ount ry s houl d appl y are comprehensively reviewed and closely analysed in the speech of my noble and learned friend Lord Goff of Chi evel ey. Wh er e the pl ai n ff is en t l ed to commenc e hi s ac on in t his country, the cour t, applying the doctrine of forum non conveniens will only stay the ac on if the def endant sa sfies t he court that some other forum is more appropriate. Where the plain ff can onl y comme n ce his ac on with leave, the court, applying the doctrine of forum conveniens will only grant leave if the *465 plain ff sa sfies the court t hat England i s the most appropr iat e f or um to try the ac on. But whatever reasons may be advanced in favour of a foreign forum, the plain ff wi l l be al l owed t o pursue an ac on wh i ch the Engl ish cour t has jur i sdi c on t o ent ert ain i f it wou l d be unj ust to t he plain ff to confine hi m to remedi es el sewher e.

In the present case, a vessel managed partly in Greece and partly in England, flyi ng the flag of Liber i a and owned by a Liberian corpora on is sai d to have been dama ged by a car go loaded by a Br i sh Columbia shipper and carried from Vancouver to India. Both sets of insurers are English. Similar li ga on t ook pl ace i n Canada concerning t he vessel Roseline . Similar li ga on t ook pl ace i n England over another vessel, the Cambridgeshire , a er Staught on J. had ref used to stay the ac on. If Staughton J. had good reason to try the Cambridgeshire , it is difficul t to s ee t hat he had bad reason for trying the Spiliada .

The factors which the court is en tled to take int o account i n cons i der ing wh et her one for um i s more appropriate are legion. The authori es do not , per haps cannot , gi ve any cl ear gui dance as to how these factors are to be weighed in any par cul ar case. Any di sput e over the appr opr iat e for um is complicated by the fact that each party is seeking an advantage and may be influenced by considera ons wh i ch are not apparent to the judge or cons i der a ons whi ch are not relevant for his purpose. In the present case, for example, it is reasonably clear that Cansulex prefer the outcome of the Roseline proceedings in Canada to the outcome of the Cambridgeshire proceedings in England and prefer the limita on per iod i n Br i sh Col umbi a t o t he l i mit a on per i od i n Engl and. The shipowners and their insurers hold other views. There may be other ma er s wh i ch nat ur al ly and

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inevitably help to produce in a good many cases conflic ng evi dence and op mis c and gl oomy assessments of expense, delay and inconvenience. Domicile and residence and place of incident are not always decisive.

In the result, it seems to me that the solu on of di sput es about the rel a ve mer i ts of trial in Engl and and trial abroad is pre-eminently a ma er for the tri al j udge. Comme r ci al cour t j udges are ver y experienced in these ma er s. I n near l y ever y case evi dence i s on affidavi t by wi t n esses of acknowledged probity. I hope that in future the judge will be allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff of Chi evel ey in thi s case in the quiet of his room without expense to the par es ; that he wi ll not be ref er red to ot her decisions on other facts; and that submissions will be measured in hours and not days. An appeal should be rare and the appellate court should be slow to interfere. I agree with my noble and learned friend Lord Goff of Chi evel ey that ther e we r e no grounds for i nt er fer ence in the pr esent case and that the appeal should be allowed.

LORD GRIFFITHS.

My Lords, I have had the advantage of reading in dra the speeches pr epared by my nobl e and learned friends, Lord Templeman and Lord Goff of Chi evel ey. For the reasons they gi ve I wo ul d al low the appeal.

*466

LORD MACKAY OF CLASHFERN.

My Lords, I have had the advantage of reading in dra the speeches pr epared by my nobl e and learned friends, Lord Templeman and Lord Goff of Chi evel ey. I agree wi th them and for the reasons which they give I would allow the appeal.

LORD GOFF OF CHIEVELEY.

My Lords, there is before your Lordships an appeal, brought by leave of your Lordships' House, against a decision of the Court of Appeal [1985] 2 Lloyd's Rep. 116 (Oliver and Neill L.JJ.) whereby they reversed a decision of Staughton J. in which he refused an applica on by the respondent s, Cansulex Ltd., to set aside leave granted ex parte to the appellants, Spiliada Mari me Cor por a on, to serve proceedings on the respondents outside the jurisdic on. The effect of the deci sion of the Court of Appeal was, therefore, to set aside the leave so granted and the proceedings served on the respondents pursuant to that leave.

(1) The facts of the case

As this appeal is concerned with an interlocutory applica on, I mu s t, like the cour ts bel ow, take the facts from the affidavi t evi dence filed on behal f of t he par es. The appel l ants ( whom I s hall r efer to as "the shipowners") claim to be (and can, for the purposes of this appeal, be accepted as being) the owners of a bulk carrier, of about 20,000 tonnes deadweight, called Spiliada . The shipowners are a Liberian Corpora on, and thei r vessel flies the Li ber i an flag; but t heir mana ger s are in Gr eece, though some part of the management takes place in England. The respondents (whom I shall refer to as "Cansulex") carry on business in Bri sh Col umb i a as expor ter s of sul phur . The shi pown er s chartered their vessel to an Indian company called Minerals & Metals Trading Corpora on of Indi a Ltd. (whom I shall refer to as "M.M.T.C.") under a voyage charter dated 6 November 1980, for the carriage of a cargo of sulphur from Vancouver to Indian ports. The charterparty contained a London arbitra on cl ause. Pur suant to that char ter par ty, the vessel pr oceeded to Vancouver and ther e loaded a cargo of sulphur between 18 and 25 November 1980. The sulphur was loaded on board the vessel by order of Cansulex, who were f.o.b. sellers of the sulphur to M.M.T.C. Bills of lading were then issued to, and accepted by, Cansulex. The bills were shipped bills, Cansulex being named as shippers in the bills. Clause 21 on the reverse of the bills of lading provided that, subject to certain clauses which are for present purposes immaterial, the bills of lading "no ma er wh er e issued, shal l

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be construed and governed by English law, and as if the vessel sailed under the Bri sh flag. " The bil ls were signed by agents for and by authority of the master. The cargo was discharged at ports in India between 29 December 1980 and 6 February 1981.

It has been alleged by the shipowners that the cargo of sulphur so loaded on the vessel was wet when loaded and as a result caused severe corrosion and pi ng t o t he hol ds and t ank tops of the vessel. The shipowners have claimed damages from Cansulex in respect of the damage so caused. The shipowners rely upon the age of the ship at the *467 me of the voyage (she wa s then thr ee years old) and the condi on of t he hol ds bef or e and a er the voyage. The shi powne r s have advanced their claim against Cansulex as shippers under the contract of carriage contained in or evidenced by the bills of lading to which I have already referred, basing their claim on ar cl e 4, rul e 6, of the Hague Rules (contained in the Interna onal Conven on f or the Uni fica on of certai n rul es rela ng to Bi lls of Ladi ng, dat ed Br us sel s, 25 Augus t 1924 ) i ncor por at ed i nt o the bi lls, and on a warranty implied by English law that dangerous cargo will not be shipped without warning. Arbitra on pr oceedi ngs have al so been comme nced by the shi pown er s agai ns t M. M. T. C. in London under the arbitra on cl ause i n the voyage char ter . I t i s open to M. M. T. C. to br ing arbi tra on proceedings in London against Cansulex under the sale contract between them, by virtue of the London arbitra on cl ause in that cont ract. Leave wa s obt ai ned by the shi pown er s to issue and ser ve a writ upon Cansulex outside the jurisdic on on a ground cont ai ned in the then R.S.C., Ord. 11, r. 1(1)(f)(iii) , viz. that the ac on wa s br ought to recover dama ges in respect of br each of a cont ract which was by its terms governed by English law.

Cansulex then applied for an order to set aside such leave and all subsequent proceedings. The applica on came bef or e Staught on J. on 26 Oc tober 1984. The hear ing of the appl ica on t ook place while there was proceeding before Staughton J. a very similar ac on, in wh i ch Cansul ex we r e al so defendants. That ac on concer ned a shi p cal led the Cambridgeshire , owned by an English company, Bibby Bulk Carriers Ltd. In it, the owners claimed damages for damage alleged to have been caused to their vessel by a cargo of sulphur loaded on her at Vancouver in November and December 1980, for carriage to South Africa and Mozambique. The defendants in the ac on we r e the char ter er s of the ship, Cobelfret NV, and three shippers - Cansulex, Petrosul Interna onal Ltd. , and Canadi an Superior Oil Ltd. In that ac on, Cansul ex (suppor ted by Pet rosul Int er na onal Ltd., anot her Canadi an company) who had been served with proceedings outside the jurisdic on on the same ground as in the present case, applied in September 1982 for the leave to serve proceedings upon them outside the jurisdic on, and al l subsequent pr oceedi ngs, to be set asi de. Staught on J. heard that appl ica on and dismissed it, holding that there was a good arguable case that the Canadian companies were par es to a cont ract gover ned by Engl ish law, and that the case wa s a pr oper one for ser vi ce out of the jurisdic on. Ther e wa s no appeal from that deci si on. The tri al of the Cambridgeshire ac on started on 15 October 1984, again before Staughton J. He recorded in his judgment in the present case that there were no less than 15 counsel engaged in the Cambridgeshire ac on; that each wa s equipped with 75 files ; and that the then es mat e f or the l engt h of the t rial was six mon t hs.

There has been another set of proceedings concerning damage to a vessel alleged to have been caused by a wet sulphur cargo shipped at Vancouver, Union Industrielle et Mari me v. Pet rosul Interna onal Ltd. ( unr epor ted) , 23 Ma rch 1984. Thi s concer ned a shi p cal led the Rosel ine. The ma er came bef or e a Canadi an Feder al Cour t in Ma rch 1984, the *468 defendant being Petrosul Interna onal Ltd. The own er s of the Roseline claimed a declara on that a cont ract exi sted betwe en them and Petrosul under which disputes were to be referred to arbitra on in Par i s. The cont ract wa s said to have been contained in or evidenced by a bill of lading, in which Petrosul were named as shippers. Reed J. upheld a conten on by Pet rosul that they we r e not a par ty to any cont ract wi th the owners, or at least not a party to any contract containing an arbitra on cl ause; her concl us i on wa s reached on the basis that the bill of lading, in the hands of Petrosul, "partook of the nature of a receipt or a document of tle, " and that use f or thi s pur pose di d not ma ke the docume nt a contractual one so far as Petrosul were concerned. There is doubt whether a similar conclusion would be reached in English law; Staughton J. was told that there was an unreported decision of

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Mus ll J. to the cont rar y effect . Howev er , Staught on J . hel d, and i t i s now a ccept ed by Cansul ex, that in the present case there is a good arguable case that Cansulex were par es to the bi ll of l adi ng contract, and so par es to a cont ract gover ned by Engl ish law.

It is right that I should record that the judge was told that there were other disputes concerning similar damage to ships alleged to have been caused by sulphur loaded at Vancouver; but he knew no more about them.

(2) The decision of Staughton J.

The judge approached the applica on of Cansul ex in the pr esent case as fol lows . Ha vi ng concl uded that there was a good arguable case that the shipowners and Cansulex were par es to a cont ract governed by English law, he then proceeded to consider whether the case had been shown to be, as a ma er of di scre on, a proper case f or servi ce out of the j uri sdi c on. He r efer red fir st to the decision of this House in Amin Rasheed Shipping Corpora on v. Kuwa i t Insur ance Co. [1984] A. C. 50 , and in par cul ar to cer tai n passages (wh i ch I wi ll quot e lat er ) from the speeches in that case of Lor d Diplock, at p. 65, and Lord Wilberforce, at p. 72, and to a suggested conflict betwe en those two passages; but, following a decision of the Court of Appeal in Ilyssia Compania Naviera S.A. v. Bamaodah [1985] 1 Lloyd's Rep. 107 , he concluded that the suggested conflict wa s mo r e apparent than real, and that the appropriate test for him to apply was that, if the English court is shown to be dis nctly mo r e sui tabl e for the ends of jus ce, then t he case i s a proper one f or servi ce out of the jurisdic on. He then sai d:

"In considering the exercise of discre on I mu s t, of cour se, assume that the Spiliada ac on wi ll come to tri al event ual ly, ei ther in Engl and or in Canada. In fact, that seems to me improbable. A er t he Cambridgeshire proceedings have reached a final conclusion, with vast expenditure of money, me and effort , I think i t very l ikel y that the par es to the Spiliada dispute will have li le appe te f or l i ga on, and wi l l reach a compromise. Cansulex feature as defendants in both ac ons , and are pr esent ly represented by the same solicitors and counsel in both. The plain ff shi powne r s are, of course, differ ent in the two ac ons , but they too are r epr esent ed by *469 the same solicitors and counsel, and it may be that they are supported by the same insurers. So I suspect that what I am in fact deciding is not where the Spiliada ac on wi ll ul mat ely be tried, but whether a se leme nt wi ll be reached agai ns t the background of li ga on pending in England or of li ga on pendi ng i n Canada. Nev ert hel ess , it i s the prospect of a trial which provides the sanc on to induce a se lemen t , and i n my j udgmen t I must decide this applica on on the assump on t hat a t rial ther e wil l be. "

This was, so far as the Cambridgeshire ac on wa s concer ned, a pr esci ent obser va on. For , on 18 January 1985, the par es to that ac on se l ed t heir differences . Furthermor e hi s t hought t hat " i t may be that [the shipowners] are supported by the same insurers" was one which would certainly have occurred to other experienced commercial prac oner s , and t he j udge' s tent a ve i nfer ence that both the Cambridgeshire and the Spiliada were entered in the same P. and I. club was confirme d bef or e your Lor dshi ps ; i ndeed the sol ici tor s ac ng f or the owne r s i n bot h cases have commenced proceedings against a number of Canadian sulphur exporters, including Cansulex, on behalf of various shipowners all entered in the same P. & I. club.

The judge then turned to consider the various factors which were said to influence the choi ce between an English and Canadian court. I need not list them all. The most important were (1) availability of witnesses, (2) mul pl ici ty of pr oceedi ngs, and (3) a ma er whi ch was regarded as crucial by the judge, which I will call the Cambridgeshire factor and which relates to prepara on for very substan al pr oceedi ngs.

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On availability of witnesses, the judge had this to say:

"Apart from those ma er s, I now have, a er l i steni ng t o t he openi ng speech i n t he Cambridgeshire trial for 15 days, a somewhat clearer picture of what the rela ve importance of the issues is likely to be. The principal or most important events in the case occurred in Vancouver, but many events of significance occur red in ma ny ot her places. The most important witnesses of fact will be from Cansulex and various other concerns in Vancouver, and the ship's officers . But ther e are l ikel y to be a great man y witnesses from other places. In the Cambridgeshire applica ons I concl uded that , i n terms of witness/hours, events in Vancouver were likely to loom largest at the trial. I am no longer convinced that that was right, even leaving out of account the expert evidence. Certainly, there will be a very substan al body of evi dence deal ing wi th events which did not take place in Vancouver. As to the expert witnesses, I am told that all but one of them in the Cambridgeshire are English. But, as I then said, experts can travel, or be replaced by other experts.

"It is true that the Cambridgeshire plain ffs are an Engl i sh compa ny and t he shi p i s Bri sh, wh er eas the Spiliada plain ffs are Liber i an; so i s thei r shi p; and t hei r man agers are in Greece, although some part of the management takes place in England. That means that the Spiliada ac on has mu ch less connec on wit h Engl and, but i t does not give it any greater connec on wi th *470 Vancouver. It is also true that two witnesses in the Cambridgeshire ac on decl ine to come to Engl and to gi ve evi dence, so that thei r evidence will have to be taken on commission in North America. Nevertheless, I reach the clear conclusion that Vancouver is not overall a more suitable place for trial than England in terms of the convenience of witnesses. Indeed, if one assumes that the par es wi ll wi sh to have the same exper ts as in the Cambridgeshire , I would say that England is shown to be more suitable."

I should interpolate that the judge was not right in thinking that all but one of the experts in the Cambridgeshire ac on we r e Engl ish; in fact, two of the def endant s' exper ts came from Engl and and four from elsewhere (one from Canada, one from the United States, and two from Europe - from Scandinavia and Greece). This was drawn to the judge's a en on at the end of his j udgmen t . The judge then stated that he did not however regard this differ ence as si gni ficant - no doubt he had i t in mind that all the owners' experts were from England.

Next, turning to the ques on of mu l pli city of proceedi ngs , he r eferr ed t o t he f act s that Cansul ex wished to join their insurers and possibly others as third par es , wh i ch they coul d onl y do in Canada, and that the shipowners wished to join M.M.T.C. as co-defendants with Cansulex, which would obviously be a sensible course if it could be achieved. As to the former, he gave the same weight to it as he did in the Cambridgeshire applica on; as to the la er, he gave l ess , because, whe r eas the relevant charterers were joined as co-defendants in the Cambridgeshire ac on, in the pr esent case (following, it appears, lobbying by both sides) he felt that he should regard the shipowners' objec ve of joining M.M.T.C. as problema cal .

Turning to the Cambridgeshire factor, which he regarded as crucial, the judge had this to say:

"But at the end of the day what seems to me important is this. Mr. Evans submits that Cansulex, having been put to the trouble and expense of bringing their witnesses and senior execu ves her e once, shoul d not have to bear the same bur den agai n. Mr . Rokison replies that li ga on i s not l ike a f oot bal l or cri cket season, wit h one fixture at home and the other away. The trouble with such an a rac ve anal ogy or met aphor i s that it tends to take one's eye off the bal l, so to speak. Indeed, if al l ot her thi ngs we r e equal, I should be inclined to hold that even-handed jus ce would be served best if one ac on we r e tri ed her e and the ot her in Canada. But al l ot her thi ngs are far from equal .

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The plain ff's sol i citors have mad e all the dispos i ons and i ncur red al l the expense for the trial of one ac on i n Engl and; they have engaged Engl ish counsel and educat ed them in the various topics upon which expert evidence will be called; they have engaged English expert witnesses; and they have assembled vast numbers of documents. They have also, no doubt, educated themselves upon the issues in the ac on. Al l that has been done on behal f of Cansul ex as we l l, save that one of thei r expert witnesses is Canadian. If they now wish to start the process again in Canada, that is their choice Rut it seems to me that the addi onal *471 inconvenience and expense which would be thrust upon the plain ffs i f this ac on were tr ied i n Canada far outweighs the burden which would fall upon Cansulex if they had to bring their witnesses and senior execu ves her e a second me.

"There might have been an appeal from my decision on the Cambridgeshire applica ons , but ther e wa s not . I appr eci at e that ther e are a numb er of si gni ficant points of dis nc on bet wee n t he t wo cases, incl udi ng t he pri nci pal ones that I have men oned. It ma y then in a sense be hard on Cansul ex if the deci si on reached on the Cambridgeshire applica ons shoul d have the effect of det ermin ing t hei r appl i ca on i n this case. But in my judgment it does, in the circumstances and for the reasons that I have men oned. Ov er al l i t wo ul d be wa stef ul i n the extreme of tal ent , effort and money if the par es to thi s case we r e to have to star t agai n in Canada. The case is a proper one for service out of the jurisdic on. "

On that basis, the judge decided not to accede to Cansulex's applica on. A er he had prepar ed his judgment, evidence was placed before him on behalf of the shipowners with regard to the relevant limita on per iod appl icabl e in Br i sh Col umbi a. It transpi r ed t hat that per i od was two year s, and had expired by November 1982, long before the hearing of Cansulex's applica on bef or e the judge. The shipowners sought to rely on this point, apparently on the basis that to send the case back to Bri sh Col umb i a wo ul d depr i ve them of a legi mat e j uri dical advant age i n t his count r y. Howev er the judge, having already concluded that the ac on shoul d be tri ed her e, i rrespec ve of the me b ar point, did not think it necessary to consider that ma er .

(3) The decision of the Court of Appeal

In the Court of Appeal [1985] 2 Lloyd's Rep. 116 , Neill L.J. (who delivered the first j udgme nt ) referred to the speech of Lord Diplock in Hadmor Produc ons Ltd. v. Hami lton [1983] 1 A. C. 191 , 220 and both he and Oliver L.J. referred to the speech of my noble and learned friend Lord Brandon of Oakbrook in The Abidin Daver [1984] A.C. 398 , 420, which state the limited grounds upon which an appellate court may interfere with the exercise of a trial judge's discre on. They al so, l ike the judge, regarded themselves bound by the decision of the Court of Appeal in the Ilyssia case [1985] 1 Lloyd's Rep. 107 to regard the differ ence betwe en t he s peeches of L or d Di pl ock and L or d Wilberforce in the Amin Rasheed case [1984] A.C. 50 as more apparent than real. Neill L.J. reviewed the judge's assessment of the various factors as follows. With regard to the availability of witnesses, he felt that, even on the judge's own analysis of the facts, the convenience of the par es and the witnesses probably lted the scal es towa rds Br i sh Col umbi a as the f orum, but cert ainly did not show that an English court was "dis nctly mo r e sui tabl e for the ends of jus ce. " On mul pl ic ity of proceedings, he saw force in the cri ci sm of Mr . Gol dsmi th (counsel for Cansul ex) that thi s wa s at most a neutral factor, and certainly did not bring the scales down heavily on the side of England. On the relevance of the Cambridgeshire factor, while rejec ng Mr . G ol dsmi th' s p r ima ry *472 submission that the Cambridgeshire li ga on was who l l y i rrelevant , he cons i der ed t hat the judge a ached far too mu ch imp or tance to it. He sai d [1985] 2 Lloyd's Rep. 116 , 124:

"The fact that the London solicitors who are presently ac ng are firms of gr eat

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eminence and the further fact that members of these firms have acqui red det ai led knowledge about the shipment of sulphur cargoes from Vancouver are pointers to trial in England but should not be regarded as of decisive importance if other factors lt the balance the other way."

He held that it was impossible to conclude that the relevant factors, when taken together, showed that the English court was dis nctly mo r e sui tabl e for the ends of jus ce. On t hi s view o f the case, it became necessary for him to consider the impact of the me bar in Br i sh Col umbi a. On t hat he adopted the view of Oliver L.J. that the existence of a me bar wa s a neut ral factor . He ther ef or e decided to allow the appeal.

Oliver L.J., like Neill L.J., accepted that they were bound to follow the decision of the Court of Appeal in the Ilyssia case, on the basis of which he thought it right to follow the view of Lord Wilberforce in the Amin Rasheed case; and he did not therefore accept the submission of Mr. Goldsmith for Cansulex that the judge had propounded the wrong test. He then considered the exercise of the judge's discre on. He r evi ewe d t he j udge' s a ssessme nt o f t he a vai labi lity o f wi tnesses i n considerable detail; and pointed out that the judge had proceeded on an erroneous assump on that all the experts in the Cambridgeshire ac on we r e Engl ish. He we nt on to expr ess the opi ni on that the supposed advantages of England as a forum were, in this respect, far less clear cut than the judge had appeared to have imagined. In his opinion, the highest that it could be put on the shipowners' side was that the factor of convenience of witnesses was neutral. He then considered the point of mul pl ici ty of pr oceedi ngs, and rej ected cri cism o f the j udge' s appr oach because t he point seemed to him to have played a neutral role in the judge's decision. Turning to the Cambridgeshire factor, he was very cri cal of the judge' s appr oach. He summa r i sed Mr . Gol dsmi th' s principal cri ci sm at [1985] 2 Lloyd's Rep. 116 , 133:

"But what, Mr. Goldsmith asks forensically, does all that amount to beyond this, that the plan ffs say, in effect, 'we wi sh , f or t he purposes of our own a nd because i t is convenient to do so, to retain the services of par cul ar legal advi ser s and exper ts wh o happen to be resident and prac si ng in Engl and. Ther ef or e, our des i re to ret ai n Engl ish legal advisers makes England a more appropriate forum for the hearing of the dispute?"'

Oliver L.J. accepted that cri ci sm a s we l l-founded. He c oncl uded t hat , i n g i vi ng t o t he Cambridgeshire ac on the deci si ve and concl us i ve we i ght that he di d, the judge er red in pr inc i pl e.

Finally, Oliver L.J. considered the impact of the me bar i n Br i sh Col umbi a. He came t o t he conclusion that the me bar wa s not of itsel f a factor wh i ch ought to car ry the day. The di fficulty in the way of the *473 shipowners' argument that, by sending the case to be tried in Bri sh Col umb i a, they would be deprived of a legi ma t e jur idi cal advant age in that the ac on was not me-b arr ed i n England, was that what was one side's advantage must be another's disadvantage. This pointed, of course, to a me bar bei ng regarded as a neut ral factor . Even if, fol lowi ng the deci si on of Sheen J. in The Blue Wave [1982] 1 Lloyd's Rep. 151 , it was to be treated as a factor on which the shipowners as plain ffs coul d r el y unl ess they had act ed unr easonabl y i n all owi n g t he me b ar t o el apse i n the relevant foreign jurisdic on, that coul d be of no benefit to t he shi powne r s i n t he present case, because there was no evidence tendered on their behalf providing any sa sfactor y expl ana on why no steps were taken to ascertain what the law of Bri sh Col umb i a wa s. Fur thermo r e, the factor of the me bar in Br i sh Col umbi a coul d not in any event be concl usi ve; because t he evi dence showed that it was open to the shipowners to sue Cansulex in the Federal Court in any province in Canada. Accordingly, in agreement with Neill L.J., he decided that the appeal of Cansulex should be allowed.

(4) Submissions of counsel

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Before your Lordships, the shipowners submi ed that the Cour t of Appeal , havi ng accept ed that the judge applied the correct test, went beyond their limited power of review of the exercise of the judge's discre on. The real reason for thei r int er ven on was that they di s agreed wi t h t he wei ght a ached by the judge to the Cambridgeshire factor and were then, it was submi ed, over -astut e to discover an error which would enable them to subs tut e thei r own di scre on f or his . For Cansul ex, on the other hand, it was submi ed that the Cour t of Appeal we r e ful ly en tled t o i nterf ere wit h t he judge's exercise of his discre on, subs tan all y f or the r easons gi ven by them; but i t was furt her submi ed that , in any event , bot h the judge and the Cour t of Appeal shoul d have appl ied the mo r e stringent test set out in the passage from Lord Diplock's speech in the Amin Rasheed case [1984] A.C. 50 , 68, which, if correctly applied, should certainly have led to the same order as that made by the Court of Appeal.

In considering the submissions of counsel, for whose assistance I am most grateful, it is necessary to review the applicable principles. I say this for two par cul ar reasons . Fi rst, si nce the cour ts bel ow have been troubled by apparent differ ences betwe en obser va ons of Lord Di plock and Lord Wilberforce in the Amin Rasheed case, it is, I think, desirable that this House should now resolve those differ ences . Second, si nce the ques on of the r elevance of a me b ar has now ar i sen i n a number of cases, including the present, it is desirable that this House should give further considera on t o t he r el evance of wh at has been c al led a " l egi mat e per sonal or juri dical advantage," with special reference to me bar s. But , in any event , the law on thi s subj ect is s l l in a state of development; and it is perhaps opportune to review the posi on at thi s stage, and i n par cul ar to gi ve fur ther cons i der a on t o t he r ela onshi p between cases wher e jurisdic on has been founded as of right by service of proceedings on the defendant within the jurisdic on, but the defendant seeks a stay of the proceedings on the ground of forum non conveniens, *474 and cases where the court is invited to exercise its discre on, under R. S. C. , Or d. 11, to gi ve leave for ser vi ce on the defendant out of the jurisdic on.

(5) The fundamental principle

In cases where jurisdic on has been founded as of ri ght , i.e. wh er e in thi s count ry the def endant has been served with proceedings within the jurisdic on, the def endant ma y now appl y to the cour t to exercise its discre on to stay the pr oceedi ngs on the ground wh i ch is usual ly cal led for um non conveniens. That principle has for long been recognised in Scots law; but it has only been recognised compara vel y recent ly in thi s count ry. In The Abidin Daver [1984] A.C. 398 , 411, Lord Diplock stated that, on this point, English law and Scots law may now be regarded as indis ngui shabl e. It is pr oper therefore to regard the classic statement of Lord Kinnear in Sim v. Robinow (1892) 19 R. 665 as expressing the principle now applicable in both jurisdic ons . He sai d, at p. 668:

"the plea can never be sustained unless the court is sa sfied t hat ther e i s some other tribunal, having competent jurisdic on, in wh i ch the case ma y be tri ed mo r e sui tabl y for the interests of all the par es and for the ends of jus ce. "

For earlier statements of the principle, in similar terms, see Longworth v. Hope (1865) 3 Macph. 1049, 1053, per Lord President McNeill, and Clements v. Macaulay (1866) 4 Macph. 583, 592, per Lord Jus ce- Cl er k Ingl is; and for a lat er stat eme nt , al so in simi lar terms , see Société du Gaz de Paris v. Société Anonyme de Naviga on "Les Ar ma t eur s Françai s, " 1926 S. C. (H. L. ) 13 , 22, per Lord Sumner.

I feel bound to say that I doubt whether the La n tag for um non conveni ens is apt to describe thi s principle. For the ques on is not one of conveni ence, but of the sui tabi lity or appr opr iat eness of the relevant jurisdic on. Howe ver the La n t ag ( some mes expr es sed as f orum no n conveni ens and

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some me s as for um conveni ens ) is so wi del y used to describe the pr inc i pl e, not onl y in Engl and and Scotland, but in other Commonwealth jurisdic ons and i n the Un i ted Stat es , that i t i s pr obabl y sensible to retain it. But it is most important not to allow it to mislead us into thinking that the ques on at i ssue i s one of "me r e pr ac cal conveni ence. " Such a sugges on was empha cal ly rejected by Lord Kinnear in Sim v. Robinow, 19 R. 665 , 668, and by Lord Dunedin, Lord Shaw of Dunfermline and Lord Sumner in the Société du Gaz case, 1926 S.C.(H.L.) 13 , 18, 19, and 22 respec vel y. Lor d Dunedi n, wi th ref er ence to the expr essi ons for um non comp et ens and for um non conveniens, said, at p. 18:

"In my view, 'competent' is just as bad a transla on for 'comp et ens ' as 'conveni ent ' is for 'conveniens.' The proper transla on for these La n wor ds, so f ar as thi s pl ea i s concerned, is 'appropriate.'"

Lord Sumner referred to a phrase used by Lord Cowan in Clements v. Macaulay (1866) 4 Macph. 583, 594, viz. "more convenient and preferable for securing the ends of jus ce, " and sai d, at p. 22: *475

"one cannot think of convenience apart from the convenience of the pursuer or the defender or the court, and the convenience of all these three, as the cases show, is of li le, if any, imp or tance. If you read it as 'mo r e conveni ent , that is to say, pr ef er abl e, for securing the ends of jus ce, ' I thi nk the true me ani ng of the doctrine is ar ri ved at . The object, under the words 'forum non conveniens' is to find that forum which is the more suitable for the ends of jus ce, and is pr ef er abl e because pur sui t of the li ga on in that forum is more likely to secure those ends."

In the light of these authorita ve stat eme nt s of the Sco sh doct r i ne, I cannot help thinking t hat i t is wiser to avoid use of the word "convenience" and to refer rather, as Lord Dunedin did, to the appropriate forum.

(6) How the principle is applied in cases of stay of proceedings

When the principle was first recogni sed in Engl and, as it wa s (a er a breakt hrough i n The Atlan c Star [1974] A.C. 436 ) in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , it cannot be said that the members of the Judicial Commi ee of thi s House spoke wi th one voi ce. Thi s is not sur pr i si ng; because the law on this topic was then in an early stage of a s ll con nui ng devel opmen t . The leading speech was delivered by Lord Diplock. He put the ma er as fol lows , at p. 812:

"In order to jus fy a stay two condi ons mus t be sa sfied, one pos i ve and the other nega ve; (a) the def endant mu s t sa sfy the cour t that ther e i s anot her forum t o who se jurisdic on he i s ame nabl e i n wh i ch j us ce can be done bet wee n t he par es at substan al ly l ess i nconveni ence or expense, and (b) the stay mu s t not depr i ve the plain ff of a l egi mate personal or j uridi cal advantage whic h woul d be avai l able to hi m if he invoked the jurisdic on of the Engl ish cour t."

This passage has been quoted on a number of occasions in later cases in your Lordships' House. Even so, I do not think that Lord Diplock himself would have regarded this passage as cons tu ng an immutable statement of the law, but rather as a tenta ve stat eme nt at an ear l y stage of a per iod of development. I say this for three reasons. First, Lord Diplock himself subsequently recognised that the mere existence of "a legi ma t e per sonal or jur idi cal advant age" of the pl ai n ff in the Engl i sh jurisdic on wo ul d not be deci si ve: see The Abidin Daver [1984] A.C. 398 , 410, where he recognised that a balance must be struck. Second, Lord Diplock also subsequently recognised that no dis nc on

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is now to be drawn between Sco sh and Engl i sh l aw o n t his topi c , and t hat i t can now b e sai d t hat English law has adopted the Sco sh pri nci ple of forum n on conveni ens : see The Abidin Daver [1984] A.C. 398 , 411. It is necessary therefore now to have regard to the Sco sh aut hor i es; and i n this connec on I ref er in par cul ar, not onl y to s tatemen t s of the f undamen t al pri nci ple, but also t o t he decision of your Lordships' House in the Société du Gaz case, 1926 S.C.(H.L.) 13 . Third, it is necessary to strike a note of cau on regardi ng the pr omi nence gi ven *476 to "a legi ma t e per sonal or juridical advantage" of the plain ff, havi ng r egard t o t he deci sion of your Lordshi ps' House i n Trendtex Trading Corpora on v. Cr edi t Sui sse [1982] A. C. 679 , in which your Lordships unanimously approved the decision of the trial judge to exercise his discre on to stay an ac on brought in t his country where there existed another appropriate forum, i.e., Switzerland, for the trial of the ac on, even though by so doing he deprived the plain ffs of an i mpo r t ant advant age, vi z. the mor e generous English procedure of discovery, in an ac on i nvol vi ng al lega ons of fraud agai nst the defendants.

In my opinion, having regard to the authori es (inc l udi ng in par cul ar the Sco sh aut hor i es), t he law can at present be summarised as follows.

(a) The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is sa sfied t hat ther e i s some other avai l abl e f orum, havi ng compe t ent juri sdi c on, which is the appropriate forum for the trial of the ac on, i.e. in wh i ch the case ma y be tri ed mo r e suitably for the interests of all the par es and the ends of jus ce.

(b) As Lord Kinnear's formula on of the pr inc i pl e indi cat es , in gener al the bur den of pr oof rests on the defendant to persuade the court to exercise its discre on to gr ant a stay (see, e. g. , the Société du Gaz case, 1926 S.C.(H.L.) 13 , 21, per Lord Sumner; and Anton, Private Interna onal Law (1967) p. 150). It is however of importance to remember that each party will seek to establish the existence of certain ma er s wh i ch wi ll assi st hi m in per suadi ng the cour t to exer ci se its di scre on i n his favour , and that in respect of any such ma er the evi den al bur den wil l rest on t he par t y who assert s i ts existence. Furthermore, if the court is sa sfied t hat ther e i s anot her avai l abl e f orum whi ch i s pri ma facie the appropriate forum for the trial of the ac on, the bur den wi ll then shi to t he plain ff to show that there are special circumstances by reason of which jus ce requi res that the tri al shoul d nevertheless take place in this country (see (f), below).

(c) The ques on bei ng wh et her ther e is some ot her for um wh i ch is the appr opr iat e for um for the trial of the ac on, it is per nent to ask whe t her the f act that the plain ff has, ex hypot hes i , founded jurisdic on as of ri ght i n accor dance wi th the l aw of thi s count ry, of i tsel f gi ves the pl ai n ff an advantage in the sense that the English court will not lightly disturb jurisdic on so establ ished. Such indeed appears to be the law in the United States, where "the court hesitates to disturb the plain ff's choi ce of forum a nd wil l not do s o unl ess the bal ance of fact ors i s strongl y i n f avor of the defendant,": see Scoles and Hay, Conflict of Laws (1982) , p. 366, and cases ther e ci ted; and al so in Canada, where it has been stated (see Castel, Conflict of Laws (1974), p. 282) that "unless the balance is strongly in favor of the defendant, the plain ff's choi ce of forum s houl d r arel y be disturbed." This is strong language. However, the United States and Canada are both federal states; and, where the choice is between compe ng j ur isdi c ons wi t hin a f eder al st ate, it i s readi l y understandable that a strong preference should be given to the forum chosen by the plain ff upon which jurisdic on has been conf er red *477 by the cons tu on of the count r y whi ch i ncl udes bot h alterna ve jur i sdi c ons .

A more neutral posi on wa s adopt ed by Lor d Sumn er in the Société du Gaz case, 1926 S.C.(H.L.) 13 , 21, where he said:

"All that has been arrived at so far is that the burden of proof is upon the defender to maintain that plea. I cannot see that there is any presump on i n f avour of t he pursuer."

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However, I think it right to comment that that observa on wa s ma de in the cont ext of a case wh er e jurisdic on had been founded by the pur suer by invoki ng the Sco sh pr incipl e that, in ac ons i n personam, excep onal ly jur isdi c on may be f ounded by arrest of the def ender ' s goods wit hin t he Sco sh j uri sdi c on. Furthermore , t here ar e cases wher e no par cular forum can be des cr i bed as the natural forum for the trial of the ac on. Such cases are par cul arl y l ikel y to occur i n comme r cial disputes, where there can be pointers to a number of differ ent j ur i sdi c ons (see, e.g., European Asian Bank A.G. v. Punjab and Sind Bank [1982] 2 Lloyd's Rep. 356 ), or in Admiralty, in the case of collisions on the high seas. I can see no reason why the English court should not refuse to grant a stay in such a case, where jurisdic on has been founded as of ri ght . It is si gni ficant that , in all the leading English cases where a stay has been granted, there has been another clearly more appropriate forum - in The Atlan c Star [1974] A. C. 436 (Belgium); in MacShannon's case [1978] A.C. 795 (Scotland); in Trendtex [1982] A.C. 679 (Switzerland); and in the The Abidin Daver [1984] A.C. 398 (Turkey). In my opinion, the burden res ng on the def endant is not jus t to show that Engl and is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or dis nctly mo r e appr opr iat e than the Engl ish for um. In thi s wa y, pr oper regard is paid to the fact that jurisdic on has been founded in Engl and as of ri ght (see MacShannon's case [1978] A.C. 795 , per Lord Salmon); and there is the further advantage that, on a subject where comity is of importance, it appears that there will be a broad consensus among major common law jurisdic ons . I ma y add that if, in any case, the connec on of the def endant wit h t he Engl i sh f orum i s a fragile one (for example, if he is served with proceedings during a short visit to this country), it should be all the easier for him to prove that there is another clearly more appropriate forum for the trial overseas.

(d) Since the ques on is wh et her ther e exi sts some ot her for um wh i ch is cl ear l y mo r e appr opr iat e for the trial of the ac on, the cour t wi ll look first to s ee wha t fact ors ther e are whi ch poi nt in t he direc on of anot her for um. These are the factor s wh i ch Lor d Di pl ock described, in MacShannon's case [1978] A.C. 795 , 812, as indica ng that jus ce can be done i n t he other forum a t "subs t an al ly less inconvenience or expense." Having regard to the anxiety expressed in your Lordships' House in the Société du Gaz case, 1926 S.C. (H.L.) 13 concerning the use of the word "convenience" in this context, I respec ul ly cons i der that i t ma y be mo r e des i rabl e, now that the Engl ish and Sco sh principles are regarded as being the same, to adopt the expression used by my noble and learned friend, Lord Keith of Kinkel, in The Abidin *478 Daver [1984] A.C. 398 , 415, when he referred to the "natural forum" as being "that with which the ac on had the mo s t real and subs tan al connec on." So it is for connec ng factor s in thi s sense that the cour t mu s t first look; and t hese wil l incl ude not only factors affec ng conveni ence or expense ( such as avai l abi l ity of wi t nes ses) , but al so other factors such as the law governing the relevant transac on (as to wh i ch see Crédit Chimique v. James Sco Engi neer ing Gr oup Ltd. , 1982 S. L. T. 131 ), and the places where the par es respec vel y resi de or carry on business.

(e) If the court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the ac on, i t wi ll or di nar i ly ref use a stay; see, e. g. , the deci si on of the Court of Appeal in European Asian Bank A.G. v. Punjab and Sind Bank [1982] 2 Lloyd's Rep. 356 . It is difficul t to i mag i ne circums t ances whe r e, in such a case, a stay may be grant ed.

(f) If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the ac on, it wi ll or di nar i ly gr ant a stay unl ess there are circumstances by reason of which jus ce requi res that a stay shoul d never thel ess not be granted. In this inquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connec ng factor s wi th other jurisdic ons . One such factor can be the fact, i f es tabl ished obj ec vel y by cogent evi dence, that the plain ff wil l not obt ain j us ce i n the f orei gn j urisdic on; s ee the The Abidin Daver [1984] A.C. 398 , 411, per Lord Diplock, a passage which now makes plain that, on this inquiry, the burden of proof shi s to the pl ai n ff. How f a r other advantages t o the pl ai n ff in proceedi ng i n t his country may be relevant in this connec on, I shal l have to cons i der at a lat er stage.

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(7) How the principle is applied in cases where the court exercises its discre onar y powe r under R.S.C., Ord. 11

As I have already indicated, an apparent differ ence of vi ew is to be found in the speeches of Lor d Diplock and Lord Wilberforce in the Amin Rasheed case [1984] A.C. 50 . In that case, Lord Diplock said, at pp. 65-66:

"the jurisdic on exer ci sed by an Engl ish cour t over a for ei gn cor por a on whi ch has no place of business in this country, as a result of gran ng leave under R. S. C. , Or d. 11, r.1(1)(f) for service out of the jurisdic on of a wr i t on that cor por a on, is an exorbi t ant jurisdic on, i .e. , i t i s one wh i ch, under gener al Engl ish conflict rules, an Engl i sh cour t would not recognise as possessed by any foreign court in the absence of some treaty providing for such recogni on. Comi ty thus di ctat es that the judi ci al di scre on t o grant leave under this paragraph of R.S.C., Ord. 11, r.1(1) should be exercised with circumspec on in cases wh er e ther e exi sts an al ter na ve f orum, viz. the cour t s of the foreign country where the proposed defendant does carry on business, and whose jurisdic on wo ul d be recogni sed under Engl ish conflict rules. "

Again, said, at p. 68: *479

"the onus under R.S.C., Ord. 11, r.4(2) of making it 'sufficient to appear to t he cour t that the case is a proper one for service out of the jurisdic on under thi s Or der ' l ies upon the would-be plain ff. Ref usal to grant leave i n a case f all ing wit hin r ule 1(1)( f) does not deprive him of the opportunity of obtaining jus ce, because ex hypot hes i there exists an alterna ve f or um, t he cour ts of t he count ry wh er e t he pr oposed defendant has its place of business where the contract was made, which would be recognised by the English courts as having jurisdic on over the ma er in disput e and whose judgment would be enforceable in England.

"The exorbitance of the jurisdic on sought to be i nvoked wh er e rel iance i s based exclusively upon rule 1(1)(f)(iii) is an important factor to be placed in the balance against gran ng leave. It is a factor that is capabl e of bei ng out we i ghed if the wo ul d- be plain ff can s a sfy the Engl i sh court that j us ce ei t her could not be obt ai ned by hi m i n the alterna ve f or um; o r c oul d onl y be obt ai ned a t e xcessi ve c os t, del ay o r inconvenience."

In contrast, Lord Wilberforce said, at p. 72:

" R.S.C., Ord. 11, r. 1 merely states that, given one of the stated condi ons , such service is permissible, and it is s ll necesssar y f or t he pl ai n ff (in thi s case the appellant) to make it 'sufficient l y to appear to t he cour t that the case i s a proper one for service out of the jurisdic on under thi s Or der ' (r.4( 2) ). The rul e does not stat e the considera ons by wh i ch the cour t is to deci de wh et her the case is a pr oper one, and I do not think that we can get much assistance from cases where it is sought to stay an ac on star ted i n thi s count ry, or to enj oi n the br ingi ng of pr oceedi ngs abr oad. The situa ons are di fferent : compa r e t he observa ons of Stephenson L . J. in Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 L loyd' s Rep. 119 , 129. The inten on mu s t be to imp ose upon the pl ai n ff the burden of s howi ng good r easons why service of a writ, calling for appearance before an English court, should, in the circumstances, be permi ed upon a for ei gn def endant . In cons i der ing thi s ques on t he court must take into account the nature of the dispute, the legal and prac cal issues involved, such ques ons as l ocal knowl edge, avai labi lity of wi tnesses and t hei r

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evidence and expense."

In the Ilyssia case [1985] 1 Lloyd's Rep. 107 , the Court of Appeal had to consider the apparent differ ence betwe en the two appr oaches expr essed by Lor d Di pl ock and Lor d Wi lber for ce. Ac kner L. J. resolved the differ ence as fol lows , at p. 113:

"Mr. Gross submits that Lord Diplock's statement was intended to be an exhaus ve one. When reliance is based exclusively upon r.1(1)(f)(iii), it is only capable of being outweighed if the would-be plain ff can s a sfy the Engl i sh court that ei ther j us ce cannot be obtained by him in the alterna ve f or um or coul d onl y be obt ai ned at excessive cost, delay or inconvenience. Like Staughton J., I do not accept that submission. As I read the speech in the context of *480 that case as a whole Lord Diplock was emphasising that where exclusive reliance is placed upon r.1(1)(f)(iii) then the burden of showing good reasons jus fyi ng ser vi ce out of the j ur i sdi c on i s a par cul ar l y heavy one, and he i llus trat ed thi s by the examp l es wh i ch he gave of situa ons wh i ch we r e capabl e of ppi ng t he bal ance i n f avour of the gran ng of l eave. Thus constructed, as the judge points out, there is no conflict betwe en Lor d Di pl ock' s statement and that of Lord Wilberforce ... Lord Wilberforce there states that in order to decide whether the case is a proper one the court must take into account the nature of the dispute, the legal and prac cal i ssues i nvol ved, s uch ques ons as l ocal knowledge, availability of witnesses and their evidence and expense."

May L.J. spoke in similar terms, at p. 118. The prac cal effect was , howev er , as i s reflected i n the judgment of Oliver L.J. [1985] 2 Lloyd's Rep. 116 , 127, in the present case, that the statement of principle of Lord Wilberforce was accepted as being the applicable principle.

With that conclusion, I respec ul ly agree; but I wi sh to add some obser va ons of my own. The first is this. Lord Wilberforce said that he did not think that we can get much assistance from cases where it is sought to stay an ac on star ted in thi s count ry, or to enj oi n the br ingi ng of pr oceedi ngs abr oad; in this connec on he ref er red to cer tai n obser va ons of Stephenson L .J . in Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119 , 129. It is right to point out that, in the relevant passage in his judgment in that case, Stephenson L.J. was only expressing cau on wi th regard to assimila ng cases of a stay to enf or ce a for ei gn jur i sdi c on c lause wit h cases of a s tay on the principle of forum non conveniens under MacShannon's case [1985] A.C. 795 . He was not addressing himself to the ques on of the appl icabl e pr inc i pl es under R. S. C. , Or d. 11, and, wh i le sharing Lord Wilberforce's concern about help to be derived, in Order 11 cases, from cases where an injunc on i s sought to restrai n pr oceedi ngs abr oad, I respec ull y doubt whe t her simil ar concern should be expressed about help to be derived from cases of forum non conveniens. I cannot help remarking upon the fact that when Lord Wilberforce came, at the end of the passage from his speech which I have quoted, to state the applicable principle, his statement of principle bears a marked resemblance to the principles applicable in forum non conveniens cases. It seems to me inevitable that the ques on i n bot h groups of cases mu s t be, at bo om, that expressed by Lord Kinnear in Sim v. Robinow, 19 R. 665 , 668, viz. to iden fy the for um i n wh i ch the case can be suitably tried for the interests of all the par es and for the ends of jus ce. That bei ng sai d, it i s desirable to iden fy the di s nc ons between t he t wo g r oups of cases. These, as I see i t , are threefold. The first is that , as Lor d Wi lber for ce indi cat ed, in the Or der 11 cases the bur den of pr oof rests on the plain ff, whe r eas i n t he f orum n on conveni ens cases that bur den r est s on t he defendant. A second, and more fundamental, point of dis nc on ( from whi ch t he first poi nt of dis nc on i n f act flows) i s that i n the Or de r 11 cases t he pl ai n ff is seeking to persuade t he cour t t o exercise its discre onary powe r to *481 permit service on the defendant outside the jurisdic on. Statutory authority has specified the par cul ar circums t ances i n whi ch t hat power may be exercised,

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but leaves it to the court to decide whether to exercise its discre onary powe r in a par cul ar case, while providing that leave shall not be granted "unless it shall be made sufficient l y to appear to t he court that the case is a proper one for service out of the jurisdic on: " see R. S. C. , Or d. 11, r.4( 2) .

Third, it is at this point that special regard must be had for the fact stressed by Lord Diplock in the Amin Rasheed case [1984] A.C. 50 , 65 that the jurisdic on exer ci sed under Or der 11 ma y be "exorbitant." This has long been the law. In Société Générale de Paris v. Dreyfus Brothers (1885) 29 Ch.D. 239 , 242-243, Pearson J. said:

"it becomes a very serious ques on ... wh et her thi s cour t ought to put a for ei gner , wh o owes no allegiance here, to the inconvenience and annoyance of being brought to contest his rights in this country, and I for one say, most dis nctly, that I thi nk thi s court ought to be exceedingly careful before it allows a writ to be served out of the jurisdic on. "

That statement was subsequently approved on many occasions, notably by Farwell L.J. in The Hagen [1908] P. 189 , 201, and by Lord Simonds in your Lordships' House in Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo) [1949] A.C. 326 , 350. The effect i s, not merely that the burden of proof rests on the plain ff to per suade t he cour t that Engl and i s the appropriate forum for the trial of the ac on, but that he has to show that thi s is cl ear l y so. In ot her words, the burden is, quite simply, the obverse of that applicable where a stay is sought of proceedings started in this country as of right.

Even so, a word of cau on is necessar y. I my sel f feel that the wo r d "exor bi tant " is, as used in the present context, an old-fashioned word which perhaps carries unfortunate overtones: it means no more than that the exercise of the jurisdic on i s extraor di nar y i n the sense expl ai ned by Lor d Diplock in the Amin Rasheed case [1984] A.C. 50 , 65. Furthermore, in Order 11 cases, the defendant's place of residence may be no more than a tax haven to which no great importance should be a ached. It is al so si gni ficant to observe t hat the circums t ances speci fied i n Or de r 11, r . 1(1), as those in which the court may exercise its discre on to gr ant leave to ser ve pr oceedi ngs on the defendant outside the jurisdic on, are of great var iet y, rangi ng from cases wh er e, one wo ul d have thought, the discre on wo ul d norma l ly be exer ci sed in favour of gr an ng l eave ( e.g., whe r e t he relief sought is an injunc on or der ing the def endant to do or ref rai n from doi ng some t hi ng wi thi n the jurisdic on) to cases wh er e the gr ant of l eave i s f ar mo r e pr obl ema cal . In addi on, t he importance to be a ached to any par cul ar ground i nvoked by the plain ff may v ary f rom cas e t o case. For example, the fact that English law is the puta ve pr oper law of the cont ract ma y be of ver y great importance (as in B.P. Explora on Co. (Li bya) Ltd. v. Hunt [1976] 1 W. L. R. 788 , where, in my opinion, Kerr J. rightly granted leave to serve proceedings on the defendant out of the jurisdic on) ; or it may be of li le imp or tance as seen in the cont ext of the wh ol e case. In these ci rcums tances , it is, in *482 my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground invoked by the plain ff as fact ors to be cons i der ed by the cour t when deciding whether to exercise its discre on to gr ant leave; but , in so doi ng, the cour t shoul d give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate.

(8) Treatment of "a legi ma t e per sonal or jur idi cal advant age"

Clearly, the mere fact that the plain ff has such an advant age i n proceedi ngs i n Engl and cannot be decisive. As Lord Sumner said of the par es in the Société du Gaz case, 1926 S.C.(H.L.) 13 , 22:

"I do not see how one can guide oneself profitabl y by endeavour ing to conci liat e and promote the interests of both these antagonists, except in that ironical sense, in which one says that it is in the interests of both that the case should be tried in the best way

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and in the best tribunal, and that the best man should win."

Indeed, as Oliver L.J. [1985] 2 Lloyd's Rep. 116 , 135, pointed out in his judgment in the present case, an advantage to the plain ff wi l l ordinar i l y gi ve r i se t o a compa r abl e di s advant age t o t he defendant; and simply to give the plain ff hi s advant age at the expense of the def endant is not consistent with the objec ve appr oach inher ent in Lor d Ki nnear ' s stat eme nt of pr inc i pl e in Si m v. Robinow, 19 R. 665 , 668.

The key to the solu on of t hi s pr obl em l ies , i n my j udgme nt , i n t he under l yi ng f undame nt al principle. We have to consider where the case may be tried "suitably for the interests of all the par es and for the ends of jus ce. " Let me cons i der the appl i ca on of t hat principl e in rela on to advantages which the plain ff may der i ve f rom i nvoki ng t he Engl i sh j uri sdi c on. Typi cal exampl e s are: damages awarded on a higher scale; a more complete procedure of discovery; a power to award interest; a more generous limita on per iod. Now, as a gener al rul e, I do not thi nk that the court should be deterred from gran ng a stay of pr oceedi ngs, or f rom exer ci si ng i ts di scre on against gran ng leave under R. S. C. Or d. 11, simp l y because the pl ai n ff will be depr i ved of s uch an advantage, provided that the court is sa sfied t hat subs t an al j us ce wi l l be done i n the avail able appropriate forum. Take, for example, discovery. We know that there is a spectrum of systems of discovery applicable in various jurisdic ons , rangi ng from the limi ted di scover y avai labl e in ci vi l law countries on the con nent of Eur ope t o t he ver y gener ous pr e- tri al or al di scover y pr ocedur e applicable in the United States of America. Our procedure lies somewhere in the middle of this spectrum. No doubt each of these systems has its virtues and vices; but, generally speaking, I cannot see that, objec vel y, inj us ce can be sai d t o have been done i f a par t y i s, in effect, compel l ed t o accept one of these well-recognised systems applicable in the appropriate forum overseas. In this, I recognise that we appear to be differ ing from the appr oach pr esent ly pr evai ling in the Un i ted Stat es : see, e.g., the recent opinion of Judge Keenan in Re Union Carbide Corp. (1986) 634 F.Supp. 842 in the District Court for the Southern District of New York, where a stay of proceedings in New York, commenced on behalf of Indian plain ffs agai nst Uni on Car bide *483 arising out of the tragic disaster in Bhopal, was stayed subject to, inter alia, the condi on that Un i on Carbi de wa s subj ect to discovery under the model of the United States Federal Rules of Civil Procedure a er appr opr iat e demand by the plain ff. But in t he Trendtex case [1982] A.C. 679 , this House thought it right that a stay of proceedings in this country should be granted where the appropriate forum was Switzerland, even though the plain ffs wer e t her eby depr i ved of the advant age of the mor e ext ens i ve Engl i sh procedure of discovery of documents in a case of fraud. Then take the scale on which damages are awarded. Suppose that two par es have been i nvol ved i n a road acci dent i n a for ei gn count ry, where both were resident, and where damages are awarded on a scale substan al ly l owe r than those awarded in this country. I do not think that an English court would, in ordinary circumstances, hesitate to stay proceedings brought by one of them against the other in this country merely because he would be deprived of a higher award of damages here.

But the underlying principle requires that regard must be had to the interests of all the par es and the ends of jus ce; and these cons i der a ons may l ead t o a different concl usion i n ot her cases. For example, it would not, I think, normally be wrong to allow a plain ff to keep t he benefit of s ecur i t y obtained by commencing proceedings here, while at the same me gran ng a stay of proceedi ngs i n this country to enable the ac on to pr oceed i n the appr opr iat e f or um. Such a concl us i on i s, I understand, consistent with the manner in which the process of saisie conservatoire is applied in civil law countries; and cf. sec on 26 of the Ci vi l Jur i sdi c on and J udgmen t s Act 1982 , now happily in force. Again, take the example of cases concerned with me bar s. Let me cons i der how the principle of forum non conveniens should be applied in a case in which the plain ff has start ed proceedings in England where his claim was not me bar red, but ther e is some ot her jur i sdi c on which, in the opinion of the court, is clearly more appropriate for the trial of the ac on, but wh er e the plain ff has not comme n ced proceedi ngs and whe r e his claim i s now me b arr ed. Now, t o take

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some extreme examples, suppose that the plain ff al l owed t he l imit a on peri od t o el apse i n the appropriate jurisdic on, and came her e simp l y because he wa nt ed to take advant age of a mo r e generous me bar appl icabl e in thi s count ry; or suppos e that it wa s obvi ous that the pl ai n ff shoul d have commenced proceedings in the appropriate jurisdic on, and yet he di d not troubl e to issue a protec ve wr i t ther e; in cases such as these, I cannot see that the cour t shoul d hes i tat e to stay the proceedings in this country, even though the effect wo ul d be t hat t he pl ai n ff's cl ai m wo ul d inevitably be defeated by a plea of the me bar i n the appr opr iat e j ur i sdi c on. Indeed a strong theore cal ar gume nt can be advanced for the pr opos i on t hat , if ther e i s anot her cl ear l y mor e appropriate forum for the trial of the ac on, a stay shoul d gener al ly be gr ant ed even though the plain ff's ac on woul d be me ba r red there. But, i n my op i ni on, t his i s a case where prac cal jus ce should be done. and prac cal jus ce deman ds that , if the cour t cons i der s that the plain ff acted reasonably in commencing proceedings in this country, and that, although it appears that (pu ng on one side the me bar poi nt ) the appr opr iat e for um for the tri al of the ac on i s *484 elsewhere than England, the plain ff di d not act unr easonabl y i n f ail ing t o comme n ce pr oceedi ngs (f or example, by issuing a protec ve wr i t) i n that j ur i sdi c on wi t hin t he l i mit a on peri od appl i cabl e there, it would not, I think, be just to deprive the plain ff of the benefit of havi ng s t arted proceedings within the limita on per iod appl icabl e in thi s count ry. Thi s appr oach is cons i stent wi th that of Sheen J. in The Blue Wave [1982] 1 Lloyd's Rep. 151 . It is not to be forgo en that , by ma ki ng its jurisdic on avai labl e to the pl ai n ff - even t he di scre onary j ur isdi c on under R. S.C. , Or d. 1 1 - the courts of this country have provided the plain ff wit h an oppor t uni t y to s tart proceedi ngs her e; accordingly, if jus ce dema nds , the cour t shoul d not depr i ve the pl ai n ff of t he benefit of having complied with the me bar in thi s count ry. Fur thermo r e, as the appl icabl e pr inc i pl es become mo r e clearly established and be er known , it wi ll, I suspect, become increasi ngl y di fficult for plai n ffs to prove lack of negligence in this respect. The fact that the court has been asked to exercise its discre on under R. S. C. , Or d. 11, rat her than that the pl ai n ff has served pr oceedi ngs upon t he defendant in this country as of right, is, I consider, only relevant to considera on of the pl ai n ff's conduct in failing to save the me bar in the ot her rel evant al ter na ve j uri sdi c on. The appropri ate order, where the applica on of the me bar in t he f oreign j uri sdi c on i s dependent upon i t s invoca on by the def endant , ma y we l l be to ma ke i t a condi on of the grant of a stay, or the exercise of discre on agai ns t gi vi ng leave to ser ve out of the jur i sdi c on, that the def endant shoul d waive the me bar in the for ei gn jur i sdi c on; this i s appar ent l y the prac ce i n the Unit ed St ates of America.

(9) Applica on of the pr inc i pl es to the facts of the pr esent case

The judge proceeded on the basis that the relevant test was that "if the English court is shown to be dis nctly mo r e sui tabl e for the ends of jus ce, then t he case i s a proper one f or servi ce out of the jurisdic on. " The appl icabl e pr inc i pl es are, I bel ieve, as I have stat ed them to be; and the judge' s approach was in accordance with those principles. I am therefore unable to accept the submission made on behalf of Cansulex that there was any material error of principle on the part of the judge.

I turn then to the ques on wh et her the Cour t of Appeal wa s en tled t o i nterf ere wit h t he j udge' s exercise of his discre on. Fi rst, I t ake the cri cism o f the j udge' s assessmen t of the f act or of availability of witnesses. It was said that he erred in thinking that all Cansulex's expert witnesses in the Cambridgeshire ac on we r e from Engl and, wh er eas in fact two we r e from Engl and, and four were from elsewhere. However, as I have recorded, this was drawn to his a en on at the end of his judgment: he then took into account the true posi on, and sai d that thi s di fference was not of significance. No doubt , i n ma ki ng that obser va on, he had i t in min d t hat al l the owne r s ' exper t witnesses in the Cambridgeshire ac on we r e from Engl and. Next , Ne i ll L. J. comme nt ed [1985] 2 Lloyd's Rep. 116 , 123 that

"even on his own analysis of the facts the convenience of the par es and the wi tnesses probably lted the scal es towa rds Br i sh Col umbi a *485 as the forum, but certainly

Page21

did not show that an English court would be 'dis nctl y mo r e sui tabl e for the ends of jus ce. '"

Similar observa ons we r e ma de by Ol iver L. J. For my par t, I cons i der , wi th al l respect, that these comments were not jus fied. At this stage, the j udge di d not have t o appl y the overal l test , but merely to assess the merits of the par cul ar factor under cons i der a on; and I cannot hel p but think that the judge, with all his experience derived from hearing a substan al par t of the Cambridgeshire ac on, wa s be er placed t o mak e an assessmen t of this fact or than t he Cour t of Appeal .

Turning to the factor of mul pl ici ty of pr oceedi ngs, the judge ref er red to the pos si bi lity of M. M. T. C. being joined as co-defendants in the English proceedings as problema cal . Bef or e the Cour t of Appeal, Mr. Goldsmith submi ed on behal f of Cansul ex that the ot her pr oceedi ngs we r e at mo s t a neutral factor and certainly did not bring the scales down on the side of England. Neill L.J. saw force in this cri ci sm. But , once agai n, the j udge di d not have to deci de, and di d not deci de, that thi s par cul ar factor wa s deci si ve of the case. Mo r eover , i f (as I thi nk) the j udge gave we i ght to thi s factor, he was, in my judgment, en tled to do so. Ther e is mu ch to be sai d, in the int er ests of jus ce, in favour of the shipowners' claims against both Cansulex and M.M.T.C. being tried in the same proceedings; and, having regard to the advice given to M.M.T.C. by their solicitors, there was a prospect that, if it was decided that the case should be heard in England, M.M.T.C. would, ac ng in their own interests, accept their own solicitors' advice. Indeed, if this were to happen, it might also be agreed that a claim over by M.M.T.C. against Cansulex should be included in the same proceedings, rather than be arbitrated in London under an arbitra on cl ause in the sal e cont ract .

But the crucial point, in the judge's view, was the Cambridgeshire factor. This was regarded, certainly by Neill L.J., as relevant; and in this I find my sel f to be in agreeme nt . The cri cism o f the judge's view of this factor goes, therefore, to its weight, as Neill L.J. indicated [1985] 2 Lloyd's Rep. 116 , 124 when he said that it seemed to him that the judge a ached far too mu ch imp or tance to this factor. With all respect, however, when I read the judgments of both the Lords Jus ces , I consider that they underrated it. I believe that anyone who has been involved, as counsel, in very heavy li ga on of this kind, wit h a numbe r of exper t s on bot h s ides and difficult s cien fic ques ons involved, knows only too well what the learning curve is like; how much informa on and knowl edge has to be, and is, absorbed, not only by the lawyers but really by the whole team, including both lawyers and experts, as they learn about the interrela on of l aw, fact and sci en fic knowl ed ge, having regard to the conten ons advanced by bot h si des in the case, and iden fy i n t hei r min ds the crucial ma er s on wh i ch a en on has t o be f ocused, why t hese ar e the cr ucial ma e r s, and how they are to be assessed. The judge in the present case has considerable experience of li ga on of this kind, and is well aware of what is involved. He was, in my judgment, en tled to take the vi ew (as he did) that this ma er wa s not me r el y of advant age to the shi pown er s, but al so cons tuted an *486 advantage which was not balanced by a countervailing equal disadvantage to Cansulex; and (more per nent ly) fur ther to take the vi ew that havi ng exper ienced teams of lawy er s and exper ts available on both sides of the li ga on, who had prepar ed f or and f ought a subs t an al part of t he Cambridgeshire ac on for Cansul ex (amo ng ot her s) on one si de and the rel evant own er s on the other, would contribute to efficiency, expedi on and economy - and he coul d have added, i n my opinion, both to assis ng the cour t to reach a j us t resol u on, and t o promo ng a poss i bi li ty of se leme nt , i n the pr esent case. Thi s i s not simp l y a ma er, as Ol i ver L. J . suggest ed, of financi al advantage to the shipowners; it is a ma er wh i ch can, and shoul d, pr oper l y be taken int o account , in a case of this kind, in the objec ve int er ests of jus ce.

For these reasons alone, I am of the opinion that this is a classic example of a case where the appellate court has simply formed a differ ent vi ew of the we i ght to be gi ven to the var ious factor s, and that this was not, therefore, an appropriate case for interfering with the exercise of the judge's discre on. But , in addi on, ther e are t wo other fact ors whi ch t he j udge coul d, but did not , take i nto account, in support of the conclusion which he in fact reached. First, he was, in my judgment,

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en tled to take i nt o account , i n assessi ng the Cambridgeshire factor, the fact that, although the owners in the two cases were differ ent , the sol ici tor s for the own er s we r e in bot h cases ins tructed by the same insurers; and he was also en tled to take i nt o account that the i nsur er s of t he shipowners in the present case are managed in England. Usually this is a ma er of no concer n in English li ga on; because, in subr oga on c l ai ms, the ac on is in thi s countr y (unlike other countr i es) brought in the name of the assured, and the rights being enforced are the rights of the assured. But in the case of an applica on such as that in the pr esent case, it is shu ng one' s eyes t o real i t y to ignore the fact that it is the insurers who are financi ng the li ga on and ar e domi nu s l i s; and t hi s i s, in my view, a relevant factor to be taken into account: see the Société du Gaz case, 1926 S.C.(H.L.) 13 , 20, per Lord Sumner. Second, it was a relevant factor that this li ga on was bei ng f ought under a contract of which the puta ve gover ni ng law wa s Engl ish law, and that thi s wa s by no me ans an insignificant factor in the pr esent case, si nce ther e wa s not onl y a di sput e as to the effect of the bil l of lading contract (as to which, as I have already recorded, there appears to be some differ ence of opinion between English and Canadian judges), but also, it appears, as to the nature of the obliga ons under the cont ract in respect of wh at i s usual ly cal led danger ous car go. Howe ver , had the judge taken these ma er s int o account , they wo ul d onl y have rei nf or ced the concl us i on wh i ch he in fact reached.

(10) The effect of the me bar in Bri sh Columbi a

On the view of the case which I have formed, it is not strictly necessary to consider the effect of the me bar in Br i sh Col umbi a; but since t he poi nt has been f ull y argued bef ore us, I propose bri efly to express my views upon it.

First, I cannot think that the fact (if it be the case) that the shipowners' claim was not me bar red if brought in the Federal Courts *487 of Canada in provinces other than Bri sh Col umb i a - one sugges on wa s the Feder al Cour t si ng i n the nei ghbour i ng Province of Albert a - was of any relevance. On this, I accept the submission of the shipowners that it cannot be in the interests of the par es or in the int er ests of jus ce t hat the ac on shoul d effec vel y be remi ed to a for um which cannot be described as appropriate for the trial of the ac on.

Second, I do not think that the discre onary powe r wh i ch is, I under stand, vested in the cour ts of Bri sh Col umb i a t o wa i ve t he me bar , is relevant in t his case. The poi nt i s si mpl y that the shipowners' claim is not me bar red i n Engl and but ma y be t reat ed as me bar red i n Br i sh Columbia. In these circumstances, the ques on inevi tabl y ar i ses wh et her the Engl ish cour t, if it we r e minded to set aside the leave to serve proceedings on Cansulex out of the jurisdic on, shoul d do so on the condi on that Cansul ex shoul d wa i ve any ri ght to rel y on the me bar appl i cabl e i n Bri sh Columbia.

So it is necessary to consider whether jus ce requi red the imp os i on of such a t erm. The evi dence before the Court of Appeal showed that neither the shipowners nor their legal advisers were aware of the two-year limita on per iod appl icabl e in Br i sh Col umbi a. Cansul ex did not draw t he ma er t o their a en on i n t hei r affidavit evidence; the shi powner s ' solici tors s impl y s tumbled upon i t when inves ga ng t he avai l abi l ity of sui t abl e l awye rs i n Vancouver . Nex t , alt hough Cansul ex had appl i ed to the English court to set aside the proceedings in the Cambridgeshire ac on, t hey had not appealed from the judge's adverse decision on the point and the Cambridgeshire ac on had proceeded to trial. Furthermore, had the shipowners' solicitors considered the ma er , exper ience would have indicated that, having regard to the law as generally understood to prevail before the decision of this House in the Amin Rasheed case [1984] A.C. 50 , in which the speeches were delivered in July 1983, and to the prominence hitherto given to legi ma t e per sonal and j ur idi cal advantages in the English jurisdic on (see, i n par cul ar, the deci sions of the Cour t of Appeal in Britannia Steamship Insurance Associa on Ltd. v. Ausoni a As si cur azi oni S. p. A. [1984] 2 Ll oyd' s Rep. 98 and the Ilyssia case [1985] 1 Lloyd's Rep. 107 ), it was improbable that any differ ent concl us i on

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would be reached on an applica on to set asi de the l eave gr ant ed i n the pr esent case. I n thi s connec on, it is to be obser ved that the shi pown er s' cause of ac on agai nst Cansul ex i n t he present case must have accrued in November 1980 (when the loading of the cargo on board the Spiliada in Vancouver was completed) and so was prima facie me bar red in Br i sh Col umbi a by Nov embe r 1982, nine months before the decision of this House in the Amin Rasheed case. In my judgment, had the point arisen, I would have been minded to hold that, in all the circumstances of the case, the shipowners had acted reasonably in commencing proceedings in this country, and that they had not acted unreasonably in failing to commence proceedings in Bri sh Col umb i a bef or e the expi ry of the limita on per iod ther e. In these ci rcums tances , had I agreed wi th the Cour t of Appeal that the judge erred in the exercise of his discre on, I wo ul d never thel ess onl y have set asi de the pr oceedi ngs, to enable proceedings to be brought in *488 Bri sh Col umb i a, on the condi on t hat Cansul ex shoul d waive their right to rely on the me bar in Br i sh Col umbi a.

However, for the reasons I have given I would allow the appeal with costs here and below, and restore the order of Staughton J.

(11) Postscript

I feel that I cannot conclude without paying tribute to the wri ngs of Jur i sts wh i ch have assi sted me in the prepara on of thi s opi ni on. Al though i t ma y be invi di ous to do so, I wi sh to si ngl e out for special men on ar cles by Mr. Adr i an Bri ggs i n ( 1983) 3 Legal Studi es 74 and i n [ 1984] L.M.C .L .Q. 227 , and the ar cl e by Mi ss Rhona Schuz in (1986) 35 I.C. L. Q. 374. They wi ll obser ve that I have not agreed with them on all points; but even when I have disagreed with them, I have found their work to be of assistance. For jurists are pilgrims with us on the endless road to una ai nabl e per fec on; and we have it on the excellent authority of Geoffrey Chaucer that conver sa ons amon g pi l gri ms can be most rewarding.

Representa on

Solicitors: Holman Fenwick & Willan ; Linklaters & Paines .Appeal allowed with costs. (C.T.B. )

________________________________________________________________________________________

. R.S.C., Ord. 11, r. 4(2): "No such leave shall be granted unless it shall be made sufficient l y to appear to the court that the case is a proper one for service out of the jurisdic on under thi s Order."

(c) Incorporated Council of Law Repor ng for Engl and & Wa l es© 2011 Swe et & Ma xwe l l

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*1270 Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd.

Court of Appeal (Civil Division)

28 May 1999

[1999] C.L.C. 1270

Beldam, Brooke and Mummery L JJ

Judgment delivered 28 May 1999

Insurance—Reinsurance—Service out of jurisdic on—C onflict of laws—Wh e t her Engl i sh l aw p roper law of reinsurance contract—Whether England appropriate forum for seeking declara ons of non-liability—Contracts (Applicable Law) Act 1990, s. 2(1)—Rome Conven on, ar t. 3.

This was an appeal by Taiwanese insurers from a judgment of Cresswell J ([1998] CLC 1072) that reinsurance placed on the London market was implied subject to English law.

‘Tai Ping’ was a Taiwanese insurance company which insured the erec on of a lar ge el ectroni cs factory in Taiwan for ‘Winbond’ under an erec on al l ri sks (‘EAR’ ). Cl ause 22 of the EAR pol icy provided for Taiwanese insurance law to apply to any ma er s not s pul ated i n t he pol i cy. Tai Ping reinsured its liability under the EAR with Gan in London on a slip providing that the form of the policy was to follow the original. The factory was seriously damaged by fire and Wi nbond claimed on the EAR policy. Tai Ping sought to avoid liability on the basis that the factory's fire protec on systems we r e not as stat ed by the insur ed. Howe ver Tai Pi ng' s repr esent a ves had personally visited the site and had seen the fire pr ecau on i nst al l a ons and accordi ngly Tai Ping could not rely on non-disclosure and se led Wi nbond' s cl ai m. Ga n cl ai me d that Tai Pi ng had se led the cl ai m wi thout its consent cont rar y to the terms of the standard cl ai ms co- oper a on clause in the reinsurance and sought to avoid the reinsurance on the ground that it had accepted the risk on the basis that the factory was protected by the extensive fire pr ecau ons specified. On the basi s that the cont ract of rei nsur ance wa s gover ned by Engl ish law under RSC, O. 11, r. 1(1)(d) Gan obtained leave to serve Tai Ping in Taiwan with a writ claiming declara ons that Gan was not liable under the reinsurance. Tai Ping applied to set aside service of the writ on the basis that the reinsurance was governed by Taiwanese law like the EAR and that under Taiwanese law the reinsurers would not be allowed to avoid for non-disclosure unless it could show that there had been wri en enqui ries wh i ch had been unt rut hf ul ly answe r ed. Cr esswe l l J ([1998] CLC 1072) held that the proper law of the reinsurance contracts was English law and that England was the appropriate forum. Accordingly he dismissed Tai Ping's applica on. Tai Ping appealed.

Held, dismissing the appeal:

1 It was not possible to infer from the reinsurance slip that the par es to the rei nsur ance intended to incorporate all the terms of the EAR policy. Where a contract of reinsurance was made in London between London underwriters and brokers their agreement was based on the well known duty of disclosure and the right of an insurer to avoid a policy for misrepresenta on. Clause 22 of the EAR policy would introduce a term of Taiwanese law in conflict wi th that basi s. In the absence of express agreement it could not reasonably be imputed to the par es that they intended the EAR choice of law clause to apply. The scope of the words ‘as original’ was confined to the pr ovi si ons of the EAR pol icy wh i ch defined t he ext ent of the r isk i nsured. Whe r e the risk presented to underwriters was materially differ ent in fact from that assume d by the reinsured, it could not reasonably be presumed that underwriters intended to affor d ‘back to back’ cover. (Forsikringsak esel skapet Vesta v But cher [1989] AC 852 cons i der ed .)

2 In any event the provisions of cl. 22 would not apply to ma er s expr essl y deal t wi th on the slip. A term could only be imported if it did not conflict wi th i ts expr ess t erms and t he reinsurance slip did refer to the broker's informa on about the fire protec on s ystems.

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3 Accordingly the express terms of the reinsurance did not make Taiwanese law the proper law of the reinsurance and the judge was correct to hold that there was an implied *1271 choice of English law demonstrated with reasonable certainty by the terms of the contract which contained the clauses commonly used in the London market and the circumstances of the case under s. 2(1) of the Contracts (Applicable Law) Act 1990 and art. 3 of the Rome Conven on.

4 The judge was also correct that England was clearly the appropriate forum. If any factual evidence was required from Taiwan it was likely to be within rela vel y nar row limi ts even on Tai Ping's argument.

The following cases were referred to in the judgment of Beldam LJ:

Forsikringsak esel skapet Vesta v But cher [1989] AC 852 .

Hong Kong Borneo Services Co Ltd v Pilcher [1992] 2 Ll Rep 593.

Municipal Mutual Insurance Ltd v Sea Insurance Co Ltd [1996] CLC 1515.

Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Ll Rep 476.

Representa on

John Lockey (instructed by Stephenson Harwood) for the appellant.

Colin Edelman QC and Colin Wynter (instructed by Dibb Lupton Alsop) for the respondent.

JUDGMENT

Beldam LJ:

The appellants, Tai Ping Insurance Co Ltd (‘Tai Ping’), appeal from the order of Cresswell J of 28 April 1998 dismissing Tai Ping's applica on under O. 12, r. 8(1), to set aside service of the writ in these proceedings (see [1998] CLC 1072). The respondent, Gan Insurance Co Ltd (‘Gan’), had obtained leave to serve the proceedings out of the jurisdic on from Ma nce J on 4 Sept emb er 1997. The proceedings were served on 19 September 1997.

The facts

Gan carries on reinsurance business in the London market. Tai Ping is an insurance company based in Taiwan. In February 1996 Tai Ping issued an erec on al l ri sks (‘EAR’ ) pol icy of insur ance covering the erec on of a lar ge factor y for the ma nuf actur e of el ectroni c wa f er s in Tai wa n for Winbond Electronic Corpora on ( ‘Wi nbond’ ). I n i ts Engl ish t rans l a on c l . 22 of the pol i cy provided:

‘Ma er s not s pul ated i n t his Pol i cy shal l be handl ed i n accordance wit h t he provi sions of insurance law and regula ons . ’

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The risk accepted by Tai Ping was substan al and i t sought f acul ta ve r einsurance on t he London and other markets. Through London brokers Jenner Fenton Slade (‘JFS’), Tai Ping presented the reinsurance risk to Gan in London. On 21 March 1996 a slip policy was subscribed by Gan for its due propor on. By the terms of the pol icy, Ga n agreed to rei nsur e the def endant in respect of its liability as insurers of Winbond under the EAR and third party liability insurance covering the works. Gan contends that the reinsurance policy contained a s pul a on t hat Tai Ping would co-operate with reinsurers in the inves ga on and assessmen t of any l oss or circumstances giving rise to loss and that it would make no se leme nt or comp r omi se or admi t liability without its prior approval. JFS received their instruc ons f rom Tai Pi ng' s br oker s i n Taiwan. In a fax dated 5 December 1997 Tai Ping's brokers said:

‘A review of our placing file indi cat es that Ga n speci fical l y asked about fire pr ot ec on and as a result of that enquiry we were provided with an underwri ng package wh i ch included the Angel engineering drawings and a reference to six separate fire pr ot ec on systems.’

*1272

Gan say that these documents were presented to them by brokers and that the risk they reinsured was thus represented as having the benefit of extens i ve fire figh ng pr ecau ons in accordance with the specifica on s tated on t he drawi n gs .

On 14 October 1996 Winbond's plant was seriously damaged by fire gi vi ng ri se to a cl ai m by Winbond under the EAR policy issued by Tai Ping. Tai Ping ini al ly sought to avoi d l iabi lity, relying on cl. 17 of its policy which in its English transla on pr ovi ded:

‘The Insured or its agent shall, at the me of ent er ing i nt o thi s Insur ance Cont ract, provide true explana ons i n response to ques ons on t he appl i ca on f orm fo r t hi s insurance and Tai Ping's wri en inqui ri es . Tai Pi ng ma y resci nd thi s Cont ract if ther e is deliberate concealment, false representa on, omi ssi on thr ough faul t, non- di scl osur e of facts to the knowledge of the Insured/its agent or misrepresenta on on the par t of the Insured or its agent which is sufficient to vary or dimin ish Tai Ping' s assessmen t of the risk.’

However Tai Ping's representa ves had per sonal ly vi si ted the er ec on s ite and had s een t he fire precau on ins tal la ons . They did not rel y upon t he s tatemen t s i n t he drawi n gs .

In July 1997, a er nego a ons wi th Wi nb ond, Tai Ping enter ed i nto an agreement t o se l e Winbond's claim under the EAR policy. Gan contends that Tai Ping failed to co-operate in the inves ga on of the circums t ances of the l oss and s e l ed Wi nb ond' s cl ai m wi th out i ts approval or consent. Gan received informa on that the pl ant and wo r ks had not been pr ot ected by the extensive fire figh ng precau ons speci fied in t he drawings. I t sought t o avoi d the rei nsur ance policy because it had been induced to accept the risk by material non-disclosure or misrepresenta on. Fur ther Ga n cont ended that , in se l ing Win bond' s claim, Tai Ping wer e i n breach of a condi on pr ecedent t o any l iabi lity of Ga n under t he pol icy of r ei nsur ance. Accordingly, on 8 September 1997 Gan sought leave to issue and serve on Tai Ping out of the jurisdic on a wr i t endor sed wi th poi nt s of cl ai m, cl ai mi ng decl ar a ons that i t was not l i abl e under the reinsurance policy. As previously stated, Mance J gave leave and on 23 October Tai Ping issued its summons under O. 12, r. 8.

The terms of the policy of reinsurance

It was common ground between Tai Ping and Gan that the EAR policy issued by Tai Ping was governed by the law of Taiwan. The reinsurance slip subscribed by Gan provided:

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‘TYPE: Erec on Al l Ri sks and Thi rd Par ty Li abi lity Rei nsur ance as or i gi nal .

FORM: Slip Policy NMA 1779 following original — original wording as agreed Leading Reinsurance Underwriter.

REASSURED: The Tai Ping Insurance Company and/or as agreed Leading Underwriter only.

ASSURED: Winbond Electronics Corp. as Principal and/or as Contractor and/or Sub-Contractors and/or Suppliers and/or all other interested par es as or i gi nal .

PERIOD: …

INTEREST: In respect of the Erec on f or Ma chi ner y i n F AB I II n ew p l ant Contract/project and all ancillary works and/or as more fully described in the original policy wording.

SUM INSURED: …

CONDITIONS: Full Reinsurance Clause NMA 416 (ex. reten on) .

Claims Co-opera on Cl ause:

*1273 … NMA 464 unless war and civil war exclusion clause contained in original policy wording. NMA 1685.

ORIGINAL CONDITIONS: all risks as per local standard EAR policy wording as approved clauses as follows: …

INFORMATION: As on file wi th Jenner Fent on Sl ade inc l udi ng separat e exhi bi ts seen. ’

It was agreed that the words ‘full reinsurance clause NMA 416’ meant the full reinsurance clause No. 1 (approved by Lloyd's Underwriters Fire and Non-marine Associa on) :

‘Being a Reinsurance of and warranted same gross rate, terms and condi ons as and to follow the se leme nt s of the … Comp any. ’

The claims co-opera on cl ause wa s in the standard London Ma rket cl ai ms co- oper a on c lause SCOR (UK) cl. 012 4/83. This provided:

‘Notwithstanding anything contained in the Reinsurance Agreement and/or Policy wording to the contrary, it is a condi on pr ecedent to any l iabi lity under thi s Pol icy that:

(a) The Reinsured shall, upon knowledge of any circumstances which may give rise to a claim against them, advise the Reinsurers immediately and in any event not later than 30 days;

(b) The Reinsured shall co-operate with Reinsurers and/or their Appointed Representa ves subs cribi ng to thi s Pol icy in the inves ga on and as sessment of any l oss and/or circumstances giving rise to a loss;

(c) No se leme nt and/or comp r omi se shal l be ma de and l iabi lity admi ed wi t hout the prior approval of Reinsurers.

All other terms and condi ons of thi s pol icy rema i n unchanged. ’

The applica on for leave to ser ve the wr it out of the jur isdi c on

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In its ex parte applica on for leave, Ga n cl ai me d decl ara ons that i t was en t led t o resci nd t he contract of reinsurance or to obtain relief in respect of breach of a condi on of the cont ract which: (1) was made within the jurisdic on, and

(2) was made through brokers carrying on business within the jurisdic on on behal f of Tai Pi ng who were out of the jurisdic on, and

(3) that the contract of reinsurance was by its terms or by implica on gover ned by Engl ish law.

The relief sought was therefore within RSC, O. 11, r. 1(1)(d).

The summons to set aside service

At the hearing of Tai Ping's summons to set aside service, Cresswell J set out the principles governing leave to serve out of the jurisdic on and rel evant to the exer ci se of hi s di scre on i n deciding whether to set service aside, including the principles on which he should decide whether an English court was the convenient forum to decide Gan's claim. I propose at this point only to summarise the principles he set out in his judgment. They were:

(1) that Gan had to establish a good arguable case that its claims were within one of the sub-paragraphs of O. 11, r. 1(1);

(2) that it had to demonstrate that there was a serious issue to be tried on the merits of the claim; *1274

(3) that the English courts were the convenient forum;

(4) that it was a proper case in which the court should exercise its discre on to gr ant leave; and

(5) the fundamental principle is that the court will choose the forum in which the case can be tried most suitably in the interests of all the par es and to ser ve the ends of jus ce.

Gan were required to show not merely that the English court was an appropriate forum for the trial of the ac on but that it wa s cl ear l y the appr opr iat e for um taki ng int o account the nat ur e of the dispute, the legal and prac cal issues invol ved, avai labi lity of wi tnesses and expense. The aim is to achieve substan al jus ce f or all the par es i n the appropri ate forum.

The judge's decision

Tai Ping accepted that the court had jurisdic on under O. 11, r. 1(1)(d)(i) and (ii) but disputed that English law governed the reinsurance policy. In view of the significance of thi s ques on, Cresswell J considered it at the start of his judgment. Tai Ping submi ed that the cont ract wa s governed by the law of Taiwan; Gan argued that the proper law was English law. The judge decided in favour of English law and his decision is challenged in this appeal. Tai Ping conceded that there was a serious issue to be tried to enable the court to exercise its discre on to gr ant leave but submi ed that Ga n' s cl ai m wa s essen all y f or nega ve decl ara ons and t hat such claims had to be viewed with great cau on wh en ther e wa s a pos si bl e conflict of juri sdi c on, par cul ar l y i f the cl ai m sma cked of an imp r oper a empt to obt ain t he advant age of a mor e favourable forum.

The judge thought it essen al to deci de wh et her Ga n we r e seeki ng rel ief for a val id pur pose and

Page6

not merely as an a emp t to pr e- emp t a jur i sdi c on whi ch mig ht other wi s e be conveni ent . He said ([1998] CLC 1072 at p. 1083B–C):

‘Whilst the relief sought in this case is declaratory and nega ve, in the sense that its object is establishing that the plain ffs are not l iabl e t o t he def endant s i n r espect of the claim made under the reinsurance, the relief is confined to i ssues on wh i ch the burden of proof rests with the plain ffs ( i .e. avoi dance and non- compl i ance wi t h a condi on pr ecedent ). The pl ai n ffs are theref or e natural plai n ffs on those i s sues. The relief sought is useful in that it will determine the two threshold issues raised by the plain ffs that stand i n t he way of the def endant s ' recovery under the r einsurances of their outlay to the assured. The relief is neither premature nor hypothe cal . On the contrary, it addresses live issues which had arisen between the par es pr ior to the commencement of the proceedings.’

As English law was the proper law of the contract, he said that nega ve decl ar at or y rel ief wa s the only form of relief available to Gan and seeking that relief in England was the only way in which it could ensure that its rights were determined in the jurisdic on of the pr oper law of the contract. He considered the jus fica on f or s eeki ng r el ief and whet her i t was appropri ate for Gan to seek the declara ons i n a separat e ac on. He concl uded t hat Gan had est abl i shed a good arguable case that it had good reason for seeking the relief, that the relief was useful, that a solid prac cal benefit wou l d ensue and t hat the decl ara ons were sought f or a val i d and valuable purpose.

The judge's decision that English law was the proper law of the contract obviously had a significant effect on his deci sion whe t her to exerci se his dis cre on i n favour of Gan and on hi s decision whether the English courts were the appropriate forum.

The importance of the choice of law is highlighted by the differ ences in the rul es permi ng avoidance of a contract of insurance. Ar cl e 64( 1) of Tai wa nese insur ance l aw requi res that , when entering into a contract of insurance, the proposer must truthfully *1275 explain wri en enquiries from the insurer who cannot repudiate the contract for misrepresenta on unl ess he has invited explana on by wr i en enqui r ies and t hen onl y i f the f act mis repr esent ed r elates to the peril in ques on (ar t. 64( 2) ). Cl ause 17 of the EAR pol icy i s, accor di ng to the appel lant ' s evidence, substan al ly to the same effect . Thus i f Tai wan ese l aw a ppl i ed t o t he cont r act of reinsurance, Gan could not avoid the contract on the ground that Tai Ping had misrepresented the extent of the fire pr ot ec on avai l abl e t o t he bui l ding i nsured unl ess i t had submi ed wr i en enquiries which had been untruthfully answered. Tai Ping argued that the use of the words ‘as original’ on the slip, resulted in the importa on int o the pol icy of rei nsur ance of cl . 22 of the EAR policy and accordingly the applica on of Tai wa nese law. The case wa s ar gued bef or e the judge and before this court on the basis of the opinion of Mr Cheng-sheng Liao, a Taiwanese solicitor, that cl.17 of the EAR policy essen al ly fol lowe d the same wo r di ng as ar t. 64( 1) of the insurance law and that the second part of cl. 17 would ‘also generally be regarded as referring to the explana ons to wr i en enqui r ies i n t he first sentence of c l . 17. Further, i f they were to be construed more widely, they could not be so construed as to modify the policy unfavourably to the insured’.

Tai Ping further argued that serious factual issues could arise on the issue whether Gan had suffer ed any los s by br each of the al leged condi on precedent of co-oper a on. Thus i t coul d not be said that taking into account all the relevant circumstances, including the need for witnesses from Taiwan and even elsewhere, the English courts were clearly shown to be the most convenient forum. The judge analysed the issues likely to arise and the witnesses who might be required to give evidence but, a er we i ghi ng al l the cons i der a ons , he concl uded t hat in t he circumstances Gan had shown that England was clearly the appropriate forum. He therefore dismissed Tai Ping's applica on.

Page7

The appeal

In presen ng hi s ar gume nt for Tai Pi ng, Mr Lockey iden fied as of f undament al i mpor t ance the judge's conclusion that English law and not Taiwanese law was the proper law of the contract of reinsurance. This ques on he sai d wa s cruci al t o t he j udge' s det ermi na on t hat Gan had established a proper case for service out of the jurisdic on and that Engl and wa s the mo s t appropriate forum for the trial. He emphasised that Tai Ping in seeking reinsurance of its liability under the EAR policy needed indemnity against its liability to Winbond for loss occurring during the construc on and er ec on of the elect roni cs plant in Tai wan . Tai Ping' s l iabi l ity to i ts i nsured was governed by Taiwanese law. The effect of the pr ovi si ons in the sl ip that the form of the policy was described as ‘following original’, that it incorporated condi ons stat ed to be ‘ ful l reinsurance cl. NMA 416’ reinforced the conclusion that the condi ons of the Tai wa nese pol icy were to be taken to be included in the reinsurance slip. He pointed to the words used in NMA 416 ‘being a reinsurance of and warranted same gross rate terms and condi ons as and to follow the se leme nt s of the … comp any’ . Fur ther from the ver y nat ur e of the cover sought by reinsurance Tai Ping were seeking ‘back to back’ cover. Relying on the decision in Forsikringsak esel skapet Vesta v But cher [1989] AC 852 , he said the presump on mu s t be that the reinsurance is on iden cal terms to those of the pol icy.

Mr Lockey pointed out that in Vesta v Butcher the original policy did not contain a choice of law clause comparable with cl. 22 of the policy issued by Tai Ping. He submi ed that the effect of the words in the slip was to incorporate the original terms of the policy issued by Tai Ping, including cl. 22. The case of Vesta v Butcher had proceeded on the assump on that al l terms were included. His argument followed the basis of the opinions of four members of the House of Lords. On this basis the proper law of the reinsurance contract was Taiwanese law. The par es by incor por a ng t he t erms of Tai Ping' s pol i cy had mad e an express choi ce of Tai wan ese law demonstrated with reasonable certainty within art. 3(1) of the Rome Conven on.

*1276

He submi ed that even if the par es had not mad e an express or real choi ce nevert hel ess the contract of reinsurance was most closely connected with Taiwan. The judge had placed too much reliance on the fact that the policy of reinsurance was a Lloyd's policy effected us i ng an English form. He had overlooked the evidence of Steven Lowe in his affidavi t of 25 Mar ch 1998 that it is common in Taiwan for reinsurance contracts to be wri en in Engl ish and for them to include standard or interna onal ly recogni sed cl auses such as the NMA cl auses . The judge wa s wrong to hold that the reinsurance contract was most closely connected with England. The subject ma er of the rei nsur ance wa s the ri sk assume d by a Tai wa nese insur er to a Tai wa nese insured in respect of property situated in Taiwan. In short he submi ed that the judge shoul d have found either that the par es had ma de an expr ess choi ce that Tai wa nese law shoul d appl y to the contract of reinsurance or alterna vel y that the cont ract of rei nsur ance wa s mo s t cl osel y connected with Taiwan.

Even if the words ‘as original’ were limited to ensuring that the risk assumed by reinsurers was ‘back to back’ with the risk undertaken in Taiwan by Tai Ping, the choice of law clause, cl. 22, could not be regarded as a separate provision. The choice of law clause was an integral part of the scope of the cover provided. It was not merely ancillary but materially affected the ri ght s of both par es .

Mr Edelman QC for Gan supported the judge's decision and reasons. The reinsurance was placed in London and it did not follow that, whenever there was a choice of law clause tucked away in an insurance policy effected i n an over seas count ry, the par es to a r einsurance contract in London must be taken to have chosen a foreign law. Moreover when brokers presented the risk to reinsurers they will have proceeded on the basis that the duty of good

Page8

faith applied. They would certainly have had no no ce that rei nsur ance coul d onl y be avoi ded for misrepresenta on on the basi s of wr i en enqui r ies. The London mar ket oper ates on t he premise of the applica on of Engl ish law to the cont ract and that the dut y of good fai th appl ies . He supported the conclusion that the words ‘as original’ applied only to define the ri sk and could not be interpreted as intended to incorporate every condi on i n the Tai wa nese pol icy whether it was applicable to a reinsurance or not. The case of Vesta illustrated that it is not necessary to hold that the par es int ended to appl y al l the terms of the under l yi ng cont ract of insurance.

He submi ed that ther e wa s no cl ear and pr eci se demo ns tra on of choi ce of Tai wan ese l aw which would sa sfy ar t. 3( 1) of the Rome Conven on. By the use of the wor ds ‘ as ori ginal ’ the par es coul d not be taken to have int ended to inc l ude ever y cl ause in the or i gi nal pol icy and certainly not a clause which would be at variance with the general understanding of the par es to the contract of reinsurance. The judge was right to rely on the similarity with the example of a Lloyd's policy of marine insurance known to be governed by English law cited in the Guiliano-Lagarde Report as poin ng t o an i mp l ied choi ce of Engl ish l aw wi th r easonabl e certainty. The slip referred to standard form clauses used in this jurisdic on in wh i ch they we r e developed. It is not unreasonable to suggest that they should be interpreted in the courts of this jurisdic on.

The cri ci sm that the judge di d not pay sufficient r egar d to the extent t he r elevant f acts woul d be in dispute at the trial was misplaced. He considered the nature of evidence likely to be needed on both issues.

Was the judge right to hold that the proper law of the reinsurance policy was English law?

The underlying ques on is wh et her , from the use of the wo r ds ‘as or i gi nal ’ in the rei nsur ance slip, an inten on shoul d be a ribut ed t o t he brokers presen ng t he s l ip and Gan subscr i bing i t that the contract of reinsurance should include the terms of Tai Ping's EAR policy and, in par cul ar , cl . 22. If so, it wo ul d me an that any ma ers whi ch wer e *1277 not expressly dealt with in the reinsurance policy should be dealt with in accordance with Taiwanese law.

The difficul t y of reconci l ing t he t erms and condi ons of a pol i cy of i nsur ance effected in an overseas country by an overseas insurer with the s pul a ons ordinar i l y f ound i n a r einsurance policy placed by brokers on the London market was succinctly stated by Hobhouse J in Vesta at first ins tance [1986] 2 All ER 488 at p. 504c–d where he said:

‘Where a contract such as the present provides that its terms and condi ons are to be the same as those of another contract and where its clear commercial purpose is to provide a corresponding cover to that provided by the other contract, then, unless some other powerful considera on is to int er vene, the concl us i on mu s t be that ther e is an inten on that bot h cont racts are to be gover ned by the same law. Howe ver , ther e remains something surprising and improbable about the conclusion that the Lloyd's slip and the Lloyd's policy are governed by anything other than English law …’

He concluded that the legal effect of the cl auses defining t he cover shoul d be t he s ame i n t he reinsurance and the original insurance but declined to hold that the relevant law (in that case Norwegian law) was intended to be the proper law of the reinsurance contract.

On appeal, this court ([1989] AC 852) rejected as ‘unrealis c’ the sugges on t hat the who l e contract of reinsurance should be governed by Norwegian law and upheld Hobhouse J's solu on as the only one which made commercial sense.

On further appeal the House of Lords, whilst confirmi ng that cover under the two pol ici es wa s indeed ‘back to back’, did not go so far as to suggest that English law was not the proper law of the reinsurance contract. Lord Griffiths, wit h whom L ord Bri dge concurr ed, referr ed at p. 896 t o

Page9

the wording of the reinsurance in that case which included the phrase ‘warranted same gross rate terms and condi ons ’ . He int er pr et ed thi s pr ovi si on as me ani ng that the insur er had gi ven a warranty that he had placed the risk on the same terms as he had disclosed to reinsurers indica ng that at the me t he s l i p was compl eted t he pol i cy terms wer e avai l abl e t o t he reinsurer to demonstrate the nature of the risk he was accep ng. Thus t he wa r rant y t o reinsurers was that the policy had been or would be wri en i n those terms . Lor d Gr iffiths con nued (at p. 896D–E) :

‘A contract of insurance will almost inevitably contain terms that are wholly inappropriate to a contract of reinsurance. The two contracts are dealing with en rel y differ ent subj ect ma er. The ori ginal pol i cy i s concerned t o define t he r i sk that t he insurer is prepared to accept. The contract of reinsurance is concerned with the degree of that risk as defined in the pol icy that the rei nsur er is pr epared to accept .’

Mr Lockey accepted that the House of Lords had stopped short of holding that English law was not the proper law of the contract of reinsurance in that case. Mr Lockey expanded his submissions to argue that cl. 22 ought properly to be regarded as a term of the EAR policy which defined the nat ur e of the ri sk and pr ecl uded Gan f rom avoi di ng the rei nsur ance pol icy for misrepresenta on of the extent of the fire protec on. I f thi s argument i s correct, the r esul t would be that underwriters would be taken to have granted back-to-back cover even if the risk as presented to them was materially differ ent from the ri sk accept ed by the rei nsur ed.

In the present case it is clear that Tai Ping's brokers were instructed to present the risk to reinsurers on the basis of the statement of fire pr ot ec on cont ained on t he drawi n gs . Acc ording to brokers this was in response to a specific enqui ry by Ga n though not apparent ly in wr i ng. In my view, where by its express terms, the risk presented to underwriters is materially differ ent from that assumed by the reinsured, it cannot reasonably be presumed that underwriters intended to affor d back- to- back cover .

*1278

In his analysis and conclusions of the proper law of the reinsurance contract, Cresswell J cited s. 2(1) of the Contracts (Applicable Law) Act 1990 providing for the incorpora on int o the law of the UK of the Rome Conven on. Ar cle 3(1) of the Conven on under t he headi ng ‘ Freedom of choice’ provides:

‘A contract shall be governed by the law chosen by the par es . The choi ce mu s t be express or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the par es can sel ect the law appl icabl e to the whole or a part only of the contract.’

Ar cl e 4, headed ‘Appl icabl e law in the absence of choi ce’ , pr ovi des :

‘1. To the extent that the law applicable to the contract has not been chosen in accordance with Ar cl e 3, the cont ract shal l be gover ned by the l aw of the count ry with which it is most closely connected. Nevertheless, a severable part of the contract which has a closer connec on wi th anot her count ry ma y by wa y of excep on be governed by the law of that other country.

2. Subject to the provisions of paragraph 5 of this Ar cl e, it shal l be pr esume d that the contract is most closely connected with the country where the party who is to effect the performance which is characteris c of the cont ract has, at the me of concl usi on of the contract, his habitual residence, or, in the case of a body corporate or uncorporate, its central administra on. Howe ver , if the cont ract is ent er ed int o in the course of that party's trade or profession, that country shall be the country in which

Page10

the principal place of business is situated or, where under the terms of the contract the performance is to be effected thr ough a pl ace of bus i ness ot her than the pr inc i pal place of business, the country in which that other place of business is situated …

5. Paragraph 2 shall not apply if the characteris c per forma nce cannot be det ermi ned, and the presump ons in paragraphs 2, 3 and 4 shal l be di sregarded if it appear s from the circumstances as a whole that the contract is more closely connected with another country.’

The judge relied on the example given in the Guiliano-Lagarde Report as a circumstance which could demonstrate an inferred inten on, of the case of a cont ract in a standard form wh i ch is known to be governed by a par cul ar system of law even though ther e is no expr ess stat eme nt to this effect , such as a Ll oyd' s pol icy of ma r ine insur ance. The judge sai d that the rei nsur ance contract was placed in London on the London market, the terms of the slip and the claims co-opera on cl ause poi nt ed to an imp l ied choi ce of Engl ish law ‘demo ns trat ed wi th reasonabl e certainty by the terms of the contract/the circumstances of the case’. He considered that the words ‘as original’ were intended to ensure that the risk undertaken by reinsurers was iden cal as to period, geographical limits and nature of the risk with the risk undertaken by Tai Ping as direct insurer. He relied on the case of Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Ll Rep 476, a decision of Gatehouse J, and the observa ons of Ne i ll LJ in Vesta v Butcher.

In my judgment Mr Lockey's argument involves a departure from the usual course of business on the London reinsurance market which could only be jus fied i f the t erms of the r einsurance policy unequivocally pointed to an inten on that the pr oper law shoul d be Tai wa nese law. If the terms are construed as a whole, they fall a long way short of demonstra ng such an int en on. Three descrip ve phr ases appear in the sl ip: ‘as or i gi nal ’, ‘fol lowi ng or i gi nal ’ and ‘as mo r e ful ly described in the original policy wording’. In describing the form of the reinsurance policy the descrip on i s ‘ Sl ip Pol icy NMA 1779 f ol lowi ng or i gi nal — or i gi nal wo r di ng agreed Leadi ng Reinsurance Underwriter’. It is common ground that NMA 1779 is an English non-marine policy form. There is further difficul t y i n i nterpre ng t he word s ‘ as ori ginal’ in the way Mr L ockey suggests because *1279 the slip draws a clear dis nc on bet wee n “Condi ons’ whic h pl ai nl y refer to the condi ons of the rei nsur ance:

‘Full Reinsurance Clause NMA 416 … NMA 464 unless war and civil war exclusion clause contained in original policy wording …’

and ‘Original Condi ons ’ :

‘all risks as per local standard EAR policy.’

I do not think it is possible to infer from the terms of the slip that the par es to the rei nsur ance intended to incorporate all the terms of the EAR policy.

In my view where a contract of reinsurance is made in London between London underwriters and brokers their agreement is based on the well known duty of disclosure and the right of an insurer to avoid a policy for misrepresenta on. Cl ause 22 of the EAR cont ract wo ul d int roduce a term of Taiwanese law in conflict wi th thi s basi s. On pr inc i pl e, i n the absence of expr ess agreement, I would hold that it cannot reasonably be imputed to the par es that they int ended cl. 22 to apply. At the most, scope for the words ‘as original’ and ‘in the original policy wording’ could be given by its applica on to the pr ovi si ons of the EAR pol icy wh i ch defined t he ext ent of the risk insured.

In any event, where ma er s we r e expr essl y deal t wi th on the sl ip, the pr ovi si ons of cl . 22 wo ul d

Page11

not apply. A term could only be implied in the reinsurance policy if it did not conflict wi th i ts express terms. In this context the words ‘Informa on: as on file wi t h J enner , Fent on, Sl ade, including separate exhibits seen’, did expressly refer to the informa on about t he fire protec on systems as stat ed in the br oker ' s fax of 5 Decemb er 1997.

I am for fied i n t his vi ew b y the man y deci sions whi ch have l i mit ed s i mil ar phr ases i n reinsurance policies. So in Hong Kong Borneo Services Co Ltd v Pilcher [1992] 2 Ll Rep 593 in construing the words ‘as per primary insurance’ in an excess of loss insurance policy Evans J held that they were intended to iden fy t he scope of t he excess cover wi th t hat of t he underlying club cover. In Municipal Mutual Insurance Ltd v Sea Insurance Co Ltd [1996] CLC 1515 Waller J construed the words ‘Condi ons as under l yi ng …’ as not necessar i ly me ani ng that one must write into the terms of the reinsurance all the underlying terms adap ng them to the reinsurance. In Pine Top v Unione Italiana [1987] 1 Ll Rep 476 Gatehouse J said:

‘The only sensible inten on I can a ribut e t o t he par es i s that t hey were concer ned to make sure that the risk undertaken by reinsurers was iden cal as t o per iod, geographical limits and nature of the risk with the risk undertaken by the primary insurer.’

I would therefore reject Mr Lockey's submission that the express terms of the reinsurance policy included a clause making Taiwanese law the proper law of the contract. In my opinion the judge was correct to hold that there was an implied choice of English law ‘demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case as required by Ar cl e 3’ . The j udge poi nt ed to the ref er ence to ‘ sl ip pol icy NMA 1779’ , ‘ ful l rei nsur ance clause NMA 416’, ‘claims co-opera on cl ause NMA 464, NMA 1685’ and the cl ai ms co- oper a on clause itself as demonstra ng a choi ce of cl auses commo nl y found in cont racts of rei nsur ance placed on the London market. Moreover the procedure adopted was to place the business in London using London brokers who presented the risk to reinsurers in the conven onal wa y in concluding a contract of reinsurance governed by English law. In my view the judge was also right to hold that, in the absence of express choice, the applicable law was English law.

*1280

Mr Lockey argued that even if English law was the proper law of the contract the judge ought nonetheless to have held that Taiwan was the convenient forum. Policies of insurance and reinsurance are frequently wri en in Engl ish in Tai wa n, the cour ts of Tai wa n we r e conver sant with the standard terms referred to and a Taiwanese court could apply English law in the same way as English law applies foreign law where it is the proper law of a contract. It would be necessary to inves gat e wh et her the fire protec on s ystems were di fferent f r om tho se r ef err ed to in the drawings and on the issue whether Gan had suffer ed any l os s by br each of the condi on pr ecedent on wh i ch it rel ied. Tai Pi ng wo ul d need to cal l evi dence to show that it wa s in any event liable under the terms of its policy.

The judge considered these submissions in detail. He concluded that if any factual evidence was required from Taiwan it was likely to be within rela vel y nar row l imi ts and even i f Tai Pi ng' s arguments proved to be correct he did not consider that the extent of the evidence needed from overseas would be significant . He sai d ( [1998] CLC 1072 at p. 1089G):

‘In all the circumstances I conclude that the plain ffs have shown not mer ely that England is the appropriate forum for the trial of the ac ons , but that i t i s cl ear l y the appropriate forum.’

A rac vel y though Mr Lockey' s submi s si ons wer e present ed, he did not per suade me t hat the judge had made any error in the exercise of his discre on wh i ch wo ul d en tle t his cour t to

Page12

review the decision he reached. Accordingly I would dismiss this appeal.

Brooke LJ: I agree.

Mummery LJ: I also agree.

(Appeal dismissed)*1281

© 2011 Sweet & Maxwell

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*106 Zvika Zivlin v Baroch Baal Taxa

Before the English High Court, Queen's Bench Division

19 May 1997

[1998] I.L.Pr. 106

(Sir John Wood)

19 May 1997

On an applica on for a stay on forum non conveniens grounds.

Jurisdic on. For um non conveni ens . The fundame nt al pr inc i pl e i s that the cour t wi ll choose that forum in which the case can be tried more suitably for the interests of all the par es and for the ends of jus ce. [8]

Spiliada Mari me Cor por a on v. Cansul ex Ltd[1986] 1 A.C. 460, [1987] E.C.C. 168 , followed.

The par es we r e Israel i na onal s. The plain ff was r esident, employ ed and car ri ed on bus iness i n England. The business concerned the iden fica on, financi ng and manag ement of i nvest ment proper es , ma i nl y f or f or ei gn b uyer s. T he p ar es en t ered i n to a se ri es of “g ent l eman ' s arrangements” in Israel concerning proper es i n Engl and. Wh en di sput es arose concer ni ng the terms of these arrangements, proceedings were commenced in Israel and in England. The plain ff in the Israeli proceedings was defendant in the English proceedings. He sought to have the English proceedings stayed on forum non conveniens grounds. The Court concluded that England was the more appropriate forum since the contracts concerned were governed by English law and resolu on of the disputes would involve reference to English property and tax laws.

Representa on

Brian Leech, instructed by T. Osmano & Co., appeared for the plain ff.

Mark Emanuel, instructed by Blount Petre Kramer, appeared for the defendant.

The following case was referred to in the judgment:

English courts

1. Spiliada Mari me Cor por a on v. Cansul ex Limit ed[ 1987] 1 A.C. 460; [1987] E.C.C. 168 .

JUDGMENT

SIR JOHN WOOD:

[1] In this ac on Mr Zvi ka Zi vl in is the pl ai n ff. He i s a na onal of Is rael but has l i ved over here f or some years and works *107 here. In August 1995 he formed a company, ZM Limited, in this country. He also controls, as I understand it, a company in the Bri sh Vi rgi n Isl ands , Suns tar Hol di ngs Ltd.

[2] Apart from being employed over here, he also operates a business findi ng investme nt pr oper es mainly for foreign buyers, helping with finance, le ng, mana gement , and so on.

[3] The first def endant , Mr Baroch Baal Taxa, i s al so an I srael i na onal . He i s a di r ect or and controlling shareholder of the second defendant, Barton Assets (1983) Ltd. The third company is

Page2

registered in the Bri sh Vi rgi n I sl ands and i s cont rol led di rectly or i ndi rectly by t he s econd defendants, or indeed by Mr Baroch Baal Taxa himself. The fourth defendant is a company Sarum Ltd, established and registered in the Isle of Man, again controlled either by Mr Baroch Baal Taxa or through his various companies. It is quite clear to me that although the pleadings will have to be put in far be er or der than they are at the mo me nt the si tua on whi ch has ari sen i s that Mr Baal Taxa wished to enter into property ownership or development in this country and to that end was opera ng thr ough hi s comp ani es or by hi ms el f and that he had been int roduced to Mr Zi vl in (or vi ce versa) and Mr Zivlin on his part also either operated himself or through ZM Ltd a er i t wa s registered and incorporated on 2 August 1995 or through Sunstar Holdings Ltd. It was for the convenience of each of those two men that various transac ons or payme nt s of mo ney we r e pl aced through their various company en es. That is a picture t hat i s not in t he l east bit uncommo n i n these courts.

[4] Clearly some arrangements (I use that word neutrally) were come to between those two gentlemen, whether on their own behalf or on behalf of any one or more of the various companies, in connec on wi th the pur chase or ma nageme nt of pr oper es i n t his count r y and mai nly i n London. They fell out about the details of the monies owed or what had happened and on 26 February 1997 Mr Baal Taxa, the first name d def endant , issued Israel i pr oceedi ngs.

[5] On 25 March of this year before Mr Brice, Q.C. (si ng as a Deput y J udge) the plain ff obtai ned a Mareva injunc on and leave to ser ve out of the jur i sdi c on. The wri t and s tatemen t of claim i s dat ed 26 March. There was an interim order of some kind but the ma er came bef or e me on 21 Apr i l of this year, when I con nued the inj unc on but gave dir ec ons as t o pl eadi ngs, as t o the r aisi ng of an issue on forum conveniens, with which I am now dealing, and as to expert evidence on Israeli law.

[6] Before me today there are two applica ons : by the def endant s to stay the pr oceedi ngs on the issue of forum conveniens and by the plain ff to con nue t he Mare va i njunc on. There was a l so an ex parte applica on of a di fferent nat ure whi ch I have deal t wit h qui t e separ ately.

[7] The posi on so far as Israel i law is concer ned is thi s. It is cl ai me d on behal f of the def endant Mr Baal Taxa that the plain ff Mr Zivli n *108 has been properly served in those proceedings. Mr Zivlin claims or would wish to claim, in an affidavi t whi ch he wou l d wi s h t o fil e, t hat he has not been properly served under Israeli law, so that that issue is s ll al ive. But once he wa s ser ved (and presumably it would only take a ma er of me) ther e i s no disput e t hat the I srael i cour t s coul d be properly seised of the issues between these par es .

[8] I therefore look to see what the balancing factors are in the exercise of my discre on in deci di ng on the most convenient forum for the hearing of these disputes, which are mul pl e and det ai led between these par es . I am cont ent , the bur den bei ng on the def endant her e, to be gui ded by the decision in Spiliada Mari me Cor por a on v. Cansul ex Ltd1 and the principles set out in the 1997 Supreme Court Prac ce, vol ume 1. 2 There the principles read as follows:

(i) The fundamental principle applicable to both the stay of English proceedings on the ground that some other forum is the appropriate forum and also to the grant of leave to serve proceedings out of the jurisdic on, is that the cour t wi ll choose that for um in wh i ch the case can be tried more suitably for the interests of all the par es and for the end of jus ce.

At (ii) they deal with the burden of proof and then it goes on:

Moreover the defendant is required to show not merely that England is not the natural or appropriate forum for the trial, but that there is another available forum which is clearly or dis nctly mo r e appr opr iat e than the Engl ish for um. I n cons i der ing wh et her ther e i s anot her forum which is more appropriate the court will look for that forum with which the ac on has the most real and substan al connec on, e.g. in terms of convenience or expense, availability of witnesses, the law governing the relevant transac on, and the pl aces wh er e the par es resi de or carry on business. If the court concludes that there is no other available forum which is more

Page3

appropriate than the English court, it will normally refuse a stay …

Those principles are to be applied to the facts of this case.

[9] It follows that before we can apply those principles it is important to see what is being alleged and what is at issue. Quite clearly, as I read the evidence, these arrangements (and there were more than one) are somewhat loose and are made between businessmen rather than between carefully dra ed cont rac ng par es advi s ed by l awyer s and dr a ed in l egal f orm. In deed t here i s one contract called the “first cont ract” wh i ch wa s dr a ed by Engl i sh sol i citors whi ch probabl y f right ened both par es , wh o fel t that i t wa s be er that they shoul d mee t in I srael and do i t in a shor t ened form, as one might say, “on the back of an envelope”. Two of the agreements or arrangements were made in Israel and have been translated back in Israeli but it is clear that the proper law, in my judgment, is English law. It is the law most akin to the arrangements because the arrangements were in *109 connec on wi th the pur chase, the ma nageme nt and the financi ng of proper es here in England; and it is going to be necessary to look at the mortgage arrangements, the banking arrangement (all in England), the receipt of rents, the payment of outgoings and the calcula on of percentages. No doubt there will be accountants involved here but the documentary evidence and the oral evidence, apart from the actual issue as to the making of the arrangements and the details of the contractual arrangements are all linked here in London. The currency is in sterling and no doubt the tax laws of England will be relevant as well.

[10] There is also an allega on that the pl ai n ff or t hrough hi m hi s compan i es , have been negl i gent in the way they have been managing these proper es and that agai n is an al lega on i n negl i gence by English law. There is also an allega on that a par cul ar tenant has achi eved a protect ed t enancy under our Rent Acts or relevant statutes and that again is essen al ly a ma er of Engl i sh l aw.

[11] The disadvantage (if any) to the defendant is, in my judgment, not great. He has been in this country, apparently, recently and is clearly on the evidence someone who is familiar with this country and its ways.

[12] It follows, for those various reasons without the necessity of going through the details of every single claim and counterclaim, that the appropriate forum in my judgment is this country. The burden being on the defendants, I am certainly not sa sfied t hat they have dis char ged t hat bur den. It follows, therefore, that the applica on to stay ma de by the def endant s is di smi ssed.

[13] I then need to go on—and I have heard argument about this—to deal with the ques on of amendments. As Mr Leech realises (and let me say at once it was not his original pleading) the statement of claim as it stands is in need of radical reconsidera on and re- pl eadi ng. The br oad br ush approach is clearly insufficient to mee t the det ai l ed ma ers rai sed by Mr E manu el f or t he defendants; indeed such are the possible cri ci sms that I thi nk he has had “a field day” wi t h t he comments he has been able to make in cri ci sm of hi s pl eadi ng. It is cl ear ther ef or e, as Mr Leech realises, that he needs leave to amend and he will need some me . I wi ll hear submi ssi ons on how long but he will need some me wi thi n wh i ch to cons i der that ma er. Mr Eman uel was min ded t o ask for leave to amend his defence and counterclaim but I accept and agree with his sugges on—i t seems very sensible—that he should await that un l a er the s t atemen t of cl aim h as been amended. It may be that there will be some ques on of cos ts but that can be deal t wi th in due course.

Applica on to stay di smi ssed. *110

[1987] 1 A.C. 460; [1987] E.C.C. 168.

. At p. 86.

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Status: Posi ve or Ne ut ral Judi ci al Tr eatme nt

*265 Cgu Interna onal Ins ur ance pl c v Szabo & Or s.

Queen's Bench Division (Commercial Court)

6 November 2001

[2002] C.L.C. 265

Toulson J.

Judgment delivered 6 November 2001

Insurance—Conflict of l aws —S er vi ce out of j ur isdi c on—De f endant s cl aimed i n Ohi o on gl obal liability policy wri en i n London for i nt er na onal group of compa ni es—Da ught er of empl oyee of group company injured in car accident in Ohio—Claim on policy based on extended underinsured motorist coverage imposed by opera on of law in Oh i o—I nsur er sought decl ar a on of non- l iabi l ity on basis that defendants were not within defini on of insured under pol i cy and t hat car acc i dent was not occurrence within insuring clause—Whether insurer had good arguable case that policy was governed by English law—Whether England natural forum for determining construc on o f policy—Whether service on defendants out of jurisdic on in Oh i o shoul d be set as i de.

This was an applica on by the first, second and t hir d def endant s to s et asi de t he order giving permission to serve the proceedings on them out of the jurisdic on in Oh i o.

The claimant, ‘CGU’, issued a global liability policy for the period from 1 July 1997 to 31 December 2000. The policy was placed in London by London brokers. It provided worldwide coverage against various kinds of legal liabili es i ncur red by an i nt er na onal gr oup of companies. The policy defined the insur ed as the parent comp ani es and/or thei r subs i di ar y and associated companies. Under the public liability sec on, the defini on of i nsur ed was t o include, if the insured so requested, any employee of the insured so as to provide cover to that employee against any liability in respect of which the insured would itself have been en tled to indemnity under the policy. Clause 16 provided cover to the insured throughout the world, except the UK, in respect of all sums which the insured became legally liable to pay for bodily injury or damage to property, in excess of US$1m, arising out of the use of motor vehicles by or on behalf of the insured. One of the group companies was a US company with a division in Dayton, Ohio. The second defendant was an employee of that company and lived in Ohio. In 1999 the second defendant's daughter (the first def endant ) wa s sever el y i nj ur ed i n a road accident in Ohio. She recovered $1m from the driver's motor insurers and the US company's insurers and, ac ng thr ough her fat her , br ought a cl ai m agai ns t CGU in Oh i o for comp ensa on for her injuries, the cost of medical treatment and loss of earning capacity. Her parents and brother also claimed in those proceedings for loss of her consor um. The cl ai ms in Oh i o we r e founded upon a provision of the Ohio Revised Code and a decision of the Ohio Supreme Court whose effect wa s to imp ose uni nsur ed or under insur ed mo t or i st cover age by oper a on of law. The claimants in Ohio said that the CGU policy was covered by those provisions and that where the insured was a company the imposed coverage extended to employees whether ac ng on the company's business or otherwise and also extended to the close rela ves of s uch employees. Therefore the first def endant obt ai ned under insur ed mo t or i st cover by oper a on of law, despite the fact that her accident had nothing to do with her father's employer's business. CGU took proceedings in England for a declara on of non- liabi lity on the basi s that the CGU policy was governed by English law and not by the law of Ohio, that none of the defendants was within the defini on of ‘insured’ in t he pol i cy and t hat the first defendant ' s acci dent was not an ‘occurrence’ within the insuring clause of the policy. Aikens J gave permission to serve proceedings on the defendants in Ohio. The defendants applied to set aside the order for service out of the jurisdic on. They ar gued that the pol icy had no fixed proper l aw a nd t hat i ts proper law for the purposes of any individual claim was the law of the place where the claim

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arose, alterna vel y that the pol icy wa s sever abl e and cont ai ned separat e cont racts betwe en CGU and each insured and that the proper law of the contract between CGU and the defendants was that of Ohio.

*266

Held , refusing to set aside service out of the jurisdic on:

1 CGU had a good arguable case that its claim was made in respect of a contract which was made within the jurisdic on under CPR, r. 6.20(5)(a) , but the court would not as a ma er of discre on al low the cl ai m to pr oceed on that basi s if it appeared that the rel evant law of the contract was that of Ohio. The issue of the governing law under CPR, r. 6.20(5)(c) was therefore the determining factor.

2 There appeared to be no prac cal di s nc on between t he t est i n Ohio for determi ni ng t he proper law and the test which would be applied in England. It was desirable that the ques on of construc on of the pol icy shoul d be det ermi ned at an ear l y stage and the gener al choi ce of law rules appeared to be the same in both jurisdic ons .

3 CGU had a good arguable case that the policy was governed by English law on the basis that it was nego at ed, conc l uded and issued in Engl and. The cour t rej ected the def endant s' ar gume nt s that the proper law of the policy for the purposes of any individual claim was the law of the place where the claim arose, or that the policy contained separate contracts between CGU and each insured and that the proper law of the contract between CGU and the defendants was that of Ohio. There was nothing in the policy to suggest that ‘the insured’ was intended to have a variable meaning according to the law of the country of the person making a claim. The argument that the insuring clause and the defini on of the i nsured shoul d be t aken t o mea n differ ent thi ngs accor di ng to the count ry of the per son cl ai mi ng under it wa s incons i stent wi th the fundamental idea of a governing law and with the rule that, if the governing law had not been chosen by the par es , it shoul d be that of the count ry wi th wh i ch the cont ract wa s mo s t closely connected. Further, in rela on to sever abi lity, i t wa s pl ai n from the structur e of the policy that it was intended to provide those defined in it as the insur ed wi th a comp endi um of rights some of which might fairly be regarded as severable from others, but there was no sensible basis on which the words of the policy defini ng the insur ed coul d be sever ed so as to be interpreted by differ ent l aws and gi ven pos si bl y di fferent mea ni ngs dependi ng on whe r e t he events occurred which gave rise to a claim.

4 On the basis that CGU had a strong case for saying that the policy was governed by English law, the English court was the natural forum for determining the construc on of the pol icy. ( New Hampshire Insurance Co v Philips Electronics North America Corp [1998] CLC 1062 .)

5 Allowing the English ac on to pr oceed wi ll not invol ve any lack of comi ty towa rds the Oh i o court, for, if the English court should decide that the policy was governed by Ohio law, CGU's claim would fail; and, as to the risks of delay and duplica on of expense, the Engl ish ac on was likely to be short. There was a poten al ri sk of conflic ng outcomes i f the Engl i sh court were to determine that the policy was governed by English law and construe it on that basis, but the Ohio court determined that it was governed for relevant purposes by Ohio law. That was a valid considera on, but , havi ng reached the vi ew that CGU had a strong case sayi ng that the pol icy was governed by English law, jus ce wo ul d not be ser ved in thi s par cul ar case by stayi ng t he ac on. On bal ance it wo ul d not be jus t to set asi de or stay the ac on at this stage.

The following cases were referred to in the judgment:

Canada Trust Co v Stolzenberg (No. 2) [1998] CLC 23; [1998] 1 WLR 547 (CA ); [2001] CLC 118; [2000] 3 WLR 1376 (HL) .

Page3

EI Du Pont de Nemours & Co v Agnew [1987] 2 Ll Rep 585 .

Gries Sports Ent Inc v Modell (1984) 15 Ohio St 3d 284 .

Messier-Dowty Ltd v Sabena SA [2000] CLC 889; [2000] 1 WLR 2040 .

New Hampshire Insurance Co v Philips Electronics North America Corp [1998] CLC 1062 .

Ohayon v Safeco Insurance Co of Illinois (2001) 91 Ohio St 3d 474 . *267

Sco -Pont zer v Li ber ty Mu t ual Fi re Insur ance Co (1999) 85 Oh i o St 3d 660; 710 NE 2d 1116 .

Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 .

Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869 .

Representa on

Alexander Layton QC (instructed by Kennedys ) for the claimant.

Huw Davies (instructed by Jones Day Reavis & Pogue ) for the first, s econd and t hi rd defendants.

Richard Waller (instructed by DJ Freeman ) for the fourth and fi h def endant s .

JUDGMENT

Toulson J: Introduc on

1 On 25 May 2001 Aikens J gave permission for the claimant, CGU, to serve proceedings out of the jurisdic on on As hl ei gh S zabo, her f at her and mo t her ( the first, second and t hir d defendants) and Reed Elsevier Inc (the fi h def endant ) . The Szabos (as I wil l refer to t he first, second and third defendants) live in Carlisle, Ohio, and are claimants in an ac on agai ns t CGU in Ohio.

2 Reed Interna onal pl c ( the f our th def endant ) i s an Engl ish comp any and i s one of two companies at the head of a mul -na onal publ i shi ng group. The other l eadi ng compa ny i n t he group is a Dutch company called Elsevier NV. The fi h def endant is a membe r of the group. It i s a Massachuse s c omp any but i t has a d i vi si on, k nown a s L exi s-Ne xi s, wh i ch has i ts headquarters in Dayton, Ohio. The Reed defendants (as I will refer the fourth and fi h defendants) are not par es to the Oh i o ac on.

3 When the present hearing began there were two applica ons ; one by the Szabos to set asi de the order giving permission to serve the proceedings on them out of the jurisdic on, and the other by the Reed defendants to strike out the proceedings against them. During the course of the hearing the Reed defendants' applica on wa s comp r omi sed on the basi s that the ac on against them should be stayed on various cross-undertakings.

4 Arguments over jurisdic on are not uncommo n, but the facts gi vi ng ri se to the jur i sdi c onal

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dispute between the Szabos and CGU are rather unusual.

The policy

5 At the heart of the dispute is a policy, called a global liability policy, issued by CGU for the period from 1 July 1997 to 31 December 2000. The evidence is that it was placed in London by a firm of London br oker s.

6 The schedule to the policy defines the insur ed as ‘Reed Int er na onal PLC, Elsevi er NV and/or subsidiary and associated companies’. Inves ga ons by the Reed def endant s suggest that the brokers, who acted as the insured's agents in arranging the policy, received their instruc ons from Reed Elsevier (UK) Ltd, which (as its name suggests) is a UK company and member of the Reed group. Be that as it may, on the material before the court it appears that the policy was arranged by an English company (either the fourth defendant or Reed Elsevier (UK) Ltd) through London brokers on behalf of all the companies in the group, including the fi h def endant .

7 As its tle suggests, the pol icy pr ovi des wo r ldwi de cover age agai ns t var ious ki nds of l egal liabili es i ncur red by the insur ed towa rds ot her s. Mo r e speci fical l y, it provi des cover agai nst employer's liability, public liability, products liability, professional indemnity and libel claims, all as set out in the policy.

8 Under s. 1 of the policy, which covers employer's, public and products liability, CGU agreed to indemnify the insured against ‘all sums which the Insured shall become legally liable *268 to pay for damages … in respect of any Occurrence to which this Policy applies as stated in the Specifica on and i n connec on wi th the Busi ness ’ , plus l egal costs and expenses .

9 The ‘business’ is defined as cover ing al l ac vi es under t aken by t he i nsur ed at any me.

10 For a comprehensive defini on of any ‘ occurr ence’ to whi ch t he pol i cy appl i es, it i s necessary to go to the specifica on and a numbe r of suppl emen t al cl auses. Rel evant l y f or pr esent purposes, cl. 16 provides cover to the insured throughout the world, except the UK, in respect of all sums which the insured shall become legally liable to pay for bodily injury or damage to property, in excess of US$1m, arising out of the use of motor vehicles by or on behalf of the insured.

11 By reason of a further clause headed ‘Reverse DIC/DIL’ (differ ence i n cover /di fference i n limits), where the policy provides cover in excess of that provided by a local policy (meaning any policy issued to an insured registered and/or domiciled outside the UK, the Channel Islands or Isle of Man), and the cover provided to the insured by the underlying policy is interpreted as broader than the cover provided under the CGU, the la er wi ll respond as if the int er pr et a on of cover applicable to the underlying policy applied also to the CGU policy.

12 Under the public liability sec on, the defini on of i nsur ed was t o include, i f the i nsur ed specified in the schedul e so requested, any emp l oyee of the insur ed so as to pr ovi de cover to that employee against any liability in respect of which the insured would itself have been en tled to indemn i ty under the pol icy. In ot her wo r ds , the insur ed coul d opt to see that , in so far as it might incur vicarious liability for the conduct of an employee, the employee would be en tled to simi lar cover .

13 Mr Ernest Szabo, the second defendant, was an employee of the fi h def endant , but no request was ever made by the Reed defendants that he should become an addi onal insur ed under the policy.

The accident and its a erma t h

14 On 28 May 1999 Ashleigh Szabo suffer ed ver y severe inj ur ies in a road acci dent . At the me of the accident she was a passenger in a car being driven by her cousin, Celeste Kline, in her

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home town of Carlisle. The accident was caused by Ms Kline's negligence.

15 Ms Szabo recovered $100,000 from Ms Kline's motor insurers and $900,000 from another insurance company, Zurich, which had issued some form of policy to the fi h def endant .

16 Ac ng thr ough her fat her , she has br ought a cl ai m agai ns t CGU in Oh i o for comp ensa on f or her injuries, the cost of medical treatment and loss of earning capacity. Claims have also been made against CGU in the same proceedings by her parents and brother, Brenton, for loss of her consor um.

17 The Ohio ac on wa s begun on 18 Ma y 2001, i.e. a we ek bef or e Ai kens J gave permi ssi on for service of the present proceedings out of the jurisdic on. CGU had hoped to i ssue i ts own proceedings in England before the Ohio ac on wa s begun, but it los t that race. (Br ent on Szabo, who is a claimant in the Ohio ac on, is not a def endant in the Engl ish ac on, because CGU had not foreseen his loss of consor um cl ai m. If the Engl ish ac on proceeds , CGU wil l seek to j oin him as an addi onal def endant .)

The Ohio ac on

18 The nature of the Ohio claims is explained in three documents; a le er dat ed 1 Ma y 2001 from the Szabos' lawyer to CGU's lawyer in Ohio, the formal complaint and a memorandum of law filed by the Szabos ' Oh i o lawy er in oppos i on t o an appl i ca on by CGU t o st ay t he Ohio proceedings. That applica on has yet to be det ermi ned.

19 The claims made in Ohio are founded upon a provision of the Ohio Revised Code (‘ORC’) and a decision of the Ohio Supreme Court in the case of Sco -Pont zer v Li ber ty Mu t ual Fi re Insurance Co (1999) 85 Ohio St 3d 660; 710 NE 2d 1116 . The case advanced can be summarised as follows. (1) ORC 3937.18 provides that no insurance policy covering risks of liability for death or personal injury suffer ed by a thi rd par ty ar isi ng f rom the use of a mo t or vehi cl e shal l be delivered or issued for delivery in Ohio, with respect to any motor vehicle registered or principally garaged in Ohio, unless the persons insured under the policy against such liability are offer ed by the insur er two addi onal forms of coverage, uni nsured mot ori st coverage and under-insured motorist coverage. The la er i s to be up to the same l imi t as the l iabi lity coverage affor ded by the pol icy, and i s to pr ovi de pr ot ec on f or the i nsured agai nst bodi l y injury, illness or death, for which a third party is liable, to the extent that such limit exceeds the insurance cover available to the third party.

(2) ORC 3937.18 has been given an expansive meaning such that it applies to the policy under considera on, not wi ths tandi ng that it wa s issued in London and that cl . 16 (pr ovi di ng excess motor liability cover) was not specifical ly ai me d at Lexi s-Ne xi s (or ri sks in Oh i o) , but wa s a small part of a global policy.

(3)If an insurer violates ORC 3937.18, by failing to offer uni nsur ed or under -insur ed mo t or i st coverage as required, the coverage not offer ed is creat ed by oper a on of law.

(4) Where the insured is a company, the Ohio courts will construe the policy so as to include the company's employees within the defini on of the i nsured, if the l anguage of the pol i cy so permits, in order to give to the employees the benefit of the ri ght to be offered uni nsured and under-insured motorist coverage.

(5) Where such coverage is not offer ed, the imp osed cover age wi ll appl y to the emp l oyee whether ac ng on the comp any' s bus i ness or ot herwi se.

(6) The same principles should by natural extension apply to close rela ves of s uch employees, so that Mr Szabo's wife, daughter and son all acquired under-insured motorist coverage by opera on of law.

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(7) The fact that the language of the public liability part of the policy required there to have been an occurrence in connec on wi th the bus i ness in or der for any sum to become payabl e under the policy, and that Miss Szabo's tragic accident had nothing to do with her father's employer's business, should not prevent Ohio law from opera ng to conf er ri ght s on her against CGU.

(8) Because the provisions of ORC 3937.18 are mandatory under Ohio law, the Ohio court must treat the policy as governed by Ohio law for the purposes of the claim by the Szabos, whatever law might apply to the policy for any other purposes. Thus the memorandum of law to which I have referred asserts that: ‘Applying any law could not be a valid applica on if incons i stent wi th the uni nsur ed mo t or i st laws in the Stat e of Ohio,’

and that:

‘The choice of law analysis relied upon by the defendant in sugges ng t hat an interna onal cont ract wa s nego ated i n Engl and cannot overshadow t he f act that Ohi o law mandates as a ma er of law that ther e is under insur ed mo t or i st cover age. ’

20 Mr Alexander Layton QC on behalf of CGU has referred me to a judgment of the Supreme Court of Ohio in Ohayon v Safeco Insurance Co of Illinois (2001) 91 Ohio St 3d 474 , in which Cook J, giving the judgment of the majority, stated that:

‘RC 3937.18, unlike some Ohio statutes that apply to contractual rela onshi ps , imp oses no choice of law on the par es if a di sput e ar i ses concer ni ng the exi stence or extent of coverage.’

21 The court held that a claim to coverage by virtue of ORC 393 7.18 is for the purposes of Ohio choice of law principles an ac on soundi ng i n cont ract; and t hat , i n t he absence of an *270 express choice of law clause, the law governing contractual rights and du es is the law of the state which ‘bears the most significant rel a onshi p t o t he cont r act ’ , as had been previ ous l y held by the Supreme Court of Ohio in Gries Sports Ent Inc v Modell (1984) 15 Ohio St 3d 284 at p. 287. In applying that test, the court in Ohayon , following its decision in Gries , adopted s. 188 of the Restatement (2d) of Conflict of Laws (1971) , wh i ch pr ovi des that the factor s to be taken into account include the place of contrac ng, the pl ace of nego a on of t he contr act, the pl ace of performance, the loca on of the subj ect ma er of the cont r act , the domi c il e, resi dence, na onal ity, pl ace of incor por a on and place of bus i nes s of the par es.

22 Therefore, as counsel agreed, there appears to be no prac cal di s nc on between t he t est i n Ohio for determining the proper law of a contract which does not contain a choice of law clause and the test which would be applied in England, whether under art. 4 of the Rome Conven on (‘the contract shall be governed by the law of the country with which it is most closely connected’) or otherwise. The factors enumerated in s. 188 of the Restatement are factors which would be taken into account in England. (It does not appear that Ohio law recognises the concept of an implied choice of law, which art. 3 of the Rome Conven on recogni ses , but that would be unlikely to make any prac cal di fference i n t he present case, si nce t he f act ors arguably relevant to an implied choice of law would be equally relevant in the context of the test applicable in the absence of any choice of law.)

The English ac on

23 The par cul ar s of cl ai m, a er reci ng t he background f acts, set out t he basi s of CGU' s cl ai m

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and the relief sought as follows:

‘22. The CGU policy is governed by English law. It is in any event not governed by the law of Ohio.

23. None of Ms Szabo, Mr Szabo, Mrs Szabo and Ms Kline was or is within the defini on of “Insured” i n t he CGU pol i cy.

26. The accident was not an Occurrence to which the CGU policy applied within the insuring clause …

27. None of the provisions of the CGU policy [or of any applicable law] give rise to a right in the first to thi rd def endant s or any of them, or (rel evant ly) in the four th and fi h def endant s or eit her of them.

And the claimant claims against the defendants and each of them: (1) A declara on that none of the first, second and t hir d def endant s i s an i nsured under the CGU's Global Liability Policy No. UQ154P 15906; and

(2) A declara on that CGU is not liabl e [wh et her ] pur suant to its Gl obal Li abi lity Pol icy No . UQ154P15906 [or in any other way] to the defendants or any of them, whether

(a) To indemnify them in respect of liability for Ms Szabo's injuries or for Mr Szabo's and/or Mrs Szabo's loss of consor um, or for the acci dent , or

(b) To make any other payment by way of damages or compensa on for , or ot herwi se in respect of, Ms Szabo's injuries or Mr Szabo's and/or Mrs Szabo's loss of consor um, or the accident,

[(c) Otherwise (save irrelevantly, the fourth and fi h def endant s ) at all .]’

24 The words in square brackets were in the pleading as it was served. They appeared to open up the possibility of the English court being asked by CGU to rule on the validity of the Szabos' claim under Ohio law. Moreover, if the English ac on we r e to pr oceed wi th the par cul ars of claim in their original form, it would be inevitable that the defendants would replicate their case on Ohio law by way of defence and counterclaim. That could not be right. It is clear that the issues of Ohio law raised by the Szabos in the Ohio proceedings are controversial. CGU's Ohio lawyers consider that the claims go well beyond the principles *271 properly deducible from Sco -Pont zer , not l east by seeki ng to extend the ri ght s afforded under ORC 3937. 18 t o a rela on of an emp l oyee of an insur ed comp any goi ng about hi s or her pr i vat e affair s. Under l ying the controversy about the true ambit of ORC 3937.18 there may be ques ons of Oh i o publ ic policy.

25 It would be manifestly inappropriate, and profoundly contrary to ordinary principles of comity, if an English court were take to it on itself to adjudicate upon such a ma er , a for ori when the ma er rel at es to pr oceedi ngs al ready pendi ng bef or e a cour t in Oh i o.

26 A er I expr essed these concer ns to Mr Layton dur ing the ar gume nt , he sai d that CGU wo ul d delete the words in square brackets. The revised pleading limits the scope of the relief which it seeks from the English court to declara ons , i n summa ry, that (a) the pol icy i s gover ned by English law and (b) CGU has no liability under it to the Szabos (i.e. by applying English law). Thus if CGU failed to establish that English law was the proper law of the policy, its claim would fail.

The jurisdic on of the Engl ish cour t

27 CGU contends that its claim falls within the jurisdic on of t he Engl ish cour t under r. 6.20(5)(a) and/or (c) of the Civil Procedure Rules , i.e. that the claim is made in respect of a contract which was made within the jurisdic on and/ or is gover ned by Engl ish law. CGU al so

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contends that the case falls within CPR, r. 6.20(3) on the ground that there is between CGU and the fourth defendant (a company incorporated and carrying on business in England) a real issue which it is reasonable for the court to try, and that the Szabos are necessary or proper par es to that claim.

28 CGU has to establish that the claim falls within one or more of those rules, applying the standard of a ‘good arguable case’, as explained and applied in a well known line of authori es including Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869 , Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 and Canada Trust Co v Stolzenberg (No 2) [1998] CLC 23; [1998] 1 WLR 547 (CA ); [2001] CLC 118; [2000] 3 WLR 1376 (HL) . In the last of those cases Waller LJ said ( [1998] CLC 23 at p. 28; [1998] 1 WLR at p. 555):

‘Although there is power … to order a preliminary issue on jurisdic on, as Staught on LJ pointed out in A ock Ceme nt Co Ltd v Roma ni an Bank for For ei gn Tr ade [1989] 1 WL R 1147 at p. 1156D, it is seldom that the power is used because trials on jurisdic on issues are to be strongly discouraged. It is also important to remember that the phrase which reflects the concept “good ar guabl e case” and the ot her phr ases in Kor ner “a strong argument” and “a case for strong argument” were originally employed in rela on to poi nt s wh i ch rel at ed to jur i sdi c on but whi ch mig ht also be argued about at the trial. The court in such cases must be concerned not even to appear to express some concluded view as to the merits, e.g. as to whether the contract existed or not. It is also right to remember that the “good arguable case” test, although obviously applicable to the ex parte stage becomes of most significance at the int er par tes stage where two arguments are being weighed in the interlocutory context which, as I have stressed, must not become a “trial”. “Good arguable case” reflects in that cont ext that one side has a much be er ar gume nt on the ma t er ial avai labl e. It is the concept wh i ch the phrase reflects on wh i ch i t i s i mp or tant to concent rat e, i .e. of the cour t bei ng sa sfied or as sa sfied as i t can be havi ng regard t o t he l i mi ta ons whi ch an interlocutory process imposes that factors exist which allow the court to take jurisdic on. ’

29 If CGU establishes to this standard that the case falls within this court's jurisdic on on one or more of the grounds advanced, it then becomes a ma er for the cour t' s di scre on whe t her the ac on begun by CGU in thi s count ry shoul d be al lowe d to pr oceed.

30 I am sa sfied on t he evi dence t hat CGU has a good arguabl e case t hat i ts claim i s mad e i n respect of a contract, i.e. the relevant policy, which was made within the jurisdic on.

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31 I am not persuaded that CGU has a good arguable case under CPR, r. 6.20(3) , i.e. that there is a real issue between CGU and the fourth defendant which it is reasonable for the court to try and that the Szabos are necessary or proper par es to that cl ai m. The real issue is betwe en CGU and the Szabos, and even if one were to make an assump on for these pur poses that the four th defendant is a necessary or proper party to the claim (which I doubt, although I have not heard full argument on the point), to say that in these circumstances the case falls within CPR, r. 6.20(3) would be to let the tail wag the dog.

32 There remains the most important ground on which CGU contends that its claim comes within this court's jurisdic on, i .e. that the pol icy i s gover ned by Engl ish l aw. I t i s the mo s t important ground because it would obviously not be sensible, as a ma er of di scre on, to all ow this ac on to pr oceed fur ther at thi s stage if it appear ed to the cour t that the rel evant law of the contract was that of Ohio. The arguments therefore rightly concentrated upon the issue of the governing law.

The governing law

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33 Mr Layton submi ed that the pol icy i s gover ned by Engl ish l aw because Engl and i s the country most closely connected with it. The factors which he says point towards English law are the following: (1) The policy was nego at ed, concl uded and issued in Engl and.

(2) CGU has its headquarters and registered office i n Engl and, and t he schedul e t o t he pol i cy states the address of the insured as 25 Victoria Street, London.

(3) The premium was in sterling.

(4) Various terms of the policy, e.g. the claims condi ons , cont ai ned pr ovi si ons poi n ng towards the policy being governed by English law.

34 Looking at the ma er nega vel y, Mr Layt on submi ed t hat t here were no f actors poin ng towards any other system of law being the proper law of the policy.

35 Mr Davies, on behalf of the Szabos, submi ed that the pol icy wa s not gover ned by a si ngl e proper law, and that the law governing the proper construc on of the cont ract for the pur poses of the Szabos' claim is Ohio law. His argument in favour of the applicability of Ohio law was put on two alterna ve bases . Hi s first submi s si on was that the pol i cy had, and has , no fixed pr oper law, but that its proper law for the purposes of any individual claim was the law of the place where the claim arose. His alterna ve submi ssi on wa s that the pol icy is sever abl e, ther e bei ng separate contracts between CGU and each insured, and that, for the purposes of determining the existence of a contract between CGU and the Szabos, the proper law is that of Ohio.

36 As to the first submi ssi on, the doctrine of par ty aut onomy , wh i ch under l ies bot h tradi onal English conflict of law rul es in rel a on t o cont r act and art . 3 of the Rome Conven on , permi ts par es to choose that di fferent laws shoul d appl y to di fferent part s of t heir contr act. The concept that a contract may be concluded without having any governing law un l some lat er event occurs to determining it is more difficul t . In EI Du Pont de Nemours & Co v Agnew [1987] 2 Ll Rep 585 at p. 592, Bingham LJ said that:

‘this is not a concept to which an English Court could give effect, si nce the ri ght s and obliga ons of cont rac ng par es crystal l i se when a contr act i s made ( subj ect to consensual varia on ther ea er) , and cont r act s can onl y crystal l ise wit h r eference t o an exis ng pr oper l aw si nce they cannot exi st i n a l egal vacuum: Amin Rashid Shipping Corp v Kuwait Insurance Co [1984] AC 50 , 65; Armar Shipping Co Ltd v Caisse Algerienne d'Assurance et de Reassurance [1980] 2 Ll Rep 450 . It may, I suppose, be theore cal ly pos si bl e for a pr oper l aw to be ret rospec vel y var i ed on exerci se of a contractual op on, but that does not di spense wi th the need for a pr e- exi s ng proper law.’

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37 There is good ground for arguing that under the Rome Conven on an expr ess choi ce by the par es of al ter na ve systems of law i n different c i rcumst a nces wi l l be effec ve: see Dicey & Morris on the Conflict of Laws (13th edn, 2000) para. 32–085. However, that does not mean that un l an event occur red caus i ng a par cul ar l aw t o govern t he cont r act , ther e coul d exi st a contract without any law governing it. That would be an impossible concept for the reasons given by Bingham LJ. It would not be an impossible concept to have a contract governed by a par cul ar law, ther ea er retr ospec vely vari ed, as Bi ngham LJ recogni sed. I t woul d al so not be impossible to envisage an inchoate agreement, which only acquired the force of law upon some act or event upon which the par es agreed that a par cul ar system o f law s houl d appl y to i t. However, all that is far removed from this case.

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38 Nothing could be more fundamental to a contract of insurance than defini ng the insur ed. There is nothing in the policy to suggest that the insured was intended to have a variable meaning according to the law of the country of the person claiming to be an insured. In these circumstances, the argument that the insuring clause of the policy, and the defini on of the insured, are to be governed by a harlequin proper law, so that the policy should be taken to mean differ ent thi ngs accor di ng to the count ry of the per son cl ai mi ng under it, is incons i stent with the fundamental idea of a governing law and with the rule that, if the governing law has not been chosen by the par es , it shoul d be that of the count ry wi th wh i ch the cont ract is mo s t closely connected.

39 The alterna ve ar gume nt , based on sever abi lity, pr esent s simi lar di fficul es. Wi th a global policy which provides a wide variety of forms of cover, I would accept that certain provisions of the policy may properly be regarded as severable from other provisions for certain purposes. For example, a breach of a policy condi on pr ecl udi ng the insur ed from ma ki ng recover y from the insurer under a par cul ar par t of the pol icy mi ght not affect the i nsured' s right s under other parts of the policy. However, it is a very differ ent ma er to suggest that the defini on of the insured in the policy can be dissected and giving differ ent me ani ngs by di fferent systems of law. It seems to me plain from the structure of the policy that it is intended, within a uniform contractual framework, to provide to those defined in it as the insur ed a comp endi um of ri ght s, some of which may fairly be regarded as severable from others, so that the loss of one right does not necessarily affect anot her . I can see no logi cal or comme r ci al ly sens i bl e basi s on wh i ch the words of the policy defini ng the insur ed can be ‘sever ed’ so as to be int er pr et ed by di fferent laws and given possibly differ ent me ani ngs, dependi ng on the par t of the gl obe in wh i ch event s may occur giving rise to a claim.

40 On the ques on of the rel evant pr oper l aw I concl ude that CGU has mu ch the be er argument.

Discre on

41 The burden is on CGU to establish that England is the appropriate forum for this ac on.

42 Mr Layton submi ed that , on the pr emi se that the cons truc on of the pol i cy i s governed by English law, England is the natural and appropriate forum. He further submi ed that , i f the policy is governed by English law, it is plain as a ma er of cons truc on t hat the Szabos can have no claim under it in respect of Ms Szabo's unfortunate accident, but that in any event the point is a short one, which could be decided by this court swi ly and inexpens i vel y. For those reasons he argued that it was just that the ac on shoul d be al lowe d to con nue.

43 Mr Davies submi ed that thi s ac on by the i nsurers for pur ely nega ve relief was a bl at ant a emp t to pr e- emp t the pr oceedi ngs begun by the Szabos in Oh i o; that such for um shoppi ng was to be discouraged; and that it was par cul ar l y wr ong that the Szabos shoul d be put to the expense and inconvenience of having to li gat e on two front s.

44 I was referred to two recent cases in which the Court of Appeal has considered the ques ons of forum non conveniens in the context of claims for nega ve rel ief .

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45 In New Hampshire Insurance Co v Philips Electronics North America Corp [1998] CLC 1062 , insurers brought proceedings in this court claiming declara ons that they we r e not l iabl e to indemnify a company, insured under three policies governed by English law, in respect of losses alleged to have been suffer ed by t he comp any as a r esul t of f raudul ent acts of a seni or employee in Illinois. The company had submi ed a det ai led pr oof of los s to the insur er s, wh o made no admissions in rela on to the facts al leged but cont ended that , if those facts we r e true, most of the losses fell outside the scope of the cover. The insurers sought to have the issues of

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construc on deci ded by t he Engl ish cour t. Ri x J at first inst ance ext ract ed t he f oll owi n g principles from previous authori es , wh i ch the Cour t of Appeal appr oved, at p. 1066:

‘1. There is power to grant a nega ve decl ar a on i n an appr opr i ate case, the fundamental test being whether it would be useful.

2. However, careful scru ny wi ll be exer ci sed not onl y to test the u l ity, or on t he other hand the fu lity, of seeki ng to det ermi ne the cl ai m by me ans of a nega ve declara on i n Engl and, but al so to ensur e that i nappr opr iat e for um shoppi ng i s not allowed, let alone encouraged.

3. A nega ve decl ar a on wil l not be appr opr i ate whe r e i t i s premat ure or hypot he cal, viz. where no claim has been made or threatened against the plain ffs.

4. The existence of imminent or a for or i cur rent for ei gn pr oceedi ngs is al wa ys a hi ghl y relevant considera on, not onl y for the pur pose of tes ng t he u l i ty of t he Engl i sh claim, but also having in mind the need to avoid the twin dangers of forum shopping and of the vices of concurrent proceedings.’

46 Phillips LJ observed, at p. 1066, that it was necessary to dis ngui sh betwe en two separat e ma er s; the nat ur e of the rel ief and the for um in wh i ch the rel ief shoul d be sought . Wh er e leave to serve out of the jurisdic on a wr i t cl ai mi ng a nega ve decl ara on was chal l enged, t he court would have to consider both the ques on wh et her ther e wa s jus fica on for seeki ng that relief and the separate ques on wh et her Engl and wa s the appr opr iat e for um in wh i ch to seek it. He emphasised that in that situa on the cour t mu s t be par cul arl y careful to ensure t hat the nega ve decl ar a on was sought for ‘a val i d and val uabl e pur pose’ and not in ‘ an i l legi mate a emp t to pr e- emp t the jur i sdi c on’ in whi ch t he disput e was to be r esol ved.

47 That case, like the present case, contained the unusual feature that the relief sought by the insurers was confined to decl ar a ons as to t he proper cons t ruc on of t he poli cy. On t his aspect Phillips LJ said at p. 1070:

‘In most of the cases concerning nega ve decl ar a ons , the decl ara ons sought have related to facts which were agreed or which would be determined by the court. In such circumstances the decision of the court is likely to resolve the dispute between the par es one wa y or the ot her . He r e the decl ar a ons sought seek the r esol u on of preliminary points of construc on on the basi s of assume d facts. The Engl ish hear ing may obviate the need for a trial of the facts but it may not. And whereas England is the appropriate forum for determining the points of construc on, Illinoi s is the appr opr iat e jurisdic on for the tri al of the facts. I f facts and l aw we r e to be tri ed i n the same proceedings, the la er c ons i der a on wou l d domi n at e and I l linoi s wou l d be t he appropriate forum. It is normally undesirable that one jurisdic on shoul d be sei zed of issues of law in a dispute while another is seized of issues of fact, let alone that the same issues should be tried in differ ent jur i sdi c ons … S houl d t hen t he Engl i sh cour t in such a case decline to entertain the applica on for the nega ve decl ara on on t he ground that it should be sought, if at all, in the jurisdic on that i s appr opr iat e for determina on of the facts? I do not bel ieve that it is pos si bl e to answe r thi s ques on as a ma er of pr inc i pl e. I t mu s t depend on the facts of the par cul ar case and, in par cul ar , on the comp l exi ty of the issues of cons truc on and t he l ikel i hood t hat they will resolve the dispute. There is an obvious anomaly in requiring a plain ff to r esol ve a point of law designed to obviate *275 an inquiry into fact, not in the country whose law is applicable, but in the country where the issues of fact should be resolved if the plain ff fail s on t he l aw. ’

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48 In that case the Court of Appeal upheld Rix J's exercise of his discre on to al low the ac on t o con nue.

49 In Messier-Dowty Ltd v Sabena SA [2000] CLC 889 at p. 897; [2000] 1 WLR 2040 at pp. 2050–2051, Lord Woolf MR described the approach of the English courts to the use of nega ve declara ons as pr agma c, and s ai d:

‘The deployment of nega ve decl ar a ons shoul d be scru nised and t heir use rejected where it would serve no useful purpose. However where a nega ve decl ar a on wou l d help to ensure that the aims of jus ce are achi eved the cour ts shoul d not be rel uctant to grant such declara ons . They can and do assi st in achi evi ng jus ce. ’

He added:

‘While nega ve decl ar a ons can per f orm a pos i ve role, t hey are an unusual r emedy in so far as they reverse the more usual roles of the par es . The nat ur al def endant becomes the claimant and vice versa. This can result in procedural complica ons and possible injus ce t o an unwi lling “ def endant ”. Thi s i n i tsel f j us fies cau on in extending the circumstances where nega ve decl ar a ons are grant ed, but , subj ect to the exercise of appropriate circumspec on, ther e shoul d be no rel uctance to thei r being granted when it is useful to do so.’

50 A significant feat ur e of the pr esent case is that the cl ai ms in Oh i o and in thi s cour t pr oceed on mutually exclusive bases. Szabo's claim against CGU in Ohio is premised upon the claim being governed by Ohio law. The founda on of CGU' s cl ai m in thi s cour t is that the pol icy is gover ned by English law. The common issue is that each court will have to make a choice of law decision, but, as stated above, the general choice of law rules applicable to contracts appear to be the same in both jurisdic ons .

51 In these circumstances, would the ends of jus ce be best ser ved by stayi ng thi s ac on at this stage or allowing it to proceed?

52 It seems to me plainly desirable that the ques on of the cons truc on of the pol i cy shoul d be determined at an early stage. Having reached the view that CGU has a strong case for saying that the construc on of the pol icy i s gover ned by Engl ish l aw, I wo ul d ther ef or e regard the English court as the natural forum for determining its construc on. I n sayi ng t hat , I am conscious that these proceedings were started a er the Oh i o pr oceedi ngs and that ther e is an obvious undesirability in having concurrent li ga on i n t wo count r ies. Howev er , al l owi n g t he English ac on to pr oceed wi ll not invol ve any lack of comi ty towa rds the Oh i o cour t, for , if the English court should decide that the policy is governed by Ohio law, CGU's claim will fail; and, as to the risks of delay and duplica on of expense, the Engl ish ac on i s l i kel y to be shor t . Mr Davies has not indicated what his clients' posi on wo ul d be as to any ri ght s under the pol icy, if it is governed by English law, preferring (as he was en tled) to reser ve thei r pos i on on t hat subject. In reality, it is difficul t to s ee wha t argumen t they wou l d have, but i t wi l l be a shor t ques on i n any event . I n t heor y, t he Szabos mi ght s eek t o count er cl ai m i n t he Engl ish proceedings not only for a declara on that the pol icy is gover ned for the pur poses of thei r cl ai m by Ohio law but also as to their rights under Ohio law, but this would be most unlikely, since they have already brought suit in Ohio for the determina on of thei r ri ght s under Oh i o law, and in any event I consider that the Ohio court would plainly be the appropriate forum for determining their rights under Ohio law, if applicable.

53 I recognise that there is a poten al ri sk of conflic ng outcomes i f the Engl i sh court were to determine that the policy is governed by English law and construe it on that basis, but the Ohio court determined that it was governed for relevant purposes by Ohio law. That is a valid

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considera on, but , havi ng reached the vi ew that CGU has a strong case sayi ng that the pol icy is *276 governed by English law, I do not think that jus ce wo ul d be ser ved in thi s par cul ar case by staying the ac on in the pr esent ci rcums tances on account of the pot en al risk to whi ch I have referred. Indeed, it seems to me that the Ohio court, which is also seized of a jurisdic onal argument, might welcome a ruling by this court on the proper law of the policy and its proper interpreta on (if thi s cour t judges it to be gover ned by Engl ish law) ; but I hasten to add that , in saying that, I would not wish to give the appearance of seeking to influence the Oh i o cour t. I am conscious that the Ohio court will have the opportunity of indica ng how i t wo ul d wi sh the li ga on t o proceed whe n i t rules on t he j uri sdi c onal dispute befor e i t . In determi ni ng t he future progress and me t abl e of thi s ac on, obvi ous l y this cour t wil l give great respect to any views which the Ohio court may express on that subject. In the mean me , I do not cons i der on balance that it would be just to set aside or stay the present ac on at thi s stage.

(Order accordingly) *277

© 2011 Sweet & Maxwell

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*515 Limit (No. 3) Ltd & Ors v PDV Insurance Co.

Court of Appeal (Civil Division)

11 April 2005

[2005] EWCA Civ 383

[2005] 1 C.L.C. 515

Auld , Tuckey and Clarke L JJ

Judgment delivered 11 April 2005

Insurance—Reinsurance—Conflict of laws —J ur isdi c on clause—Fo rum n on conveni ens—Oi l pol l u on caused by oil leaks in Venezuelan pipelines—Risks covered by Venezuelan insurance and reinsured in London—English reinsurers issued proceedings for declara ons of non- liabi lity—P r oceedi ngs not yet issued in Venezuela—Whether dispute clause a ached to ret rocessi on conf er ring j ur isdi c on on English court applied only to claims emana ng f rom No r th Ame r i can j ur isdi c ons—Wh e t her Venezuela convenient forum—Judge to consider not just whether issues likely to arise at trial but consequences if they were to arise.

This was an appeal from the decision of Moore-Bick J ( [2003] EWHC 2632 (Comm) that the appropriate forum for proceedings to determine reinsurers' liability under a retrocession slip policy was Venezuela.

In 1998 and 2001 there were leaks of crude oil from pipelines owned and operated by the Venezuelan na onal oi l c omp any, PDV, i n Venezuel a. Each l eak c aused pol lu on of the surrounding land and waterways. PDV incurred substan al l iabi li es for cl eani ng up t he pollu on and comp ensa ng l ocal landowne r s . PDV was i nsured by a Venezuel an i nsurance company, Mercan l, wh i ch had rei nsur ed wi th PDVI , a cap ve i nsurance compa ny of PDV. PDV had not made any claim on the insurance. PDVI had retroceded the risk by two slip policies placed in the London market with the appellants, Limit.

Limit was concerned that PDVI might issue proceedings against it in Venezuela and to forestall such proceedings it issued English proceedings for declara ons of non- liabi lity on grounds that (i) PDV was in breach of the no fica on pr ovi s i on of t he or iginal poli cy; and/or ( i i) the l oss was excluded under the pollu on excl us i ons of t he or i gi nal pol icy and t he r ei nsur ance and retrocession policies; and/or (iii) in any event PDVI was not obliged to make good losses which PDV was not obliged to pay under the terms of contracts with landowners or other third par es the rights of such par es havi ng been wa i ved; and/or (iv) in any event the dat e for taki ng the exchange rate between Venezuelan Bolivars and US Dollars was the date of any actual payment by Mercan l to PDV.

Moore-Bick J set aside permission to serve the claim form out of the jurisdic on, hol di ng that a ‘dispute clause’, in effect an Engl ish law and jur i sdi c on c lause, a ached t o the 1997 s l ip and incorporated by reference into the 1999 slip, applied *516 only to North American claims, not the cover as a whole, and, in par cul ar not to any pot en al disput es from t he oi l leakages i n Venezuela, and that, having regard to the closeness of their connec on to Venezuel a, that country was the forum conveniens. Limit appealed arguing that the incidents were covered by the dispute clause in the retrocession slip policy so as to require Limit's claim for declaratory relief to be tried in the English courts, and that England was the forum conveniens.

Held , dismissing the appeal:

1 The judge was right to construe both the 1997 and 1999 retrocession slips so as to confine the applica on of the di sput e cl ause, so far as i t we nt , to US A and Canadi an cl ai ms , so that the issues raised by these proceedings and their determina on fel l to be det ermi ned in accor dance with the principles of forum conveniens.

2 The weight to be accorded to the fact that a dispute arose out of a contract of reinsurance or

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retrocession placed on the London market and governed by English law depended upon the nature of the issues arising for determina on, so that a di sput e rai si ng issues of Engl ish law as to placement of the risk in London, misrepresenta on and non- di scl osur e mi ght be mo r e appropriately tried in England, whereas, as here, a dispute turning largely on factual ma er s that had occurred overseas might more appropriately be tried in the overseas jurisdic on.

3 The judge's task in considering forum conveniens was not to take each poten al i ssue and accept or reject it as relevant to the overall exercise of his discre on by appl yi ng in isol a on a rigid yards ck as to the likel ihood of its ar i si ng, wi thout regard to the ser ious consequences to the jus ce of the ma er i f it and/or other i ssues wer e t o ari se. Howev er he shoul d give l i le weight to issues raised which, for want of suppor ng evi dence or per suasi ve ar gume nt , appeared to him to be fanciful or unlikely areas for dispute whenever the ma er reached tri al .

4 An unusual feature of the proceedings arising out of the retrocession cover and an important considera on wa s that they we r e cl ai ms for decl ar a ons of non- l iabi l ity rela ng t o pr oceedi ngs that had yet to be ins tut ed i n Venezuel a by PDV or PDVI . Li mi t' s cl ai ms amo unt ed to an a emp t to have al l the i ssues det ermi ned in Engl and wh en they wo ul d or mi ght have to be resolved again between the claimants for loss and PDV and Mercan l and PDVI in Venezuel a.

5 It was for Limit to persuade the judge that England was the appropriate forum for the trial of the ac on, not for PDVI to show to the cont rar y. And, wh er e, as her e, a numb er of factor s we r e presented to the judge in support, the judge must clearly exercise his discre on in the round, with all of them in *517 mind. The judge did not err in his individual treatment of the various factors put before him or in his overall exercise of discre on to set asi de ser vi ce out si de the jurisdic on.

The following cases were referred to in the judgment of Auld LJ:

Bensaude & Co v Thames & Mersey Marine Insurance Co Ltd [1897] AC 609 .

G v G (Minors: Custody Appeal) [1985] 1 WLR 647 .

HIH Casualty & General Insurance Ltd v New Hampshire Insurance Co [2001] CLC 1480 .

Hill v Mercan le and Gener al Rei nsur ance Co pl c [1996] CLC 1247; [1996] 1 WL R 1239 .

Ladd v Marshall [1954] 1 WLR 1489 .

Spiliada Mari me Cor p v Cansul ex Ltd [1987] AC 460 .

Toomey (Syndicate 2021) v Banco Vitalicio De Espana SA de Seguros y Reaseguros [2003] EWHC 1102 (Comm);[2004] 1 CLC 965 .

Representa on

Richard Mille QC and John Sni der (ins tructed by Cl yde & Co ) for the appel lant .

Siobán Healy (instructed by Hill Taylor Dickinson ) for the respondent.

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JUDGMENT

Auld LJ:

Introduc on

1 In July 1998 and August 2001 there were leaks of crude oil from pipelines owned and operated by the Venezuelan na onal oi l comp any, Pet rol eos de Venezuel a S. A. ( ‘PDVSA’ ) i n Venezuela's Anzoategui State. The 1998 leak was at ‘Rio Guanipa’, and the 2001 leak was at ‘Campo Limon’. Each leak caused pollu on of the sur roundi ng l and and wa t erwa ys. PDVSA incurred substan al liabi li es for cleani ng up t he pol l u on and compen sa ng local l andowner s . In respect of each leak it may issue proceedings in Venezuela to recover its losses under a general third party liability policy issued by a Venezuelan insurance company, Seguros Mercan l SA (‘Mercan l’) (As far as the Cour t is awa re, no such pr oceedi ngs have yet been ins tuted by PDVSA, either by li ga on or arbi t ra on, nor has PDVI C sought any decl arat or y or other r eli ef i n the ma er agai ns t L i mi t). Me r can l had r einsured wi t h t he Res pondent , PDV I nsurance Company (‘PDVIC’), a ‘cap ve’ insur ance comp any of PDVSA. And PDVI C had ret roceded the ri sk by two slip policies placed in the London market with the appellants, Limit (No 3) Ltd and other reinsurance companies (‘Limit’).

2 In each case, in the event of PDVSA ins tu ng proceedi ngs , ther e coul d be i ssues of law a nd fact as to whether the leak is covered, having regard to a provision at each level of insurance excluding liability, in effec vel y the same t erms, whe r e t he i nci dent in r espect of whi ch t he claim is made is not sudden, unforeseen or accidental. In the *518 case of the Rio Guanipa loss, the incident was the fracture of the pipeline as a result of tree-root ac on. In the case of the Campo Limon loss, the incident was a leakage caused by corrosion of the pipeline.

3 Despite the absence of any proceedings by PDVSA against Mercan l or by PDVI C for any declaratory or other relief against Limit, Limit is concerned that PDVIC might issue proceedings against it in Venezuela. To forestall such proceedings, it issued these proceedings in this country seeking declara ons that i t i s not l iabl e to i ndemn i fy PDVI C i n respect of ei ther l os s. The retrocession slip policy material to the Rio Guanipa loss incepted on 1st January 1997 for a period of two years, and that material to the Campo Limon loss, incepted two years later on 1st January 1999 for a period of three years.

4 Limit, by each of its claims against PDVIC, sought declara ons of non- liabi lity and rel at ed rel ief that: (i) PDVSA is in breach of the no fica on pr ovi s i on of t he or iginal poli cy; and/or

(ii) the loss is excluded under the pollu on excl us i ons of t he or i gi nal pol icy and t he reinsurance and retrocession policies; and/or

(iii) in any event, PDVIC is not obliged to make good losses which PDVSA is not obliged to pay under the terms of contracts with landowners or other third par es the ri ght s of such par es having been waived; and/or

(iv) in any event, the date for taking the exchange rate between Venezuelan Bolivars and US Dollars is the date of any actual payment by Mercan l to PDVSA.

5 In addi on, in respect of the Ri o Guani pa cl ai m, PDVSA sought a decl ar a on t hat the claims against Mercan l and PDVI C are out si de the Venezuel an limi ta on per i od.

6 On 20th December 2002 Gross J granted Limit permission to serve the claim forms on PDVIC

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out of the jurisdic on. On 11t h Novemb er 2003 Mo or e- Bi ck J set asi de those or der s, the ser vi ce of the claim forms and subsequent proceedings. In doing so, he held that a ‘Dispute Clause’, in effect an Engl ish l aw and j ur i sdi c on c l ause, a ached t o the 1997 s l i p and i ncor porat ed by reference into the 1999 slip, applied only to North American claims, not the cover as a whole, and, in par cul ar not to any pot en al disput es from t hese oil leakages i n Venezuel a, and t hat , having regard to the closeness of their connec on to Venezuel a, that count ry wa s the for um conveniens. With the permission of Po er LJ , Li mi t now appeal s that or der of Mo or e- Bi ck J so as to enable it to proceed with its claim in this country for declaratory relief in the terms pleaded against PDVIC.

*519

7 The two main issues raised by this appeal are: (i) whether the dispute in the case of each incident is covered by the Dispute Clause in the retrocession slip policy so as to require Limit's claim for declaratory relief to be tried in the English courts; and, if not

(ii) whether the English or the Venezuelan courts are the forum conveniens.

Whether the risk is covered by the Dispute Clause in the retrocession slip so as to require the proceedings to be tried by in the English courts

8 The cri cal i ssue in the case of each ret rocessi on sl ip pol icy i s wh et her the Di sput e Cl ause applied to the contract as a whole so as to commit the par es to resol vi ng any issue under the policy in the English courts or whether the clause only applied in respect of North American claims. If the former, only the English courts had jurisdic on to deal wi th the ma er; if the la er , i t wa s for the Engl ish cour t i n these pr oceedi ngs to det ermi ne, i n the exer ci se of i ts discre on, the for um conveni ens . The Di sput e Cl ause read as fol lows :

‘Any dispute concerning the interpreta on of the terms , condi ons , limit a ons and/or exclusions contained herein, is understood and agreed by both the Reinsured and Reinsurers to be subject to English Law. Each party agrees to submit to the jurisdic on of any Court of competent jurisdic on wi thi n Engl and and t o c omp l y wi th a l l requirements necessary to give such Court jurisdic on.

All ma er s ar i si ng her eunder shal l be det ermi ned i n accor dance wi th the l aw and prac ce of such Cour t.’

9 In the case of both periods of cover the original insurance, the reinsurance and the retrocession all provided a ‘dis nct regi me ’ for deal ing wi th Nor th Ame r i can cl ai ms . Thus , at each layer of insurance there were special provisions restric ng the amb i t of cover age i n respect of judgments, awards or se leme nt s ema na ng f rom c ount r ies oper a ng under t he laws of the United States or Canada, so as to: 1) exclude cover for fines , penal es, puni ve or exemplary damages; 2) exclude cover en rel y in respect of seepage, pol lu on or cont ami n a on; 3) include defence costs within the limit of the liability insured and reinsured; and 4) apply English law and make English courts the forum for any disputes concerning the construc on of the rules of the special regime for North American claims.

The 1997 and 1999 slips

10 The 1997 retrocession slip cover in force at the me of the Ri o Guani pa leak had been pl aced in the London Market, was in the standard London market form and was ‘scratched’, that is ini al led, by the lead underwr i ter as an indi ca on of his agreemen t . The Dis put e Clause was not an integral part of the slip, but was physically *520 a ached to the back of i t on a separat e

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piece of paper headed ‘Dispute Clause’, and was also scratched by the lead underwriter.

11 The slip included a four page summary of the condi ons , and ‘The wo r di ng’ of the cont ract was to be, as its opening words indicated, by reference to earlier cover. It included the following provisions:

‘FORM: Wording as expiring. Amendments, if any, to be agreed slip leader only.…

ORIGINAL INSURED: PETROLEOS DE VENEZUELA and/or its direct and indirect subsidiaries and/or its direct and indirect affiliates as ori ginal . …

SITUATION: Worldwide excluding USA/Canadian domiciled companies other than sales offices. …

CONDITIONS: —Full Reinsurance Clause (NMA 416) ex premium … Including all endorsements and addenda as expiring.…

—Seepage and Pollu on Cl ause NMA 1683 or as expi ring. …

—USA CANADIAN JURISDICTION SUBJECT TO:

—Excluding puni ve and exemp l ar y dama ges .

—costs inclusive.

—Excluding pollu on absol ut el y.

—Disputes clause (English Law)

all as expiring…

In respect of the Reac va on of Mar ginal Fi elds Project and cons t ruc on ac vi es only, the exclusion of US/Canadian domiciled companies is deleted, however, in respect of all Co-Insureds domiciled in the USA/Canada, Jurisdic on her eunder i s Worldwide excluding USA/Canada all as expiring…

Claims Co-opera on Cl ause as expi ring as a ached. ’

It should be noted that the summary in the ‘USA CANADIAN JURISDICTION …’ sec on of the sl ip reflects but does not en rely repl i cate s imil ar provi sions i n t he r einsurance cont r act bet wee n Mercan l and PDVI C.

*521

12 I should men on her e that some me was given by the par es i n the course of t he appeal t o searching for original documenta on not put bef or e the Judge. One of the docume nt s eme r gi ng from that exercise was the original scratched 1996 slip, which was materially similar in form and terms to the 1997 slip, including an a ached Di sput e Cl ause.

13 The a ached Di sput e Cl ause is wi de in its amb i t in one sense in that it expr essl y cover s ‘al l disputes concerning the terms, condi ons , limi ta ons and/or excl usi ons cont ained her ein’. But it is confined to di sput es , l ike that encomp assed by the first issue i n t his appeal , about the construc on of t he r et rocessi on, i nc l udi ng t hat of t he Di sput e Cl ause i tsel f and as t o i ts applica on. It does not , on the face of it, appl y to di sput es of fact ar i si ng out of any pot en al claim under the original insurance or further up the insurance chain and ul ma t el y by PDVI C against Limit, for example, as to whether the claims were me l y, or as to wh et her PDVSA had an adequate inspec on and ma i nt enance regi me or wh et her the landown er s wh o had suffered from the pollu on had wa i ved thei r ri ght s as agai ns t PDVSA to comp ensa on.

14 The Judge held that that the Dispute Clause related only to disputes emana ng from cl ai ms origina ng in the US A or Canada. Bef or e looki ng at hi s reasoni ng and the ri val submi ssi ons on

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the issue before him and before this Court, I should look, as he did, at the commercial context of the retrocession slips, including the various underlying contracts disclosed to Limit as part of the placing material. In doing so, I should note that what was presented to the Judge as the wording of the 1997 reinsurance contract between Mercan l and PDVI C, wa s simi lar to that set out in the original insurance contract between PDVSA and Mercan l. I t cont ai ned, i n a page headed ‘Memorandum 1’, the special regime for North American claims, including a broadly similar Dispute Clause. I say ‘broadly similar’ because it referred to ‘terms, condi ons and, limita ons appl yi ng to thi s Me mo r andum’ , rat her than ‘ terms , condi ons , limit a ons and/or exclusions contained herein ’ as in the a achme nt to the 1996 and 1997 sl ips .

15 However, what was thought, when the ma er wa s bef or e the Judge, to be the wo r di ng of the reinsurance contract between Mercan l and PDVI C, name l y a copy docume nt scrat ched by Limit's lead underwriter, might now, as a result of further disclosure and examina on of documents in the course of the appeal, turn out to be the wording of the retrocession contract. At the hearing the la er cont ract wa s assume d to have been cont ai ned in the 1997 sl ip. I shal l say more about this later in the judgment, but for the moment, I shall proceed on the basis accepted below by the Judge that the 1997 contract was in substan al ly the same terms or ‘mirrored’ those of the underlying reinsurance contract between Mercan l and PDVI C and of the original contract between PDVSA and Mercan l, incl udi ng the pr ovi si on in ‘Me mo r andum 1’ for the special regime for North American claims and the Dispute Clause similar to that in the a achme nt to the 1997 sl ip. That Me mo r andum cont ai ned the fol lowi ng pr ovi si ons rel a ng respec vel y to excl us i ons and di sput es : *522

‘(i) COVERAGE

The indemnity provided by this Policy in respect of any judgment, award or se leme nt within countries which operated under the laws of the United States of America and/or Canada (or to any order made anywhere in the world to enforce such judgment, award or se leme nt ei ther i n wh ol e or i n par t) i s s ubj ect t o t he f ol lowi ng addi onal condi ons and excl us i ons :

…

(b) SPECIAL EXCLUSIONS

i) No liability shall a ach t o I nsur er s i n r espect of any fines , penal es, puni ve or exemplary damages,

ii) This policy does not cover any claims whatsoever arising directly or indirectly from seepage, pollu on and cont ami na on.

(ii) DEFENCE COSTS:

All Defence Costs in respect of claims under this Memorandum shall be included in the limit of liability hereunder

(iii) DISPUTES CLAUSE

Any dispute concerning the interpreta on of the terms, condi ons and l imi ta ons applying to this Memorandum shall be subject to English Law. The Insured and Insurers agree to submit to the jurisdic on of any cour t of comp et ent j ur i sdi c on wi t hin England and to comply with all requirements to give such court jurisdic on. Al l ma ers arising hereunder shall be determined in accordance with the law and prac ce of such court.’

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I have emphasised the words in the above formula on of the Di sput es Cl ause, ‘ the terms , condi ons and limi ta ons appl ying t o t his Memor andum’ so as to i ndi cate t he s li ght difference in wording from the corresponding passage in the Disputes Clause a ached to the 1996 and 1997 slips, namely ‘the terms, condi ons , l imi ta ons and/or excl usi ons cont ained her ein’. As will appear, Mr Richard Mille QC , for Li mi t, rel ied in suppor t of a br oad cons truc on of the s li p a achme nt s on the pr esence in thei r ver si ons of the Di sput e Cl ause of the wo r d ‘excl us i ons ’ , not men oned in the Me mo r andum ver si on, and the subs tu on of t he word ‘herei n’ i n the s l ip a achme nt v er si ons f or t he wo r ds i n t he Me mo r andum v er si on ‘ appl yi ng t o t hi s Memorandum’.

16 As to the 1999 slip, of which there was only a copy in evidence before the Judge, it began, as had the 1997 slip, against the heading ‘FORM’, ‘Wording as expiring’, that is, incorpora ng the provisions of the 1997 slip and its underlying wording. *523 Seemingly, for the avoidance of doubt, it also contained as part of the CONDITIONS, the term ‘Including all endorsements and addenda as expiring’. Given those references, it did not repeat - in typescript at any rate - the special regime, including the Disputes Clause, for North American claims derived from Memorandum 1, and it did not refer to or have a ached to it, as the 1997 sl ip had done, any ‘Dispute Clause’. However, against the heading ‘World-wide’, it had a manuscript entry against the leading underwriter's scratch ‘excl. USA and Canadian domicile companies other than direct PDVS sales offices’ . And, in t he CONDI T IONS , it incl uded t he wor ds ‘ Ful l Rei nsurance Cl ause (NMA 416) …’

17 However, as I have indicated, searches made by PDVIC in the course of the appeal also yielded the original 1999 slip, which was in the same terms, save that it included in manuscript against the scratch of the lead underwriter (at the RJ Wallace syndicate) the words ‘RJW N.A. Condi ons ’ , a ref er ence to the ‘RJ W Di sput es Cl ause’ , that i s, a cl ause in simi lar terms to the Dispute Clause a ached to the 1996 and 1997 sl ips , i n the Nor th Ame r i can Condi ons 1986 providing for the special regime for USA and Canadian claims. Mr Mille di d not chal lenge the admission of this material as fresh evidence. But he maintained that, if anything the incorpora on by ref er ence of the Nor th Ame r i can condi ons i nto t he 1999 s l i p suppor t ed Limit's case on the interpreta on of the 1997 sl ip, si nce thei r avai labi lity in 1997 suggested that the separately a ached Di sput e Cl ause in the 1997 sl ip mu s t have ser ved some ot her , br oader purpose than that for which the North American condi ons p r ovi ded. Howe ver , h e acknowledged that, whatever the correct form and construc on of the 1997 ret rocessi on, the reference to the North American condi ons in the 1999 sl ip wa s super fluous .

The Judgment

18 As I have said, the Judge held that the Dispute Clause in each of the slips applies only to the special regime of restric ons and excl us i ons of liabi lity in respect of Nor th Ame r i can cl ai ms . In reaching that conclusion, he began by no ng that the summa ry of condi ons i n t he 1997 s li p, including the reference to the ‘Disputes clause’ in the North American claims exclusion sec on, made no reference to the nature of such clause, which he found surprising if it had been the par es ' int en on t o subj ect all disput es under the cont r act to t he Engl i sh cour t s. He con nued:

‘11. If one asks oneself why the par es shoul d have a ached t he disput es clause t o t he slip, one obvious answer is that it was to enable anyone reading the slip to iden fy the disputes clause referred to in the condi on rel a ng t o t he Uni t ed States and Canada…

12. In my view, the condi on rel a ng t o t he cl aims ari sing i n t he Uni t ed States and Canada is intended to capture, albeit in more abbreviated terms, the protec on provided under the original policy by Memorandum 1. The exclusion of puni ve and exemplary damages, the exclusion of pollu on l iabi lity a bsol ut el y a nd t he *524 inclusion of costs mirror to a remarkable extent the substan ve terms of that Memorandum and suggest strongly that is what was intended. It is quite natural in that context to incorporate the disputes clause as well, but in order to do that it would

Page8

either have to be set out in full in the body of the slip or iden fied i n some other way . A clause of that kind is not usually set out in the slip, so it would not be surprising to find it as an a achmen t . Howev er , the wor ding of the c lause i n Memor andum 1 i s not wholly apt for incorpora on di rect ly int o the rei nsur ance cont ract because it ref er s in terms to the Memorandum. Some me s the wh ol esal e incor por a on of clauses l i ed from another contract gives rise to linguis c anoma l ies, but if the dr a sman of the s li p is alive to such difficul es, he may wel l adapt t he c l ause i n a way whi c h he t hi nks makes it more suitable for inclusion the par cul ar cont ract bef or e hi m. In my vi ew that is what has happened in the present case and the introduc on of the ref er ence to “exclusions” is in my view quite understandable in the light of the wording of the condi on rel a ng t o Uni t ed States and Canadi an J uri sdi c on whic h refer s in terms t o exclusions

13. The clause remains awkward in some respects, however, in par cul ar in the use of the word “herein” … That awkwardness disappears to some extent, however, if one reads the clause as if it were incorporated in the condi on itsel f, or as par t of a group of terms covering the same subject ma er in a treat y wo r di ng. In my vi ew the cl ause was a ached to the sl ip simp l y to iden fy i t as the disput es clause r eferr ed t o i n t hat condi on and wa s not int ended to appl y to the cont ract as a wh ol e. ’

19 The Judge reached the same conclusion on the evidence before him as to the 1999 slip, given its opening words ‘Wording as expiring’, notwithstanding the absence of any express condi ons in the slip rela ng to Nor th Ame r i can cl ai ms cor respondi ng to those in the 1997 sl ip or of any reference to or a achme nt of a di sput es cl ause. Mr Mi lle , rel ying on t he i ncl usi on i n t he summary of Condi ons of the expr essi on ‘inc l udi ng al l endor seme nt s and addenda as expi ring’ , had argued that it was apt to include the Dispute Clause a ached to the 1997 sl ip, inc l udi ng the meaning for which he contended, namely its applica on to the cont ract as a wh ol e. Howe ver , the Judge held that, as on his ruling, the Clause did not apply to the 1997 contract as a whole, its ‘expiring’ terms had to be read in the same way for the purpose of the 1999 slip. He added that, in any event, the condi on on wh i ch Mr Mi lle rel i ed was l i mit ed t o ‘ endor semen t s and addenda’ and, therefore, did not extend to the original terms of the expiring 1997 slip. He concluded, at paragraph 15, that the Dispute Clause a ached to the 1997 sl ip wa s one of i ts original terms and that the purpose of the reference in the 1999 slip to ‘all endorsements and addenda as expiring’:

‘…was simply to ensure that any addi ons and al ter a on t o t he expi r ing cont r act introduced during the policy year by way of endorsement or addendum were incorporated into the new terms. In other words, the condi on wa s des i gned to ensur e that the slip reproduced the expiring terms, subject to whatever modifica ons wer e introduced by the other condi ons . ’

*525

The ‘fresh’ evidence

20 As I have said, before the Judge, and ini al ly bef or e thi s Cour t, the par es proceeded on t he assump on that a copy docume nt scrat ched by Li mi t' s l ead underwr i ter , wa s the under l yi ng reinsurance contract between Mercan l and PDVI C, wh i ch rei nsur ance wa s simi lar to that in the original insurance contract between PDVSA and Mercan l, i nc l udi ng i n i ts Me mo r andum 1 a broadly similar Disputes Clause to, but differ ing in the respects to wh i ch Mr Mi lle has drawn a en on f rom, that in t he 1996 and 1997 r etr ocess i on s li ps.

21 However, as a result of the enquiries made by PDVIC, with the assistance of Limit during the

Page9

course of the appeal, it is suggested by PDVIC that the wording that the par es had hi ther to understood to be the underlying 1997 reinsurance was in fact that of the 1997 retrocession itself, thus confini ng the Di sput e Cl ause to the body and sec on of the s li p deal i ng wit h speci al regime for North American claims. Miss Siobán Healy, on behalf of PDVC, sought to put it before the Court as fresh evidence.

22 Mr Mille 's response to thi s ‘di scover y’ wa s to chal lenge its admi ssi on on Ladd v Marshall principles. He said, first, that that the mi sunder standi ng coul d, wi th due di ligence, have been cleared up at an earlier stage and that it was now too late to seek to put it before the Court as evidence of the 1997 wording. Secondly, he maintained that the proposed new evidence was not, in any event credible. He suggested that there are a number of discrepancies between the slip and the wording, and relied on other ma er s to suppor t hi s cont en on t hat the wor ding un l now a ribut ed t o t he under l ying r e insurance was not the wor ding of the 1997 retrocession. Thirdly, he indicated that there would or could be dispute about the contractual effect of such ma t er ial i f admi ed i nto evi dence. In par cular , he suggest ed t hat, even i f the Court found it necessary to admit, consider and accept it as the wording of the 1997 slip, it would not follow that it would supersede the slip. Given the differ ences betwe en them, the two documents might or might not have to be read together; see HIH Casualty & General Insurance Ltd v New Hampshire Insurance Co [2001] CLC 1480, CA . One outcome might be that the Dispute Clause a ached to the sl ip con nues to have t he broad appl i ca on f or whi c h Li mi t contends.

23 Even if that were not the outcome as a ma er of cons truc on, and t he Cour t wer e t o hol d that the puta ve wo r di ng super seded the 1997 sl ip, Mr Mi lle invi ted t he Cour t to cons i der further complica ons . It mi ght affect the val i dit y of the cover provi ded by the 1999 s li p, given the alleged failure by PDVIC to disclose to Limit such ‘varia on’ i n cover adver se to Li mi t i n depriving it of contractual resort to English law and jurisdic on for resol u on of any disput es arising under the retrocession. Mr Mille suggested that such ma ers , incl udi ng pos s i bly an issue as to rec fica on of t he 1997 word i ng, migh t ari se for determi na on, an exerci se that could not, he observed, be resolved by this Court. The only course would be for it to allow the appeal and remit the issue of poten al avoi dance to a Comme r ci al Judge to deci de.

*526

24 However, as both Mr Millet and Miss Healy agreed, if the Court ruled that the Dispute Clause a ached to the 1997 sl ip, on the evi dence as it wa s pr esent ed to and under stood by the Judge, governed only North American claims, admission of the new evidence would add nothing, save possibly confirma on. It i s onl y i f the Cour t wer e t o r ule t hat the Dis put e Clause a ached t o the 1997 slip, considered without such addi onal ma t er ial , gover ned the wh ol e cont ract, that i t would be necessary for this Court to consider de bene esse whether to admit the evidence of the puta ve wo r di ng B of the 1997 ret rocessi on, and, if so, wh at to do wi th it. Mr Mi lle and Miss Healy suggested to the Court that it could adopt a stage by stage course, and decide the ma er on the evi dence as it wa s bef or e the Judge, bef or e deci di ng, if it needs to, wh at to do about PDVIC's applica on to adduce put a ve wor ding as fresh evi dence. On t hat appr oach t he Court would con nue wi th the appeal on the basi s of the evi dence bef or e the Judge, name l y that the wording of the 1997 cover was that of the underlying reinsurance, forming part of the matrix of fact to the 1997 and 1999 slips.

25 Miss Healy suggested by way of alterna ve that the Cour t coul d pr oceed on the basi s that the terms of the 1997 retrocession are to be found in both the 1997 slip and the puta ve wording. Only if the Court were to conclude that the terms of the slip as to jurisdic on and governing law are inconsistent with those of the puta ve wo r di ng wo ul d i t be necessar y to determine admissibility of the new evidence and/or the need to remit the ma er t o a Commercial Judge for a ‘mini-trial’ as to its contractual status. Mr Mille opposed t hi s alterna ve on the ground that it wa s unnecessar y and, in any event , begged the ques on of the

Page10

admissibility of the puta ve 1997 wo r di ng, some t hi ng that the Cour t coul d not resol ve wi thout a trial.

26 In the event, the Court has adopted the course of con nui ng wi th the appeal on t he evidence as it was before the Judge, leaving open the issues of admissibility of the new evidence and the status of the puta ve wo r di ng onl y if it shoul d pr ove necessar y to deal wi th them.

Submissions on the basis of the evidence before the Judge

27 Mr Mille submi ed, as he had done bef ore t he J udge, that the Di s put e Cl ause i n t he a achme nt to the 1997 sl ip appl ied to al l di sput es under the sl ip, not jus t those ref er abl e to North American claims, with the result that all of the issues raised by Limit's claim must be dealt with in the English courts. He suggested that that was the inten on of the par es i s suppor t ed by their a achme nt of the Di sput e Cl ause to the sl ip, i ns tead of jus t havi ng a ref er ence to a ‘Disputes clause (English law)’ in the sec on in it deal ing wi th the Nor th Ame r i can excl us i ons . He pointed out that the Clause was scratched by the lead underwriter, and suggested that, if read as a whole with the slip, it did not ma er that ther e wa s no expr ess ref er ence in the ma i n body of the slip to it or any iden fica on of i ts terms. He noted t o the s ame e ffect t hat t he ref erence in the North American sec on of sl ip to ‘Di sput es cl ause (Engl ish l aw) ’ wa s not gover ned by words such as ‘as a ached’ .

*527

28 As I have men oned, he al so dr ew a en on t o di fferences between t he wor di ng of the ‘Disputes Clause’ in the underlying reinsurance policy, as it was thought to be, and that of the ‘Dispute Clause’ in the a achme nt . He suggested the la er had a wid er effect, first, i n its use of the word ‘herein’, as if it were a reference to the contract as a whole, instead of ‘applying to this Memorandum’ (which was concerned solely with the special regime for North American claims), and, second, to the inclusion in the a achme nt ver si on of the wo r d ‘excl us i ons ’ , not found in the Memorandum. If all that was intended was a reference back to Memorandum in the underlying reinsurance policy, why, he asked, was it reproduced at all in the in the a achme nt and in differ ent terms ?

29 As to the 1999 slip, Mr Mille submi ed t hat , if as he cont ended, the Dis put e Clause i n t he a achme nt to the 1997 sl ip appl ied to the wh ol e of its cover , not jus t to the speci al regi me for North American claims, the 1999 slip must incorporate it to like effect because, al though i t made no express reference to the Clause, it did so by implica on in the wo r ds ‘ inc l udi ng al l endorsements and addenda as expiring’. The 1997 a achme nt wa s, he submi ed, just such an endorsement or addendum.

30 Miss Healy's response was that the Dispute Clause a ached to the 1997 sl ip wa s confined, as was the equivalent provision in the Memorandum 1 of the reinsurance contract between Mercan l and PDVI C, to cons truc on of the speci al provi sions for the Nor t h Amer i can c laims. She relied on the following factors in support of that submission: 1) the only reference in the 1997 slip to a disputes clause is that in the sec on deal ing wi th Nor th Ame r ican cl ai ms ; 2) i t clearly has its origin in the structure of the corresponding provisions in the original contract of insurance between PDVSA and Mercan l and in the rei nsur ance cont ract betwe en Me r can l and PDVIC in their provision of a dis nct regi me for such cl ai ms ; 3) that the Di sput e Cl ause had clearly been a ached to the 1997 sl ip for the pur pose of iden fying t he provi sion r eferr ed i n the North American indent of the Condi ons in the sl ip; 4) the Di sput e Cl ause wa s not an apt provision for resolu on of di sput es ar i si ng out of the cont ract as a wh ol e, or even al l the disputes of fact and otherwise that could arise under North American claims, since it was, on its own terms, confined to issues of construc on of contractual terms, whatever their ambit, and did not extend to other ma er s of law or factual issues goi ng to comp l iance wi th the cont ract .

Conclusion

31 In my view, on the evidence before the Judge, his reasoning and Miss Healy's submissions as

Page11

to the construc on of the 1997 sl ip, and hence of the 1999 sl ip, car ry the day for the ver y prac cal reasons that they bot h gave. If no Di sput e Cl ause had been a ached t o t he back of the 1997 slip, it would have been unclear what was meant by the words ‘Disputes clause (English Law)’ in the sec on of the summa ry of Condi ons i n t he s li p under the headi ng ‘ USA CANADI AN JURISDICTION …’. They were not incorporated by reference to any other document or standard market terms or otherwise, as, for example was achieved by the reference in the summary *528 of Condi ons to the ‘Ful l Rei nsur ance Cl ause (NMA 416) ex pr emi um’ and the ‘Seepage and Pollu on Cl ause (NMA 1683) ’ (see paragraph 11 above) . Nor wa s i t a standard London market reference.

32 Second, the only reference to the Dispute Clause was in the indented part of the summary of the Condi ons under the headi ng ‘US A CANADI AN JURI SDI CTI ON …’ . In conj unc on wit h t he use of the words ‘contained herein’ in the phrase in the Dispute Clause in the a achme nt , ‘ [a] ny dispute concerning the interpreta on of the terms , condi ons , li mit a ons and/or excl usions contained herein’, that posi oni ng of the ref er ence i n the sl ip had the effect , not onl y of incorpora ng i t i n the sl ip, but al so of confining i t to t he speci al regi me f or Nor t h Amer i can claims with which that sec on of the sl ip deal t. In that respect, it wa s of a pi ece wi th the sl ip' s incorpora on by ref er ence of the ‘Ful l Rei nsur ance Cl ause (NMA 416) …’ , the effect of whi ch was to incorporate terms and bind reinsurers to follow se leme nt s or awa rds ma de under the original PDVSA/Mercan l insur ance cont ract, wh i ch bound the par es to a choi ce of Venezuel an arbitra on in rel a on t o Nor t h Amer i can c laims rather than Engl i sh l aw. By cont r ast , it does not bind them in respect of any cover, or any exclusion of cover, not included in the reinsurance or otherwise in the retrocession: see Hill v D Mercan le and Gener al Rei nsur ance Co pl c [1996] CLC 1247; [1996] 1 WLR 1239, HL , per Lord Mus ll at 1254; 1246–1247, and Toomey v Banco Vitalicio [2003] EWHC 1102 (Comm);[2004] 1 CLC 965 . As Miss Healy observed, if the Dispute Clause had been intended to be of general applica on to al l di sput es ar i si ng under the sl ip, it would have been included under the general part of the ‘CONDITIONS’ sec on in the sl ip, not in an indented sub-sub-sec on of those Condi ons concerned onl y wit h Nor t h Amer i can c laims.

33 Third, if the a ached Di sput e cl ause we r e to be read as extendi ng to the wh ol e of the contract so as to subject all disputes arising under it to the jurisdic on of the Engl ish cour ts, what func on wo ul d the speci fic reference t o t he Di s put e Clause under the headi ng of ‘USA Canadian Jurisdic on’ in the summa ry of condi ons have i n r ela on t o the a ached c l ause? I f it were differ ent in the sense of sugges ng some dis nct regime f or Nort h Amer i can cl ai ms, how would that differ ence be i den fied? I f it were the s ame s o that t he c l ause were of gener al applica on to the wh ol e cont ract , the ref er ence in that sec on of the summa r y of Condi ons would be o ose. Ne i ther out come coul d sens i bl y flow f rom t he f act that the c lause i s phys i cal l y a ached to, as di s nct from b ei ng i n t he body of the s li p; see e.g. Bensaude v Thames & Mersey Marine Insurance Co Ltd [1897] AC 609, HL . In my view, the outcome for which Miss Healy contended gave sensible effect to the confined cons t ruc on of t he c l ause for whi c h PDVI C contended.

34 Pu ng asi de t hose t ext ual impe r a ves t o confini ng the Di spute Claus e t o Nor th Ameri c an claims, the Judge's construc on, as Mi ss Heal y submi ed, mad e good comme r cial sense i n t hat it produced consistency with the original insurance contract and the reinsurance contract, both of which provide a special protec on agai ns t hi gh awa rds of dama ges that ma y ema nat e from such jurisdic ons . Ret rocessi onai res *529 are likely to be similarly, if not more, cau ous about undertaking such risks, and to insist, not only on exclusions to be found in the underlying insurance, but also on any ques on as to thei r cons truc on t o be det ermin ed by Engl i sh cour t s rather than courts in the USA or Canada.

35 As to the 1999 slip, which, on the evidence before the Judge, neither referred to nor had a ached to i t any Engl ish l aw or j ur i sdi c on provi sion i n t he f orm o f a ‘ Dis put e Cl ause’ or otherwise, the Judge was plainly correct in his rulings that: (1) the opening words in the slip

Page12

‘Wording as expiring’ had the effect of incor por a ng t he t erms of the 1997 s li p, incl udi ng t he a ached Di sput e Cl ause pr oper l y cons trued so as to l imi t its effect to Nor t h Amer i can c laims; and (2) it follows that the term in the 1999 slip ‘including all endorsements and addenda as expiring’, which refer to altera ons of a pol icy a er i ts i ncep on, coul d not have i ncor porat ed the 1997 Dispute Clause so as to give it a more general ambit, since it was an original term of the 1997 cover. And, as there is no dispute about this aspect, I should note again that, among the further evidence that came to light in the appeal, was the original of the 1999 slip, which expressly incorporated the standard form of Dispute Clause applicable to North American claims (see paragraph 17 above).

36 It follows that, on the evidence before the Judge, I would endorse his construc on of bot h the 1997 and 1999 retrocession slips so as to confine the appl ica on of the Dis put e Clause, so far as it went, to USA and Canadian claims, so that the issues raised by these proceedings and their determina on f al l t o be det ermi ned i n a ccor dance wi th t he pr inc i pl es of f or um conveniens.

37 It also follows, for the reasons that I have given in paragraphs 24 to 26 above, that I do not consider it necessary to meet Mr Mille 's chal lenge to that out come to cons i der wh et her the Court should admit on Ladd v Marshall principles the addi onal put a ve mat eri al on whi ch PDVIC sought to rely in the course of the appeal. I would only comment that, if that material were to be admi ed and read wi th the 1997 sl ip, it wo ul d suggest fur ther and strong suppor t for PDVIC's case, if it were needed, notwithstanding the various ensuing complica ons to wh i ch Mr Mille ref er red.

Forum conveniens

38 That leaves the ques on of t he appr opr iat e f or um f or det ermi na on of the ma ers iden fied by Limit in s eeki ng t he decl ara ons of non- l i abil i ty. Mr Mi ll e 's two ma i n submi s s i ons were: (1) that England is clearly the appropriate forum because the 1997 and 1999 retrocessions are governed by English law and there are no countervailing factors that make it appropriate for the claims to be tried in Venezuela; and (2) that the Judge, having appeared to agree with Limit's conten on that a par ty al legi ng for um non conveni ens shoul d put bef or e the court some credible evidence that issues of the kind relied upon were likely to arise in prac ce, then failed to apply that test to the individual issues or the case as a whole.

*530

39 Miss Healy, by contrast submi ed: (1) that thi s wa s not a cl ear case for Engl ish jur i sdi c on since, apart from the retrocession contract entered into by Limit and the fact that its governing law is English, none of the facts or possible disputes arising out of them has any close connec on wi th thi s count ry; (2) that the we i ght to be accor ded to the fact that a di sput e ar i ses out of a contract of reinsurance or retrocession placed on the London market and governed by English law depends upon the nature of the issues arising for determina on, so that a di sput e raising issues of English law as to placement of the risk in London, misrepresenta on and non-disclosure may be more appropriately tried in England, whereas, as here, a dispute turning largely on factual ma er s that have occur red over seas ma y mo r e appr opr iat el y be tri ed in the overseas jurisdic on; (3) that , ther ef or e, the Judge ri ght ly appr oached hi s cons i der a on of this issue by reference to the well-known proposi ons of Lord Goff of Chi evel ey in Spi liada Ma r i me Corp v Cansulex Ltd [1987] AC 460 , at 481D-E and 482D, that it was for Limit to show that England is clearly the most suitable forum for trial in the interests of the par es and for the ends of jus ce; and 4) that , al though the cl ai ms rel at ed to di fferent pol i cies and di fferent occurrences, many of the issues are common to both and that it was unlikely to be conducive to jus ce for one of them to be tri ed in Engl and and the ot her in Venezuel a.

40 I have set out in paragraph 4 of this judgment the four ma er s of cl ai me d decl ar at or y rel ief

Page13

common to each claim, namely delay in no fica on of l oss, sudden occurrence, wai v er by landowners of their rights and currency conversion, and the addi onal one of limi ta on i n t he case of the Rio Guanipa loss. Two further issues common to both losses arose in argument, namely the wider implica ons of these pr oceedi ngs and the qual ity of the admi ni stra on of jus ce in Venezuel a.

41 The Judge, having considered all those claims and issues individually and collec vel y, concluded that Limit had not sa sfied him t hat Engl and was clear l y the appr opr i ate f orum f or trial of the claims. He said, at paragraph 36 of his judgment:

‘…Almost all the issues that are likely to arise in this li ga on can mor e appr opr i ately be decided in Venezuela where the relevant documents and witnesses are readily available than in this country and even those issues of law and construc on wh i ch fal l to be decided under English law can be determined sa sfactor i ly ther e…’

I turn now to each of the issues and the Judge's treatment of them leading him to that conclusion. In doing so, I have in mind the general proposi ons behi nd the thr ee submi ssi ons of Miss Healy that I have summarised in paragraph 39 above - and which I accept - in par cul ar , the applica on of the Spiliada principle that it is for Limit to show that England is clearly the more suitable forum for trial in the interests of the par es and for the ends of jus ce.

*531

Delay in no fica on of l oss

42 In the case of the Rio Guanipa loss, the no fica on of PDVSA' s cl ai m to Merc an l was a bout 13 months a er the l eakage, but i n the case of the Camp o Li mo n los s the del ay wa s onl y a ma er of days. The par es' respec ve Venezuel an l awyer s wer e in confli ct as t o what cons tut ed a reasonabl e per iod wi thi n wh i ch to no fy the claim. The J udge expressed t he view that, in the Rio Guanipa claim, given the long period of delay, there seemed to be ‘good prospects of establishing’ that it was unreasonable, and there was, therefore, li le to indi cat e that substan al i ssues we r e l ikel y t o ar i se under t hi s head. Howe ver , he added t hat t he possibility of such issues arising could not be ruled out and was clearly of the view that, if they did, it would be more appropriate for them to be tried in Venezuela because the relevant evidence was there and the local courts were likely to be be er equi pped t o det ermi ne consequen al ma ers of law. As to t he Campo L imon c laim, alt hough t he per i od of del ay was so short as to be likely to preclude a defence of late no fica on, he s ai d that t he i s sues were essen al ly the same and, by imp l ica on, that i f they wer e t o ari se Venezuel a was the mor e appropriate forum.

43 In my view, despite the lack of likelihood, for differ ent r easons , of t he i ssues of l at e no fica on ar i s ing as si gnificant i s sues at tr ial , the Judge was e n tl ed, in the exer ci se of hi s discre on, to take int o account as a rel evant factor in the over al l exer ci se of hi s di scre on, that , if they did, Venezuela would be the best place for their determina on.

‘Sudden, unforeseen and accidental incident’/ ‘Sudden, unintended and unexpected happening’

44 In the case of each leakage the original policy excluded cover for loss not caused by a ‘sudden, unforeseen and accidental incident’, and the reinsurance and retrocession contracts excluded cover for loss not caused by a ‘sudden, unintended and unexpected happening’. And in the case of each leakage Limit's posi ve case, in rel iance on local ly appoi nt ed los s adj us ter s' reports, was that the cause of the leakage giving rise to the claimed loss was so excluded because it was of a long-standing and progressive nature - in the Rio Guanipa loss, tree root growth causing damage to and eventually fracture of the pipeline, and in the Campo Limon loss, corrosion of the pipeline leading eventually to a leak. In addi on, i n the case of the Camp o Limon loss, Limit complains of the absence of an adequate system of inspec on and

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maintenance by PDVSA.

45 The Judge accepted the argument of Mr Mille that , gi ven the me t hat had elapsed s ince the date of each incident, further site inves ga ons as to t he mec hani sm b y whi ch each pipeline were breached was unlikely to produce any new evidence that would add significant ly to that already obtained by the loss adjusters, and that the results of their inves ga ons coul d be made available as easily in this country as *532 in Venezuela. However, he was of the view that, given Limit's posi ve case on the appl ica on of this excl usi on, incl udi ng i n t he Campo Limon claim that as to PDVSA's system of periodic inspec on and ma i nt enance of the pi pel ine, a court might have to consider evidence yet to be obtained, of all of which is in Venezuela.

46 As to the construc on of the excl us i on in the respec ve l ayers of pol i cy cover , that under the original and reinsurance policies fell to be decided in accordance with Venezuelan law, and that under the retrocession policy, by English law. The Judge agreed with Mr Mille 's cont en on that the fact that the retrocession policy is governed by English law and that the pollu on cl ause is a standard London Market clause (NMA 1683) might normally favour determina on of such ma er in Engl and. But he hel d that , si nce the issue in each case wa s as to the appl ica on of the words of the clause to the facts of the case, it was ‘unlikely to require any deeper understanding of English insurance law or London market prac ce’ and that ther e wa s ‘no reason to thi nk that any other ques ons of Engl ish law cal ling for par cul ar exper se of t he Engl i sh court s [were ] likely to arise’. In summary, he expressed the view that in the case of both losses, there were no ‘ques ons of law or ma rket pr ac ce of a kind t hat argue[ d] strongl y i n f avour i n t he Spiliada sense of a trial in this country’.

47 Before this Court Mr Mille , wh i lst acknowl edgi ng Li mi t' s pos i ve case t hat the l oss i n each case fell within the relevant exclusion provision, maintained that the evidence provided by PDVSA and PDVIC's loss adjusters make plain the mechanism of each cause of loss. He submi ed, as the Judge appear s to have accept ed, that ther e wa s no evi dence, as di s nct from specula on, that any fur ther factual i nves ga on of t he cause of t he l osses woul d yi el d any addi onal inf orma on of assi stance t o a cour t . He compl ained t hat , whi l e PDVI C had suggest ed that there were possible challenges to that evidence, it had not precisely iden fied t he areas of dispute or indicated what evidence it could adduce that could effec vel y chal l enge i t . He submi ed that , ther ef or e, the Judge wr ongl y fai led to rej ect thi s cons i der a on. He dismi s sed the possibility of a need of evidence from some Venezuelan witnesses on the issue of inspec on and maintenance as of li le consequence wh en put al ongsi de the powe r ful factor that Engl ish law governed any issues of construc on of the ret roces si on.

48 Miss Healy prefaced her submissions on this issue, as she had done more generally, by observing that the weight to be accorded to the fact that a dispute arises out of a reinsurance contract placed on the London market and governed by English law depends upon the nature of the issues arising for determina on. She submi ed t hat a disput e r ai sing i ssues of Engl i sh l aw a s to placement of the risk in London, misrepresenta on and non- di scl osur e mi ght be mo r e appropriately tried in England, but, here, where the dispute would turn largely on factual ma er s t hat have occur red over seas wo ul d mo r e appr opr iat el y be t ri ed i n t he over seas jurisdic on. She under l ined t hat s ubmi ssi on by poi n ng t o L i mit 's’ pos i ve cas e on t he mechanisms of the pipeline failures, and contended that PDVIC was en tled to take issue on them without being required at this stage to iden fy the pr eci se basi s upon wh i ch it wo ul d seek to make good the challenge at trial. With somewhat greater force, she said that *533 Limit's posi ve case in response to the issues rai sed by PDVI C' s los s adj us ter s as to PDVSA' s systems of inspec on and ma i nt enance is likel y to be a si gni ficant issue, cert ainly i n t he case of the Campo Limon loss.

49 In my view, the dis nc on drawn by the J udge and Mis s Hea l y bet wee n i ssues of law a nd applica on of them to the facts in di sput e, is imp or tant gi ven the pr ima ry factual case of Li mi t that the mechanism of pipeline failures took the losses outside the seepage and pollu on

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exclusions (NMA 1683) common to all layers of the insurance cover, and in respect of which there is no pleaded claim by Limit that the ma er is gover ned by London ma rket or pr ac ce. Whilst there might not be much more evidence to be gathered in bearing upon the mechanisms of failure of the pipelines, there is clearly scope, as the Judge accepted, for much local inves ga on and prepar a on of evidence i n the Campo L i mon c l ai m on t he c l earl y iden fied issue as to PDVSA's system of inspec on and ma i nt enance. Looked at al ong wi th the ot her issues raised, this is clearly a possible development that could cause problems if it arises in a trial outside Venezuela. Its relevance and its weight in the overall balancing exercise, considered with that of the other issues, was a ma er wi thi n the di scre on of the J udge.

Liability to indemnify landowners

50 Limit's pleaded case is that a number of iden fied l andowne r s who have mad e cl aims for compensa on agai ns t PDVSA for pol lu on caused by the l eakages, and by other s who have yet to be iden fied, ent ered i nto cont r act s wi t h PDVSA gran ng i t the r i ght t o run i t s pi peli nes across their land on terms that they waived claims for any resultant pollu on dama ge. The extent of damage in respect of which compensa on is cl ai me d wo ul d requi re inves ga on and evidence from Venezuelan witnesses of PDVSA. And, given PDVIC's Venezuelan lawyer's advice that it is disputable under Venezuelan law whether such waiver is effec ve, ther e wou l d also need to be inves ga on i n Venezuel a on t hat issue. The J udge hel d t hat , al t hough t hese are ma er s on wh i ch, ther e wa s yet , no ‘evi dence to indi cat e wh et her any of them … [wa s] likel y to arise in prac ce’ :

‘They are all ques ons , howe ver , that wo ul d be mo r e sui tabl y deci ded in Venezuel a if they were to arise.’

51 Mr Mille rel ied, as he had done on ot her i ssues , on the l ack of evi dence from PDVI C to indicate whether any of these issues were likely to arise in prac ce, and asser ted that the Judge, having expressly noted that absence, should not have taken them into account. Miss Healy submi ed that the Judge di d not er r in taki ng these ma ers i nto cons i der a on i n the exer ci se of his discre on. They we r e issues of fact wh i ch, if they arose, wo ul d have to be inves gat ed and evidenced in Venezuela, as would ques ons of Venezuel an law on the efficacy of t he waiv er.

*534

52 In my view, on this as on other issues, the Judge could not properly exclude the relevance of the difficul es t hat woul d be caused i f such i s sues of f act and l aw ar e taken when cl ai ms a re pressed by landowners who have suffer ed from pol lu on whi ch may be, or coul d be, met wit h a defence by PDVSA of waiver on which Mercan l and/or PDVI C wo ul d no doubt al so seek to rel y. As I have indicated in rela on to the pr evi ous i ssue, the Judge' s task i n cons i der ing for um conveniens is not to take each poten al issue and accept or rej ect it as rel evant to the over al l exercise of his discre on by appl yi ng i n i sol a on a r i gid yards ck as t o the l i keli hood of i ts arising, without regard to the serious consequences to the jus ce of the ma er i f it and/or other issues were to arise. He should, of course, give li le we i ght to i ssues rai sed wh i ch, for want of suppor ng evi dence or per suasi ve ar gume nt appear to hi m to be fanci ful or unl ikel y areas for dispute whenever the ma er reaches tri al , but that is not thi s case.

Currency conversion

53 As the Judge explained this issue in paragraph 28 of his judgment, Limit maintained that most, if not all, payments by PDVSA of compensa on are likel y to have been, or to be, ma de in bolivars and that Mercan l, the or i gi nal insur er wo ul d al so be obl iged to se le val i d c laims to i t in bolivars. As the currency of account in all the insurance contracts is the United States dollar, Limit was concerned that PDSVA might seek to make a windfall profits as a resul t of mo veme nt s in the exchange rate since the dates of the losses. It maintained that England was a more

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appropriate forum than Venezuela for deciding the appropriate dates and rates for any sums payable under the retrocessions.

54 The Judge, while accep ng the pos si bi lity that ther e wo ul d be some argume nt at a l at er stage about the dates at which conversion between the two currencies should be made, was not impressed by that argument. He said that it did not strike him as likely to be the sort of issue that pointed strongly in favour of holding a trial of the substan ve issues in Engl and rat her than elsewhere.

55 Before this Court Mr Mille di sagreed wi th the Judge' s concl us i on. He ma i nt ai ned that ther e are important legal ques ons gover ned by Engl ish law as to the appr opr iat e rat es of exchange to be applied, ques ons that an Engl ish, rat her than a Venezuel an cour t, shoul d deci de. Mi ss Healy's response was that there is no great issue of principle of English law that the Venezuelan courts could not apply in determining the appropriate date by reference to which the amount of any United States dollar liability under the retrocessions should be calculated.

56 It looks from the Judge's somewhat cryp c comme nt s on thi s issue as if it wa s enough for him that Mr Mille had not demo ns trat ed that thi s wa s a cl ear ins tance for pr ef er ring Engl ish jurisdic on to that of the cour ts of Venezuel a, some t hi ng of wh i ch i n accor dance wi th the Spiliada test he would have had to be sa sfied on all *535 the material before him before he could, as a proper exercise of his discre on, opt for Engl and as the for um conveni ens .

Limita on

57 The Rio Guanipa issue of limita on we nt to a thr ee year limi ta on per i od under Venezuel an law, in respect of which the par es had obt ai ned conflic ng evidence f r om Ve nezuel an l awyer s as to what might stop the running of me , for examp l e by PDVSA' s acknowl edgeme nt of the claim or by conduct inconsistent with maintenance of a defence of limita on. Al though PDVI C had not put before the court hard evidence to show that such issues of fact or law would arise at trial, it maintained that they might do so and that, if they did, it would be more appropriate for them to be determined in Venezuela. Limit again maintained that it would not enough for PDVIC to rely on issues that might arise and that, in the absence of credible evidence that they would or were likely to do so, the Judge should have given li le we i ght to them.

58 The Judge, while acknowledging that, in general, it was not enough for a defendant merely to iden fy grounds on wh i ch i t mi ght successful ly ar gue t hat t he runni ng of me had been interrupted, took the view that limita on issues of fact and law we r e likel y to ar i se. He sai d, at paragraph 21 of his judgment:

‘…I doubt whether PDVSA or Mercan l wo ul d simp l y let the ma er go wit hout a fight. I think it likely, therefore, that there will be argument about the applica on of the law on limita on to the facts of thi s case, and if ther e is, I thi nk that Venezuel a is cl ear l y the more appropriate place in which to decide the ques on, bot h because the rel evant evidence is there and because the courts there are be er equi pped to det ermi ne the issues of law to which they are likely to give rise.’

59 Mr Mille cri cised t he J udge' s concl usi on because PDVI C had not produced any credi ble evidence to show that such issues would , as dis nct from might , arise, so as to require factual enquiry or evidence of Venezuelan law. But, even if I were to put aside for the moment the wide ambit of discre on accor ded to a judge in we i ghi ng the factor s indi vi dual ly and cumu l a vel y i n such an exercise, I can see no fault in his approach on this ma er as it wa s put to hi m. He wa s en tled, gi ven the wa y the par es wer e shapi ng up t o each other through t he med i um o f conflic ng l ocal exper t evi dence on t he l imit a on point , to concl ude, as a ma e r of common sense that there was a likelihood of factual and legal issues on limita on ar i si ng at t ri al . Moreover, as Miss Healy pointed out, issues such as this arising on an applica on wh et her to stay English proceedings in favour of a foreign jurisdic on are necessar i ly ma de an ear l y stage of

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an ac on. The Comme r ci al Cour t is frequent ly cal led upon to adj udi cat e upon them bef or e the claimant's case has been fully pleaded and always before service of the defence. She rightly observed that it is unrealis c to confine t he Cour t ' s cons i der a on at such an earl y stage t o issues on which there is already firm evi dence i ndi ca ng t he l i kel i hood of thei r ari sing f or determina on at tri al .

*536

The wider implica ons of these pr oceedi ngs

60 As Clarke LJ pointed out in the course of argument, an unusual feature of these proceedings arising out of the retrocession cover is that they are claims for declara ons of non- liabi lity rela ng to pr oceedi ngs that have yet to be i ns tuted i n Venezuel a. As I have sai d, on t he informa on bef or e the Cour t, nei ther PDVSA nor PDVI C has as yet i ssued any pr oceedi ngs in Venezuela either by way of li ga on or arbi t ra on i n respect of t he Ri o Guani pa or Campo Limon losses. Certainly, apart from some ra l ing of accout reme nt s bef or e the charge, ther e seems to have been li le mo veme nt betwe en t he par es to t he under l ying cont r act s of insurance to crystallise the important issues of law and fact on which PDVSA and its insurers and reinsurers may, at some stage, have to fight thei r respec ve corner s . Ther e i s, ther efore, an unreality and considerable uncertainty in these proceedings, in what amounts to a phoney war at the retrocessionary stage before the implica ons for it have eme r ged from the Venezuel an ba les yet to be joi ned bel ow.

61 If and when any such claims are made and issues are raised by way of defence to them, Limit's liability or otherwise will be linked with PDVSA's stand and that of the underlying insurers, all concerned with common insurable risks in Venezuela. As Clarke LJ also observed in argument, Limit's claims amount to an a emp t to have al l these i ssues det ermi ned now i n England when they will or may have to be resolved again between the claimants for loss and PDVSA and Mercan l and PDVI C i n Venezuel a. And, as Mi ss Heal y added, the Venezuel an solu on or sol u ons , whe t her judi c ial or arbi t ral , coul d l ead t o i ncons i stenci es wit h a deci sion of an English court on the retrocession. The Judge, at paragraph 32 of his judgment, touched on this feature of the case in the following terms:

‘…many of the issues raised in these proceedings relate directly to other contracts of insurance and reinsurance, linking … [Limit] to PDVSA. It is likely, therefore, that in order to protect its own posi on PDVI C wi ll wi sh to rai se the same poi nt s agai ns t Mercan l and i t i s pos si bl e that Me r can l mig ht wi s h t o r ai se some or al l the same points against PDVSA. In that case it would clearly be desirable for the issues all to be determined in one set of proceedings. That would not be impossible if the ac ons we r e to con nue in thi s count ry si nce the CPR permit the service abroad of proceedings by a defendant against other par es wh er e hi s cl ai m agai ns t them tur ns on simi lar or related issues, but the fact that all but one of the par es are locat ed in Venezuel a and that the underlying contracts are probably all governed by Venezuelan law is a good indica on of wh er e the cent re of gr avi ty of the li ga on as a whol e li es.’

62 In my view, in the circumstances of this case that is a very important considera on, to wh i ch the Judge was en tled to gi ve great we i ght wh en looki ng at the ma er as a who l e and agai nst the backcloth of his assessment individually and cumula vel y of the var ious i ssues that had been canvassed before him.

*537

The quality of the administra on of jus ce i n Venezuel a

63 Mr Mille , rel ied in ar gume nt bef or e the Judge on exper t evi dence from Li mi t' s Venezuel an lawyer that neither the local courts nor the Supreme Court in Venezuela has sufficient

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experience of dealing with disputes of this kind and that, because PDVSA and PDVIC are state-owned, trial of an ac on invol vi ng ei ther of them by a Venezuel an cour t coul d be affect ed by poli cal cons i der a ons . On t he l a er aspect , he r ef er red t he J udge t o a repor t of t he Interna onal Bar As soci a on Human Right s I ns tute of Marc h 2003, whic h suggest ed t hat t he Venezuelan Government was undermining the posi on of some judges and that some judi ci al decisions are seen as poli cal ly mo vated.

64 Miss Healy pointed to PDVIC's contrary expert evidence that the Supreme Court of Venezuela had considerable experience of insurance and reinsurance cases, including those where risks had been placed in the London market. As to the IBA Human Rights Ins tut e' s 2003 report, she said that its cri ci sms of pol i cal interf erence i n Venezuel an cour t s was not dir ect ed to commercial cases before the Supreme Court, the judges of which are permanent appointees. She also referred to PDVIC's expert's evidence to the effect that the Supr eme Cour t had ma ny me s found agai ns t PDVSA and/or PDVI C not wi ths tandi ng that they are stat e- own ed.

65 The Judge's response in paragraph 34 of his judgment to those concerns was that English courts should not, without cogent evidence, prefer English jurisdic on t o t hat of anot her jurisdic on on the ground that jus ce wil l not be done i n t hat other juri sdi c on. He s aid:

‘It is well-known that the poli cal si tua on i n Venezuel a has been i n t urmoi l in r ecent months and that as a result there has been some disrup on of publ ic ser vi ces , but despite that I do not think that the evidence on which … [Limit] … [relies] provides sufficient grounds for thinki ng t hat i t wou l d not be pos s i ble f or a disput e of this kind t o be resolved in Venezuela fairly and within a reasonable period of me . … i t i s by no means clear that the comments made in … [the 2003] report were directed to the Supreme Court or to the kind of li ga on i nvol ved i n t his case. In The Abidin Daver [1984] AC 398 , at pages 410–411 Lord Diplock pointed out that it is not appropriate for the court to embark upon a comparison of the quality of jus ce obt ai nabl e in a for ei gn jurisdic on wi th that obt ai nabl e in thi s count ry; if a cl ai ma nt wi shes to cont end that he will not obtain jus ce in anot her jur i sdi c on he mus t say so candi dly and suppor t his argument with cogent evidence. In the present case neither of those requirements is sa sfied and accordingl y I do not cons i der this to be a proper fact or to t ake i nto account when considering the exercise of my discre on. ’

66 In my view, for the reasons advanced by Miss Healy and those given by the Judge, his decision on this aspect cannot be faulted. The asser ons ma de by Li mi t of *538 the dangers of incompetent or poli cal ly bi ased deci si ons if the ma ers wer e t o be t ried i n Venezuel a r equi r ed much stronger eviden al suppor t than Li mi t put bef or e hi m.

General conclusion

67 The exercise for the Judge, as I have said, is one of discre on, not the appl ica on of a r igid or mathema cal anal ysi s as to pr obabi li es or l i kel i hood, in t he i ndi vidual wei ghi ng of relevant factors. Factors to be taken into account, include: the nature of the dispute; the legal and prac cal issues likel y to ar i se, or that coul d cause si gni ficant difficul es in one jur i sdi c on rather than another if they did arise; ques ons as to l ocal knowl edge; avai labi lity of evi dence; and efficiency, expedi on and economy, not only in the t r ial of t he i nstant proceedi ngs, but also i n related proceedings that, in the interests of jus ce shoul d be tri ed i n the same j ur i sdi c on and/or with it. Whilst, at the early stage of proceedings at which the issue of forum conveniens normally arises for decision, an English court should look beyond theore cal di fficul es for tr i al in one jurisdic on rat her than anot her , it does not fol low that it shoul d onl y take int o account such difficul es i f it is sa sfied that they ar e l i kel y i n the sense of al r eady bei ng evi den al l y supported, though such evidence where it is available is, of course, helpful. It is permissible, as the Judge did here, to form his own view of what is likely and what is not likely though possible,

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and, in the la er case, to take account of ser ious pr obl ems that wo ul d flow f rom c hoi ce of one jurisdic on rat her than anot her if it we r e to ar i se.

68 The test of likelihood of issues arising at trial, to the extent that it is a guiding factor in the exercise of judicial discre on in thi s cont ext , is count er bal anced by the Spiliada requirement. As I have said, applying it to the circumstances of this case, as neither of the losses giving rise to claims has any close connec on wi th thi s count ry, it wa s for Li mi t to per suade the Judge that England is the appropriate forum for the trial of the ac on, not for PDVI C to show to the contrary. And, where, as here, a number of factors are presented to the Judge in support, the Judge must clearly exercise his discre on i n the round, wi th al l of them i n mi nd. I do not consider that the Judge erred in his individual treatment of the various factors put before him or in his overall exercise of discre on to set asi de Gr os s J' s or der gr an ng Limit leave t o s erve outside the jurisdic on.

69 As Lord Templeman observed in Spiliada , at 465E-G, the answer in each case is pre-eminently a ma er for the tri al judge, and an appel lat e cour t shoul d be sl ow to int er fer e. Po er LJ , in gr an ng permis si on t o appeal , clear l y had t his cau on i n mi nd , obser vi ng t hat t he Judge's ruling on forum conveniens on its own would not have merited permission, a sen me nt with which, as I have indicated, I agree. Even pu ng Limit 's case at i ts highes t , it cannot be sai d that the Judge's decision showed any error of principle or fell outside Lord Fraser's formula on in G v G (Minors: Custody Appeal) [1985] 1 WLR 647, HL of ‘the generous ambit within which a reasonable disagreement is possible’.

*539

70 Accordingly, I would dismiss the appeal and uphold the Judge's decision for the reasons that he gave.

Tuckey LJ:

71 I agree that this appeal should be dismissed for the reasons given by Auld LJ. I also agree with the note of cau on sounded by Cl ar ke LJ in the first par agraph of his j udgmen t .

Clarke LJ:

72 I agree that this appeal should be dismissed for the reasons given by Auld LJ. I wish to add a comment on a very narrow aspect of the forum conveniens part of the case. It is to my mind important that, in general, where a defendant wishes to set aside an order for permission to serve out of the jurisdic on on the basi s that the ac on i nvol ves or may i nvol ve i ssues whi ch i t would be appropriate should be tried in a court or courts outside the jurisdic on, i t i s incumbent upon him, so far as possible to iden fy the issues concer ned and to stat e as cl ear l y as possible how they arise or may arise in the proceedings. That is so even though, on such an applica on, the bur den of pr ovi ng that Engl and is the mo r e appr opr iat e for um for the tri al of the ac on is on the cl ai ma nt . It is not appr opr iat e for a def endant me r el y to specul at e as to the issues which might arise.

73 There is I think some force in Mr Mille 's submi ssi on that PDVI C has indul ged in an el eme nt of specula on i n thi s case. Howe ver , each case depends upon i ts own f acts. The gener al approach iden fied above seems to me t o have par cular appl i ca on to a c laim by an ins ured or reinsured or retrocedents for posi ve rel ief , wh er eas thi s case is unusual in that it is a cl ai m for a declara on of non- liabi lity by ret rocessi onai res i n ci rcums tances i n wh i ch i t i s far from clear what issues may ul ma t el y ar i se betwe en int er ests fur ther up the line. The nat ur e of those issues will be relevant to the issues ul ma t el y to be det ermi ned as betwe en PDVI C and Li mi t.

74 In all the circumstances I detect no error of principle on the part of the judge. It was a ma er for the judge to weigh many differ ent aspects of the case in the round in the exer ci se of hi s discre on. I agree wi th Aul d LJ that ther e i s no basi s upon wh i ch thi s cour t coul d pr oper l y interfere with the way in which the judge exercised his discre on on the facts of thi s case.

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(Appeal dismissed) *540

© 2011 Sweet & Maxwell

Page1

Status: Posi ve or Neut ral Judi ci al Tr eatme nt

FR Lürssen Wer Gmb H & Co KG v Ha l le

Queen’s Bench Division (Commercial Court)

29 October 2009

[2009] EWHC 2607 (Comm)

[2010] C.P. Rep. 11

Simon J. :

October 29, 2009

Agreements; Applicable law; Commission; Contract terms; Dispu ng the cour t' s jur i sdi c on; Forum non conveniens; Service out of jurisdic on; Shi pbui ldi ng

H1 Construc on cont ract betwe en Ge rma n comp any and Ame r ican ci zen—ag r eemen t to be construed in accordance with English law—subsequent commission agreement silent as to governing law—whether claimant had demonstrated a good arguable case that commission agreement governed by English law—CPR Pt 11 and r.6.36—Rome Conven on art.3

H2 Applica on by the defendant (H) for an order under CPR Pt 11 that the court had no jurisdic on to hear a cl ai m comme nced in Engl and by the cl ai ma nt (L) in respect of sums said to be due under a commission agreement made between the par es .

H3 L, a German shipbuilding company and H, an American ci zen, had ent er ed int o a vessel construc on cont ract (VCC) for the cons truc on of a mot or yacht for a pri ce of €48 million. The VCC provided that disputes should be se led under the Rul es of Arbitra on of the London Ma r i me Arbi t rators Ass oci a on and t hat t he contr act woul d be construed in accordance with English law. The par es subsequent l y ent er ed int o a commission agreement whereby 5 per cent of the sale price would be payable by H to L if the yacht was purchased by a client introduced by L. Nothing was said about how any dispute would be resolved or which system of law governed the agreement. Later, the par es ent er ed int o an agreeme nt to termi nat e the VCC wh i ch wa s al so to be cons trued in accordance with English law. In the present ac on, L cl ai me d that the yacht had been sold to a purchaser that it had introduced at a price of €73 million and that it was en tled to 5 per cent of that pr i ce. Leave to ser ve the cl ai m for m out of the jur i sdi c on was granted to L on the basis that the claim had been made in respect of a contract which was governed by English law within the meaning of CPR r.6.36 and CPR PD 6B 3.1(6)(c) .

H4 Issues for considera on by the cour t we r e: (i ) wh et her L had demo ns trat ed a good arguable case that the agreement was governed by English law; (ii) whether there was a serious issue to be tried; and (iii) whether England was the forum conveniens .

H5 In rela on to the first i ssue, H a rgued t hat i t did not foll ow f rom t he f act that the par es had expr essl y sel ected Engl ish l aw to appl y to the VCC, that they i nt ended English law to apply to a one-off commi ssi on ar rangeme nt ; t he exi stence of t he commission agreement did not depend on the VCC but on the existence of the vessel, and the terms under which the vessel had been built were irrelevant to the proper opera on of the commi ssi on agreeme nt ; nei ther of the par es had par cular l inks to England; and there was no link between England and the performance of either party’s

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obliga ons under the commi ssi on agreeme nt . In rel a on t o t he second i ssue, H a rgued, inter alia, that no introduc on resul ng i n t he pur chase of the yacht had ever taken place; he had been bought out of the VCC and a sale had subsequently taken place between L and a third party. In rela on to the thi rd issue, H ar gued that Ge rma ny wa s the more natural forum for the dispute than England; none of the likely witnesses were based in London; and none of the relevant documenta on wa s l ikel y to be l ocat ed within the jurisdic on.

H6 Held, refusing the applica on:

Issue 1: whether it could be shown that English law governed the commission agreement to the required standard

H7 The commission agreement was governed by the Rome Conven on on the Law Applicable to Contractual Obliga ons wh er eby: (1) as an int er na onal conven on, t he Rome Conven on shoul d be int er pr et ed on the basi s of an “aut onomo us” rat her than a par cul ar na onal or Engl i sh l aw a ppr oach; (2) thi s i nvol ved a pur pos i ve appr oach t o interpreta on rat her than a nar row or liter al appr oach; (3) a cour t shoul d not strai n to find a choi ce of law wh er e none exi sted; (4) ar t.3 of the Rome Conven on envi saged an implied choice of governing law provided it was a real choice which was demonstrated with reasonable certainty and sufficient clari ty eit her from t he t erms of the cont r act as a whole or from the surrounding circumstances; (5) the possibility of such an implied choice of law did not permit the court to infer a choice of law where there was no clear inten on to ma ke such a choi ce; and (6) an examp l e of a real but imp l ied choi ce of law might be demonstrated where there had been an express choice of law in related transac ons betwe en the same par es ( [22] and [ 33] ) .

H8 Applying these principles, it was clear that a choice of English law had been demonstrated from the circumstances. The VCC had made a clear and express choice of English Law, and that choice was not simply incidental to the choice of arbitra on to se le di sput es . The VCC wa s cl ear ly cl osel y rel at ed to the commi ssi on agreeme nt : i t en rel y gover ned t he par es’ pr i or comme r cial rela onshi p and i t s per f ormanc e formed the factual background to the rela onshi p c reat ed b y t he c ommi ssi on agreement. The commission agreement was at the very least an “associated or succeeding contract”. Furthermore, although the termina on agreeme nt had been made a er the commi ssi on agreeme nt , the par es had express l y chosen Engl i sh l aw a s the governing law for that agreement. That choice threw significant l ight on wh at the par es wo ul d have agreed if they had tur ned thei r mi nds to wh at law shoul d gover n the commission agreement. The par es wo ul d inevi tabl y have chosen Engl ish law, as they had chosen it to govern their other contractual rela onshi ps . Al though cons i der a on of subsequent conduct to construe an earlier transac on ran count er to pr inci pl es of English law, it was legi ma t e to cons i der the terms of a l at er cont ract betwe en the par es as par t of the “ci rcums tances of the case” under ar t.3. 1 of the Rome Conven on ([34]–[38]).

Issue 2: whether there was a serious issue to be tried

H9 CPR r.6.37(1)(b) required that a claimant adduce evidence sta ng that he bel ieved

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his claim had “a reasonable prospect of success”. In the present case, it was at least arguable that commission was s ll payabl e in ci rcums tances wh er e H had been bought out of the VCC at a profit to hi m and a new sal e had then taken pl ace wi th a thi rd par ty on the basis that the vessel had been purchased by a client introduced by L ([39], [47] and [48]).

Issue 3: whether England was the forum conveniens

H10 The principles were well established whereby: (1) a claimant must show that England was clearly the most suitable forum for the trial of the issues, taking into account the convenience of the par es and the int er ests of jus ce; (2) whe r e t he onl y basis relied on by a claimant to establish jurisdic on wa s that the cl ai m had been ma de in respect of a contract governed by English law, par cul ar cau on wou l d be r equi r ed, and the burden on the claimant of showing good reasons jus fyi ng ser vi ce out of the jurisdic on wa s a “par cul arl y heavy one”; (3) alt hough different expr es si ons had been used to characterise the nature of the jurisdic on, i t wa s cl ear l y recogni sed that i t would be an excep onal cour se to requi re a for ei gn per son to l i gat e i n t he Engl i sh court purely on the basis that English law was the governing law of the contract; and (4) the fact that English law was the governing law may or may not be of importance depending on the circumstances of the case and the relevant issues ([49]).

H11 Applying these principles to the present case, the English court was clearly the most convenient court for the determina on of the i ssues ar i si ng under a cont ract clearly governed by English law. The legal issues were very likely to be determined in accordance with English law and it was likely that this would involve the applica on of principles which were not en rel y strai gh orwar d. It wou l d plainly be sens i ble f or these issues to be determined by a court which was experienced in dealing with such ma er s. Although neither of the par es wa s Engl ish, they had bot h been cont ent to se le t hei r disputes by reference to the London Mari me Ar bi trat or s As soci a on, and t her efore England was a place where they must be taken to have foreseen disputes might be determined ([53]).

H11Rules of Court referred to:

CPR rr.6.36 and 6.37(1)(b)

CPR Pt 11

CPR r.24.2

CPR PD 6B 3.1(6)(c)

H12Statutory materials referred to:

Contracts (Applicable Law) Act 1990

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Rome Conven on on the Law Appl icabl e to Cont ractual Ob l iga ons

Rules of Arbitra on of the London Ma r i me Arbi t rators Ass oci a on

H13Cases referred to:

Aeolian Shipping SA v ISS Machinery Services Ltd (The Aeolian) [2001] EWCA Civ 1162; [2001] 2 Lloyd’s Rep. 641

American Motorists Insurance Co (Amico) v Cellstar Corp [2003] EWCA Civ 206

Bols Dis ller ies BV (tradi ng as Bol s Royal Di s l leri es) v Super i or Yacht Services Ltd [ 2006] UKPC 45; [2007] 1 W.L.R. 12; [2007] 1 All E.R. (Comm) 461

Canada Trust Co v Stolzenberg (No.2) [1998] 1 W.L.R. 547; [1998] 1 All E.R. 318 CA (Civ Div)

Carvill America Inc v Camperdown UK Ltd [2005] EWCA Civ 645

Cherney v Deripaska [2008] EWHC 1530 (Comm)

Egon Oldendorff v Li ber a Cor p (No . 2) [1996] 1 Ll oyd’ s Rep. 380 QBD

Ilyssia Compania Naviera SA v Ahmed Abdul-Qawi Bamaodah (The Elli 2) [1985] 1 Lloyd’s Rep. 107 CA (Civ Div)

Limit (No.3) Ltd v PDV Insurance Co Ltd [2005] EWCA Civ 383

Novus Avia on Ltd v Onur Ai r Tasi ma ci lik AS [2009] EWC A Ci v 122

Spiliada Mari me Cor p v Cansul ex Ltd (The Spi liada) [1987] A. C. 460; [1986] 3 W. L. R. 972; [1986] 3 All E.R. 843 HL

H14 Representa on

Andrew Thomas (instructed by Wilmer Hale LLP ) for the applicant.

David Lewis (instructed by Holman Fenwick Willan ) for the respondent.

JUDGMENT

Simon J.:

The applica on

1 This is the hearing of the defendant’s applica on under CPR Pt 11 challenging the jurisdic on of thi s cour t to hear a cl ai m comme nced i n Engl and by the cl ai ma nt i n respect of sums said to be due under a Commission Agreement.

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2 Three ques ons ar i se: i) whether the claimant has demonstrated a good arguable case that the agreement is governed by English law;

ii) whether there is a serious issue to be tried; and

iii) whether England is the forum conveniens ?

3 The defendant argues that the answer to each ques on (appl yi ng the requi si te legal test) is: no.

The claimant submits that the answer to each ques on (agai n, appl yi ng the appr opr iat e legal test) is: yes.

Background to the claim

4 The claimant is a German shipbuilding company. The defendant is an American ci zen and a resident of the state of Florida.

5 On April 15, 2005 the par es ent er ed int o a Vessel Cons truc on Cont r act (VCC) for the construc on of a 20m Mo t or Yacht (the Nemo ) for an adj us tabl e pr i ce of €48 mi llion. On the same date they entered into a similar contract for a vessel (the Shark).

6 It is convenient to focus on the terms of the Nemo contract, in which the defendant was referred to as the purchaser and the claimant as the builder.

By cl.1.9 the comple on dat e wa s to be Ma y 31, 2007 and by cl .1. 30 the own er wa s to have the same meaning as the purchaser. In each VCC there were specified staged payments to be made over the course of construc on.

Clause 3.2 provided for 50 per cent of the price to be paid at the date the keel was laid (no earlier than January 1, 2006), and a further 20 per cent on the date the hull and superstructure were welded together (no earlier than June 1, 2006).

The delivery of the Nemo was to take place on May 31, 2007, and the Shark on March 31, 2008.

Clause 8.4 provided that for the purposes of securing payments made and as security for any claims, tle wa s to pass at the dat e of keel -layi ng.

7 Of par cul ar rel evance i n the cont ext of the pr esent appl ica on are cl l .20 and 21. Clause 20 is comprehensive Arbitra on Cl ause, wh i ch pr ovi des ( subj ect t o var ious qualifica ons ) that di sput es ari sing out of or in connec on wi th the VCC s houl d be se led under the Rul es of Ar bi tra on of the London Mar i me A r bi tr ator s Associ a on (the LMAA). Clause 21 was headed “Law”:

This Contract shall be construed in accordance with and shall be governed by English Law, however and always provided that, the s pul a ons of thi s Cont r act shall prevail. With regard to tle wi thi n Ge rma ny, the Pr e De l iver y Mo r tgage and the registra on wi th the Ge rma n shi pbui ldi ng regi ster , Ge rma n Law wi ll be applicable insofar as this law is mandatory ( lex rei sitae ).”

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8 On May 8, 2008 the par es ent er ed i nt o the Commi ssi on Agreeme nt dat ed Ma y 8, 2008. The Commission Agreement provided, amongst other ma er s, that i f the vessel were purchased by a client introduced by the claimant then a commission of 5 per cent of the sale price would be payable by the defendant to the claimant.

9 The Commission Agreement’s en re terms we r e expr essed as fol lows :

It has been agreed between [the claimant] and [the defendant] that, in the event that the yacht ‘Nemo’ or ‘Shark’ is purchased by a client introduced to the yacht and the Owner, by [the claimant] or one of its representa ves , a commission of 5 per cent of the sales price will be payable to [the claimant] by [the defendant] no later than 15 days from the sale becoming effec ve. ”

Nothing was said about how any dispute was to be resolved, or what system of law governed the agreement.

10 On July 28, 2006 the defendant granted to the claimant, for the week beginning on July 28, the exclusive right to sell the Nemo at a price of €71.5 million.

11 In the event a deal was struck whereby the Nemo was sold to a third party buyer; and there were nego a ons bet wee n t he cl aiman t and t he def endant , amon g other ma er s, about wh o shoul d pay for cer tai n legal fees . In the cour se of thi s nego a on, the claimant sent an email to the defendant dated August 9, 2006 which it will be necessary to consider later in this judgment.

12 On August 17, 2006 the par es ent er ed int o an agreeme nt to termi nat e the VCC for the Nemo.

13 The VCC of April 15, 2005 was defined as the or igi nal cont ract; and cl .1. 1 pr ovi ded for the termina on of the or i gi nal cont ract in these terms :

[The claimant] and [the defendant] will, by mutual agreement, and without any further liability on either part, other than as contained in this Agreement, terminate the Original Contract with effect from the Da t e of comp l e on of the closing of this Agreement as set out in Cl.3.2 below (the ‘Closing Date’).”

Clause 7 dealt with Law and Arbitra on

This Agreement will be construed in accordance with and be governed by English law and the provisions of Clauses 20.4, 20.5, 20.6 and 20.8 of the Original Contract shall apply to this Contract as if set out in full herein, provided that the words ‘with the amount in controversy thought to be more than €25,000’ shall be deemed to have been deleted from Clause 20.4 of the Original Contract.”

14 In this ac on the cl ai ma nt cl ai ms that the vessel wa s, i n due cour se, sol d to a purchaser introduced by the claimant for a price of €73 million; and it makes a claim for 5 per cent of that price: €3,650,000.

15 On February 27, 2009, the claimant issued a claim form making a claim under the Commission Agreement for this sum.

16 Leave to serve the claim form out of the jurisdic on wa s gr ant ed by Bl ai r J. on the

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same date, on the basis that claim was made in respect of a contract which was governed by English law, within the meaning of CPR r.6.36 and CPR PD 6B 3.1(6)(c) .

17 The applica on for leave to ser ve out wa s suppor ted by a wi tness stat eme nt of Ms Pitroff wh i ch cont ended t hat t her e i s a good ar guabl e case t hat t he Commi ssi on Agreement was governed by English law, noted the defendant’s reliance on cl.1.1 of the Termina on Agreeme nt to suppor t the ar gume nt that he wa s under no fur ther liabi lity, submi ed that ther e wa s a real i ssue to be tried betwe en the par es and t hat the claimant had a reasonable prospect of success, and asserted that there was no more convenient forum for the determina on of the issues .

Those points prefigur ed the thr ee issues wh i ch the cour t faces on thi s appl ica on.

18 On July 1, 2009 the defendant issued the present applica on seeki ng an or der : i) declaring that the court has no jurisdic on, or al ter na vel y shoul d not exerci se i ts jurisdic on;

ii) se ng asi de t he order of Blair J. of Febr uar y 27, 2009 giving permis si on t o s erve t he claim form out of the jurisdic on;

iii) for costs to be paid by the claimant.

I turn then to the three issues that have to be decided.

The first i ssue: wh et her i t can be shown t hat Engl ish l aw gover ns t he Commi ssi on Agreement to the required standard

19 Before considering whether English law governs the relevant contract, there is the logically prior ques on: to wh at standard mu s t the cour t be sa sfied?

20 This is common ground. The claimant (by Mr David Lewis) accepts that in the present case the claimant must show that it has much the be er of the ar gume nt that Engl ish law governs the Commission Agreement.

21 In my view the concession was rightly made, in the light of a number of authorita ve statements of the law: Canada Trust Co v Stolzenberg (No.2) [1998] 1 W.L.R. 547 CA Waller L.J. at 555, Bols Dis ller i es BV (tradi ng as Bol s Royal Di s l leri es) v Super i or Yacht Services Ltd [2006] UKPC 45 where at [28] the Privy Council endorsed Waller L.J.’s approach in the Canada Trust case, and Cherney v Deripaska [2008] EWHC 1530 (Comm) where Christopher Clarke J. considered the authori es at lengt h [13] –[ 44] .

The governing law

22 The Contracts (Applicable Law) Act 1990 gives effect to the Rome Conven on on t he Law Applicable to Contractual Obliga ons . Ar cle 3. 1 of the Rome Conven on provides:

A contract shall be governed by the law chosen by the par es . The choi ce mu s t be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the par es can sel ect the law applicable to the whole or a part only of the contract.”

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23 In the absence of a choice of law under art.3 the law governing a contract is determined in accordance with art.4 of the Rome Conven on .

24 It is common ground in the present case that if art.3 does not apply then the defendant’s applica on mu s t succeed, si nce ar t.4. 1 pr ovi des that the cont ract “shal l be governed by the law of the country with which it is most closely connected”, and Mr Lewis accepts that it would be difficul t to argue t hat the Commi s si on Agr eemen t i s closely connected with England and Wales, if the par es di d not choose Engl ish law as the governing law.

25 In the present case there is no “expressed” choice of law; and so the ques on for the court is: whether it is sa sfied t hat the claiman t has muc h t he be er of t he ar gument that the par es demo ns trat ed, by the terms of the cont ract or the ci rcums tances of the case, a choice of English law as the governing law of the contract with reasonable certainty.

26 Sec on 3( 3) (a) of the Cont racts (Appl icabl e Law) Ac t 1990 states that the report on the Rome Conven on by Pr of essor Ma r io Gi ul iano and Pr of essor Paul L agarde, reproduced in the Official Jour nal of the Commu n i es of October 31, 1980 [ 1980] OJ C282/1 may be considered in ascertaining the meaning or effect of any pr ovi si on of the Rome Conven on .

27 Paragraph 3.3 of the Guiliano-Lagarde Report (under the heading “Ar cl e 3” ) i s in the following terms:

The par es ’ choi ce mu s t be expr ess or be demo ns trat ed wi th r easonabl e certainty by the terms of the contract or the circumstances of the case. This interpreta on, wh i ch eme r ges from the second sent ence of Ar cle 3 ( 1) , has an important consequence.

The choice of law by the par es wi ll o en be express but the Conven on recognises the possibility that the court may, in the light of all the facts, find that the par es have ma de a real choi ce of law al though thi s i s not expr essl y stated in the contract. For example, the contract may be in a standard form which is known to be governed by a par cul ar system of law even though ther e is no express statement to this effect, such as a Ll oyd’ s pol icy of ma r i ne insurance. In other cases a previous course of dealing between the par es under contracts containing an express choice of law may leave the court in no doubt that the contract in ques on i s to be gover ned by the l aw pr evi ous l y chosen where the choice of law clause has been omi ed i n ci rcums tances which do not indicate a deliberate change of policy by the par es . I n some cases the choice of a par cul ar for um ma y show in no uncer tai n ma nner that the par es int end the cont ract to be gover ned by the law of that for um, but this must always be subject to the other terms of the contract and all the circumstances of the case. Similarly references in a contract to specific Ar cles of the French Civil Code may leave the court in no doubt that the par es have deliberately chosen French law, although there is no expressly stated choice of law. Other ma er s that ma y imp el the cour t to the concl us i on that a real choi ce of law has been made might include an express choice of law in related transac ons betwe en the same par es, or the choi ce of a place whe r e dis put es are to be se led by arbi tra on i n c ircums t ances i ndi ca ng t hat t he ar bi tr ator should apply the law of that place.

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This Ar cl e does not permi t the cour t to inf er a choi ce of law that the par es might have made where they had no clear inten on of ma ki ng a choi ce. Such a situa on is gover ned by Ar cle 4 . ”

28 This passage emphasises that the court should look to see whether there is a real, albeit implicit, choice of law which is demonstrated with reasonable certainty by all the circumstances of the case.

29 For the defendant, Mr Andrew Thomas submi ed that ther e we r e a numb er of factors which indicated that there had been no real choice of English law in the Commission Agreement: (i) Although the VCCs contained a choice of English law, this choice was made in the context of a nuanced dispute resolu on pr ocedur e wh i ch i nvol ves choos i ng LMA A arbitra on over l i ga on. I t was a choi ce whi c h reflected the mar i n e constr uc on nature of the VCCs. Mari me pr ac ce or law was of li le, i f any, rel evance to the opera on of the Commi ssi on Agreeme nt . I t di d not f ol low f rom the f act that the par es had expr essl y sel ected Engl ish law (in conj unc on wit h arbi t ra on under t he LMAA Rules) to apply to the two VCCs that they intended English law to apply to a one-off commi ssi on ar rangeme nt , any mo r e t han t hey di d t o t hei r c omme r ci al dealings generally.

(ii) The existence of the Commission Agreement did not depend on the VCCs; it depended on the existence of the vessels. The terms under which the vessels were built, the specifica ons , man uf act ure and pur chase provi sions i n r ela on t o those vessels were irrelevant to the proper opera on of the Commi ssi on Agreeme nt . Si nce there was no reason to think that a dispute between the par es i n rel a on t o t he Commission Agreement (in which no reference is made to the VCCs) would involve any issues rela ng to those cont racts, t her e wa s no reason to pr esume that the par es wo ul d have chosen the same jur i sdi c on and governing l aw t o appl y to t he issues which arose under the Commission Agreement. Furthermore, and related to this point, since the claimant’s claim in the English court is based on the premise that the arbitra on pr ovi si ons i n the VCC di d not extend to the Commi ssi on Agreeme nt , the claimant could not argue that the Commission Agreement was a mere varia on of , or annex to, the VCC.

iii) Neither of the par es had par cul ar l inks to Engl and, nor i s ther e any l ink bet wee n England and the performance of either party’s obliga ons under the Commi ssi on Agreement. The claimant is a German Company and the defendant is a ci zen of the United States. It follows that whatever the performance which is characteris c of the Commission Agreement (which is relevant to the test under art.4.2 ) the law of the country which was most closely connected to the Commission Agreement was not English law. Furthermore, the Commission Agreement was signed in Germany during a business trip by the defendant.

30 For the claimant, Mr Lewis submi ed: (i) The express choice of English law in the related and preceding contracts: the two VCCs (and, to a lesser extent, the arbitra on cl ause i n wh i ch the ar bi trat or s wo ul d apply English Law) were of decisive effect. The Commi ssi on Agreeme nt wa s ent er ed

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into against the commercial background of two contracts which the par es had agreed that English Law should govern. The claimant would come to hear of any interest in the vessels from poten al thi rd par ty buyer s because i t wa s bui ldi ng the vessels. Importantly, the claimant would know the stage the building had reached (a highly material ma er to any pur chaser ), on account of its per forma nce of the VCCs .

ii) He accepted that the Commission Agreement was a free-standing contract; but submi ed that the factual cont ext wa s the exi stence and per forma nce of the VCCs. He relied on a passage in Dicey, Morris & Collins on The Conflict of Laws, 16th edn, at para.32-093 which emphasised the importance of a course of commercial dealing. The second example given by the Giuliano-Lagarde Report is that ‘a previous course of dealing between the par es under cont racts containing an express choice of law may leave the court in no doubt that the contract in ques on is gover ned by the law pr evi ous l y chosen wh er e the choi ce of law clause has been omi ed i n ci rcums tances wh i ch do not i ndi cat e a deliberate change of policy by the same par es ’ . To that examp l e of pr evi ous contractual arrangements the Report later adds the example of ‘an express choice of law in related transac ons betwe en the same par es’ . These are bot h references to differ ent cont racts betwe en t he s ame par es, whe r e i t wi l l undoubtedly be the normal inference that, if one of their contracts is clearly governed by one law, then associated or succeeding contracts will be governed by the same law.”

iii) As a back-up point he relied on the fact that English law had been agreed as the Governing Law of the Termina on Agreeme nt , wh i le recogni si ng the di fficulty, as a ma er of Engl ish law, that the Termi na on Agr eemen t came some t hree mon t hs a er the Commission Agreement.

31 I have considered all these submissions when coming to my conclusion.

Discussion and conclusion on first issue

32 A number of cases were cited by the par es as pr ovi di ng gui dance on the pr oper resolu on of thi s issue: Egon Oldendorff v Li ber a Cor p (No . 2) [1996] 1 Ll oyd’ s Rep. 380 at 387, Aeolian Shipping SA v ISS Machinery Services Ltd (The Aeolian) [2001] 2 Lloyd’s Rep. 641 at [16] and American Motorists Insurance Co (Amico) v Cellstar Corp [2003] EWCA Civ 206 .

33 A number of broad principles are clear: (1) Since the Rome Conven on i s an i nt er na onal conven on i t ought t o be interpreted on the basis of an “autonomous” rather than a par cul ar na onal or English law approach. Its interpreta on and its appl ica on t o f act s ought , in pri nci ple, to be the same in all states who are party to the Conven on.

(2) This involves a purposive approach to interpreta on rat her than a nar row or liter al approach, see for example the Egon Oldendorff case at 387r .

(3) A court should not strain to find a choi ce of law wh er e none exi sts. Thi s is imp l ici t both from the terms of art.3 and from the existence of art.4 which applies in the

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absence of choice.

(4) Ar cl e 3 envi sages an imp l ied choi ce of Gover ni ng Law pr ovi ded it is a real choi ce which is demonstrated with reasonable certainty and sufficient clari ty eit her from t he terms of the contract as a whole or from the surrounding circumstances, see the wording of art.3.1 and the terms of the Giuliano-Lagarde Report referred to above.

(5) The possibility of such an implied choice of law does not permit the court to infer a choice of law where there was no clear inten on to ma ke such a choi ce, see agai n the Giuliano-Lagarde Report and The Aeolian per Po er L. J. at [16] . The fact that the cour t regards such a choice as being reasonable is plainly insufficient , see t he Amico case per Mance L.J. at [44].

(6) An example of where a real (albeit implied) choice of law may be demonstrated, is where there has been an express choice of law in related transac ons betwe en the same par es , see the Gi ul iano- Lagarde Repor t.

34 Applying these principles to the standard required I have concluded that a choice of English law has been clearly demonstrated from the circumstances. The VCCs made a clear and express choice of English law; and that choice was not simply an incident of the choice of arbitra on to se le disput es. The VCCs wer e plainly closel y related t o t he Commission Agreement: they en rel y g over ned t he p ar es’ pr i or co mme r cial rela onshi p and thei r per for ma nce forme d the factual background to the rel a onshi p created by the Commission Agreement. The Commission Agreement was, to use the expression in the passage of Dicey at para.32-093 which I have previously cited, at the very least an “associated or succeeding contract”.

35 For these reasons I answer the ques on posed in the first i ssue: yes.

36 I have reached this conclusion before considering a further point which, in my judgment, reinforces the impression that there was a clear, albeit implicit, choice of English law as the governing law of the Commission Agreement. Although the Termina on Agreeme nt wa s ma de a er the Commi s si on Agr eemen t , agai n t he par es expressly chose English law as the governing law. It was a rela vel y shor t agreeme nt (just over three pages and eight paragraphs); but the choice of law was clear and unequivocal. I do not overlook Mr Thomas’s point that this would have been the natural choice of law since it was bringing to an end agreements which were expressly governed by English law; but it seems to me that it throws significant light on wh at the par es wo ul d have agreed if they had tur ned thei r mi nd to wh at law shoul d gover n the rela onshi p establ ished by the ver y shor t Commi ssi on Agreeme nt . Si nce nei ther si de an ci pat ed a br each it seems hi ghl y unl ikel y that they wo ul d have agreed Ge rma n law or the law of the state of Florida. In my judgment they would inevitably have chosen English law, as they chose it to govern their other contractual rela onshi ps .

37 In Dicey, Morris & Collins at para.32-059, the editors express cau ous suppor t for the proposi on that the cour ts ma y cons i der subsequent conduct.

The Rome Conven on does not d eal e xpr essl y wi th t he ques on. The Giuliano-Lagarde Report recognises that a choice of law may be inferred ‘in the light of all the facts’, and that in order to determine the country with which the

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contract is most closely connected ‘it is also possible to take into account factors which supervened a er the concl us i on of the cont ract. ’ The Engl ish vi ew that subsequent conduct cannot be taken into account in construing a contract is not shared by other countries, and it would not be in keeping with the spirit of the Rome Conven on to appl y it so as to def eat the int en ons of the par es. It is suggested, with some hesita on, that the Engl ish cour t shoul d be en tled to take subsequent conduct into account, at least to the extent that it sheds light on the inten on of the par es (or on t he count r y wit h whi ch t he cont r act is most closely connected) at the me the cont ract wa s concl uded. ”

See also para.32-091.

38 As Dicey, Morris & Collins notes, considera on of subsequent conduct to cons true an earlier transac on runs count er to pr i nci pl es of Engl ish law; but it seems to me (al bei t with some diffidence i n view o f the cau ous expr es si on of opini on i n Di cey, Morr i s & Collins ) that it is legi ma t e to cons i der the terms of a l at er cont ract betwe en the par es as par t of the “ci rcums tances of the case” under ar t.3. 1 .

The second issue: whether there is a serious issue to be tried?

39 CPR 6.37(1)(b) requires that a claimant adduce evidence sta ng that he bel ieves hi s claim has “a reasonable prospect of success”. The Court of Appeal has made clear that this threshold is the same as if the claimant were resis ng an appl ica on by the defendant for summary judgment, i.e. “the claimant has no real prospect of succeeding on the claim” ( CPR r.24.2 ), see Carvill America Inc v Camperdown UK Ltd [2005] EWCA Civ 645 .

40 For the defendant Mr Thomas submi ed that ther e are a numb er of i ssues to be tried. His purpose was both to iden fy the i ssues rel evant to the ar gume nt on forum conveniens and to argue that the claimant had no real prospect of succeeding on the claim. This approach follows the guidance given by Clarke L.J. in Limit (No.3) Ltd v PDV Insurance Co Ltd [2005] EWCA Civ 383 at [72]:

It is to my mind important that, in general, where a Defendant wishes to set aside an order for permission to serve out of the jurisdic on on the basi s that the ac on invol ves or ma y invol ve issues wh i ch it wo ul d be appr opr i at e shoul d be tried in a court or courts outside the jurisdic on, it is incumb ent upon hi m, so far as possible to iden fy the i ssues concer ned and to stat e as cl ear l y as possible how they arise or may arise in the proceedings. That is so even though, on such an applica on, t he bur den of pr ovi ng t hat Engl and i s t he mo r e appropriate forum for the trial of the ac on is on the cl ai ma nt .”

41 Mr Thomas iden fies three i ssues : (a) whe t her the cl aiman t i s es t opped f r om claiming or waived the right to claim the commission; (b) whether the Termina on Agreement discharged the obliga on to pay commi ssi on; (c) wh et her the cl ai ma nt i s en tled to commi ssi on under the Commi ssi on Cont ract as a ma er of cons t ruc on?

42 The estoppel/waiver argument is based on part of an email sent to the defendant at 14.59 on August 9, 2006 by Mr Schmidt of the claimant.

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On our part as I have told you before, we do not benefit from thi s sal e at al l. Indeed, in order to maintain our rela onshi p wi th the New Buyer as cus tome r of the Yard in another transac on, we have agreed wi th you, on the basi s that the sale to the New Buyer goes ahead, to give up a valid claim for in excess of €800,000.”

Mr Thomas submi ed that ther e wa s a cl ear repr esent a on t hat the claiman t s wer e not benefi ng f rom t he sal e whi ch f orms the bas i s of the claim.

43 In my view considera on of the pr ior exchange demo ns trat es at l east that i t i s arguable that this exchange was in the context of who should pay the legal fees incurred by the defendant in the sale to the “New Buyer”. It is at least arguable that the claimant was saying no more than that it was not benefi ng f rom a sal e t o whi ch i t was not a party. To suggest, as Mr Thomas did, that the defendant would be en tled to Pt 24 judgment on this issue is to overstate the strength of the defendant’s case to a considerable degree: not least because the defendant’s argument on reliance is, at the moment, exiguous.

44 The argument on the Termina on Agreeme nt is based on cl .1. 1:

[The claimant] and [the defendant] will, by mutual agreement, and without any further liability on either part, other than as contained in this Agreement, terminate the Original Contract with effect from the Da t e of comp l e on of the closing of this Agreement as set out in Clause 3.1 below.”

45 Again it seems to me to be at least arguable that this clause, which makes no reference to the Commission Agreement, was doing no more than bringing to an end the VCC, which was defined as the or igi nal agreeme nt in the pr eamb l e.

46 The construc on ar gume nt i s f ounded on t he wo r ds “i s pur chased by a cl ient introduced to the yacht and its owner by [the claimant]” in the Commission Agreement. Mr Thomas’s skeleton argument claims:

In fact, no introduc on resul ng i n t he pur chase of ei t her yacht from [ the defendant] ever took place … Instead, [the defendant] was bought out of the Nemo Contract and a sale was then effected bet we en [the cl ai ma nt ] and the third-party client Nemo Shipping Limited.”

47 Again, it is clearly at least properly arguable that commission was s ll payabl e i n circumstances where the defendant was bought out of the VCC at a profit to hi m and a new sale was then effected to a thi rd par ty; on the basi s that the vessel wa s pur chased by a client of the claimant introduced to the yacht and to the defendant by the claimant.

48 I have therefore concluded that there are three serious issues to be tried, as iden fied above.

The third issue: whether England is the forum conveniens?

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49 Again, a number of cases were cited, although the principles to be applied are now well-established:

(1) A claimant must show that England is clearly the most suitable forum for the trial of the issues taking into account the convenience of the par es and the int er ests of jus ce, see Spiliada Mari me Cor p v Cansul ex Ltd (The Spi liada) [1987] A. C. 460 per Lord Goff at 481D- E, and the Limit (No.3) case per Auld L.J. at [39].

(2) Where the only basis relied on by a claimant to establish jurisdic on i s that the claim is made in respect of a contract governed by English law, par cul ar cau on wil l be required, and the burden on the claimant of showing good reasons jus fyi ng service out of the jurisdic on is a “par cul arl y heavy one”: Ilyssia Compania Naviera SA v Ahmed Abdul-Qawi Bamaodah (The Elli 2) [1985] 1 Lloyd’s Rep. 107 at 113, at 479–480 and Novus Avia on Ltd v Onur Ai r Tasi ma ci lik AS [2009] EWC A Ci v 122 per Lawrence Collins L.J. at [32].

(3) Although differ ent expr essi ons have been used to char acter i se the nat ur e of the jurisdic on, i t i s cl ear ly r ecogni sed t hat i t i s an excep onal cour se t o r equi r e a foreigner to li gat e i n the Engl ish cour t pur el y on the basi s that Engl ish l aw i s the Governing law of the contract. It may be a less excep onal cour se, as Mr Thoma s acknowledged, where there has been a choice of law under the Rome Conven on .

(4) The fact that English law is the Governing law may or not be of importance depending on the circumstances of the case and the relevant issues, see the Limit (No.3) case (Clarke L.J. at [72]) and the Novus Avia on case at [74], [77] & [79].

50 In the present case Mr Thomas points out that neither of the par es is Engl ish, and submits that, although the defendant should have been sued in Florida, Germany is the more natural forum for the dispute than England. The defendant has only ever visited England once in his life and there is no link between England and the performance of either party’s obliga ons under t he Commi ssi on Agreeme nt , wh i ch wa s s i gned i n Germany. He submi ed that none of the likel y wi tnesses is based in London and none of the relevant documenta on i s l ikel y to be l ocat ed wi thi n the j ur i sdi c on. If , as intended, the defendant argues that German law governs the Commission Agreement then it may be necessary to adduce expert evidence. In addi on t he di scl osur e obliga ons are mo r e extens i ve in thi s jur i sdi c on t han t hey are i n Ger man y; and t her e are also likely to be addi onal cos ts of t rans l a ng documen t s from G er man whi ch would not arise if the case were heard in Germany. Finally he drew a en on t o t he defendant’s condi onal under taki ng to submi t to the non- excl us i ve jur i sdi c on of the German courts if he failed in all his other arguments at this stage.

51 Mr Lewis submi ed that the Engl ish cour t wa s cl ear l y the mo s t appr opr iat e for um in which to determine the issues which are very likely to be governed by English law. All of the iden fied i ssues , except pos s i bly the def endant ’ s fact ual evi dence on r el i ance on the first issue, we r e issues of Engl ish law. None of the factor s rel ied on by the def endant pointed unequivocally to either Florida or German; and there was no significant difficul t y i n r ela on t o ei ther t ransl a on or di scl osure i n the l i ght of the iden fied

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issues.

52 I have taken these submissions into account.

Discussion and conclusion on third issue

53 In my judgment the English court is very clearly the most convenient court for the determina on of the issues ar i si ng under a cont ract cl ear l y gover ned by Engl ish law. On the evidence presently available the factual issues, and thus the need to call oral evidence, are confined to the first i ssue. The l egal issues are al so very l i kel y to be determined in accordance with English law; and are, in any event, unlikely to give rise to any extensive disclosure. It is likely that the first i ssue wi ll i nvol ve the appl ica on of English law principles which are not en rel y strai gh orwar d, as the argumen t on t hi s hearing has demonstrated; and it would plainly be sensible for this issue to be determined by a court which is experienced in dealing with such issues. The par es communicated in English and so any need for transla on wi ll not be si gni ficant . I take into account that neither of the par es i s Engl ish and bot h are bei ng br ought to a foreign court; on the other hand they were both content to se le thei r di sput es by arbitra on under LMA A rul es , and ther ef or e Engl and wa s a pl ace wh er e they mu s t be taken to have foreseen disputes might be determined, with such inconvenience of travelling as there might be.

54 I should add that I have also considered the compara ve conveni ence of a hear i ng in Germany and Florida; and have concluded that neither would be a convenient place for the resolu on of thi s di sput e. Ge rma ny wo ul d be an equal ly excep onal juri sdi c on so far as the defendant is concerned; and would require proof of English law; and no factor points to Florida as a convenient forum other than the defendant’s residence there.

55 Finally, I must consider the defendant’s offer to submi t to Ge rma n jur i sdi c on. Thi s i s contained in [37(b)] of Mr Thomas’s skeleton argument.

[The defendant] is prepared to give a condi onal under taki ng to submi t to the non-exclusive jurisdic on of the Ge rma n cour ts in rel a on t o t hi s disput e. Giv en that [the defendant] is a ci zen of the US A, for obvi ous reasons he wo ul d pr ef er the dispute to be determined there. Therefore, [the defendant’s] undertaking is condi onal upon the cour t findi ng agai nst [the def endant ] in r espect of hi s submissions that the English courts do not have, or should not exercise, jurisdic on because (a) ther e is not a good ar guabl e case that the Commi ssi on Agreement is governed by English law, (b) England is not a clearly more appropriate forum than Maryland or Florida, (c) the claim has no reasonable prospects of success.”

56 In my view li le we i ght shoul d be a ached t o t hi s offer. It comes very late and gi ves every appearance of being mo vat ed mo r e by tac cal cons i der a ons t han an i ntent efficient l y to r esol ve t he i ssues bet wee n t he par es; and i s , i n any event , closel y hedged with condi ons .

57 In these circumstances I answer the ques on in the thi rd issue: yes .

Summary

58 Accordingly the defendant’s applica on is ref us ed.

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Deripaska v Cherney

Court of Appeal (Civil Division)

31 July 2009

[2009] EWCA Civ 849

[2009] C.P. Rep. 48

Waller , Moore-Bick L.JJ. , and Sir John Chadwick :

July 20, 21 and 31, 2009

H2 Appeal by the defendant (D) to the Court of Appeal against an order gran ng the cl ai ma nt (C) leave to serve the proceedings out of the jurisdic on and rul ing that the pr oper pl ace to bring the claim was England.

H3 The appeal was concerned with where the trial of an ac on shoul d take pl ace. C al leged that he was en tled, by an or al agreeme nt , to a share of a Rus si an comp any, that Engl ish law and jurisdic on had been or al ly agreed and that it wo ul d not be pos si bl e to br ing the cl ai m in Rus si a as he would face assassina on, ar rest on trump ed up charges and the lack of a fai r tri al . The judge held that the claimant had a reasonable prospect of success in his claim, and indeed the be er of the ar gume nt ; that , al though ther e wa s a good ar guabl e case that Engl ish l aw and English jurisdic on had been or al ly agreed, in respect of jur i sdi c on, D had t he be er s ide of the argument; and that since it was common ground that if the contracts on which C sued were made, they were made in England, the English court had a basis for exercising its discre on to take jurisdic on under CPR r.6.20(5)(a) [now 6BPD.3-3.1(6)(a)]. The judge went on to find that although the “natural forum” was Russia, the risks inherent in a trial in Russia were sufficient to make England the forum in which the case can most suitably be tried in the interest of both par es and the ends of jus ce. The i ssues that arose on appeal wer e ( i) whe t her , if a cour t had concluded in a leave to serve out case that the natural forum was other than England, it was s ll open to the court to find that Engl and wa s the “pr oper for um” ; (i i) if the cour t can s l l concl ude England is the “proper forum”, in what circumstances can it so conclude and did the judge: (a) direct himself appropriately; and (b) if so, did he have evidence, or evidence of sufficient cogency, on which he could reach the conclusion he did; and (iii) insofar as C claimed a declara on i n t rus t, had he establ ished t hat i t c ame wi thi n wh at i s now one of t he subparagraphs in 6BPD3-3.1.

H4 Held, dismissing the appeal:

H5 (1) If a court concluded in a leave to serve out case that the natural forum was other than England, it was s ll open to the cour t to find t hat Engl and was the proper forum ( [20] , [22] ) ; Spiliada Mari me Cor p v Cansul ex Ltd (The Spi liada) [1987] A. C. 460 fol lowe d . In that case Lord Goff di s ngui shed bet wee n “nat ural ”, bei ng t he f orum wi t h whi ch t he case had t he mos t natural connec on, and “appr opr iat e”, wh i ch ma y be di fferent , to mee t the ends of jus ce. The judge in the instant case did not use “natural” and “the proper place for trial” as interchangeable otherwise his judgment makes no sense. He followed the use of the words as suggested in The Spiliada —“natural” for closest connec on and “pr oper ” as the pl ace of tri al in the interest of all par es and the ends of jus ce ( [22] ) .

H6 (2) If a natural forum other than England has been iden fied, the corr ect appr oach i s to evaluate, taking into account all factors, whether the claimant has discharged the burden of showing that England is clearly the proper forum. One factor, that jus ce cannot be achi eved in that natural forum, requires “cogent evidence”. Owners of the Las Mercedes v Owners of the Abidin Daver [1984] A.C. 398 followed . As the judge was not conduc ng a tri al , i t wa s not necessary for him to be sa sfied on t he bal ance of probabi l i es t hat f acts maki ng Engl and t he proper forum had been established. In many instances the judge will have to assess risks of

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what might occur in the future. He must have evidence that risks exist, but it is not a requirement that he should find on the bal ance of pr obabi li es that the r i sks wi l l event uat e ([27]–[29]).

H7 (3) D's submission that the court could not hold England to be the appropriate or proper forum unless there was a sufficient Engl i sh i nterest over and above t he r equi r emen t that one of the gateways, such as a contract made in England, was established. The gateways under 6BPD3 3.1 supplied the English connec on ([30] ).

H8 (4) The judge took account of the correct factors when considering whether England was a more appropriate forum for the trial of the ac on than the nat ur al for um ([56] ).

H9 (5) The judge's evalua on of the evi dence wa s based on sound reasoni ng and it wa s not for the Court of Appeal to reassess it. There was cogent evidence of a risk in the circumstances of the instant case that C would not get a fair trial in Russia ([31]–[45] and [56]).

H10 (6) D's submission that C's claim in trust did not fall within any of the subparagraphs rela ng to trus t in 6BPD3 3. 1 and that the cl ai m wa s not in respect of a cont ract and thus di d not fall within the gateway rela ng to cont racts wa s i ncor rect. The wo r ds “ in respect of a contract ” in CPR r 6.20(5)(a) (now 6BPD 3.16(a)) should be construed broadly and are wide enough to encompass a claim based on rights said to arise out of a contract, even though those rights may be of a proprietary nature ([50]–[51] and [67]).

H11 (7) Whether Russian law is the proper law, and whether Russian law recognises the concept of trust are ma er s for tri al . The fact that D has the be er of the argumen t in r ela on t o pr oper law does not mean C's case is so weak that it does not give rise to a serious issue to be tried ([53] and [67]).

H12Rules of Court referred to:

CPR rr.6.20(5)(a), (c) and (d) [now 6BDP.3-3.1(6)(a) and (c)], 6.21(2A) [now CPR 6.37(3) ]

H13Cases referred to:

Spiliada Mari me Cor p v Cansul ex Ltd (The Spi liada) [1987] A. C. 460; [1986] 3 W. L. R. 972; [1986] 3 All E.R. 843 HL

Owners of the Atlan c Star v Own er s of the Bona Spes (The At lan c Star and t he Bona Spes ) [1974] A.C. 436; [1973] 2 WLR 795; [1973] 2 All E.R. 175 HL

Owners of the Las Mercedes v Owners of the Abidin Daver [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] All E.R. 470 HL

Connelly v RTZ Corp Plc (No.2) [1998] A.C. 854; [1997] 3 W.L.R. 373; [1997] 4 All E.R. 335 HL

H14 Representa on

Mr Ali Malek Q.C. , Mr Joe Smouha Q.C. , Mr Christopher Harris (instructed by Dechert LLP ) for the appellant/defendant.

Mr Geoffrey Vos Q. C. , Mr Davi d Foxton Q. C. , Mr Davi d Lor d Q. C. and Mr J ame s We al e (instructed by Bryan Cave ) for the respondent/claimant.

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Judgment

Lord Jus ce Wa l ler :

1 This appeal is concerned simply with where the trial of an ac on shoul d t ake pl ace. Christopher Clarke J by a judgment of some 264 paragraphs dated 3rd July 2008 has granted permission to serve the proceedings out of the jurisdic on and rul ed that the pr oper pl ace to bring the claim is England. In so deciding he found (1) that Mr Cherney had a reasonable prospect of success in respect of his claim [116] and indeed that he had the be er si de of the argument that the agreements as alleged by him (rela ng to 20% of the shares in a Rus si an company known in the proceedings as ‘Rusal’) were made [119]; (2) that, although Mr Cherney had a good arguable case that English law and English jurisdic on had been or al ly agreed, he di d not have the be er ar gume nt , indeed on wh et her jur i sdi c on had been agreed Mr Der i paska had much the be er si de of the ar gume nt [144] ; and thus that CPR 6.20(5)(c) and (d) [now 6BDP.3 -3.1(6)(c ) applicable by virtue of CPR 6.36 ] were not available to Mr Cherney as a basis for the English court taking jurisdic on; ( 3) t hat s i nce i t wa s commo n ground t hat i f t he contracts on which Mr Cherney sued were made, they were made in England, the English court had a basis for exercising its discre on to take jur i sdi c on under CPR 6.20(5)(a) [now 6BPD.3 -3.1(6)(a)]. In considering whether the English court was the proper place for the proceedings to be brought under CPR 6.21(2A) [now CPR 6.37(3) ], having considered a great deal of material, he analysed the ques on in two stages ; at the first stage he f ound t hat the “nat ural forum” was Russia but at the second stage he found that “the risks inherent in a trial in Russia (assassina on, ar rest on trump ed up charges , and l ack of a fai r tri al ) ar e sufficient t o make England the forum in which the case can most suitably be tried in the interest of both par es and the ends of jus ce”.

2 In reaching that conclusion he had to consider whether, if the English court declined jurisdic on on the basi s that the nat ur al f or um wa s Rus si a, Mr Cher ney wo ul d be abl e to proceed with his claim in Russia. What he found was that Mr Cherney would never go to trial in Russia [198]. He found that Mr Cherney had a well founded fear for his own safety and that he would be more at risk in Russia than England [199]. He found that there was a significant likelihood of Mr Cherney being prosecuted if he returned to Russia and a real possibility that Mr Deripaska might use his influence, or hi s abi lity to or chestrat e feel ings agai ns t Mr Cher ney, to encourage the authori es to take that cour se, and a “di s nct pos s i bil ity that the char ges wou l d be trumped up” [201]. As regards the ques on wh et her Mr Cher ney wo ul d recei ve a fai r trial , he directed himself as to the need for circumspec on in rel a on t o any asser on t hat a fair trial could not be obtained in a foreign court and as to the need for “posi ve and cogent evi dence” [237]; he recorded the fact that it was common ground between the experts that, in certain cases, the arbitrazh courts in Russia cannot necessarily be expected to perform their task fairly and impar al ly – for examp l e wh er e “the out come wi ll affect the dir ect and mat eri al strategi c interest of the Russian state” [239]. He found that the affai rs of Rusal and Mr Der ipaska' s group of companies must be of considerable importance, including strategic importance, to the Russian state [243] and there was a close link between the Russian state and Mr Deripaska [246] and thus that there was “a significant ri sk of imp r oper gover nme nt int er fer ence if Mr Cher ney were to bring the present claims in Russia” [248]; what he also made clear was that he was not findi ng that a fai r tri al coul d never be obt ai ned in the Rus si a - on the cont rar y [247] .

3 He also found that Mr Deripaska appreciated that Mr Cherney would not go to trial in Russia relying on certain correspondence between an English public rela ons firm Mir epco L imit ed and a lawyer, or possibly a consultant, who acted for one of Mr Deripaska's companies (the Mirepco documents). One of the strategies for dealing with the li ga on out l ined i n t he r epor t was i n

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the following terms:-

“5. Russian (or other jurisdic on) j udgeme nt offset. A c ase can be opened agai nst Cherney in Russia, or any other jurisdic on wi th wh i ch t he UK has r eci pr ocal enforcement arrangements (under the Hague Conven on) . Cher ney wi ll pr obabl y not defend it, as he will not return to Russia to answer any ques ons . Thus a def aul t judgement can be obtained against him. If the case in the UK is se led or wo n by Cherney, and an amount paid, the outstanding judgement debt from the Russian case can be used to offset any such l iabi lity by us i ng i t to i mp ound any mo ney due to Cherney either under a se leme nt or a judgeme nt .”

4 Counsel before the judge told the judge on instruc ons t hat Mr Der ipaska had not commissioned that report and knew nothing about it, but no evidence was filed wh i ch offered any explana on. The j udge c oncl uded t he r epor t wa s genui ne and a r eflec on of t he assessment of Mr Deripaska and his advisers. That findi ng has not been chal lenged and ther e is s ll no evi dence to count er the inf er ence dr awn by the judge.

5 When considering at the second stage, whether England was the proper place for the trial, the judge also took account of the fact that neither party were strangers to England. Apart from the contract being made here Mr Deripaska had a house in London and a house in England outside London and considerable assets here [261].

6 As I emphasised at the outset, what the court is at present concerned with is simply where an ac on shoul d be tri ed. I appr eci at e that l i gant s do o en f eel s trongl y about t he pl ace wher e cases should be tried but disputes as to forum should not become state trials. A passage from the speech of Lord Templeman at 465 F-G in The Spiliada Mari me Cor por a on v Cansul ex Ltd [1987] AC 460 ( The Spiliada ) is worth repea ng: -

“In the result, it seems to me that the solu on of di sput es about the rel a ve mer i ts of trial in England and trial abroad is pre-eminently a ma er f or t he t ri al j udge. Commercial court judges are very experienced in these ma er s. In near l y ever y case evidence is on affidavi t by wit nes ses of acknowl e dged probi t y. I hope t hat in f uture t he judge will be allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff of Chi evel ey in thi s case in the qui et of hi s room without expense to the par es ; that he wi ll not be ref er red to ot her deci si ons on ot her facts; and that submissions will be measured in hours and not days. An appeal should be rare and the appellate court should be slow to interfere. I agree with my noble and learned friend Lord Goff of Chi evel ey that ther e we r e no grounds for int er fer ence in the present case and that the appeal should be allowed.”

7 But here we are with an appeal to this court with a mountain of material; an appellant's skeleton argument of 69 pages; respondent's skeleton of 53 pages; a reply skeleton from the appellant of 39 pages. It surely would have been be er for bot h par es and be er use of court me if they had expended thei r mo ney and thei r ener gy on figh ng t he meri t s of t he c l ai m.

8 Permission to appeal was granted by the judge because he was persuaded that there was an arguable point rela ng to wh at i s terme d the second stage i n The Spi liada test. I t i s sai d by those represen ng Mr Der ipaska that , havi ng found Rus si a to be the nat ur al for um, that wa s the end of the ma er and the cour t simp l y had no bus i ness goi ng int o the ques on whe t her a trial would ever take place in Russia or as to whether a fair trial could be obtained in Russia. That second ques on mi ght be rel evant in a stay case, wh er e the Engl ish cour t has jur i sdi c on and is considering staying the ac on, but i s not ( so i t i s submi ed) a ques on t he court considers when leave is being sought to serve out and the court has concluded that the natural forum is not England. In the alterna ve i t i s sai d i f that extreme submi ssi on i s unaccept abl e,

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then reasons for giving permission to serve out, even though the natural forum is not England, must be of the most compelling kind.

9 It is this la er submi ssi on that has led Mr Ma l ek QC for Mr Der ipaska to ask us to look at the evidence that there was before the judge to support his submission that it was not “cogent” or sufficient l y cogent to all ow t he j udge t o hol d t hat Engl and was the “proper forum”. He submi t s (rightly) that the judge's ul ma t e hol di ng wa s t hat cumu l a vel y as sassi na on, arr est on trumped up charges and lack of fair trial persuaded him to rule the way he did and thus, if the evidence in rela on to any one of the aspects wa s not ther e or wa s not of the “cogency” required, this court would have to re-assess whether the proper forum was England.

10 When gran ng permi ssi on the judge di d not suggest that any of the factual issues or any of the aspects on which he had made an evalua on we r e ones on wh i ch he wa s gr an ng permission. Furthermore evalua on of evi dence is ver y mu ch the pr ovi nce of a judge exer ci si ng the discre on under the l eave to ser ve out pr ovi si ons . I t i s not the func on of the Cour t of Appeal to go through the whole exercise again unless it can be shown that the judge has misdirected himself in some way. What an appellant is (I accept) en tled to do is to ar gue (if it is arguable) that there was no evidence to support a findi ng or i ndeed i n a case such as thi s (assuming for the present that the extreme submission, that no stage 2 ques on ar i ses , fai ls) argue that the evidence is simply not at the level of cogency to allow a conclusion that the natural forum should be displaced. But in conduc ng that exer ci se the Cour t of Appeal shoul d be slow to interfere with the judge's assessment of the affidavi t evi dence. In t his case Mr Mal ek accepted that the judge's summary of the evidence was impeccable. The ques on is wh et her that evidence supported the judge's conclusions or whether it was of the ‘cogency required’.

11 The issues on the appeal are these. (1) If a court has concluded, in a leave to serve out case, that the natural forum is other than England, is it open to the court s ll to find Engl and t he “proper forum”, i.e. the place where, in the interests of the par es and the ends of jus ce, the case should be tried ? (2) If the answer to the first ques on i s that the cour t can concl ude England is the “proper forum”, in what circumstances can it so conclude and did the judge (a) direct himself appropriately and (b) if so, did he have evidence, or evidence of sufficient cogency, on which he could reach the conclusion he did? (3) Insofar as Mr Cherney claims a declara on i n t rus t, has he establ ished t hat i t c ome s wi thi n wh at i s now one of t he subparagraphs in 6BPD3 -3.1.

(1) If a court has concluded in a leave to serve out case that the natural forum is other than England, is it open to the court s ll to find Engl and t he “proper forum” i .e. the place whe r e i n t he interests of the par es and the ends of jus ce t he case shoul d be t ried?

12 The argument of Mr Malek and his team is founded on the speech of Lord Goff i n The Spiliada . In The Spiliada , which was actually a service out case, Lord Goff wa s concer ned first to clarify the law rela ng to the si tua on i n whi ch t he Engl i sh cour t grant ed a s tay i n proceedi ngs properly served on a defendant. He was doing so, as he explained, in the context of recent developments establishing that English law had now adopted the Sco sh pri nci ple of forum non conveniens in stay cases. This as he says followed a break through in The Atlan c Star [1978] A.C. 436 [where incidentally he had been counsel for the appellants]. In that case Lord Denning MR's famous dictum “You may call this “forum shopping” if you please, but if the forum is England, it is a good place to shop …” was disapproved as out of date and insular [see Lord Reid at 453]. It developed further through such authori es as The Abidin Daver [1984] A.C. 398 , but not altogether with a clear voice, and it was a needed clarifica on on whi ch Lord Goff embarked in rela on to stay pr oceedi ngs in The Spi liada .

13 In the course of his explana on he defined wha t “ forum non conveniens ” meant saying “that the basic principle is that a stay will only be granted on the ground of forum non

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conveniens where the court is sa sfied t hat ther e i s some ot her avai l abl e f orum h avi ng competent jurisdic on, wh i ch is the appr opr iat e for um for the tri al of the ac on, i.e. in whi ch the case may be tried more suitably for the interest of all the par es and the ends of jus ce. ” [476C]

14 In se ng out how a cour t shoul d appr oach a stay appl i ca on he s aid the court wi ll look first to see what factors there are which point in the direc on of anot her for um. These are factor s indica ng anot her for um, wh er e j us ce can be done at “subs t an al ly less i nconveni ence or expense”. He suggested that at this stage the court is looking for the “natural forum”, that being as Lord Keith had said in The Abidin Daver at [478A] of The Spiliada “that with which the ac on had the most real and substan al connec on” and i t i s for those f act ors the cour t mus t first look. If there is no other forum in that sense, that will normally be the end of the stay applica on, but if ther e is anot her for um in that sense, Lor d Goff sai d t he cour t “wi l l ordinar i l y grant a stay unless there are circumstances by reason of which jus ce requi res that a stay should nevertheless not be granted …”. “One such factor can be the fact, if established objec vel y by c ogent evi dence, t hat t he pl ai n ff wil l not obt ai n jus ce in t he for eign jurisdic on: see The Abidin Daver [1984] AC 398 at 411 per Lord Diplock, a passage which now makes plain that, on this inquiry, the burden of proof shi s to the pl ai n ff.”

15 Lord Goff then tur ned to how the pr inc i pl e of forum non conveniens is applied when the court is exercising its discre on to ser ve out . Hi s vi ew wa s that “I t seems to me inevi tabl e that the ques on in bot h groups of cases mu s t be at bo om t hat expressed by Lord Kinnear in Sim v Robinow, 19 R. 665 , 668, viz to iden fy the for um in wh i ch the case can be sui tabl y tri ed for the interests of all par es and for the ends of jus ce” [480G] . But he poi nted out three dis nc ons: (1) In service out cases the burden is on the plain ff; in s tay appl i ca ons t he burden i s on t he defendant; (2) in service out cases the plain ff is seeki ng t o get the cour t to exerci se i t s discre onary powe r ; ( 3) s peci al r egard mu s t be had t o t he f act t hat t he j ur i sdi c on i s “exorbitant” (although, he cau onsn t hat s imp l y me ans i t i s extraor di nar y i n t he s ense explained by Lord Diplock in the Amin Rasheed case [481E-F]). In summary he said “The effect is not merely that the burden of proof rests on the plain ff to per suade t he cour t that Engl and i s the appropriate forum for the trial of the ac on, but he has to show that thi s is cl ear l y so. In other words the burden is quite simply the obverse of that applicable where a stay is sought of proceedings started in this country as of right.” [481D-E].

16 Mr Malek's argument involved sugges ng that in that summa ry Lor d Goff was usi ng t he wor d ‘appropriate’ in the sense of ‘natural’. His argument was that, once the court had found that a plain ff had f ail ed t o est abl i sh t hat Engl and was the “nat ural ” forum, that concl uded t he posi on. He submi ed t hat in a stay case once a def endant had f ail ed t o show t hat anot her jurisdic on wa s the “nat ur al ” for um that wa s the end and no second stage wa s necessar y and thus he said the “obverse” of that was that a conclusion that England was not clearly the natural forum concludes the argument in a service out case. He said it so concluded it even if the Plain ff / Claiman t coul d demon s t rate t hat jus ce coul d not be achi eved i n the “natural ” forum. He suggested there might be room for the court s ll to al low ser vi ce out if the nat ur al for um was actually unavailable but that would be the limit of the court's powers.

17 If he is right, then the object (as Lord Goff put it “at bo om”) of achi evi ng t he f orum i n whi ch the case can be tried “for the interest of all the par es and for the ends of jus ce” wil l, in man y service out cases, not be achieved. It is unlikely Lord Goff int ended that and in my vi ew it is cl ear he did not. Certainly if the natural forum was unavailable that would provide a strong basis for the court giving leave to serve out, but that is not the limit of the court's powers.

18 The argument of Mr Malek involved failing to appreciate what the word “obverse” in the above summary related to. It was simply referring to the fact that the burden of proof is the “obverse” in service out cases from that in stay cases.

19 Furthermore Lord Goff wa s not us i ng t he wo r d “appr opr iat e” i n t he sense s imp l y of

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“natural”. The use of the word “appropriate” as opposed to “natural” in that summary was, I think, deliberate. In the summary Lord Goff has not gone thr ough a two - stage pr ocess; he has gone straight to what is the ul ma t e ques on – wha t is the f orum whe r e i n t he i nterest of the par es and the ends of jus ce t he t rial shoul d t ake place?

20 I accept that there are instances in the authori es wh en the wo r d “appr opr iat e” and the word “natural” in rela on to for um are used int er changeabl y. Indeed Lor d Goff himse l f coul d be said to be doing so, even in the judgment in The Spiliada , in the passage at 478C, to which I have already referred but will quote in full below, where he spells out what is involved at the “second stage”. Lord Goff hi ms el f in Connelly v RTZ Corpora on PLC [1998] AC 854 at 874D, in a stay case where the “natural” forum was Namibia, was sa sfied t hat “this i s a case i n whi ch, having regard to the nature of the li ga on, subs t an al j us ce cannot be done i n t he appropriate forum, but can be done in this jurisdic on”(my under l ini ng) . But in the The Spi liada Lord Goff had ma de cl ear that i t wo ul d be be er to di s ngui sh between “natural ”, i .e. t he forum with which the case had the most natural connec on, and “appr opr iat e”, wh i ch ma y be differ ent , to me et the ends of jus ce [ see 478A quot ed above] . In my view t he summa r y i n t he notes on page 22 of the White Book under CPR 6.37(4)Forum Conveniens summarises the posi on cor rectly: -

“Subject to the differ ences set out bel ow, the cri ter i a that gover n the appl ica on of the principle of forum conveniens where permission is sought to serve out of the jurisdic on are the same as those that gover n the appl ica on of the pri nci ple of forum non conveniens where a stay is sought in respect of proceedings started within the jurisdic on. Those cri ter i a are set out in The Spi liada , above:

(i) The burden is upon the claimant to persuade the court that England is clearly the appropriate forum for the trial of the ac on.

(ii) The appropriate forum is that forum where the case may most suitably be tried for the interests of all the par es and the ends of jus ce.

(iii) One must consider first wh at i s the “nat ur al for um” ; name l y that wi th wh i ch the ac on has the mo s t real and subs tan al connec on. Connec ng factor s wi l l include not only factors concerning convenience and expense (such as the availability of witnesses), but also factors such as the law governing the relevant transac on and the places where the par es res i de and respec vel y carr y on bus i nes s .

(iv) In considering where the case can be tried most “suitably for the interests of all the par es and for the ends of jus ce” ordinar y Engl i sh procedur al advant ages such as a power to award interest, are normally irrelevant as are more generous English limita on per iods wh er e the cl ai ma nt has fai led to act pr udent ly in respect of a shor ter limita on per iod el sewh er e.

(v) If the court concludes at that stage that there is another forum which is apparently as suitable or more suitable than England, it will normally refuse permission unless there are circumstances by reason of which jus ce requi res that permi ssi on shoul d nevertheless be granted. In this inquiry the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connec ng factor s wi th ot her jur i sdi c ons . One such f act or can be t he f act , if established objec vel y by cogent evi dence, that the cl ai ma nt wi ll not obt ai n jus ce i n the foreign jurisdic on. Ot her factor s inc l ude the absence of legal ai d or the abi lity to obtain contribu on in the for ei gn jur i sdi c on.

(vi) Where a party seeks to establish the existence of a ma er that wi ll assi st hi m in persuading the court to exercise its discre on in hi s favour , the evi den al bur den i n respect of that ma er wi ll rest upon the par ty asser ng i t.”

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21 That summary correctly emphasises, in rela on to ser vi ce out , the di s nc on between what may at stage one seem the “natural forum”, as the place with which the case has the closest connec on, and ul mat ely the “appr opr i ate or proper forum” whi ch a plain ff can est abl ish, even if England is not the “natural forum” if jus ce requi res that permi ssi on to ser ve out be given.

22 On any view it is clear that the judge in his judgment in this case was not using “natural” and “the proper place for trial” as interchangeable otherwise his judgment makes no sense. He was following the use of words as suggested in The Spiliada –“natural” for closest connec on and “proper” as the place of trial in the interest of all par es and the ends of jus ce.

23 I thus reject Mr Malek's more extreme argument as to the applica on of the two stage process.

24 What then is the correct approach if a natural forum other than England has been iden fied? In The Spiliada case itself it does not seem that the judge, Staughton J (as he then was), went through a two-stage process. The test he had applied was whether the plain ff had shown t he English court “to be dis nctly mo r e sui tabl e for the ends of jus ce. ” That of cour se i s ul mate l y the correct ques on. Comp ar i sons we r e t hen done as t o t he pos i on of wi t nes ses, the connec on wi th Canada and ma ers rela ng t o what can be t ermed t he “natural f orum” without reaching any posi ve concl us i on. That i ndeed can be t he pos i on i n man y cases. Ul ma t el y wh at the judge found to be cruci al wa s the “ Cambridgeshire factor ”, i.e. the fact that he was trying a similar case where teams of lawyers and experts had already prepared a precisely similar case and where thus “Overall it would be wasteful in the extreme of talent, effor t and mo ney if the par es to t hi s case wer e t o have t o s tart agai n i n Canada. ” [471C t he quote from Staughton J's judgment].

25 It was the exercise of that discre on wh i ch the House of Lor ds restor ed and i t i s wo r th, having regard to the exercise I must conduct herea er , quo ng t he wor ds of Lord Goff, who a er spel ling out the di fferences i n view a s bet wee n t he j udge and t he Cour t of Appeal , and i n par cul ar havi ng sai d t hat t he Cour t of Appeal had under rat ed t he i mp or tance of t he “ Cambridgeshire factor ” said this “…I am of the opinion that this is a classic example of a case where the appellate court has simply formed a differ ent vi ew of the we i ght to be gi ven to the various factors, and that this was not, therefore, an appropriate case for interfering with the exercise of the judge's discre on. ”[486C] .

26 The point however at this stage is that The Spiliada was not a case where it can be said there was a clear natural forum other than England, but jus ce s l l requi r ed t he case t o be t ried i n England. For assistance as to the proper approach when the court has such a case one must go back to Lord Goff's anal ysi s in stay cases as to wh at the appr oach shoul d be. I repeat mo r e ful ly the passage at 478C where he said (and I accept it is in this passage that he does use “appropriate” as meaning the same as “natural”) as follows:-

“(f) If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the ac on, i t wi ll ordinarily grant a stay unless there are circumstances by reason of which jus ce requires that a stay should nevertheless not be granted. In this inquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connec ng factor s wi th ot her jur i sdi c ons . One such factor can be the fact, if established objec vel y by cogent evi dence, that the plain ff wi l l not obt ain j us ce i n the f orei gn j urisdic on; s ee the The Abidin Daver [1984] AC 398 , 411, per Lord Diplock, a passage which now makes plain that, on this inquiry, the burden of proof shi s to the pl ai n ff. How f a r other advantages t o the plain ff in proceedi ng i n t his count r y may be r elevant in t his connec on, I shal l have to consider at a later stage.”

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27 In my view what appears from that passage is the following. First, so far as establishing that there are factors that make England an appropriate forum despite another forum being natural, one factor, that jus ce cannot be achi eved in that nat ur al for um, requi res “cogent evi dence” and the reason for that was spelt out by Lord Diplock in The Abidin Daver at [411B-D] in terms which it is worth quo ng in ful l:-

“The possibility cannot be excluded that there are s ll some count ries in wh ose cour ts there is a risk that jus ce wi ll not be obt ai ned by a for ei gn li gant in par cular kinds of suits whether for ideological or poli cal r easons , or because of i nexper ience or inefficiency of the j udi c iary or excess i ve del ay i n t he conduct of the bus i nes s of the courts, or the unavailability of appropriate remedies. But where there is already a lis alibi pendens in a foreign jurisdic on wh i ch cons tutes a nat ural and appr opr i ate forum for the resolu on of the di sput e, a pl ai n ff in an Engl i sh ac on, i f he wi she s t o resist a stay upon the ground that even-handed jus ce ma y not be done to hi m in that par cul ar for ei gn jur i sdi c on, mus t assert this candi dly and suppor t his all ega ons wi th posi ve and cogent evi dence. ”

28 It does not follow that there is a requirement for “cogent evidence” or any par cul ar ki nd of evidence to establish all other factors which may lead the court to be persuaded that, despite somewhere else being the natural forum, England is the forum where it is in the interests of all par es and the ends of jus ce f or the case t o be t ried. The r equi r emen t is that the plain ff, or now the claimant, should “clearly establish” that England is the appropriate forum in that sense. This may be a dis nc on wit hout muc h difference but i t must not be f orgo en that t he judge i s deciding whether a discre on shoul d be exer ci sed, and some poi nt s ma y seem mo r e powe r ful on the evidence that he has and some less, but it is for the judge to evaluate the same and reach his conclusion.

29 I should make clear again, having regard to points made by Mr Malek, that the judge is not conduc ng a t ri al . I t i s not a si tua on i n whi ch he has to be sa sfied on the bal ance of probabili es that facts have been establ ished. He is in ma ny ins tances seeki ng to assess risks of what might occur in the future. In so doing he must have evidence that the risk exists, but it is not and cannot be a requirement that he should find on the bal ance of pr obabi li es that the risks will eventuate, e.g. as in this case that assassina on wi ll occur . He has onl y stat eme nt s and experts' reports on which he is not going to hear cross examina on. He is abl e, of cour se, to take a view as to the cogency of the evidence at that stage. But then he has to make an evalua on taki ng account of al l factor s as to wh et her the cl ai ma nt (despi te Rus si a bei ng the “natural forum”) has discharged the burden of showing that England is “clearly the proper forum”. That involves (1) assessing whether on the evidence a trial would be likely to take place in Russia; (2) if not, because Mr Cherney says he will not go there, whether Mr Cherney has shown that he has well-founded reasons why he will not go to Russia and (3) whether in any event Mr Cherney has shown on cogent evidence that there is a real risk that he will not get a fair trial there.

30 I should add the following, having regard to a further point made by Mr Malek. Mr Malek sought to add a requirement that the court could not hold England to be the appropriate or proper forum unless there was a sufficient Engl i sh i nterest over and above ( as I under stood his argument) the requirement that one of the gateways such as contract made in England was established. In my view there is no such requirement; the gateways under 6BPD3 3.1 supply the English connec on.

31 Can the judge's evalua on be cri cised? I n cons i der i ng whe t her Engl and was the proper forum despite Russia being the natural forum, the judge, in my view, rightly divided the

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ques on of fai r tri al from the poi nt s on wh i ch Mr Cher ney wa s rel yi ng for sayi ng that he wo ul d not be able to go to Russia if the case had to be brought there. What the judge concluded was summarised by him as follows:-

“255. I turn then to the second stage. If the claim is not permi ed to con nue i n England, it will almost certainly not be pursued in Russia or elsewhere. It has not been suggested that, if the case is not heard in either Russia or England, there is some other jurisdic on to wh i ch Mr Der ipaska is subj ect wh er e the case can appr opr iat el y be tri ed.

256. The fact that the claimant may face difficul es or obst acles i n pr oceedi ng i n what is, prima facie, the natural forum does not necessarily en tle hi m to tri al in Engl and. Nor can the English courts, whatever their merits, be the default home for every claimant who asserts that he will not venture abroad for his li ga on or recei ve a f air trial there, provided only that he can bring himself within the le er of CPR 6.3 . But the fact that the effec ve choi ce i s bet wee n t rial in Engl and and no t rial at all is a mat eri al factor in any determina on of the appr opr iat e for um. The extent to wh i ch it is ma t er ial will depend on the reasons for that being the effec ve choi ce.

257. In the present case I am sa sfied t hat two of the r easons are t hat Mr Cher ney has a well founded fear that, if he proceeds in Russia, he will (a) be at greater risk of assassina on, and (b) face crimi nal pr osecu on f or wha t , on hi s evi dence, and t he reported remarks of Mr Deripaska's lawyer, would be a trumped up charge. Those fears cannot be discounted or disregarded on the foo ng that he runs no great er ri sk of assassina on i n Rus si a than i n I srael or that ther e i s no real pos si bi lity of any trumped up charge being brought.

…

260. In addi on, wh at ever the pos i on i n other cases may be, I am, as I have sai d, sa sfied t hat , in t his par cular case, t here i s a si gnificant r i sk that Mr Ch erney wi l l not obtain in Russia a trial unaffected by imp r oper int er fer ence by St at e actor s and that substan al jus ce may not be done.

261. So far as general discre onary cons i der a ons are concerned, the par es are not strangers to England. Mr Deripaska has a house in London and another in the country. His group has substan al asset s wi thi n the j ur i sdi c on. The par es met and made whatever agreement they did make in London. The rules contemplate that there may be circumstances in which the only basis for jurisdic on l ies i n t he f act t hat t he agreement was made in this country. The fact that that is the only ground for jurisdic on ma y mi litat e agai ns t exer ci si ng di scre on i n t he cl aiman t ' s favour . But in this case London was not a fortuitous mee ng pl ace. I t wa s some wh er e r eadi ly accessible to both par es and ma y pr oper l y be regarded as neut ral ground. Bot h par es have confidence i n Engl i sh l aw a nd t he Engl i sh cour t s.

262. It does not seem to me that any need to call Russian or other non-English witnesses would give rise to unacceptable difficul es. The t wo mos t i mpor t ant witnesses are the par es thems el ves . A subs tan al propor on of t he r elevant mate r ial (e.g. as to company structures, instruc ons to lawy er s and account ant s and mo veme nt of funds) must be in wri ng. Sever al wi tnesses , such as the repr esent a ves of Syndi kus and Mr Philipides, Mr Mishakov and others are likely to be seasoned travellers. Neither party has suggested that they will suffer si gni ficant prejudi ce i f the t rial takes pl ace here.

263. Lastly, I take into account the fact that Mr Cherney delayed un l Decemb er 2007 making the applica on that Toml inson, J had cont emp l at ed wo ul d be heard (a er i t had been made) in June. There appears to me no sa sfactor y j us fica on for thi s delay. I do not, however, regard that delay as a sufficient reason t o deny Mr Cher ney

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the order that I would otherwise make.

Conclusion

264. Taking all those considera ons i nt o account , I am per suaded t hat t he r i sks inherent in a trial in Russia (assassina on, ar rest on trump ed up charges and lack of a fair trial) are sufficient to mak e Engl and t he f orum i n whi ch t he case can mos t sui t abl y be tried in the interests of both par es and the ends of jus ce and, accordingl y, the proper place for the determina on of thi s cl ai m. ”

32 It seems to me that if the judge had evidence or in the case of fair trial “cogent evidence” on which he could make the above findi ngs, ther e can be no cri cism o f his appr oach. Des pi t e Mr Malek's a emp t s t o per suade t he cour t ot herwi se i t s eems t o me t o be an i mp os si bl e conten on that the judge di d not have evi dence or indeed “cogent evi dence”. I wi ll exami ne each of the features relied on by the judge in turn.

33 Was there sufficient evi dence t hat Mr Cher ney was at great er risk of assassi na on i n Russ i a? The summary of the evidence at paragraphs 47 and 48 rela ng to an assassi na on a empt i n Israel in 1995 is not cri ci sed. From that summa ry i t appear s that such an a empt had a significant Rus si an connec on. It was for the j udge t hen t o assess whe t her ther e was a great er risk if Mr Cherney returned to Russia. That the judge did in paragraph 199 in these terms:-

“199. As to the first of Mr Cherney's concerns, Mr Stewart submi ed that Mr Cher ney is no more likely to be the subject of an assassina on a empt in Rus s i a t han he was i n Israel or is anywhere else. I do not accept that. Whoever tried to have him killed in Israel was almost certainly Russian based. The risk of a successful assassina on seems to me likely to be greater in the place where the person or persons who might wish to have him killed reside and where the requisite personnel and materiel are likely to be more readily available. This is par cul ar l y so if Mr Cherney is engaged in a publ ic tri al . I cannot tell whether any threat to Mr Cherney is likely to come from a figur e from hi s supposed criminal past or a former business rival (or someone who falls into both categories) or neither. I do, however, consider that Mr Cherney has a well founded fear for his safety and that he will be more at risk in Russia than England.”

34 That assessment is based on sound reasoning and it is not for the Court of Appeal to reassess the posi on.

35 Was there sufficient evi dence f or the j udge t o have f ound t her e was a r eal ri sk of prosecu on and on trump ed up charges if he ret ur ned to Rus si a? In hi s road ma p for hi s or al submissions under issue 6, Mr Vos QC iden fies all the evi dence t hat was avai l abl e t o t he j udge, and it is clear that to say there is “no evidence” is simply unarguable. The key points are that the main issue before the judge on this aspect appeared to be not whether he would be arrested if he returned to Russia, but whether the arrest and prosecu on wo ul d be j us fied by Mr Cherney's criminality. The judge dealt with that aspect at great length findi ng no evi dence of criminality on Mr Cherney's part.

36 There was also evidence as to the misuse of criminal prosecu ons . The judge summa r ised the evidence in a way which was not cri ci sed by Mr Ma l ek at paragraphs 213 and 214 in these terms:-

“213. The use of criminal prosecu ons (or the thr eat of them) as tool s i n a powe r struggle with rivals was a feature of Soviet Russia. The pa er n has con nued and has a new name: “ zakaznye dela ” (“prosecu ons to or der ”) . In 2004 the ECHR in Gus i ns ky v

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Russia found that the Russian authori es had, i n vi ol a on of Ar cle 18 and 5 , commenced a criminal inves ga on and depr i ved Mr Gus i nsky of hi s l i ber t y, not on suspicion that he had commi ed a crimi nal offence, but in order to i n mida te hi m as part of a commercial bargaining strategy, namely to induce him to sell his media business to Gazprom on unfavourable terms. The Central Magistrates Court in Madrid refused the Russia Government's a emp t to extradi te Mr Gus i ns ky from Spai n on a similar basis.

214. There is force in Professor Bowring's opinion that a State capable of such conduct on one occasion is perfectly capable of doing so again… His view is that Mr Cherney is an obvious candidate for false charges because Mr Cherney's ac on poses a real thr eat to Rusal and to Mr Deripaska's most fundamental interests. The likelihood of this is increased because of Mr Cherney's link with Mr Berezovsky, who has been tried and sentenced in absen a, and is a we l l known enemy of Mr Pu n, his former protégé. ”

37 The Mirepco documents showed that Mr Deripaska was capable of making allega ons to denigrate Mr Cherney, and the judge thus reached this conclusion at paragraph 201:-

“It seems to me that there is a significant likel ihood of Mr Cher ney bei ng pr osecut ed if he returns and a real possibility that Mr Deripaska might use his influence, or hi s abi lity to orchestrate feeling against Mr Cherney, to encourage the authori es to take that course. I refer below to the evidence of Professor Bowring (see paragraphs 213-4 below) which appears to me to lend substan al suppor t to that conc l us i on. Ther e i s reason to suppose that Mr Deripaska or his advisers have already conceived a plan to denigrate Mr Cherney in this country (see paragraph 249 below) and in Israel (see paragraph 153 above); and there appears to be far more scope for such a plan and for a prosecu on in Rus si a. Fur ther ther e is a di s nct pos s i bil ity that any char ges wou l d be trumped up.”

38 It is simply unarguable that the judge did not have the evidence on which he could arrive at that assessment of the risk to Mr Cherney.

39 Was there cogent evidence that Mr Cherney was at risk of not ge ng a f air trial in t he Russian arbitrazh court? Again in his road map, Mr Vos, under issue 7, iden fied t he evi dence that was before the judge. The cri cal feat ur es of the judge' s findi ngs on t his i ssue are t hese. First, as he records in paragraph 239, “it appears to be common ground between the experts that, in certain cases, the arbitrazh courts cannot necessarily be expected to perform their task fairly and impar al ly. Pr of essor Stephan [Mr Der ipaska' s exper t] character i ses that as onl y applicable in a case whose outcome will affect the di rect and ma t er ial strat egi c int er est of the state.” The judge however pointed out that, in what was termed the Films by Jove case, it appeared that the Russian State had intervened in a dispute which did not affect i ts vi tal interests [see paragraph 242 of the judgment, which Mr Malek did not cri ci se, as an accur at e summary of the evidence rela ng to that case] . The judge then exami ned the pos i on of Rus al [the company whose shares are the subject of the contracts sued on by Mr Cherney], and Mr Deripaska's companies in Russia in paragraph 243. I do not understand the facts there summarised to be disputed, although the conclusion which the judge reached must have been in issue before him. His conclusion was that “The affai rs of Rusal and Mr Der i spaska' s group must be of considerable importance, including strategic importance, to the Russian State.”

40 That is the judge's assessment, there was evidence to support that conclusion, and it is not a ma er on wh i ch the Cour t of Appeal shoul d conduct a reassessme nt .

41 The judge then pointed to the strong links between Mr Deripaska and the Russian State which he suggested bordered on the “umbilical” [244] and as to which he had the evidence of

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Professor Bowring to support him.

42 That led the judge to make this assessment in paragraph 246:-

“246. Given the closeness of the link between the Russian State and Mr Deripaska, the alignment of his interests with those of the State, and the size and importance of Rusal, it seems to me that the Russian State may well regard the ques on as to wh o wa s benefici al ly en tled t o 20% o f Rus al and i s beneficial ly en t l ed to a 13. 2% int erest i n UCR (even if the interest is held on trust for sale), as sufficient l y i mpo r t ant to j us fy encouraging the courts to see their way to rejec ng Mr Cher ney' s cl ai ms , if he we r e to present them in a Russian Court. The same applies to the ques on wh et her any par t of that interest has to be sold to honour obliga ons to Mr Cher ney (no fri end of the Russian State). Sual and Glencore have a 33 1/3% interest in UCR. A sale of Mr Cherney's alleged 13.2% benefici al i nt er est wo ul d i ncrease the mi nor i ty i nt er ests to just over 46%, which might be a ma er of concer n (even if Mr Cher ney we r e to sel l to a loyal Russian). The apparent need to keep Mr Cherney's name off the face of the documents suggests a considerable sensi vi ty on the par t of Mr Der ipaska or the Russian State about Mr Cherney having any link with Rusal or UCR. The prospect of this is enhanced if, as also seems very possible, the State took, or was persuaded to take, the view, whether by a public campaign or by private representa on, t hat Mr Cherney's interests had been obtained by the illicit acquisi on of Stat e pr oper ty, as has been alleged in various publicity campaigns in Russia and elsewhere. This was a considera on that Judge Trager thought ma y we l l have influenced s tate officials i n the Films by Jove case: see page 53 (RHC) of his 2003 decision. The fact that Mr Deripaska is reported to have owed his expansion to strong support from the Russian authori es also provides ground for believing that he may benefit f rom such suppor t i n the future.”

43 What the judge further said in paragraph 247 and 248 is important:-

“247. I should make it clear what I am not deciding. I am not deciding that a fair trial can never be obtained in the Russian arbitrazh system. On the contrary I do not doubt that there are many honest and good judges in the system at every level, who conscien ous l y s eek t o do j us ce according t o t he r elevant legal pr i nci ples and procedures, who are developing the arbitrazh system to relate to the commerce of the new Russia, and who do so without improper interference. Nor is it the case that in the arbitrazh courts the State is prac cal ly bound to succeed, as appear s from the two examples cited by Mr Dmitry Dyakin of the Magisters Law firm i n hi s wi tness statement.

248. I do however regard there as being a significant ri sk of i mp r oper gover nme nt interference if Mr Cherney were to bring the present claims in Russia, where they would be very high profile pr oceedi ngs indeed, such that subs tan al jus ce may not be done to him if he is required to proceed there. I am not sa sfied t hat , if he i s so required, jus ce wi ll be done. I find suppor t for this concl usi on f rom t he observa ons of Professor Hendley, upon whom Professor Stephan relies, in a chapter headed “ Pu n and the Law ” in her book “ Pu n' s Rus si a ” wh er e she concl uded:

“But the con nued wi llingness of t hose wi th pol i cal power to us e l aw i n an instrumental fashion to achieve their short term goals means jus ce can some mes be out of reach. It also means that the commitment to the basic principle of the rule of law, namely that law applies equally to all, irrespec ve of thei r powe r or connec ons , is not yet complete. A gap between the law on the books and the law in prac ce exi sts in Russia, as in all countries. Surely it has receded from the chasm it was during the

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Soviet era. But whether it will increase or decrease as me goes by rema i ns to be seen”.”

44 In my view there was cogent evidence of a risk in the circumstances of this par cul ar case , having regard to the posi on of Mr Cher ney, the pos i on of Mr Der i paska and t aki ng account of the Mirepco documents, that Mr Cherney would not get a fair trial in Russia of a dispute between him and Mr Deripaska over shares in Rusal. I emphasise this par cul ar case because it would be quite wrong for it to be suggested that the English court is saying that a fair trial cannot be obtained in Russia in all normal cases. This is not a normal case and it has par cul ar features from which the judge was en tled to reach the concl us i on he di d.

45 Accordingly, insofar as an a ack wa s ma de on the judge' s concl us i on as to pr oper for um, I would dismiss the appeal.

46 That leaves the final issue rel a ng t o Mr Cher ney' s claim f or a decl ara on t hat certain shares are held in trust. The way the claim was pleaded was first to asser t ma ers of background; the fact that Mr Deripaska and Mr Cherney were benefici al own er s of Radom Founda on whi ch controlled Sibal; that what was contemplated was a merger of Sibal with other en es i nto a vehicle, Rusal, of which the owners of Radom and the other en es wou l d have a 50% shareholding. The pleading then asserted the existence of an agreement dated 10th March 2001 under which it was recognised that Mr Cherney would be en tled to 20% of Rusal and by which it was agreed that Mr Deripaska would pay the value of that 20%, following in par cul ar realisa on of the 20%, and that Mr Der ipaska wo ul d hol d the 20% f or Mr Cher ney i n the meanwhile. Mr Deripaska was to pay $250 million as a first i ns tal me nt wi thi n a year , that amount to be deducted from the ul ma t e sum real ised.

47 A number of paragraphs then set out the terms of the two wri en agreeme nt s al leged as confirmi ng the agreeme nt and pr ovi di ng the me chani cs as to how the agreeme nt wo ul d wo r k. $250 million, it is common ground, was paid and the ac on rel at es to an al leged fai lur e to perform the further stages of the agreements.

48 Part of the case made by Mr Cherney in rela on to non- per forma nce rel at es to an al lega on that in March 2007 Rusal merged with two other companies to form United Company Rusal, under which merger 66% of the new company was to be owned by the former shareholders of Rusal, and it is alleged “In the premises 20% of that 66% shareholding (which is held by Mr Deripaska directly or indirectly) is held on trust for Mr Cherney” and a declara on is cl ai me d to that effect.

49 Two issues arise. First, it is said that the claim in trust does not fall within any of the subparagraphs rela ng to trus t in 6BPD3 3. 1 and that the cl ai m is not “i n respect of a cont ract” and thus does not fall within the gateway rela ng to cont racts. I n any event i t i s sai d that Russian law is the proper law, that the judge has held that Mr Deripaska has the be er of the argument on proper law and, since Russian law knows no concept of trust, there is not a sufficient l y arguabl e case t o permi t servi ce out of the j uri sdi c on.

50 I can deal with both points shortly. First, what Mr Cherney was seeking was a remedy in respect of the contractual bargain he says he made. His case on the pleading was that, flowi ng from the contract under which shares in Rusal were agreed to be held for him, insofar as those shares had been exchanged for others, the bargain applied to those shares. Under English law his remedy would be a construc ve trus t reme dy but it ar i ses out of hi s cont ractual cl ai m. Hi s claim was not alleged to arise out of any dealings or any trust exis ng pr ior to the ent ry int o the agreements the subject of the ac on as al leged by those repr esen ng Mr Der i paska. Previ ous dealings were ma er s of background onl y agai ns t wh i ch obl iga ons under the all eged cont r act s were said to arise.

51 His case is also that English law was agreed as the proper law of the contract and the judge

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has held he has a good arguable case that it was. But in considering whether Mr Cherney can base jurisdic on on the pr oper law bei ng Engl ish he found it wa s not as strong as Mr Der ipaska' s argument that Russian law applied.

52 In my view the claim which was being brought by Mr Cherney was a claim in respect of a contract made within the jurisdic on and it di d not cease to be that wh en he cl ai me d that the contractual bargain in rela on to one lot of shares a aches to other shar es for whi ch t hey have been exchanged. That remains so even if he asserts that the effect of t hat bargai n now a achi ng to ot her shares wo ul d gi ve ri se to a cons truc ve t rust in Engl i sh l aw.

53 As to the asser on that under Rus si an law a reme dy in trus t wo ul d not be recogni sed, and thus a sufficient l y arguabl e case f or such a r emed y had not been est abl i shed f or servi ce out purposes, the answer seems to me to be that at this stage English proper law was not being relied on so as to provide a gateway for jurisdic on. Rus si an law is a ma er for Mr Der i paska t o raise by way of defence. I accept that if he could raise by way of defence something amoun ng to a knockout blow that would obviously have to be taken into account and would mean that a sufficient l y arguabl e case wou l d not be est abl i shed. But in t his case he wou l d not (for exampl e) be en tled to summa ry judgme nt that Rus si an l aw appl ied, and thus i t i s on any vi ew not a knockout blow.

54 Furthermore, I am not absolutely clear that, even if he could say that he would be bound to succeed on showing Russian law should apply to the contract, the court would prevent the ac on cl ai mi ng a reme dy by ref er ence to the shares in the new en ty remai ning par t of the claim. It would depend how clear the Russian law was as to there being no remedy if the shares, the subject of a contractual obliga on, had been exchanged for ot her s. It does not appear to have been wholly clear on the evidence before the judge.

55 It follows that in any event I would dismiss the appeal.

Lord Jus ce Mo or e- Bi ck:

56 I agree that the appeal should be dismissed, in substance for the reasons given by Waller L.J. By any normal standards this case has li le to do wi th Engl and beyond the fact that the cont ract happened to be made here in London. Apart from that all its connec ons are wi th Rus si a, so it is understandable that the judge should have held that Russia was the “natural” forum for the trial of the ac on. He concl uded, howe ver , that because of the unusual ci rcums tances sur roundi ng the case, in par cul ar the i ncreased r i sks to Mr . Cher ney of assassi na on, prosecu on on trumped-up charges and state interference in the judicial process, England was the jurisdic on in which the ac on coul d mo s t sui tabl y be tri ed in the int er ests of al l the par es and f or the ends of jus ce. Ac cor di ngl y, Mr . Ma l ek Q. C. coul d succeed on the appeal onl y if he coul d sa sfy the court either that the judge was wrong in holding that factors of the kind just men oned could properly be taken into account when considering whether England was a more appropriate forum for the trial of the ac on than Rus si a, or (since the judge relied on the cumula ve effect of all three f act ors ) that ther e was i nsufficient evidence t o suppor t hi s findings in rela on to one or mo r e of them. In my vi ew, howe ver , he fai led to establ ish ei ther of those ma er s.

57 I think it is clear, as Waller L.J. has explained, that in The Spiliada Mari me Cor pn v Cansul ex Ltd [1987] A.C. 460 Lord Goff wa s dr awi ng a di rect comp ar i son betwe en t he pr inc i pl es applicable to the stay of proceedings begun as of right in this jurisdic on and those appl icabl e to the grant of permission to serve proceedings out of the jurisdic on. I n each case t he fundamental principle is that of forum conveniens, although the approach of the court when dealing with an applica on to stay pr oceedi ngs ma y be subt ly influenced by the f act that in such cases jurisdic on has been founded her e as of ri ght . Mr . Ma l ek submi ed t hat once t he j udge, having considered the usual connec ng factor s, has reached the conc l us i on that the cour ts of another country provide the “natural” forum for the trial of the ac on he cannot take i nt o

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account other extraordinary factors when deciding where the ac on can mo s t sui tabl y be tri ed in the interests of all the par es and for the ends of jus ce. I agree, howev er , that the argumen t proceeds on a misunderstanding of Lord Goff's speech and leads to a concl us i on wh i ch is wh ol ly at odds with the principles that he was enuncia ng. The case of Connelly v R.T.Z. Corpn Plc [1998] A.C. 854 provides one example of the kind of unusual circumstances that may lead the court to conclude that the interests of jus ce requi re the ac on t o be t ried i n a f orum wi t h which it has li le or no nat ur al connec on.

58 For similar reasons I am unable to accept the modified ver si on of Mr . Ma l ek' s ar gume nt which would recognise the possibility of giving weight to unusual factors of that kind, but only if they demonstrate a close link of some compelling kind with this jurisdic on. In my vi ew, the fact that the contract was made in this country, which is sufficient under our l aw t o give t he cour t jurisdic on to al low ser vi ce of the pr oceedi ngs abr oad, al so pr ovi des a sufficient l ink t o jus f y the exercise of that power in circumstance where it is in the interests of jus ce to do so. For these reasons I am sa sfied t hat the j udge was ri ght to have r egard t o ma ers that migh t prevent Mr. Cherney obtaining jus ce in Rus si a wh en deci di ng wh et her , vi ewe d over al l, Engl and was the appropriate forum for the trial of the ac on.

59 As Waller L.J. has pointed out, the evalua on of the evi dence in cases of thi s ki nd is ver y much a ma er for the judge. Thi s cour t can int er fer e wi th hi s concl us i ons onl y if it is sa sfied that the evidence before him was incapable of suppor ng them. To hi s credi t Mr . Ma l ek recognised that and therefore set out to persuade us that, although there was some evidence going to the risks of assassina on, pr osecu on on t r umpe d- up char ges and governmen t interference in the judicial process, on careful examina on it wa s incapabl e of suppor ng t he judge's conclusions. He submi ed that bef or e taki ng any i ndi vi dual factor i nt o account the judge had to be sa sfied by cogent evi dence t hat the event in ques on woul d in fact occur, but a li le reflec on i s suffici ent to make o ne real ise that that cannot be the right tes t. Al l one can ever do when considering what will happen in the future is to assess the degree of likelihood that the event in ques on wi ll occur ; and the degree of likel ihood requi red to jus fy t aki ng t he risk seriously will depend on the nature of that event. In most ordinary cases a person cannot reasonably be expected to accept more than a slight degree of increase in the risk of assassina on, but a great er degree of ri sk of gover nme nt int er fer ence in the judi ci al pr ocess might be thought acceptable. These are very much ma er s f or t he j udge hear ing t he applica on.

60 I do agree with Mr. Malek, however, that allega ons of a ki nd that imp ugn the int egr i ty of the ins tu ons of a f riendl y f oreign s tate shoul d nei t her be mad e nor ent ert ained l ight l y, but must be dis nctly al leged and suppor ted by pos i ve and cogent evi dence. Lord Diplock mad e that plain in rela on to ideol ogi cal or pol i cal obs t ruc ons t o jus ce in The Abidin Daver [1984] A.C. 398 at page 411 and in my view the same principles apply in cases where, as here, it is alleged that a foreign government will be unable or unwilling to protect the claimant's personal safety or will manipulate its criminal jus ce system to br ing fal se charges agai ns t hi m. These too are serious charges that are not to be made lightly or accepted without the support of posi ve and cogent evidence. However, I do not think that the court is precluded on the grounds of comity from considering them in a proper case.

61 The judge held that there was a significant ri sk in thi s case that by travel ling to Rus si a, as would be necessary if he were to pursue his claim there, Mr. Cherney would place himself at materially greater risk of assassina on than if he we r e to rema i n in Israel , wh er e he norma l ly lives, or if he were to come to London for the purposes of the trial. In my view there was plenty of evidence to support that findi ng. In paragraphs 46 to 48 of hi s judgme nt Chr i stopher Cl ar ke J. gives a brief summary of Mr. Cherney's personal history which includes an a emp t on hi s life in Israel in 1995 by people with Russian connec ons . Wh at ever vi ew one takes of Mr . Cher ney' s former business ac vi es, ther e i s every reason t o t hink that he had mad e enemi e s i n Rus s i a

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and that the risk of assassina on wo ul d be si gni ficant l y great er in t hat count r y than i n mos t others that he was likely to visit. Mr. Malek laid some emphasis on the fact that the only posi ve a empt to ki l l Mr. Cher ney had t aken pl ace wel l over ten year s ago, but ther e was evidence that he had been warned quite recently that he would be at risk if he travelled to Russia and that he had cancelled plans to visit the country as a result. In my view there was evidence of sufficient qual i ty to suppor t the j udge' s finding i n this regar d.

62 It appears to have been accepted before the judge (though not before us) that Mr. Cherney might well face prosecu on if he we r e to ret ur n to Rus si a. Mr Der ipaska sai d that if Mr Cher ney feared prosecu on i t wa s because he had been accused of a numb er of ser ious crime s ; Mr Cherney says that false charges would be made against him to jus fy hi s ar rest, and per haps subsequent imprisonment, in order to prevent him form pursuing his claim. The judge held that there was no evidence that Mr. Cherney had been involved in criminal ac vi es and Mr. Mal ek did not seek to challenge that findi ng. It fol lows , ther ef or e, that ther e is a real pos si bi lity that any charges brought against him would not be well-founded. However, the ma er does not end there because there was evidence before the judge, not least in the form of Professor Bowring's report, the decision of the European Court of Human Rights in Gusinsky v Russia and the well-known proceedings against Mr. Khordorkovsky of Yukos, that tended to support the conclusion that the criminal jus ce system has been used, and from me t o me i s s ll used, as an instrument of government policy, a conclusion that was further supported by the wri ngs of an acknowledged expert on the Russian judicial system, Professor Kathryn Hendley. Even Mr. Deripaska's expert, Professor Paul Stephan, cast a degree of doubt on the integrity of the criminal jus ce system wh en he stat ed that the inadequaci es in the judi ci al system we r e limi ted to the courts of general jurisdic on rat her than the arbi trazh cour ts.

63 Mr. Malek submi ed that the judge had fai led to take account of the fact that Mr . Gus i ns ky and Mr. Khordorkovsky were poli cal opponent s of the gover nme nt , wh er eas Mr . Cher ney wa s not, but that in my view is only part of the ques on. The fact that Mr . Cher ney is not a pol i cal opponent of the Kremlin may mean that he is not exposed to the risk of mistreatment on that ground, but it does not mean that the system might not be turned against him for other reasons if Mr. Deripaska or those suppor ng hi m thought it mi ght be wo r thwh i le to do so. I shal l come in a moment to the ques on wh et her t he j udge wa s en tled t o find t hat t he Rus s i an government would be likely to take an interest in this dispute, but the Mirepco documents, to which Waller L.J. has referred, give one an insight into the methods which Mr. Deripaska or his supporters had in mind to use in order to discredit Mr. Cherney and undermine his posi on. As such they provide some addi onal grounds for thi nki ng that , if the gover nme nt we r e mi nded to exert pressure on Mr. Cherney, the ini a on of cri min al proceedi ngs , whe t her on a specul a ve or knowingly false basis, could not be ruled out. The extradi on cases to wh i ch the judge wa s referred provide addi onal suppor t for thi s par t of Mr . Cher ney' s case. If, as I thi nk, ther e wa s cogent evidence before the judge that the system is capable of being manipulated in that way, albeit in rela vel y rare cases , it wa s for hi m to assess the degree of ri sk that Mr . Cher ney wo ul d run if he were to travel to Russia in order to pursue the ac on.

64 It was an essen al pl ank in Mr . Ma l ek' s argume nt , bot h in rel a on t o t he r isk of prosecu on on trumped-up charges and the risk of interference in the working of the arbitrazh courts, that there was no reliable evidence that the government was or would be interested in what was no more than a private dispute between two individuals over a rela vel y sma l l sharehol di ng in a joint stock company whose business, unlike that of oil and gas produc on, wa s not cons i der ed to engage the strategic interests of the state. He accepted that there was evidence that in cases which do engage Russia's na onal int er ests the gover nme nt is liabl e to ma ni pul at e the judi ci al process (the proceedings against Yukos and Mr. Khordorkovsky provide one obvious example), but he submi ed that that wa s confined t o cases i n whi ch na onal strategic inter ests were at stake or in which the state was seeking to re-na onal ise pr evi ous l y pr i va sed assets . He submi ed that the pr esent case fel l i nt o nei ther of those cat egor ies and that none of the

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examples on which Mr. Cherney relied was truly comparable to the present case. Accordingly, they did not provide a sufficient bas i s for the opi nions expressed by Prof. Bowr i ng on whi ch he placed considerable reliance.

65 Mr. Malek did not really dispute that the nature and size of United Company Rusal, in which Mr. Cherney claims a 13.2% interest, renders it an industrial giant of na onal imp or tance i n Russia, responsible for the employment of many people and of significant economi c imp or tance generally. That of itself is some evidence from which the judge could properly infer that its fortunes were of some interest to the government. The size of the stake being claimed by Mr. Cherney may not be large in overall terms, but in financi al terms i t i s ver y subs tan al and although he is not seeking to gain control of the shares themselves, the claim if successful could prove financi al ly emb ar rassi ng f or Mr . Der ipaska, wh o cur rent ly rema i ns i n cont rol of t he company. Moreover, there was some evidence before the judge that Mr. Deripaska enjoyed the support of the government.

66 The three instances of government interference in the judicial process on which the judge relied are the proceedings rela ng to Yukos , Fi lms by Jove and Me di a Mo s t. It can be sai d wi th some jus fica on t ha t t he Yuk os cas e i nv ol ved bot h wha t migh t be des cr i bed as t he re-na onal isa on of strategi c assets and t he damag i ng of a pol i cal opponent . It can al so be said that the Films by Jove case (which concerned rights to animated cartoons produced in the Soviet era) involved the re-na onal isa on of assets former l y owne d by the s tate ( though har dly assets of strategic nature) and that the Media Most case again involved the damaging of a poli cal opponent . Howe ver , i t wa s open to the j udge to vi ew these cases mo r e br oadl y as examples of the government's willingness to interfere in the judicial process in circumstances where it considers that na onal i nt er ests are sufficientl y engaged. Havi ng r egar d to the economic and industrial importance of United Company Rusal and the links between Mr. Deripaska and those in government, I think that there was ample evidence on which the judge could find that ther e wa s a ri sk of gover nme nt int er fer ence in the judi ci al pr ocess if the pr esent ac on we r e tri ed in Rus si a. Agai n, i t wa s for hi m to assess the extent of that ri sk; thi s cour t could interfere with his assessment only if it were sa sfied t hat the evi dence was not capabl e of suppor ng hi s concl us i on. In my vi ew that is not the case.

67 For these reasons, as well as those given by Waller L.J., I am of the view that the judge was en tled to hol d that , al though Rus si a is the nat ur al for um for the tri al of the ac on, the r isks to which Mr. Cherney would be exposed if the case were to be tried there are sufficient to r ender England the appropriate forum in the sense in which that expression was used by Lord Goff in The ‘Spiliada’ . As far as jurisdic on i s concer ned, I agree that the wo r ds “i n respect of a contract” in CPR rule 6.20(5)(a) (now paragraph 3.1(6)(a) of Prac ce Di rec on 6B) are t o be construed broadly and are wide enough to encompass a claim based on rights said to arise out of a contract, even though those rights may be of a proprietary nature. It may be that in due course Mr. Deripaska will succeed in establishing that the contract is governed by Russian law and that Russian law does not recognise rights of the kind asserted by Mr. Cherney. However, that is for the trial. The fact that, as the judge held, Mr. Deripaska has the be er of the argument at this stage in rela on to pr oper law does not me an that Mr . Cher ney' s case is so weak that it does not give rise to a serious issue to be tried.

Sir John Chadwick:

68 I agree that what Lord Jus ce Wa l ler has described as t he appel lant ' s mo r e extreme argument fails. The argument is founded on a misunderstanding of Lord Goff's obser va ons i n The Spiliada case. I agree, also, that it cannot be said that there was no evidence, or no evidence of sufficient cogency, to suppor t the j udge' s concl usi on t hat Engl and was the appr opr i ate f orum on the special facts in this case. It is not for this court to re-assess the weight to be given to the ma er s wh i ch the judge wa s en tled t o t ake i nto account in exerci sing his own dis cre on.

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*619 Roneleigh Ltd. v Mii Exports Inc.

1988 R. No. 3214

Court of Appeal

6 February 1989

[1989] 1 W.L.R. 619

Nourse and Butler-Sloss L.JJ.

1989 Feb. 6

Prac ce—Wr it—S ervi ce out of j ur i sdi c on—Ap pl i ca on t o set asi de—Eng l i s h buyer of s crap s t eel f.o.b. New York from New Jersey corpora on—C ont ract ma de in Engl and—N o or der for payme nt of successful party's costs if trial in New Jersey—Whether applica on to set as i de to be gr ant ed— R.S.C., Ord. 11, r. 1(1)(d)

The plain ff, an Engl i sh compa ny, ent ered i nto a cont r act wi t h t he def endant , a New J ersey corpora on, to buy scrap steel to be del iver ed f.o. b. New Yor k for expor t di rect to Tur key and paid the purchase price to the defendant. The plain ff all eged t hat the goods del i vered at New York were not in accordance with their descrip on and cl ai me d resci ssi on of the cont ract or alterna vel y, dama ges . On 8 Sept emb er 1987 the ma ster gave leave to ser ve the wr i t out si de the jurisdic on under R.S.C., Ord. 11, r. 1(1)(d) on the ground that the contract was made within the jurisdic on. The pl ai n ff issued and ser ved t he wr i t and s t atement of c lai m on t he defendant. Under Ord. 12, r. 8 , the defendant applied to set the service aside. The plain ff's evidence showed that if it won the ac on, of wh i ch ther e wa s a strong chance, it wo ul d lose the advantage of having its costs paid by the defendant. Instead the plain ff wou l d have t o pay a percentage of any award to its American lawyers under the prevalent con ngency fee system. On 2 February 1988 the deputy master refused the applica on. The j udge di smi ssed t he defendant's appeal but indicated that he would be prepared to allow the appeal to the extent of staying the ac on pr ovi ded that the def endant gave an under taki ng that i t wo ul d pay the plain ff's cost s of proceedi ngs i n New J ersey taxed i n accordance wit h Engl i sh pri nci ples. The undertaking was not given.

On appeal by the defendant:—

Held, dismissing the appeal, that where on an applica on under R.S.C., Ord. 11, r. 1 the evidence showed that in a foreign forum a plain ff was l ikel y to succeed but his success wou l d, in monetary terms, be substan al ly adver sel y affect ed because he wou l d have t o pay muc h higher costs than in England a judge could reasonably and properly conclude that substan al jus ce wa s not likel y to be done in the for ei gn for um; and that , accor di ngl y, the judge had been en tled to concl ude on the evi dence that the cos ts advant age from li ga on i n Engl and was, i n the circumstances, a sufficient fact or agai nst proceedi ngs i n New J ersey ( pos t , pp. 623H–624A, H–625B).

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460, H.L .(E.) appl i ed .

Decision of Sir Neil Lawson, si ng as a j udge t he Que en' s Bench Div ision, affirmed.

The following cases are referred to in the judgments:

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362; [1978] 1 All E.R. 625, H.L.(E.)

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460; [1986] 3 W.L .R. 972; [1986] 3 All E.R. 843, H.L.(E.) *620

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The following addi onal case wa s ci ted in ar gume nt :

Smith Kline & French Laboratories Ltd. v. Bloch [1983] 1 W.L.R. 730; [1983] 2 All E.R. 72, C.A.

INTERLOCUTORY APPEAL from Sir Neil Lawson si ng as a j udge of the Que en' s Bench Div ision.

On 8 September 1987 the plain ff, Ronel eigh Ltd., an Engl i sh compa ny, was gi ven l eave by Master Creightmore to issue a writ and to serve it on the defendant, MII Exports Inc., a New Jersey corpora on, out of t he j ur i sdi c on. On t he def endant ' s appl i ca on Deput y Mast er Tennant refused to set aside the order. Sir Neil Lawson, si ng as a j udge i n chambe r s i n t he Queen's Bench Division, dismissed the defendant's appeal.

By a no ce of appeal dat ed 20 Jul y 1988 the def endant appeal ed on the grounds that (1) the judge was wrong to require the defendant to undertake to pay the costs of the plain ff's proceedings in New Jersey in respect of the subject ma er of the pr esent ac on, in t he event that the plain ff wer e success ful in t hose proceedi ngs , to be t axed i n accordance wi t h t he principles of taxa on of the Hi gh Cour t in Engl and as a condi on of stayi ng t he ac on; ( 2) havi ng concluded that on the whole it was more appropriate for the proceedings to be li gat ed in the defendant's jurisdic on, i.e. New Jer sey, than the pl ai n ff's juris dic on, t he judge was wrong t o hold that the fact that the plain ff wou l d not recover cost s i n t he event of bei ng success ful in New Jersey was a sufficient per sonal or juri dical dis advant age t o t he plain ff to jus fy requiri ng the defendant to defend the present ac on i n the cour t i n Engl and; (3) the j udge ma de no findi ng that subs tan al jus ce woul d not be done i n the r esol u on of the di spute between t he par es in New Jer sey and ther e wa s no evi dence on wh i ch the judge coul d have ma de such a findi ng; and (4) the judge' s deci si on wa s wr ong and unj us tly requi red the def endant to submi t to the jurisdic on of the Engl ish cour t and to cont est its ri ght s 3000 mi les awa y from thei r pl ace of incorpora on and bus i ness.

By a respondent's no ce under R.S.C., Ord. 59, r. 6(1) the plain ff gave no ce of i ts inten on to contend that the judge's decision should be affirmed on t he ground t hat on t he evi dence bef ore him the proceedings were not appropriately li gat ed in Engl and rat her than New Jer sey on the basis that the contract was made in England, governed by English law and that considera ons of cost and convenience indicated that England was a more appropriate forum in view of the witnesses likely to be called by the par es at the tri al .

The facts are stated in the judgment of Nourse L.J.

Representa on

Christopher Gibson for the defendant.

Jonathan Harvie for the plain ff.

NOURSE L.J.

This is a case about forum non conveniens in rela on to an appl ica on f or l eave t o s erve out s ide the jurisdic on.

The plain ff in t he ac on i s an Engl i sh export / impor t compan y based i n London. The defendant is a New Jersey corpora on speci al isi ng in the expor t of di fferent types of steel . The plain ff agreed to buy scrap steel from the defendant, to be delivered f.o.b. New York for export direct from there to Turkey. The price was about U.S. $250,000. The defendant was duly paid by the

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plain ff, but the plain ff claims th at *621 when the goods were delivered in New York they did not comply with their descrip on. Ac cor di ngl y the pl ai n ff make s a pr imary cl ai m fo r r esci ssion, alterna vel y for dama ges to inc l ude the amo unt of the pur chase pr i ce and fur ther dama ges on account of expenses and loss of profit.

On 8 September 1987 Master Creightmore gave leave to serve outside the jurisdic on under R.S.C., Ord. 11, r. 1(1)(d) , on the foo ng that the cont ract to be enf or ced wa s ma de wi thi n the jurisdic on. It wa s ar gued bel ow that the cont ract wa s not ma de wi thi n the jur i sdi c on. That point was rejected. Although it is not raised on this appeal, the point is kept open for further argument at a later stage, if appropriate. For today's purposes we can proceed on the foo ng that the contract was made within the jurisdic on.

On 2 October 1987 the writ, endorsed with a statement of claim, was issued and was subsequently served. On 2 February 1988 Deputy Master Tennant refused to set the service aside under Ord. 12, r. 8 . He also gave leave to amend the statement of claim by dele ng an allega on of fraud.

The defendant then appealed to the judge in chambers. That appeal came before Sir Neil Lawson, si ng as a j udge of the Que en' s Bench Div ision, on 9 J une 1988. He r efused t o s et the service aside, but said that if the defendant undertook to pay the plain ff's cost s of proceedi ngs in New Jersey “taxed in accordance with English principles,” he would allow the appeal to the extent of staying the ac on.

On 5 July 1988 the ma er came back bef or e the judge, wh en i t wa s ma de cl ear , first by t he defendant, that no undertaking would be given and, secondly, by the judge, that the dismissal of the appeal which he thereupon ordered had been implicit in what he had said on 9 June, should the undertaking not be given.

The result of all that was that Master Creightmore's order stood. If it con nues to stand, the plain ff can pur sue t his ac on and wi ll not have to take pr oceedi ngs i n New J e rsey. Howeve r , the defendant has now appealed again, contending that the judge exercised his discre on on a wrong principle, so that his decision ought to be reversed by this court.

The plain ff is al so di s sa sfied wi t h the judgment , contending that t he judge ought t o have been willing to decide the ma er i n i ts f avour wi thout adop ng t he mi d dl e cour se of proceedings in New Jersey with an undertaking; and that in any event the exercise of the judge's discre on wa s flawed by his havi ng t aken i nto account somet hing whi ch he ought not to have taken into account. More about that later.

Having dealt with the argument on the applica on of Ord. 11, r. 1(1)(d) , the judge said:

“But it is not clear if it is a proper case for service out of the jurisdic on. It is evenl y balanced and the ques on is wh et her the def endant , bei ng a for ei gn comp any, wi th no connec on wi th t he Un i ted Ki ngdom, ot her t han doi ng bus i ness wi th an Engl ish customer, it would be proper to compel it to respond to this ac on bef or e thi s cour t. The real ques on, si nce the cont ract wa s for the suppl y of steel f.o. b. New Yor k i s: what was the condi on of the goods wh en taken on board shi p in New Yor k? It wi ll therefore be necessary to have evidence from the United States about the condi on of the steel when it was shipped. It will be necessary to have evidence from Turkey as to the condi on of the steel wh en it *622 arrived. One could say that London is half way between New York and Constan nopl e, and that ther ef or e it is a conveni ent for um for trial. But this is a case of interna onal trade and the na onal i ty and domi c il e of the par es and the na onal law i s fort uit ous . Wi t h one qual i fica on I have come t o the conclusion that this is a case where the proceedings should be stayed because on the whole it is more appropriate that they should be li gat ed i n t he def endant 's jurisdic on than in the pl ai n ff's court s .

“But the one qualifica on i s this : it i s commo n ground t hat i f the plain ff is succes sful

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in New Jersey, he will have to pay all his own costs. The claim is for about $250,000. I take the view that this is a case where the plain ff wou l d be placed at a subs t an al personal or juridical disadvantage in li ga ng i n New J ersey by reference t o t he cost s, cf. Lord Goff of Chi evel ey in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , 482, and his reference to In re Union Carbide Corpora on (1986) 634 F. Supp. 842 , where there was a stay of proceedings in the United States on condi on that Un i on Carbide would submit to the United States rules of discovery in the ac on in Indi a, and also Trendtex Trading Corpora on v. Cr edi t Sui sse [1982] A. C. 679 . I take the view that the general trend of Lord Goff's j udgme nt i s t hat one c annot br ush asi de t he consequences of differ ent for ums as bei ng irrel evant .”

The basic submission of Mr. Gibson for the defendant is that Sir Neil Lawson, having started by correctly balancing the compe ng cons i der a ons and concl udi ng t hat New J ersey was the mor e appropriate forum, then fell into error both in allowing the balance to be pped the ot her wa y by the juridical disadvantage to the plain ff in t he shape of his i nabi l ity to obt ain an order for costs in New Jersey and also in requiring an undertaking from the defendant in order to cancel it out. As I have said, Mr. Harvie for the plain ff does not seek to argue t hat i t was right to r equi r e the undertaking. Indeed, it seems that the judge got Lord Goff's vi ews on that ma er the wro ng way round. Moreover, it is en rel y uncl ear to me how thi s par cul ar under t aki ng coul d be implemented. It might be very difficul t for the t axi ng mas t er to appl y Engl i sh pri nci ples to cost s incurred in rela on to pr oceedi ngs in New Jer sey. Howe ver that ma y be, Mr . Ha r vi e submi ts, in answer to Mr. Gibson's basic submission, that the judge was en tled to take the j ur idi cal disadvantage into account, that he did take it into account and that he effec vel y expressed t he view that it ought to p the bal ance in favour of pr oceedi ngs in Engl and. In those ci rcums tances , says Mr. Harvie, the judge neither erred in principle, nor exercised his discre on in a ma nner which was plainly wrong, so that his decision cannot be interfered with by this court.

In support of his basic submission, Mr. Gibson further submits that in a case where leave is sought under Ord. 11, r. 1 , the burden is on the plain ff to show g ood r easons why the service of the writ on a foreign defendant should be permi ed. He mu s t show that Engl and is cl ear l y the appropriate forum. That submission is based on what was said by Lord Goff of Chi evel ey in Spiliada Mari me Cor por a on v. Cansul ex Lt d. [1987] A. C. 460 , and it is not as such controverted by Mr. Harvie.

The main controversy has arisen from what Lord Goff sai d, at p. 482: *623

“The key to the solu on of t hi s pr obl em l ies , i n my j udgme nt , i n t he under l yi ng fundamental principle. We have to consider where the case may be tried ‘suitably for the interests of all the par es and f or t he ends of j us ce. ’ Let me cons i der the applica on of that pr inc i pl e in rel a on t o advant ages whi ch t he plain ff may d er i ve from invoking the English jurisdic on. Typi cal examp l es are: dama ges awa rded on a higher scale; a more complete procedure of discovery; a power to award interest; a more generous limita on per iod. Now, as a gener al rul e, I do not thi nk that the cour t should be deterred from gran ng a s tay of pr oceedi ngs, or f rom exer ci si ng i ts discre on agai ns t gr an ng l eave under R.S.C., Ord. 11 , simply because the plain ff wil l be deprived of such an advantage, provided that the court is sa sfied t hat subs t an al jus ce wi ll be done in the avai labl e appr opr iat e for um. ”

The evidence as to the juridical disadvantage in taking proceedings in New Jersey is contained in an affidavi t of Mr. Afnai m, the man agi ng dir ect or of the plain ff, sworn on 26 January 1988, paragraph 15:

“I am advised and believe that the plain ff has a very strong chance of win ni ng t his

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ac on wh er ever it is tri ed, but if it we r e mo ved to New Jer sey, the pl ai n ff woul d lose the advantage of having [its] costs paid, if successful, by the defendant. Instead, it would have to pay a fixed per cent age of the awa rd ma de in its favour to its Ame r ican lawyers under the con ngency f ee system. The net resul t wo ul d be that l i ga ng successfully in America would result in a lower award to the plain ff than wou l d li ga ng i n Engl and. ”

Basing himself on the passage which I have read from the speech of Lord Goff, Mr . Gi bson submits that it is impermissible for the judge to take into account a juridical disadvantage of this nature. He says that the judge effec vel y deci ded t his case i n f avour of the plain ff; that he then took into account something which he ought not to have taken into account; and that he therefore erred in principle. It is interes ng to not e that amo ngst hi s typi cal examp l es of the advantages to be derived from invoking the English jurisdic on Lor d Goff does not refer to a costs advantage. Mr. Harvie's primary submission is that the omission was deliberate. He says that if you look at what Lord Diplock and Lord Salmon said in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , 816 and 821, you find that a ques on of compa r a ve costs is a ma e r which is proper to be taken into account. He adds that that decision was considered in Spiliada [1987] A.C. 460 , where nothing was said to suggest that Lord Diplock or Lord Salmon had adopted the wrong approach.

I am not sure whether that submission is correct or not. It may be. I would prefer to base my decision of this ques on on the fact that Lor d Goff expressed himse l f to be s ta ng a gener al r ule in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , 482. I do not think that he was going so far as to say that a costs advantage could never be taken into account in carrying out this balancing exercise. It seems to me that there must be cases where a judge could reasonably and properly come to the conclusion that substan al jus ce wou l d not be done via proceedings in a foreign forum, if the success of the plain ff in mon et ary terms wou l d necessarily and substan al ly be di mi ni shed by cos ts wh i ch he wo ul d have to pay ther e but would not have to pay here. *624 Moreover, although the evidence in this case is not very specific, I do not thi nk that it is open to thi s cour t to say that Si r Ne i l Laws on wa s not en tled t o conclude from it both that the costs advantage from li ga ng her e was mad e out and t hat i t ought to p the bal ance agai ns t pr oceedi ngs in New Jer sey.

At this stage I think it appropriate to remind myself of what Lord Templeman said in Spiliada , at p. 465F–G. He said that the solu on of di sput es about the rel a ve mer i ts of trial in Engl and and trial abroad was pre-eminently a ma er for the tri al judge. Lat er he sai d that an appeal shoul d be rare and that the appellate court should be slow to interfere.

I have not found the decision of this ques on ver y easy but , on the wh ol e, I thi nk that Mr . Harvie has made out his answer to Mr. Gibson's basic submission, and that the appeal should be dismissed on that ground.

I wish to add this. Mr. Harvie said that in any event the exercise of the judge's discre on wa s flawe d because he had taken int o account some t hi ng wh i ch he ought not to have taken int o account, namely that there was a real possibility that it would be necessary to have oral evidence from the United States about the condi on of the steel wh en i t wa s shi pped. Mr . Harvie said that, for its part, the plain ff had condes cended t o some det ai l as to t he wit nes ses who would have to go to New Jersey if the trial took place there. That is certainly true so far as the two Turkish Lloyds' surveyors, who inspected the steel when it arrived in Turkey, are concerned; and also so far as Mr. Afnaim is concerned, who has said on affidavi t that he also inspected the goods in Turkey. On the other hand, says Mr. Harvie, the evidence of the defendant about the need for oral evidence on its side is at best vague. I see some force in that argument. It may very well be true that, on an applica on of thi s ki nd, wh en one of the mo s t important considera ons i s the di stances wh i ch wi tnesses wi ll have to travel , i t behoves a

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defendant to state with some par cul ar i ty wh at i s l ikel y to be hi s pos i on i n t hat respect . However, in the light of my view on the main ques on, I need not take that ma er furt her and I do not do so.

I would dismiss this appeal.

BUTLER-SLOSS L.J.

I agree with the judgment that Nourse L.J. has just given, and would add this. I do not consider that the effect of cos ts can never i n any ci rcums tances be rel evant i n cons i der ing j ur idi cal disadvantage. Nor was it indeed as a category included in the passage of Lord Goff of Chi evel ey, in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , 482, which has been cited already by Nourse L.J. The judge in this case, Sir Neil Lawson, took the view that in a case of a rela vel y sma l l sum likel y to be recover abl e ther e wa s a subs tan al dis advant ageous effect on the plain ff of the cost s situa on i n the Amer i can court i n New J e rsey, and t here i s patentl y no corresponding disadvantage to the defendant in coming to the English court. I would not like to suggest that, where other factors are clearly in favour of the case going to one of the American jurisdic ons , the cos ts factor shoul d be det ermi na ve. But ther e wer e other fact ors i n t his case in favour of the plain ff. Ther e i s some f orce, in my j udgmen t , in t he submi s si ons of Mr. Har vie for the plain ff, that ther e wer e i den fiable wit ne sses i n whom i t may b e sai d t hat expenses would be incurred, both from Turkey and from England in going to the United States, compared with *625 a marked lack of informa on as to the extent of the expenses to be incur red by the defendant, the American company, having to bring any other than the one witness iden fied by it to this country. I for my part cannot say that the judge was plainly wrong. I would also adopt the passage already cited by Nourse L.J. from Lord Templeman in Spiliada Mari me Cor por a on v. Cansulex Ltd. [1987] A.C. 460 , 465, and would hesitate to interfere with the exercise of the discre on of the judge. I agree that the under taki ng that he sought wa s inappr opr iat e, but I agree that this appeal should be dismissed.

A. R.Representa on

Solicitors: Nabarro Nathanson; Courts & Co.

Appeal dismissed with costs. Leave to appeal refused.

(c) Incorporated Council of Law Repor ng for Engl and & Wa l es© 2011 Swe et & Ma xwe l l

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*1487 Herceg Novi (Owners) v Ming Galaxy (Owners)

Court of Appeal (Civil Division)

16 July 1998

[1998] C.L.C. 1487

Stuart-Smith and Brooke L JJ and Sir Christopher Staughton

Judgment delivered 16 July 1998

Shipping—Conflict of l aws —C ol lisi on—F or um non conveni ens—S hi pown er s' r i ght to l imi t l iabi lity under interna onal conven on—Wh e t her Engl i sh proceedi ngs shoul d not be stayed because r ight to limit in England differ ent from that in appr opr iat e for um— Merchant Shipping Act 1995, s. 185(1), Sch. 7, Pt. I.

This was an appeal from a judgment of Clarke J refusing to stay English proceedings because that would deprive shipowners of a legi ma t e jur idi cal advant age cons i s ng of the higher l imit of liability in England under the 1976 Conven on on Li mi ta on f or Mar i me C l ai ms.

The Herceg Novi collided with the Ming Galaxy off Si ngapor e and the He r ceg Novi sank. The owners of each vessel cri ci sed the navi ga on of the other . Appr oxi mat e figures f or t heir cl ai ms in US dollars were: Herceg Novi, $10.35m; her cargo, $4m; Ming Galaxy, $3.187m. The limit of liability of the Ming Galaxy in England under the 1976 conven on (havi ng the for ce of law in the UK by virtue of s. 185(1) of the Merchant Shipping Act 1995) was about $5.8m, whereas in Singapore it was only $2.9m under the 1957 Conven on rel a ng t o t he Li mit a on of t he Liability of Owners of Seagoing Ships. The Ming owners took proceedings against the Herceg owners in Singapore and sought to limit their liability under the relevant Singapore statute. The Herceg owners issued proceedings in England and the Ming owners applied to stay those proceedings. Clarke J stayed the ac on pendi ng det ermi na on i n Si ngapor e of the i ssues of responsibility for the collision and the amount of the Ming owners' claim for damages. However he refused to stay the ac on as a wh ol e, hol di ng that if the Mi ng own er s wi shed to limi t thei r liability in England they would have to rely on the English statute and the higher limit under the 1976 conven on. Cl ar ke J hel d that Si ngapor e wa s cl ear l y the appr opr iat e f or um and that (applying Spiliada Mari me Cor p v Cansul ex Ltd [1987] AC 460 ) there ought to be a stay unless that would deprive the Herceg owners of some legi ma t e jur idi cal advant age. That advant age was the higher limit under the 1976 conven on. The Mi ng own er s appeal ed wi th leave of the judge.

Held, allowing the appeal:

The ques on wa s not wh et her the 1976 conven on was be er t han t he 1957 conven on, but whether substan al jus ce wou l d be done i n Singapor e, as the appr opr i ate overseas forum. It was impossible to say that a preference for the 1976 conven on over the 1957 conven on meant that substan al jus ce wou l d not be avai l abl e i n Singapor e. In t erms of abst ract jus ce neither conven on wa s obj ec vel y mor e j ust than t he other . The 1976 conven on had not received universal acceptance and had not been enacted as an interna onal consensus . Substan al jus ce wou l d be done i n Singapor e under the 1957 r egi me, wit h whi ch a signi ficant body of civilised na ons agreed. ( Spiliada Mari me Cor p v Cansul ex Ltd [1987] AC 460 appl ied ; Caltex Singapore Pte Ltd v BP Shipping Ltd [1996] 1 Ll Rep 286 overruled; The Kapitan Shvetsov [1998] 1 Ll Rep 199 not followed.)

The following cases were referred to in the judgment of the court:

Bouygues Offshor e SA v Caspi an Shi ppi ng Co (No . 2) [1997] CLC 1497

Caltex Singapore Pte Ltd v BP Shipping Ltd [1996] 1 Ll Rep 286

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Caspian Basin Specialised Emergency Salvage Administra on v Bouygues Offshor e SA [ 1997] CLC 1463

Connelly v RTZ Corp plc [1997] CLC 1357; [1998] AC 854

De Dampierre v de Dampierre [1988] AC 92

Kapitan Shvetsov, The [1998] 1 Ll Rep 199 *1488

Sim v Robinow (1892) 19 R 665

Société du Gaz v Société Anonyme de Naviga on Les Ar ma t eur s Françai s 1926 SC 13

Spiliada Mari me Cor p v Cansul ex Ltd (‘The Spi liada’ ) [1987] AC 460

Ul sol Tr anspor t Cont ractor s Ltd v Bouygues Offshor e SA [ 1998] CLC 1526

Vishva Abha, The [1990] 2 Ll Rep 312

Representa on

Jeremy Russell QC and Charles Haddon-Cave (instructed by Ince & Co) for the appellant.

Nigel Teare QC and Luke Parsons (instructed by Holman Fenwick & Willan) for the respondent.

JUDGMENT OF THE COURT

(Delivered by Sir Christopher Staughton)

The facts

On 18 August 1996 there was a collision between the Herceg Novi and the Ming Galaxy within a traffic separ a on s cheme i n the St raits of Singapore. When t his case was befor e Cl ar ke J it was originally common ground that the collision took place in Singapore waters. Then at a late stage it was submi ed for He r ceg Novi that the col lisi on wa s in Indones i an wa t er s. The judge found it unnecessary to resolve that dispute.

The Herceg Novi sank as a result of the collision. There were criminal proceedings in Singapore. The master of the Ming Galaxy pleaded guilty and was fined S$4, 000; the ma ster of the He r ceg Novi also pleaded guilty, and was fined S$8, 000.

The owners of the Herceg Novi are South Cross Shipping Ltd of Malta; the owners of the Ming Galaxy are Yangming Marine Transport Corp of Taiwan. The owners of each vessel cri ci se the naviga on of the ot her . Appr oxi ma t e figures for thei r claims are, in US dol l ars:

The Herceg Novi $10,350,000

Her cargo $4,000,000

The Ming Galaxy $3,187,000

If those figur es are subs tan ated, li mit a on of t he owner s ' l iabil i ty under t he i nter na onal conven ons wi ll or ma y ar i se. The l imi t of l iabi lity of the Mi ng Ga l axy i s about $5. 8m in thi s country; but it is only $2.9m in Singapore, where a differ ent conven on appl i es. So f ar as we know the claim of the Ming Galaxy will not exceed the limit of the Herceg Novi under either

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conven on. Ther e i s no sugges on t hat the l i mit wi l l be broken under the t erms of ei t her conven on on the facts of thi s case.

Naturally enough, there is a dispute as to the appropriate forum to determine those claims.

The proceedings

On 20 August 1996, which was two days a er the col lisi on, the Mi ng own er s began Admi ral ty ac ons in rem and in per sonam agai ns t the He r ceg own er s and thei r vessel in the Hi gh Cour t of Singapore. (To avoid confusion, we do not refer to either party as plain ffs or def endant s .) On the following day a third writ was issued in the same court by the Ming owners, against the master and the third mate of the Herceg Novi. In a fourth ac on, al so i n the Hi gh Cour t of Singapore on 21 August, the Ming owners sought to limit their liability against the Herceg owners and all persons claiming to have sustained loss or damage by reason of the collision. The claim was founded on s. 136 of the Merchant Shipping Act (Cap. 179) of Singapore.

*1489

The writ in the ac on i n rem br ought by the Mi ng own er s wa s ser ved, wi th comme ndabl e enterprise, by fixi ng i t to the ma st of the He r ceg Novi wh er e she had sunk, i ns i de Si ngapor e waters.

On 28 August, again with commendable dispatch, the Herceg owners issued a writ in an Admiralty ac on in rem in the Queen' s Bench Di vi si on agai ns t the Mi ng Ga l axy. Thi s wr it wa s served on a sister ship, the Ming South, on 30 August at Felixstowe. On 7 November 1996 the Ming owners gave no ce of mo on t o s tay the Engl i sh ac on on t he gr ounds t hat ( 1) Engl and was not the appropriate forum, and (2) there were proceedings pending elsewhere, that is to say in Singapore. That applica on came bef or e Cl ar ke J. By hi s or der ma de on 20 June 1997 he stayed the ac on pendi ng the det ermi na on of two i ssues i n t he Hig h Cour t of Singapor e, as to: (1) the responsibility for the collision, and

(2) the amount of the claim of the Ming owners for damages.

More significant ly, the j udge ref used to gr ant a stay of the Engl ish ac on as a who l e. In par cul ar , the effect of hi s order was that i f the Min g owne r s wi s h t o l imit thei r l i abi l ity i n England, they will have to rely on the English statute and the higher limit which it affor ds (see [1998] 1 Ll Rep 167). The judge gave the Ming owners leave to appeal on that issue.

Spiliada again

Clarke J decided on the evidence that England was not the natural or appropriate forum for the trial of the ac on, and that Si ngapor e wa s cl ear l y and di s nct l y shown t o be mor e appr opr i ate than England. From that conclusion there has been no appeal. It followed that there ought to be a stay of the English ac on, unl ess that cour se wo ul d depr i ve the He r ceg own er s of some legi ma t e jur idi cal advant age so as to jus fy the r efusal of a stay. The advant age whi ch t hey rely on is, of course, the higher limit of liability prevailing here as opposed to the limit in Singapore.

We were referred by Mr Russell QC for the Ming owners to a number of passages in Spiliada Mari me Cor p v Cansul ex Ltd (‘The Spi liada’ ) [1987] AC 460 and de Dampierre v de Dampierre [1988] AC 92. Mr Teare for the Herceg owners told us that there was no dispute as to the appropriate principles, but only as to how they should be applied. We can, therefore, be brief in sta ng wh at we under stand those pr inc i pl es to be. Lor d Goff of Chi evel ey sai d i n t he Spiliada case (at p. 482E):

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‘The key to the solu on of t hi s pr obl em l ies , i n my j udgme nt , i n t he under l yi ng fundamental principle. We have to consider where the case may be tried “suitably for the interests of all the par es and for the ends of jus ce”. ’

The quota on come s from the speech of Lor d Shaw of Dunf erml ine in Soci ét é du Ga z v Soci ét é Anonyme de Naviga on Les Ar ma t eur s Françai s 1926 SC 13 at p. 19, wh er e i n tur n i t wa s derived from Sim v Robinow (1892) 19 R 665 at p. 668.

Turning to the applica on of that fundame nt al pr inc i pl e, Lor d Goff observed ( at p. 482D) that :

‘an advantage to the plain ff wil l ordinar i ly give r ise t o a compa r abl e dis advant age t o the defendant; and simply to give the plain ff hi s advant age at the expense of the defendant is not consistent with the objec ve appr oach i nher ent i n Lor d Ki nnear ' s statement of principle in Sim v Robinow.’

Lord Goff then me n oned t ypi cal exampl es of such an advant age:

‘damages awarded on a higher scale; a more complete procedure of discovery; a power to award interest; a more generous limita on per iod. ’

He con nued: *1490

‘Now, as a general rule, I do not think that the court should be deterred from gran ng a stay of proceedings … simply because the plain ff wi l l be depr i ved of such an advantage, provided that the court is sa sfied t hat subs t an al j us ce wi l l be done i n the available appropriate forum.’

That we take to be the sub-heading of principle for cases where there is said to be a legi ma t e personal or juridical advantage. It was echoed in the de Dampierre case, where Lord Goff sai d (at p. 110B):

‘the court should not as a general rule, be deterred from gran ng a stay of pr oceedi ngs simply because the plain ff in t his count r y wi l l be depr i ved of such an advant age, provided that the court is sa sfied t hat subs t an al j us ce wi l l be done i n t he appropriate forum overseas.’

Lord Templeman (at p. 101F) said:

‘The court must consider whether in all the circumstances it is just that the plain ff should be allowed to exploit and enforce his English advantage and should only refuse a stay if it would be unjust to confine the pl ai n ff to hi s remedi es el sewher e. ’

In a later passage (p. 102B) Lord Templeman agreed with the approach of Lord Goff; in our opinion he was not in any way, depar ng from the requi reme nt of an obj ec ve appr oach or the view that a stay should be refused if substan al jus ce wil l be done i n t he f oreign cour t .

The same theme is to be found in the speech of Lord Goff in Connelly v RTZ Corp plc [1997] CLC 1357 at p. 1366; [1998] AC 854 at p. 872.

Limita on of liabi lity

Sec on 503 of the Me r chant Shi ppi ng Ac t 1894 pr ovi ded that the own er s of a shi p shoul d not

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be liable for (i) loss of life or personal injury, or (ii) loss or damage to goods, occurring on board their ship without their actual fault or privity, beyond the sum of £15 per ton of the ship's tonnage in case (i), and £8 per ton in case (ii).

By the Merchant Shipping (Liability of Shipowners and Others) Act 1958 those amounts were altered: £15 became an amount equivalent to 3,100 gold francs; £8 became 1,000 gold francs. Other amendments were made, including an extension of the events for which limita on wa s available, and also of the persons who could rely on it.

That Act gave effect to the ra fica on by the UK of the Conven on Rel a ng t o t he L imi t a on of the Liability of Owners of Seagoing Ships of 1957. The conven on wa s ra fied or acceded t o by 46 states (Griggs, Limita on of Li abi lity for Ma r i me Cl aims (1997) LMCL Q 6 45) , but other s abstained; and in par cul ar the US stayed wi th thei r pr evi ous law wh i ch al lowe d limi ta on by abandoning the ship and freight to the claimants. The regime of the 1957 conven on became (and remains) part of the law of Singapore.

Now there is the Conven on on Li mi ta on f or Mar i me C l ai ms 1 976, whic h i s set out i n Pt. I of Sch. 7 to the Merchant Shipping Act 1995. By s. 185(1) of the Act it is to have the force of law in the UK. This conven on ma de two i mp or tant changes . Fi rst, i t subs tan all y i ncr eased t he figur es to wh i ch liabi lity wa s limi ted. These are expr essed in uni ts of account rat her than gol d francs; but the effect is cl ear enough from the figures we have given of the l imit s appl i cabl e t o the Ming Galaxy under the two conven ons .

Secondly, the 1976 conven on subs tuted a new t est for the circums t ances i n whi ch l imit a on would not apply. Under the 1957 conven on the shi pown er had to show that the los s occur red without his actual fault or privity. It was thought by some that shipowners were too readily found not to have discharged that burden. Ar cl e 4 of the 1976 conven on provi des : *1491

‘A person liable shall not be en tled to l imi t hi s l iabi lity i f i t i s pr oved that the l os s resulted from his personal act or omission, commi ed wi th the int ent to cause such loss, or recklessly and with knowledge that such loss would probably result.’

That wording is similar to, but more restric ve than, a pr ovi si on in the Ha gue Pr ot ocol of 1955 to the Warsaw Conven on on car ri age by ai r.

The 1976 conven on wa s thus a package deal , wh er eby the limi ts we r e rai sed cons i der abl y but in return the shipowner received the benefit of a l imi t wh i ch wa s thought to be vi rtual ly unbreakable. It was largely the work of the Comité Mari me I nt er na onal e, a non-governmental body represen ng the int er ests of al l those invol ved in sea transpor t. The dra wa s final i sed by the CMI at i t s 1974 conf erence i n Hambu r g ( Sel vig, Limita on of Shipowners' Liability p. 9) — which one of us a ended. As commo nl y happens , the wo r k wa s then taken over by governments, in the shape of the IMCO (now the Interna onal Ma r i me Organisa on and an or gan of the Un i ted Na ons ) . We men on t hese detai ls because i t is an important part of the case for the Herceg owners that the 1976 conven on is comme nded by IMO.

By s. 17(1) of the Merchant Shipping Act 1979 the 1976 conven on became par t of the laws of the UK. That provision was re-enacted, as we have said, in the 1995 Act. The conven on has never been ra fied by Singapor e, whe r e t he 1957 r egi me s l l prevai l s.

We have a variety of figur es as to the extent to wh i ch one or ot her conven on i s s l l appl i ed interna onal ly. It wa s onl y in 1986 that the 1976 conven on came i nto f orce, havi ng achi eved 12 ra fica ons. Mr R uss el l for t he Mi ng owner s told us t hat, of t he count r i es wi th the worl d' s ten largest fleet s, those wi th 153m tons appl y the 1976 conven on, and t hose wit h 159m t ons do not. Only four out of the top ten adhere to 1976, and the largest (Panama) does not. That can be contrasted with the sta s cs men oned by Cl ar ke J , that 43 per cent of t he worl d' s

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tonnage is registered with the 1976 states, and only 7.6 per cent with the 1957 states. All those figur es are in our vi ew subj ect to the comme nt that they are onl y concer ned wi th shi ps and shipowners. They tell us nothing about countries which provide the world's cargoes, or which have coastlines or bridges or harbours which are exposed to damage by ships. Mr Russell told us that of the 184 states which are members of the United Na ons , onl y 30 cur rent ly adher e to the 1976 conven on. That i s about equal to the numb er s l l adher i ng t o t he 1957 conven on, which is 30 or thereabouts. The US s ll have nei ther conven on. Luxembo ur g, we wer e t old, has recently joined the 1957 conven on.

Some of those who have ra fied or acceded t o t he 1976 conven on have done so wi t h reserva on( s), wh i ch mi ght be sai d to det ract from the gener al ity of its accept ance. Howe ver , it is said that the ma er s on wh i ch reser va ons are all owed are of min or impo r t ance. And i n any event, it is impossible to say that there is much interna onal consensus on thi s topi c. Mr Gr iggs has wri en (p. 376) :

‘Reviewing the various limita on Conven ons and l ooki ng at the States whi ch have ra fied t hem r eveal s that i t i s onl y a r ela vely smal l propor on of the mar i me na ons of the world which has sought to achieve uniformity in this area. Of those who dipped their toe in the water of uniformity, by subscribing to the 1924 Limita on Conven on, some have not had the courage of their convic ons and adopt ed the 1957 Conven on. Even fewer have made the leap to the 1976 Conven on and it rema i ns to be seen how many will adopt the changes introduced by the 1996 Protocol. To add to the confusion some countries have adopted a later limita on Conven on wi t hout bot her i ng t o denounce the previous one. S ll ot her s (of wh i ch per haps the US is the mo s t imp or tant example) have their own law of limita on, wh i ch ma y be based on one or mo r e of the exis ng Limi ta on Conven ons but may, on t he ot her hand, be very indivi dual i s c. One is forced to *1492 the conclusion that in this area there is, despite outward appearances, rela vel y li le uni f ormi t y despi t e year s of wor t hy endeavour . ’

We do not find that sur pr i si ng. Some ma y be temp t ed by the hi gher limi t of 1976; ot her s by the greater prospect of breaking the limit under 1957; others s ll pr ef er thei r own system of limita on — or none at al l.

Other cases

The Vishva Abha [1990] 2 Ll Rep 312 was, so far as we know, the first of the ser ies . Ther e Sheen J refused to stay an English ac on because, amo ngst ot her reasons , he cons i der ed that it wo ul d be a grave injus ce to the pl ai n ffs:

‘to deprive them of their right to li gat e in thi s count ry and send them to Sout h Af ri ca where their chances of recovering damages would be limited to so much less than the sum they may recover in this country.’

The point was considered in more detail by Clarke J in Caltex Singapore Pte Ltd v BP Shipping Ltd [1996] 1 Ll Rep 286, where the essen al facts we r e simi lar to thi s case. He hel d that limi ta on under the 1976 conven on wa s a legi mat e j uri dical advant age whi ch wou l d j us fy the r efusal of a stay in favour of the natural forum. His reasons were as follows (at p. 298):

‘In my judgment (subject to the actual figur es) the ends of jus ce wil l bes t be served i f the plain ffs are permi ed t o pr oceed i n Engl and. I t is true t hat many count r i es have not ra fied t he 1976 Conven on. I t is howeve r t he poli cy of I MO t hat t hey shoul d. I t has been recognized by countries which have 43 per cent of the world's tonnage. It is desirable that as many countries as possible should apply the same standards, partly

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because that is desirable in itself and partly because it avoids problems such as have arisen in this case. It seems to me to be proper to regard the 1976 Conven on as represen ng a wi del y accept ed devel opme nt from the regi me wh i ch exi sted under the 1957 Conven on.

The UK is a party to the 1976 Conven on and has enacted it as par t of Engl ish law. It seems to me that it can fairly be regarded as part of English public policy which the courts should take into account and that for that reason it is objec vel y des i rabl e that the provisions of the 1976 Conven on shoul d appl y wh er e pos si bl e. ’

Next there was the decision of Waung J in The Kapitan Shvetsov [1998] 1 Ll Rep 199, by which he stayed an ac on pr oceedi ng in Hong Kong in favour of the cour ts of Si ngapor e in response to the persuasive arguments of Mr Haddon-Cave. The judge declined to follow the decision in the Caltex case. He said (at p. 211):

‘The fact that the 1976 Conven on is a devel opme nt from the 1957 Conven on does not make the 1976 more widely acceptable objec vel y or mo r e des i rabl e obj ec vel y. There are pros and cons in respect to the two Conven ons and a count ry' s pr ef er ence for one Conven on over anot her is a ver y comp l icat ed ma er, very o en di ct ated by factors such as whether it is a country of shipowners or cargo-owners/traders, its level of economic ac vi ty and devel opme nt and the over al l imp act of the two Conven ons on the country's economic welfare.

Where I find I cannot accept t he r easoni ng of Cal tex i s t he par t of t he deci si on expressed to be based on English public policy. It may be the law of Hong Kong that the 1976 Conven on is gi ven the for ce of law in Hong Kong but that is not the same thi ng as saying that the 1976 Conven on reflect s Hong Kong publ i c pol i cy or that i t i s Hong Kong public policy to give full coercive force to the 1976 Conven on or to appl y the 1976 limit against par es wh ose count ries have not subs cribed to the 1976 Conven on (e.g. Singapore and Russia). It seems to me that this approach goes directly against the very high authority of Spiliada and the *1493 very case which came to be decided immediately a er Spiliada, namely de Dampierre v de Dampierre.’

That decision was reversed, by a majority, in the Court of Appeal of Hong Kong. Liu JA, in a dissen ng j udgme nt , sai d that Wa ung J ‘wa s right i n ref us i ng to al low hi ms el f to be undul y persuaded by the ra onal e of Mr Jus ce Clarke’ .

Two more cases followed in quick succession. In Caspian Basin Specialised Emergency Salvage Administra on v Bouygues Offshor e SA [ 1997] CLC 1463 the contest was the opposite way round from the present case: the shipowners wished to limit their liability in England, presumably because the difficul t y i n breaki ng t he l imit under the 1976 conven on was greater although the limit itself was higher. Rix J declined a stay in favour of the South African courts. A er cons i der ing the Cal tex case and the Kapi tan Shvet sov (bot h bef or e Wa ung J and in the Court of Appeal), he said that it was clearly a point on which two views could be strongly argued, and con nued (at p. 1494B) :

‘What Clarke J referred to as English public policy was, as he made plain, ul ma t el y a reflec on of the mod er n i nterna onal view of t he j us ce of the ma er . That i s not to say, of course, that the earlier conven on, to wh i ch the UK itsel f adher ed un l qui t e recently, is an unjust regime or that jurisdic ons wh i ch s l l appl y i t are l ess civil ised f or doing so. But it does, it seems to me, en tle a cour t to say that the 1976 conven on represents not merely English law but an interna onal ly sanc oned and obj ec ve vi ew of where substan al jus ce i s now v iewed as l ying, and t hat in such c ircums t ances the advantages of the 1976 conven on (wh i chever wa y they fal l on the facts of any case)

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are a relevant and legi ma t e cons i der a on i n t he overal l ques on of wher e a case may be tried for the interests of all the par es and the ends of jus ce. ’

However, Rix J went on to say that the point was not one which he had to decide. He based his decision on other authori es , wh i ch sai d that a shi pown er had at least a pr ima faci e ri ght to choose the forum in which he would bring limita on pr oceedi ngs. (That , i nc i dent al ly, i s an argument which would favour the Ming owners in the present case; but Mr Russell told us that they do not rely on it.) The decision of Rix J is presently under considera on in the Court of Appeal [see Ul sol Tr anspor t Cont ractor s Ltd v Bouygues Offshor e SA [ 1998] CLC 1526] .

The last of the other cases is Bouygues Offshor e SA v Caspi an Shi ppi ng Co (No . 2) [1997] CLC 1497. It is, we hope, enough to say that Timothy Walker J followed the reasoning of Clarke J in the Caltex case and Rix J in the decision just men oned, sayi ng (at p. 1506D) that :

‘the 1976 conven on repr esent s a wi del y hel d vi ew of obj ec ve j us ce.’

The present case: the decision of Clarke J

This was delivered on 13 May 1997, a er Ri x J but bef or e Ti mo t hy Wa l ker J. A er an exhaus ve review most of the authori es Cl ar ke J sai d:

‘I have reconsidered this ques on wi th care i n the l ight of the submi ssi ons cl ear ly advanced on both sides. As already stated, I accept the point that it is wrong to refer to English public policy, at least as that expression is used in Dicey & Morris. I also accept the submission that in general one must not compare the quality of jus ce in di fferent jurisdic ons . I n p ar cul ar, di fferent j ur isdic ons wi l l natu r al l y have di ffe r ent approaches to ma er s such as evi dence, di scover y and cos ts. The ques on r emai ns an objec ve one, name l y wh et her in the int er ests of al l par es and t he ends of jus ce i t is just to grant a stay…

A er hear ing the ar gume nt and cons i der ing the ques on afr esh, but bef ore l ear ning of the decision of Mr Jus ce Ri x to wh i ch I ref er bel ow, I reached the *1494 conclusion that the views expressed in Caltex are to be preferred to those expressed by Mr Jus ce Waung in The Kapitan Shvetsov, namely that, given the provisions of the 1976 Conven on and the devel opme nt of int er na onal mar i me l aw wh ic h i t represents (as evidenced by the support of IMO), it is in principle appropriate to hold in an appropriate case that, viewed objec vel y, the int er ests of al l par es and t he ends of jus ce ma y best be ser ved by ref us i ng a stay in an appr opr iat e case and al lowi ng the plain ffs to proceed. ’

Clarke J went on to say that the views of Rix J were en rel y cons i stent wi th the concl us i ons he had reached.

Our conclusion

We have to say that we agree with Waung J and with Liu JA, rather than with the majority of the Court of Appeal in Hong Kong and the English judges at first ins tance. We reach that deci si on for three reasons:

(a) The 1976 conven on has not recei ved uni ver sal accept ance, or anythi ng like it. It is not ‘an interna onal ly sanc oned and obj ec ve vi ew of wher e subst an al jus ce is now vi ewed as lying’. It is simply the view of some 30 states.

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(b) The Interna onal Ma r i me Org ani s a on i s not a l egis l ature. I t may commen d t he 1976 conven on to the int er na onal commu n i t y. But i f by doi ng so i t wer e f ound t o have enact ed an interna onal consensus , that wo ul d be to depr i ve sover ei gn stat es to a lar ge extent of thei r right to stay with some other regime. We say that because jurisdic on coul d o en be obtained by arres ng a shi p in a 1976 count ry, and i f that ac on wer e al l owed t o proceed despite there being a more appropriate forum where 1957 prevailed, the 1957 country would be le wi th no effec ve use for i ts own l aw.

(c) In our view it is quite impossible to say that substan al jus ce i s not avai l abl e i n Singapor e, seeing that there is a significant body of agreeme nt amo ng ci vi lised na ons wit h t he l aw a s i t is there administered. The preference for the 1976 conven on has no great er j us fica on than for the 1957 regime. Loss in the cases we are considering will o en be bor ne by the insurers of one side or the other. The 1976 conven on pr ovi des a great er degree of cer tai nt y, which they will perhaps welcome. But in terms of abstract jus ce, nei ther conven on i s objec vel y mo r e jus t than the ot her . Ou r task is not to deci de wh et her our law is be er than the law of Singapore. It is to decide whether substan al jus ce wil l be done i n Singapor e. In our view it will be. This appeal should be allowed, and an uncondi onal stay of the Engl ish ac on grant ed.

(Order accordingly)*1495

© 2011 Sweet & Maxwell

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*716 Baghlaf Al Safer Factory Co BR for Industry Ltd v Pakistan Na onal Shi ppi ng Co & Anor .

Court of Appeal (Civil Division)

11 December 1997

[1998] C.L.C. 716

Phillips, Waller and Chadwick L JJ

Judgment delivered 11 December 1997

Stay of proceedings—Exclusive jurisdic on cl ause—T i me bar i n for ei gn j ur isdi c on—Bi l ls of ladi ng conferred exclusive jurisdic on on Paki stan—S hi pown ers sought stay of Engl ish pr oceedi ngs by car go owners—English proceedings taken in me but me had expi r ed i n Paki stan—Wh e t her shi powne r s had agreed to English jurisdic on—Wh ether pr oceedi ngs shoul d be stayed—Wh ether shi pown ers should waive me - bar def ence in Paki stan—Wh ether car go own er s acted reasonabl y in comme nci ng English proceedings—Hague-Visby Rules, art. III, r. 8.

This was an appeal by shipowners from a judge's refusal to stay an ac on by car go own er s in order to give effect to an excl us i ve jur i sdi c on c lause.

The respondent cargo owners alleged that some coils of steel wire shipped on the appellants' vessel sustained damage in transit and they sought to recover damages from the shipowners for breach of the contract of carriage. The coils were carried under bills of lading which conferred exclusive jurisdic on on the pl ace wh er e the car rier had i ts pr inc i pal pl ace of bus i ness, wh i ch was Pakistan. The cargo owners commenced proceedings in England within the one-year limita on per iod i n the Ha gue- Vi sby Rul es. They di d not comme nce pr oceedi ngs i n Paki stan within the one-year period under the Hague Rules applied by the law of Pakistan. The shipowners undertook not to invoke the me bar in Paki stan in or der to obt ai n a stay of the English proceedings, although they argued that the fact that the claim was likely to be held me - bar red in Paki stan wa s no reason for permi ng t he cargo owner s to pr oceed i n Engl and i n breach of the jurisdic on cl ause.

Nego a ons took pl ace bet wee n t he shi powne r s and cargo owne r s , and t he cargo owne r s contended that the nego a ons had l ed t o an oral agreemen t that the Engl i sh cour t shoul d have exclusive jurisdic on in respect of thei r cl ai m. Sol ici tor s ac ng f or the shi powne r s accept ed service of the writ in England, and the cargo owners also contended that that precluded the shipowners from invoking the exclusive jurisdic on cl ause. The shi pown er s appl ied to stay the proceedings in order to give effect to the excl us i ve jur i sdi c on c lause. The j udge dismi s sed t hei r applica on, on the basi s of for um non conveni ens . The shi pown er s appeal ed.

Held, allowing the appeal and gran ng a stay on terms that the shi pown er s under took to wa i ve the one-year me - limi t in Paki stan:

1 The judge was right to conclude on the evidence that no oral agreement to exclusive English jurisdic on had been concl uded. The cargo own er s fai led to establ ish that the shi pown er s' P & I club orally agreed on behalf of the shipowners to exclusive English jurisdic on. It wa s cl ear that the par ci pant s we r e never ad idem and i t wa s unl ikel y in the extreme , havi ng regard to the vigorous protests that had been made as to the effect of the excl us i ve jur i sdi c on c lause i n t he bill of lading, that the club would agree to exclusive English jurisdic on.

2 The shipowners' solicitors were instructed to accept service in circumstances where the shipowners were vigorously protes ng agai ns t pr oceedi ngs bei ng br ought in Engl and but wh er e the cargo owners were on the point of arres ng one of thei r shi ps . Ha d they done so, the shipowners would have had no choice but to acknowledge service, whereupon they could have applied for a stay on the ground of the exclusive jurisdic on cl ause i n the bi ll of l adi ng. By agreeing to accept service they were merely an ci pa ng t h at si tua on, and t ha t *717 agreement did not imply that they were abandoning the insistence that the dispute

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should be li gat ed in Paki stan. The judge wa s ri ght on that issue as we l l.

3 The judge applied the wrong test in approaching the case as one of forum non conveniens. Where the par es had agreed that a di sput e shoul d be resol ved in the cour ts of one count ry to the exclusion of all others, the English court ought to respect such agreement, unless to do so risked resul ng in inj us ce. The r ela ve mes t o obt ai n a j udgment i n Pakis t an and England di d not cons tut e strong cause for not gi vi ng effect to t he excl usi ve j uri sdi c on pr ovi s i on agreed by the par es . ( The Pioneer Container [1994] 2 AC 324 applied; The El Amria [1981] 2 Ll Rep 119 considered.)

4 In an exclusive jurisdic on c l ause c ont ext , wh er e a pl ai n ff had act ed r easonabl y in commencing proceedings in England and in allowing me to expi re i n the agreed f or ei gn jurisdic on, a s tay of t he Engl ish pr oceedi ngs shoul d onl y be gr ant ed on t erms t hat t he defendant waived the me bar in the for ei gn jur i sdi c on. ( Spiliada Mari me Cor p v Cansul ex Ltd [1987] AC 460applied; Ci -Ma rch Ltd v Ne pt une Or ient Li nes [1996] 1 WL R 1367 and The M C Pearl [1997] CLC794considered.)

5 It was reasonable for the cargo owners to have commenced proceedings in England because under the Hague Rules as applied in Pakistan the shipowners' liability would have been limited to a frac on of the car go own er s' cl ai m, wh er eas the lar ger Ha gue- Vi sby limi t in Engl and wo ul d not impinge on the cargo owners' claim. Where a bill of lading contained a foreign jurisdic on clause whose effect wo ul d be to l imi t the hol der ' s cl ai m to a sum that wa s l ess than an applicable Hague-Visby Rules limit, the English Court should, by virtue of art. III, r. 8 of the Hague-Visby Rules, normally treat the holder as en tled to di sregard that cl ause unl ess and un l the shipowner undertook not to seek to take advantage of the lower limit. (The Hollandia [1983] AC 565 and The Benarty [1985] 1 QB 325 considered.)

6 It was not necessary for the cargo owners to have commenced proceedings in Pakistan in order to keep me open ther e. The obj ect of the one- year me- l imit was to ensure t hat shipowners were given reasonably prompt no ce of cl ai ms agai ns t them and not faced wi th stale claims. By reasonably commencing proceedings in the English jurisdic on, t he car go owners achieved that object. To have commenced parallel proceedings in Pakistan would have been a pointless technicality, and it would not be consistent with the prac cal requi reme nt s of jus ce to penal ise the car go own er s for thei r fai lur e to do so.

The following cases were referred to in the judgment of Phillips LJ:

Benarty, The [1985] 1 QB 325

Ci -Ma rch Ltd v Ne pt une Or ient Li nes Ltd [1996] 1 WL R 1367

El Amria, The [1981] 2 Ll Rep 119

Hollandia, The [1983] 1 AC 565

Johnson v Taylor Bros & Co Ltd [1920] AC 144

Manta Line Inc v Sofiani tes [1984] 1 Ll Rep 14

M C Pearl, The [1997] CLC 794

Pioneer Container, The [1994] 2 AC 324

Spiliada Mari me Cor p v Cansul ex Ltd (‘The Spi liada’ ) [1987] AC 460

Representa on

Timothy Young QC and Arshad Ghaffar (ins tructed by Mo r e Fi sher Br own ) for the shi pown er s.

Page3

Michael Nolan (instructed by Swinnerton Ashley-Claydon & Co) for the cargo owners.

JUDGMENT

Phillips LJ:

On 24 May 1995 181 coils of steel were shipped in Bilbao aboard the vessel, SIBI, owned by the appellants (‘the shipowners’). They were consigned to the respondents (‘the cargo owners’) in Damman. It is alleged that some of the coils sustained *718 damage in transit to the tune of something under £20,000. The cargo owners seek to recover damages from the shipowners for breach of the contract of carriage.

The coils were carried under bills of lading which contained the following exclusive jurisdic on clause:

‘Jurisdic on . The contract evidenced by this Bill of Lading shall be governed by the law of the place where the Carrier has his principal place of business and disputes determined at that place (or, at the op on of the Car rier , at the por t of des na on) according to that law the exclusion of the jurisdic on of the Cour ts of any ot her country.’

Pakistan is the principal place of business of the shipowners.

Nego a ons have t aken pl ace bet wee n t he r epr esent a ves of t he shi powner s and car go owners. The cargo owners contend that these nego a ons l ed t o an oral agreemen t that the English court should have exclusive jurisdic on i n r espect of thei r cl ai m ( ‘the first issue’ ) . Swinnerton Ashley-Claydon, solicitors ac ng for the car go own er s, issued a wr i t and Mo r e Fi sher Brown (‘MFB’), solicitors ac ng for the shi pown er s, accept ed ser vi ce of the wr i t. The cargo owners contend that this precludes the shipowners from invoking the exclusive jurisdic on clause in the bill of lading (‘the second issue’). The shipowners contend that the proceedings served upon their solicitors should be stayed in order to give effect to the excl us i ve jur i sdi c on clause (‘the third issue’).

The shipowners took out a summons seeking a stay of the ac on. On 3 January 1997 Hi s Honour Judge Kershaw QC, si ng as a j udge of the Comme r cial Cour t , dismi s sed t hei r appl i ca on. The shipowners now appeal against his order, with leave of the single Lord Jus ce.

The first issue

The first i ssue requi red the judge to resol ve wh at he ri ght ly described as a star k issue of fact that arose on the affidavi t s. Because of the mod es t amou nt at stake t he par es agreed t hat t he judge should resolve this on the basis of the inherent probabili es rat her than by assessi ng the credibility of the deponents a er seei ng them cros s-exami ned on thei r affidavi t s.

On this issue he found in favour of the shipowners, holding that there was no oral agreement that the English court should have exclusive jurisdic on over the di sput e. By a respondent s' no ce the car go own er s seek to rever se thi s findi ng, so t hat this cour t i s requi r ed t o r e-assess the conflict that ar i ses on the affidavi t s.

The facts

Discharge of cargo in Damman was completed on 19 July 1995. On 25 June 1996 Stean Shaw, the cargo owners' recovery agents, contacted the shipowners' protec on and i ndemn i ty associa on, t he St eams hi p Mu t ual ( ‘the cl ub’ ), t o s eek an extens i on of t he Ha gue Rul es

Page4

one-year me - limi t. Thi s extens i on wa s ref used. On 1 Jul y Swi nner tons issued wr i ts in rem and in personam and faxed a le er to the shi pown er s inf ormi ng them of thi s and invi ng t hem t o instruct London solicitors to accept service. They threatened to arrest the SIBI or a sister ship if a se leme nt offer was not mad e.

The shipowners replied the following day in a le er wh i ch took the poi nt , amo ng ot her s, that because of the jurisdic on cl ause i n the bi ll of l adi ng, car go own er s we r e not en tled t o commence proceedings in the UK.

On 5 July the club faxed Swinnertons as follows:

‘We are surprised that you have troubled to issue writs in England in rela on to the above cap oned cl ai m. Pr oper j ur i sdi c on f or any cl aim u nder the above cap oned above bill is Pakistan. Accordingly, the proceedings you have issued are, *719 in our view, an abuse of process par cul ar l y wh en t he s hi pme nt has no c onnec on whatsoever with England. Moreover, as commencing an ac on in wh at is pat ent ly the wrong jurisdic on wi ll not pr ot ect me.

You should have no doubt that if you do a emp t t o ser ve Engl ish wr i ts on our Members, we shall make an immediate applica on to chal lenge the jur i sdi c on of the English Court. Moreover should you a emp t to ar rest any vessel s own ed by PNS C, in these circumstances, we will apply to set aside any arrest order made.’

This response had been discussed with both the shipowners and with MFB. Cargo owners' solicitors replied aggressively on 8 July:

‘We are not instructed to discon nue pr oceedi ngs i n thi s j ur i sdi c on. Indeed cargo interests have a valid claim for damages and are en tled to pr ot ect thei r int er ests in respect of the same.

Your members have ignored correspondence reques ng an extens i on of me and t hen a er pr oceedi ngs we r e issued al leged that pr oceedi ngs we r e comme nced out of me which is incorrect.

Will you please confirm that you/ your me mb er s wi ll gi ve due cons i der a on t o t he claim immediately. Please note that we are instructed to proceed with an arrest if the SIBI or one of her sister ships calls in England or Wales and a watch is being kept upon the vessels.’

On the same day, Stean Shaw faxed to the club an invita on to put up secur i ty, a achi ng ‘ a suitable wording for the guarantee’.

The form a ached inc l uded an under taki ng to pay such sums as shoul d be adj udged due by the English High Court, an undertaking to instruct solicitors to accept service of proceedings commenced in the English High Court and an agreement to submit to the exclusive jurisdic on of the English High Court for the purpose of enforcing the undertaking.

S ll on 8 Jul y the cl ub invi ted Swi nner tons to send the cl ai ms docume nt s and copi es of the wr i ts that had been issued.

On 9 July the club faxed to Stean Shaw in the same terms as their fax to Swinnertons of 5 July.

I now come to a telephone conversa on betwe en Stean Shaw and the cl ub on the a ernoon of 9 July. The first issue tur ns on the cont ent of thi s conver sa on. Mr Hawes , a claims handl er for Stean Shaw, gives this account of it:

‘Captain Singh introduced himself and said that Darren Heppel was with him. I heard a voice in the background shou ng out “He l lo” and assume d that that wa s Mr Heppel . Captain Singh said something like “we are all friends here together”.

Page5

Captain Singh then told me that he had been trying to speak to Swinnerton Ashley-Claydon but was unable to get through. He said he was phoning to say that he did not want one of the defendants' vessels arrested and that the club was prepared to provide a le er of under taki ng in the form pr oposed by me . He al so sai d some t hi ng to the effect that the pl ai n ffs coul d found j urisdic on that way b ut I cannot r emembe r now precisely how he put it.

I then telephoned Swinnerton Ashley-Claydon and spoke to Mr Swinnerton's assistant, Julie Allen. I told her about the agreement which I had reached with Mr Singh.’

Both Mr Hawes and Miss Allen made contemporary notes of their conversa ons .

*720

Mr Hawes' note read:

‘9.7.96

T.C. from Steamship Mutual (Capt Singh/Darren Heppel) — agreeing to security as proposed — I suggested they speak to Tony Swinnerton, as he has been instructed to discuss this claim further.

I phoned Swinnerton's to advise.’

Miss Allen's note read:

‘10.7.96

James Hawes

Stean Shaw

Sibi Capt. Singh

Darren

Heppel

Steamship Mutual

— le er of under taki ng wo r di ng as per dr a .’

Mr Singh's version of the conversa on is as fol lows :

‘Darren Heppel (who has been assis ng me on thi s ma er) was bes i de me whe n I answered the call. Mr Hawes confirme d to me that St ean Shaw had ins tructed SAC but were unaware that SAC had already been in contact with Steamship Mutual. I then advised Mr Hawes that the Club's views on jurisdic on had been ma de known to SAC and that since solicitors had been instructed by both par es , fut ur e di scus si ons shoul d take place between them. I did say to Mr Hawes, however, that in order to avoid a PNSC vessel being arrested, that Steamship Mutual would be prepared to provide a guarantee, but in a wording to be agreed between the solicitors. In light of the background which I have explained above, I could not have, even remotely, agreed that Steamship Mutual would provide security in the form suggested by Stean Shaw, and Stean Shaw were quite aware of the posi on on j ur i sdi c on havi ng r ecei ved our above-men oned fax on the mo r ni ng of 9 Jul y pr ior to our tel ephone conver sa on. There would be absolutely no reason for me to depart from the posi on wh i ch had been unequivocally adopted by both Steamship Mutual and PNSC on the issue of jurisdic on. ’

Page6

Mr Heppel confirms thi s account :

‘I recall that during the conversa on Capt ai n Si ngh confirmed t o Mr Hawes that Steamship Mutual was prepared to provide security — our concern being that we wished to avoid the arrest of a PNSC ship which was being threatened by the plain ffs at the me . Capt ai n Si ngh di d not , howe ver , agree to the speci fic wor ding of the LOU which Stean Shaw had proposed. Both Captain Singh and I had looked at the dra LOU and it was unacceptable for a number of reasons, not least because it referred to PNSC agreeing to English jurisdic on…

A er Capt ai n Si ngh and Mr Hawe s had finished speaki ng, Capt ain Singh asked me t o send the dra LOU to Mo r e Fi sher Br own , wh om Steams hi p Mu t ual had ins truc ted on behalf of PNSC. I therefore sent More Fisher Brown a fax reques ng them to nego ate the security wording with Swinnerton Ashley-Claydon.’

The fax that Mr Heppel sent to MFB included the following paragraphs:

‘Given that PNSC have informed Swinnerton's that you have been appointed on their behalf we now feel that in order to deprive cargo interests of a reason to detain a PNSC vessel it would be advisable to (a) appoint you to accept service and (b) provide a Club LOU.

Accordingly, please could you now contact Swinnerton's and request them to send you the writs that they have issued. We would also be grateful if you could nego at e the wording of the LOU to a form acceptable to the Club and in this *721 regard we a ach a copy of Stean Shaw's proposal. Naturally, we would wish the LOU to incorporate “competent Court” as opposed to the jurisdic on of the Engl ish Hi gh Cour t.’

On behalf of the cargo owners, Mr Nolan argued that the judge was wrong to conclude on the basis of this evidence that no oral agreement to exclusive English jurisdic on had been concluded. The only issue was whether Mr Singh had agreed that security would be provided on the terms of Stean Shaw's form, which included an agreement to English jurisdic on. As to thi s, the best evidence consisted of the contemporary notes of Mr Hawes and Miss Allen. The problem with this submission is that the fax sent by Mr Heppel to MFB a er the tel ephone conversa on is incons i stent wi th an agreeme nt to the terms of Stean Shaw' s form.

Mr Nolan submi ed that the agreeme nt wo ul d have been concl uded in a sent ence or two . If this is correct, and it seems likely that it is, it is hard to accept that either party to the telephone conversa on i nt ended to creat e l egal rel a ons i n an cipa on of the execu on of a f ormal wri en under taki ng.

What seems quite clear is that the par ci pant s we r e never , subj ec vel y, ad i dem. It was unl i kel y in the extreme, having regard to the vigorous protests that had been made as to the effect of the exclusive jurisdic on cl ause i n the bi ll of l adi ng, that the cl ub wo ul d agree to excl us i ve English jurisdic on, and Mr Heppel 's fax to MF B shows that he di d not bel ieve that it had done so. In my judgment the most likely explana on for the conflict on t he cont empo r ary documen t s is that there was a misunderstanding as to what Mr Singh had agreed. He could well have said ‘we will put up the security asked for by Stean Shaw’, intending to refer only to the amount, which was £20,000. Mr Nolan correctly submi ed that any agreeme nt fel l to be det ermi ned having regard to the objec ve i nt er pr et a on of the wor ds used. I agree. The t roubl e i s that there is no sa sfactor y evi dence as to wh at those wo r ds we r e. In these ci rcums tances I agree with the judge that the cargo owners have failed to establish that the club orally agreed on behalf of the shipowners to exclusive English jurisdic on.

Page7

The second issue

On 10 July MFB faxed to Swinnertons a le er wh i ch stat ed:

‘We have been instructed on behalf of PNSC in this ma er and are aut hor i sed on thei r behalf to accept service. Would you please therefore send us the writs which have been issued.’

Swinnertons replied two days later, somewhat confusingly:

‘We also enclose two writs in personam together with two acknowledgments of service for the two defendants by way of service together with, for your informa on, a copy of the writ in rem.’

MFB faxed back on 15 July:

‘Thank you for your 12 July le er recei ved her e today. We are unsur e wh et her you are intending by means of your le er to ser ve us wi th the wr i t or not . As we have al ready indicated we do have instruc ons to accept ser vi ce. Pl ease coul d you cl ar i fy.

If you are serving us then please let us know what you wish to do about an acknowledgment of service. Are you proposing to get on with the claim or do you wish to agree a general extension of me for acknowl edgme nt and l odgi ng of no ce of inten on to def end.

Finally, we should stress that although we are instructed to accept service, this is not a step in the ac on and we ma ke no admi ssi on wh at ever in rel a on t o *722 jurisdic on. This is a point which we will be considering further in the future but for present purposes please treat all communica on wi th us and f rom us as bei ng wi thout prejudice to jurisdic on issues . ’

Swinnertons replied on 16 July:

‘We thank you for your fax dated 15 July and do apologise for any apparent confusion but we sent the writ in personam to you by way of service. We are obliged to you for confirmi ng that you wo ul d accept ser vi ce.

According to our le er dat ed 12 Jul y we inc l uded two acknowl edgme nt s of ser vi ce as there are two defendants. We a ach a fur ther copy for your assi stance.

In default of any proposals from your clients we are instructed to press ahead with the claim and would ask you please to file the acknowl edgeme nt s in the usual wa y.

We note the third paragraph of your fax.’

Mr Nolan submi ed that by agreei ng to accept ser vi ce by thei r sol ici tor s, the shi pown er s agreed to submit to the jurisdic on of the Engl ish cour t, and that thi s pr ecl uded them from ther ea er seeking to stay the English proceedings. The judge rejected this submission. Mr Nolan referred us to Manta Line Inc v Sofiani tes [1984] 1 Ll Rep 14. Bef or e tur ni ng to cons i der that case it is helpful to consider the nature of the jurisdic on of the cour t. The imme di at e founda on of the jurisdic on of the Engl ish cour t is due ser vi ce of pr ocess: see Johnson v Taylor Bros [1920] AC 144 at p. 154 per Lord Dunedin. Of more significance, of cour se, are the pr inc i pl es of Engl ish law which govern the circumstances in which service is permissible. Where service of process is properly effected in accor dance wi th those pr inc i pl es , the jur i sdi c on of the Engl i sh cour t wil l

Page8

normally be established. Where service has been improperly effected cont rar y t o t hose principles, an applica on can be ma de to set ser vi ce asi de. Wh er e ser vi ce i s set asi de, the English court has no jurisdic on.

In Manta v Sofiani tes the pl ai n ffs obtai ned l eave ex part e to is sue a wr it for s ervi ce out of t he jurisdic on, rel yi ng on a numb er of the grounds for such ser vi ce to be found i n RSC, O. 11. Solicitors ac ng for the def endant then under took to accept ser vi ce, and the wr i t wa s dul y served on them. Their inten on wa s simp l y to shor t ci rcui t the pr ocess of ser vi ng out of the jurisdic on, leavi ng the def endant abl e to chal lenge the jur i sdi c on of the Engl i sh cour t on t he ground that no case for service under O. 11 had been made out. They had not, however, made this plain to the plain ffs' sol i citors . The Cour t of Appeal hel d t hat the accept ance of servi ce had founded the jurisdic on of the Engl ish cour t, so that i t wa s no l onger ma t er ial to cons i der whether or not service could properly be effected out si de the j ur i sdi c on. The pos i on was exactly the same as if the defendant had been served within the jurisdic on per sonal ly or through an agent. Sir John Donaldson MR remarked at p. 20 that, had that been the case:

‘…there would have been no ques on t hen of hi s appl yi ng t o set t he wr i t asi de whether the appearance he subsequently entered was uncondi onal or condi onal , because those who are served within the jurisdic on, per sonal ly or thr ough an agent , have no right to challenge the jurisdic on. Al l that they can do is chal lenge its exer ci se on the limited grounds which I have men oned, wh i ch do not appl y in thi s case. ’

This last sentence referred back to a passage at p. 18 where the Master of the Rolls referred to:

‘…examples where the Court, although it has jurisdic on, c us toma r i ly decl ines jurisdic on as, f or examp l e, wh en the di sput e concer ns the ma t rimo ni al stat us of persons under other systems of law in the absence of any domicile within the jurisdic on, or a for ei gn sover ei gn, or some ema na on of a f oreign sovereign, or the tle to for ei gn real ty. ’

*723

Strangely, the Master of the Rolls appears to have overlooked other, more per nent , circumstances where the English court will decline to exercise a jurisdic on wh i ch i t undoubtedly has, such as where it is shown that there is an alterna ve for um wh er e the ac on can more suitably be tried having regard to the interests of the par es and the ends of jus ce. Establishing jurisdic on by ser vi ce is no bar to seeki ng a stay of pr oceedi ngs on the grounds of forum non conveniens or on the ground that the plain ff has agreed t hat the cour t of anot her country shall have exclusive jurisdic on over the di sput e. The fact that a pl ai n ff has agreed with a defendant that any dispute between them will be resolved, exclusively, in a foreign jurisdic on does not depr i ve the Engl ish cour t of j ur i sdi c on whe r e t he def endant has been duly served. It may, however, lead the English court to decline to exercise that jurisdic on.

In the present case, the shipowners have been duly served, having voluntarily instructed solicitors to accept service. That is, however, no bar to their invi ng the cour t to stay the proceedings in order to give effect to the jur i sdi c on c lause i n t he bil l of ladi ng unl ess i mpl i cit in their agreement to accept service was an agreement that they waived their right to invoke the clause. Mr Nolan argues that this was indeed implicit. The shipowners were not suscep bl e to service in personam and thus the only explana on for thei r accep ng servi ce was that they were agreeing that the English court should adjudicate on the merits of the dispute.

Were one to ignore the relevant background, I would find Mr No l an' s ar gume nt convi nci ng. But MFB were instructed to accept service in circumstances where the shipowners were vigorously protes ng agai ns t pr oceedi ngs bei ng br ought in Engl and but wh er e the car go own er s we r e on

Page9

the point of arres ng one of thei r shi ps . Had they done so, the shi pown er s wo ul d have had no choice but to acknowledge service, whereupon they could have applied for a stay on the ground of the exclusive jurisdic on cl ause in the bi ll of ladi ng. By agreei ng to accept ser vi ce they we r e merely an ci pa ng t hat situa on, and I cannot r ead i nto that agreement any i mpli ca on that they were abandoning the insistence that the dispute should be li gat ed in Paki stan.

For these reasons I would uphold the conclusions of the judge in rela on to the second issue.

The third issue

In the concluding paragraph of his judgment, the judge said this:

‘Mr Nolan submi ed, cor rect ly, that a stay shoul d onl y be gr ant ed i f the cour t i s sa sfied t hat ther e i s some other avai l abl e f orum, havi ng compe t ent juri sdi c on, whic h is the appropriate forum for the trial of the ac ons , i.e. in wh i ch the case ma y be tri ed more suitably for the interests of all the par es and the ends of jus ce. I have r eached the conclusion that that test has not been sa sfied. I ther efore r efuse a stay on t he forum non conveniens basis.’

I accept the submission of Mr Young QC for the shipowners that the judge erred in accep ng the approach advanced by Mr Nolan and, in consequence, applied the wrong test. Where the par es have agreed that a di sput e shal l be resol ved in the cour ts of one count ry to the excl us i on of all others, the English court ought to respect such agreement, unless to do so risks resul ng in injus ce. Lor d Goff summa r i sed t he pos i on conci s ely in The Pioneer Container [1994] 2 AC 324 at p. 347F, when he said:

‘…the Court has a discre on wh et her to gr ant a stay of pr oceedi ngs br ought in br each of an agreement to refer disputes to a foreign court; but the discre on shoul d be exercised by gran ng a stay, unl ess strong cause for not doi ng so is shown . ’

*724

Lord Goff had pr evi ous l y appr oved the mo r e det ai led expos i on of the r elevant pri nci ples given in The El Amria [1981] 2 Ll Rep 119 at p. 123 by Brandon LJ, who had made this area of the law peculiarly his own:

‘(1) Where plain ffs sue i n Engl and i n breach of an agreemen t to r efer di sput es to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within its jurisdic on, is not bound to gr ant a stay but has a di scre on whether to do so or not.

(2) The discre on shoul d be exer ci sed by gr an ng a s tay unl ess strong cause f or not doi ng so is shown.

(3) The burden of proving such strong cause is on the plain ffs.

(4) In exercising its discre on the Cour t shoul d take int o account al l the ci rcums tances of the par cul ar case.

(5) In par cul ar , but wi thout pr ej udi ce to (4) , the fol lowi ng ma ers , whe r e t hey ari se, may properly be regarded:

(a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the rel a ve conveni ence and expense of tr ial as between the English and foreign Courts.

(b) Whether the law of the foreign Court applies and, if so, whether it differ s from Engl ish

Page10

law in any material respects.

(c) With what country either party is connected, and how closely.

(d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.

(e) Whether the plain ffs wou l d be prejudi ced by havi ng t o sue i n t he f oreign Cour t because they would: (i) be deprived of security for their claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a me - bar not appl icabl e in Engl and; or (iv) for poli cal , raci al , rel igi ous or ot her reasons be unl ikel y to get a fai r tri al .’

As the judge applied the wrong test when exercising his discre on, it is for thi s cour t to revi ew the posi on af resh by appl yi ng the cor rect pr inc i pl es . I pr opose to cons i der the var ious ma ers itemised by Brandon LJ under his fi h pri nci ple. (a) The evidence on the issues of fact is situated in neither England nor Pakistan.

(b) The exclusive jurisdic on cl ause pr ovi ded that the cont ract of car ri age wo ul d be gover ned by the law of Pakistan.

(c) The shipowners are closely connected with Pakistan, but their P & I club is managed in England and considera on of the cl ai m is likel y to be car ried out in Engl and.

(d) Where a cargo claim is involved, par cul ar l y as mo dest a cl ai m as that in the pr esent case, I do not think that it is realis c to vi ew ei ther par ty as mo vated by a concern t hat the disput e be li gat ed in i ts pr ef er red jur i sdi c on. Such c laims almos t alway s se l e. The j urisdic on in which the claim is proceeding is relevant chiefly in rel a on t o t he effect that i t wi ll have on t he nego a ng pos i on of t he par es in se lement d i s cus si ons. That i s not, of its elf, a reason f or depriving a party of a nego a ng advant age whi ch accrues to t hat par t y as a r esul t of a contractual agreement as to jurisdic on.

(e) Time-bar is the only relevant ma er under thi s par agraph of Br andon LJ ' s list. That is the one aspect of this appeal that is of general significance. Bef or e tur ni ng to it, I shoul d deal wi th one further factor upon which the cargo owners have relied.

*725

It seems that li ga on i s subj ect to l onger del ays i n Paki stan t han i n t his count r y. It mig ht take six or seven years to resolve this dispute in the courts of Pakistan. In The El Amria Brandon LJ discouraged a prac ce of comp ar ing the pr ocedur al advant ages and di sadvant ages of r i val jurisdic ons . He sai d at p. 126:

‘…for an English Court to inves gat e such a ma er and pronounce a j udgmen t on i t i s not consistent with the mutual respect with which the Courts of friendly states, each of which has a well developed system for the administra on of jus ce, owe, or shoul d owe, to each other.’

It does not seem to me that these words are applicable to delay, which may well be a ribut abl e not to procedural shortcomings but to demand swamping the available resources. But I do not consider that the rela ve lead mes i n Paki stan and Engl and, whe n t aken on t hei r own or i n conjunc on wi th the ot her ma ers that I have j ust cons i der ed, cons tute st rong cause for not giving effect to the excl us i ve jur i sdi c on provi sion agreed by the par es.

The me limi t

Carriage of goods by sea is covered by interna onal conven on. The Brussel s Conven on of 1924 produced the Hague Rules. Some, but not all, of the par es to that conven on have, by

Page11

the Brussels Protocol 1968, amended those rules to produce the Hague-Visby Rules. The law of Pakistan applies the Hague Rules; the law of England applies the Hague-Visby Rules. Each set of rules applies the same limita on pr ovi si on. Sui t mu s t be br ought wi thi n one year of del iver y, failing which the carrier is discharged from all liability. The cargo owners commenced the English proceedings within the one-year limita on per iod. They di d not comme nce pr oceedi ngs in Pakistan and, should they do so now, risk being defeated if the shipowners plead that the claim is out of me . The shi pown er s have ma de it pl ai n that they are pr epared to under take not to invoke the me bar in Paki stan if thi s is the pr i ce that they have to pay in or der to obt ai n a stay of the English proceedings. They contend, however, that they should not be required to pay this price. They say that the fact that the claim is likely to be held me - bar red in Paki stan is no reason for permi ng t he cargo owne r s to proceed i n Engl and i n breach of the j uri sdi c on clause.

Where a claim has become me - bar red in wh at wo ul d ot herwi se be the appr opr iat e or agreed jurisdic on i n wh i ch i t shoul d be tri ed, does thi s mi litat e i n favour of gr an ng a stay of the English proceedings, or against gran ng a stay, or is it a neut ral factor ? Thi s is a ques on whi ch the courts have considered on a number of occasions. There is, in my judgment, no binding decision on the point and differ ent judges have expr essed di fferent views. The aut hor i es have recently been reviewed in two cases in the Commercial Court involving exclusive foreign jurisdic on cl auses i n bi lls of l adi ng and I pr opose to ref er to these, rat her than repeat the exercise.

In Ci -Ma rch Ltd v Ne pt une Or ient Li nes [1996] 1 WL R 1367 service out of the jurisdic on had been effected in rel a on t o bil ls of ladi ng whi ch had an excl usi ve Singapor e j uri sdi c on c l ause. The plain ffs all owed t he Hag ue Rul es one- year me-l i mit to expi re wi th out i ssui ng a prot ec ve writ. A er revi ewi ng the aut hor i es, Col man J gave t he f oll owi n g summa r y of thei r effect at p. 1374C–F:

‘The approach in these cases is, in my judgment, consistent with the view that in an exclusive jurisdic on c l ause case, wh er e a pl ai n ff has f ai led t o is sue pr ot ec ve proceedings in the contractual forum, a stay will be ordered or service set aside unless strong cause is shown why English jurisdic on shoul d be ma i nt ai ned. In a case wh er e, but for the me bar , ther e i s strong cause for Engl ish jur i sdi c on, a stay wi l l not be ordered or service set aside in spite of the Plain ffs' havi ng cons ci ous l y deci ded not to preserve me in the cont ractual for um, for in so *726 conduc ng hi ms el f he cannot be said to have acted unreasonably and it is in the circumstances inappropriate that he should be shut out from pursuing his claim by reason of the foreign jurisdic on cl ause. In a case where, however, but for the me bar , strong cause i n favour of Engl ish jurisdic on cannot be shown , a pl ai n ff may be able to rely on t he pr ej udice to hi m by reason of a me bar i n the cont ractual for um i f he can show that he di d not act unreasonably in failing to issue protec ve pr oceedi ngs i n or der t o pr event me running against him. Whether his omission is unreasonable will depend on all the circumstances of the case, including his awareness of the poten al me bar , the explana on for hi s omi ssi on to pr eser ve me and t he ext ent to whi ch t he cont r act ual forum is also, me bar apar t, the appr opr iat e for um for the adj udi ca on of the disput e in ques on. At the end of the day the cour t mu s t cons i der wh et her in the int er ests of jus ce it is mo r e appr opr iat e to permi t a pl ai n ff to pr oceed i n Engl and, although he has omi ed to pr eser ve me i n t he cont r act ual forum, and al t hough Engl and i s not clearly the more appropriate forum, than to deprive him of all opportunity of pursuing his claim in any forum.’

On the facts of that case, Colman J held that strong cause had been shown for maintaining English jurisdic on. He we nt on to hol d that i n those ci rcums tances the pl ai n ffs had ac ted

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reasonably in proceeding in England and that it could not be maintained that the omission to incur further costs in order to preserve me in Si ngapor e wa s unr easonabl e.

In The M C Pearl [1997] CLC 794 the plain ffs served proceedi ngs i n Engl and i n dis regard of a clause in the bills of lading which provided for the exclusive jurisdic on of the cour ts of Sout h Korea. No proceedings were commenced in South Korea and the Hague Rules me - limi t expired. Rix J held that the case was on all fours with Ci -Ma rch . There was strong cause for proceeding in England. Rix J also reviewed the relevant authori es and, br oadl y, forme d the same conclusions as Colman J. He did, however, differ from hi m i n advanci ng the fol lowi ng proposi on (at p. 807C) :

‘Fi hl y, it seems to me that it ought to fol low that (save pos si bl y in some excep onal circumstance which I cannot presently visualise) a plain ff's fail ure t o preserve a me - limi t in the cont ractual for um cannot assi st hi m to found jur i sdi c on i n Engl and where he does not have a strong case for it separately from the me - bar poi nt ; and that even where he does have a strong case for jurisdic on in Engl and apar t from the me - bar poi nt , the f act that he has al lowe d the me- bar to go by def aul t in t he contractual jurisdic on al wa ys r equi res some cons i der a on or expl ana on ( as i n Ci -Ma rch ).’

Rix J obviously was not able to envisage a situa on i n wh i ch i t mi ght be reasonabl e to star t proceedings in England in disregard of a foreign jurisdic on cl ause, but wh er e the pl ai n ffs would be unable subsequently to demonstrate that there was strong cause for proceeding in England. Accordingly he did not believe that the following extract from the speech of Lord Goff in The Spiliada [1987] AC 460 at pp. 483H–484E could apply in an exclusive jurisdic on cl ause context:

‘And prac cal j us ce deman ds that , if the cour t cons i der s that the pl ain ff acted reasonably in commencing proceedings in this country, and that, although it appears that (pu ng on one s ide t he me b ar point ) the appropri ate forum f o r t he t r ial of t he ac on i s el sewh er e than Engl and, the pl ai n ff did not act unreasonabl y in fai l i ng t o commence proceedings (for example, by issuing a protec ve wr i t) in that jur i sdi c on within the limita on per iod appl icabl e ther e, i t wo ul d not , I thi nk, be jus t to depr i ve the plain ff of the benefit of havi ng s t arted pr oceedi ngs wi th in the l i mita on per iod applicable in this country … The appropriate order, where the applica on of the me bar in the foreign jurisdic on is dependent upon its *727 invoca on by the def endant , may well be to make it a condi on of the gr ant of a stay, or the exer ci se of di scre on against giving leave to serve out of the jurisdic on, that the def endant shoul d wa i ve the me bar in the for ei gn jur i sdi c on; this i s appar ent l y the prac ce i n the Uni t ed States of America.’

I consider that the demands of prac cal j us ce i den fied by L ord Goff c an i n some circumstances apply in an exclusive jurisdic on cl ause cont ext . Wh er e a pl ai n ff has acted reasonably in commencing proceedings in England and in allowing me to expi re in the agreed foreign jurisdic on, a stay of the Engl ish pr oceedi ngs shoul d onl y be gr ant ed on terms that the defendant waives the me bar in the for ei gn jur i sdi c on.

Did the cargo owners act reasonably in star ng pr oceedi ngs in Engl and?

In my judgment factors existed in this case which, when viewed objec vel y, ma de it reasonabl e for the cargo owners to commence proceedings in England. Those factors are by no means uncommon.

One of the principal objects of the Brussels Protocol 1968 was to subs tut e a mo r e real is c l imit

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of liability for the Hague Rules limit, which, at least as interpreted in some countries, infla on had rendered derisory. The new limit under art. IV, r. 5 of the Hague-Visby Rules is two SDRs per kilo of gross weight or 666.67 SDRs per package. The old limit was £100 per package and the courts of Pakistan have to date treated this as £100 sterling, rather than £100 gold value. It follows that the effect of the jur i sdi c on c lause i n t he bil l of ladi ng was that cargo owne r s wer e required to sue in a jurisdic on wh er e the shi pown er s wo ul d have been en tled t o l imit thei r liability to a frac on of t he c l ai m. I n t hese c i rcums tances I cons i der t hat i t wa s pl ai nl y reasonable to commence proceedings in England, where the larger limit would not impinge on the claim. Indeed, the ma er goes fur ther than that .

By art. III, r. 8 of the Hague-Visby Rules:

‘Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connec on wi th goods ar i si ng f rom negligence, fault or failure in the du es and obl iga ons provi ded i n t his Ar cle or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect.’

The effect of thi s i s that the Engl ish Cour t i s requi red to treat as of no effect an excl usi ve jurisdic on cl ause i f the appl ica on of that cl ause wi l l resul t in t he pl ain ffs' recovery bei ng restricted to less than the Hague-Visby limit.

In The Hollandia [1983] 1 AC 565 at pp. 574H–575E Lord Diplock described the posi on as follows:

‘My Lords, unlike the first paragraph of condi on 2 a choi ce of forum c lause, such as that appearing in the third paragraph, does not ex facie offend agai ns t ar cle I I I, paragraph 8. It is a provision of the contract of carriage that is subject to a condi on subsequent; it comes into opera on onl y upon the occur rence of a fut ur e event that may or may not occur, viz: the coming into existence of a dispute between the par es as to their respec ve legal ri ght s and du es under the cont r act whi ch t hey are unabl e to se le by agreeme nt . Ther e ma y be some di sput es that wo ul d br ing the choi ce of forum clause into opera on but wh i ch wo ul d not be concer ned at al l wi th negl igence fault or failure by the carrier or the ship in the du es and obl iga ons provi ded by ar cl e III; a cl ai m for unpai d frei ght is an obvi ous examp l e. So a choi ce of for um cl ause which selects as the exclusive forum for the resolu on of di sput es a cour t wh i ch wi ll not apply the Hague-Visby Rules, even a er such cl ause has come int o oper a on, does not necessarily always have the effect of lesseni ng the liabi lity of the car rier in a wa y that a racts the appl ica on of ar cle II I, paragraph 8.

*728 My Lords, it is, in my view, most consistent with the achievement of the purpose of the Act of 1971 that the me at wh i ch to ascer tai n wh et her a choi ce of for um cl ause will have an effect that i s pr os cribed by ar cle I I I, par agraph 8 shoul d be whe n t he condi on subsequent is ful filled and t he carr ier seeks to bri ng t he clause i nto oper a on and to rely upon it. If the dispute is about du es and obl iga ons of the carr ier or shi p that are referred to in that rule and it is established as a fact (either by evidence or as in the instant case by the common agreement of the par es) that the for ei gn cour t chosen as the exclusive forum would apply a domes c subs tan ve l aw whi ch wou l d result in limi ng the car rier ' s l iabi lity to a sum lowe r than that to wh i ch he wo ul d be en tled i f ar cle I V, par agraph 5 of the Hag ue- Vis by Rul es appl i es, then an Engl i sh Court is in my view commanded by the Act of 1971 to treat the choice of forum clause as of no effect .’

Thus, where a stay is sought, the English court will consider as of no effect a for ei gn jur i sdi c on

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clause whose effect wi ll be to subj ect the pl ai n ff to a rel evant l imit of l iabil i ty bel ow t h e Hague-Visby limit. This has led defendants to adopt the stratagem of undertaking not to rely upon a package limita on under t he l aw of t he cont ractual f or um t hat i s l ess t han t he Hague-Visby limit, and in The Benarty [1985] 1 QB 325 at p. 339 Ackner LJ gave this prac ce hi s approval.

In the present case, at the hearing of the stay applica on but not bef or e, the shi pown er s undertook not to rely upon the Pakistan package limit. Had they not done so, the stay applica on wo ul d have been doome d to f ai lur e. Thi s l ed Mr Young to ma ke the f ol lowi ng submission. Un l the stay appl ica on was hear d i t was uncert ain whe t her any i ssue of package limita on wo ul d ar ise and, in the event , no such issue di d ar i se. Ac cor di ngl y the car go own er s could not jus fy thei r deci si on to pr oceed in Engl and by the need to avoi d the effect of the Pakistan limit. This is wholly unrealis c. Ha d the car go own er s simp l y sued in Paki stan, ther e is every reason to think that the shipowners would have invoked the Pakistan limit. It was only by suing in England that they compelled the shipowners to waive that limit. In my judgment, where a bill of lading contains a foreign jurisdic on cl ause wh ose effect wi l l be t o l imit the hol der ' s claim to a sum that is less than an applicable Hague-Visby Rules limit, the English Court should normally treat the holder as en tled to di sregard that cl ause unl ess and un l the shi powne r undertakes that he will not seek to take advantage of the lower limit.

For these reasons, when an objec ve test is appl ied to the conduct of the car go own er s in the present case, I conclude that they acted reasonably in commencing the English proceedings.

Mr Young submi ed that i t wa s wr ong to appl y an obj ec ve t est . The cargo owne r s ought to have demonstrated that their subjec ve mo ve f or comme n ci ng proceedi ngs i n Engl and was reasonable. I disagree. It seems to me that it is appropriate, when considering whether cargo owners acted reasonably, to view the relevant factors objec vel y.

Mr Young further submi ed that the car go own er s ought , i n any event , to have comme nced proceedings in Pakistan in order to keep me open ther e. I do not find t his an a rac ve submission. The object of the one-year me - limi t i s t o ensur e t hat shi pown er s are gi ven reasonably prompt no ce of cl ai ms agai ns t them and not faced wi th stal e cl ai ms . By reasonabl y commencing proceedings in the English jurisdic on, the car go own er s achi eved that obj ect. To have commenced parallel proceedings in Pakistan would have been a pointless technicality. A cau ous l awy er mi ght , nonet hel ess, have advi sed such a cour se, but I do not bel ieve that i t would be consistent with the prac cal requi reme nt s of jus ce t o penal i se t he cargo owne r s for their failure to do so.

For these reasons, I would make it a term of the grant of a stay that the shipowners undertake to waive the one-year me - limi t in Paki stan. Upon that basi s I wo ul d al low thi s appeal .

*729

Waller LJ:

I agree with the judgment of Phillips LJ en rel y, subj ect to a concer n that I have about the ul ma t e exer ci se of di scre on on t he f act s of this par cular case.

My concern is as to whether having concluded it was reasonable to commence these proceedings in England, and having concluded that it was not necessary to commence parallel proceedings in Pakistan (with which conclusions I say again I en rel y agree) , it is ri ght ul mat ely in an ac on concer ned wi th such a sma l l sum of mo ney to stay the Engl ish pr oceedi ngs, and force further costs to be incurred in commencing proceedings in Pakistan. I realise it will be said that the costs so far have been concerned essen al ly wi th t he j ur i sdi c on di sput e, but nevertheless lawyers in England will have at the least a broad understanding of the merits, and lawyers in Pakistan on both sides will be required to start from scratch.

I stress that my concern arises simply because of the lack of propor on in thi s case betwe en the sum claimed and the costs to which the respec ve par es wil l now b e put , and has absol utely

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nothing to do with a emp ng t o compa r e l ead mes i n the r espec ve jur isdi c ons.

Having registered my concern, I am not prepared to dissent in the result advocated by Phillips LJ, but when the ques on of cos ts come s to be cons i der ed, thi s i s a poi nt wh i ch in my vi ew should be borne in mind.

Chadwick LJ:

I agree that this appeal must be allowed. I share the concern of Waller LJ that the costs yet to be incurred if this dispute is to be li gat ed in Paki stan ma y be out of pr opor on t o t he sum i n dispute; but I am not persuaded by any material before the court that the costs of li ga on i n Pakistan are greater, or significant ly great er , than the cos ts of fur ther li ga on i n Engl and. The problem, as it seems to me, is that the costs of li ga on are l i kel y to be di spropor onat e in rela on to the amo unt i n di sput e in thi s case wh et her the l i ga on con nues i n England or commences afresh in Pakistan. But that is a ma er for the par es. In r ela on t o the ques on which we have to decide-whether or not to stay proceedings in England-the point seems to me to be neutral.

(Appeal allowed with appellant to have half costs)*730

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*551 Carlson v Rio Tinto plc & Anor

Queen's Bench Division

4 December 1998

[1999] C.L.C. 551

Wright J.

Judgment delivered 4 December 1998

Tort—Conflict o f l aws —F or um n on c onveni ens—S out h A f ri can p l ai n ff sue d Eng l i s h company for injury suffer ed in Nami bi a—Wh et her pr oceedi ngs shoul d be stayed on gr ounds of forum non conveniens.

This was the English defendant's applica on for a stay of the Sout h Af ri can pl ai n ff's ac on on the ground of for um non conveni ens .

The plain ff was the wid ow o f C who wor ked f rom 1 977 t o 1984 i n a urani um min e owned by Rossing, a Namibian subsidiary of the defendant. C died in 1995 of cancer which his widow claimed was caused or contributed to by exposure to uranium ore dust at the mine. The plain ff was resi dent and domi c il ed i n Sout h Afr ica. Her claim a gai nst the defendant was based on allega ons that it owe d du es dir ect l y to C. The def endant applied for the ac on to be stayed on the ground of f or um non conveni ens . The defendant accepted that the case was governed by the Court of Appeal decision in Lubbe v Cape plc [1998] CLC 1559 but asked the court to give an opinion on the applica on free of the aut hor i ty of Lubbe.

Held, refusing the applica on for a stay:

The plain ff had t he benefit of l egal aid for t he purposes of pursuing her ac on against the defendants in England. The case was one of such nature and complexity that it could only be pursued with the benefit of financi al assi stance and exper t sci en fic evidence. In the light of evidence that the South African legal aid board would not fund li ga on out s ide Sout h Afr ica and t hat con ngency f ee ar rangement s were not l awful i n Namibia, it had not been shown that South Africa or Namibia would be the more convenient forum and the applica on for a stay wa s ref used.

The following cases were referred to in the judgment:

Connelly v RTZ Corp plc [1997] CLC 1357; [1998] AC 854 (HL); [1999] CLC 533

Lubbe v Cape plc [1998] CLC 1559

Spiliada Mari me Cor p v Cansul ex Ltd [1987] AC 460

Representa on

Michael Spencer QC (instructed by Davies Arnold Cooper) for the defendant.

Brian Leveson QC (instructed by Leigh Day & Co) for the plain ff.

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JUDGMENT

Wright J:

This ma er come s bef or e the cour t on the def endant ' s appl ica on f or a stay of the plain ff's ac on on t he gr ounds of f orum no n conveni ens. The pl ai n ff i s the widow and personal representa ve of the estat e of her deceased husband, Mr Pet er Car l son, wh o worked at the Rossing uranium mine from 19 January 1977 un l 23 Novemb er 1984. He died on 23 January 1995 from oesophageal cancer which his widow claims was caused or contributed to by his exposure to uranium ore dust during the period of his employment at Rossing. The basis upon which the plain ff claims that l i abi l ity f or her husband's death a aches to these def endant s i s si mi lar to that rel ied upon i n the Connelly ac on ( see [1999] CLC 533), and I need not repeat the details. A major differ ence, howe ver , is that Mr s Car l son is res i dent and domi ci led in Sout h Af ri ca.

The principles to be applied to applica ons to stay on the grounds of f or um non conveniens are enshrined in the House of Lords decision in Spiliada Mari me Cor p v Cansulex Ltd [1987] AC 460 In the context of the present case however, the defendants concede that the ma er i s now gover ned by the deci si on of the Court of Appeal in Lubbe v Cape plc [1998] CLC 1559, the facts of which, but for the fact that the exposure of the plain ffs was to asbes t os and i n Sout h Af r ica, are i ndi s ngui shabl e fr om t h e present *552 case. The Court of Appeal held that a major obstacle in the path of the defendant's applica on in a case of thi s ki nd is that the Sout h Af ri can for um wo ul d not become ‘available’ to the plain ffs unl ess the def endant compa ny had, pri or to t he commencement of proceedings at least, agreed to submit to the jurisdic on of the South African court. In Lubbe as in the present case, there was no pre-exis ng agreement between the par es as to j ur i sdi c on, nor had t he def endant s agreed t o submit to South African jurisdic on bef or e the pl ai n ff issued her proceedi ngs i n thi s case. These defendants have however now indicated their willingness to do so.

Evans LJ, with whom Mille and Aul d L JJ agreed, sai d (at p. 1571E) :

‘But the effect of trea ng t he f oreign j uri sdi c on as avai l able to the pl ai n ff in these circumstances is to give the defendant a choice of jurisdic on, i f he i s sued in England. He can accept that jurisdic on, i f i t sui ts hi m to do so, or he can elect in favour of the foreign jurisdic on, i f that appear s mo r e favour abl e for him … it becomes almost a case of forum shopping in reverse …’

The Court of Appeal held that this factor, together with the fact that the allega ons being made against the defendant in Lubbe were said to involve the taking of decisions and the implementa on of pol ici es i n Engl and, essen all y si mil ar to some of the allega ons bei ng ma de i n the pr esent case, l ed them to al low the appeal and to set aside the stay.

The defendants in this ac on conf ess thei r inabi lity to di s ngui s h Lubbe from the facts of the present case on any sensible basis and concede that the authority is binding upon me, and is therefore determina ve of thi s appl ica on. Howev er , I am i nformed by counsel that the House of Lords have already granted provisional leave to the defendants to present an appeal to their Lordship's House in Lubbe, and there is a high

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probability therefore that the ma er wi ll fal l to be cons i der ed by the House of Lor ds in the foreseeable future. Accordingly, the par es have agai n asked me to indi cat e wh at my view would have been if I had been able to consider this applica on free of thi s binding authority, and I am happy so to do.

The ma er agai n as it seems to me , tur ns on the ques on of fundi ng. Thi s plain ff has the benefit of legal ai d for the pur poses of pur sui ng her ac on agai nst the def endant s i n England. Since the decision in Connelly v RTZ Corp plc [1997] CLC 1357; [1998] AC 854, the House of Lords has established that the availability of legal aid in this country is a factor for the court to take into account when considering a stay on the grounds of forum non conveniens. This case, like Mr Connelly's case, is of such a nature and complexity that it could not be tried at all without the benefit of financi al assi stance and of expert scien fic evi dence. The ques on t heref or e i s whet her f undi ng woul d be available to Mrs Carlson in South Africa. The plain ffs cont end t hat i t i s not ; the defendants contend that it is. No other factor, as it seems to me, dis ngui shes thi s case from Connelly.

The evidence adduced on behalf of the defendant, on whom, of course, the burden of proof lies, asserts that in principle there is no reason why the plain ff, assumi n g t hat she is otherwise en tled, shoul d not recei ve legal ai d to fund her ac on i n Nami b ia. Mr Hodes SC goes so far as to suggest that if the Legal Aid Board were to refuse assistance on that ground the decision could be challenged by way of judicial review. However, the evidence of Peter Brits, an a or ney of the Hi gh Cour t of Sout h Af ri ca and pr i nci pal senior legal administra on officer of t he Legal Aid Boar d of Sout h Af ri ca who has sworn an affidavi t on behal f of the plain ff, deposes that i n civi l ma er s, subject to cert ai n very limited excep ons , no per son has a c ons tu onal or l eg al r ig ht t o leg al representa on at stat e expense. The ma er i s l e to the di scre on of the Legal Ai d Board, and the principles under which the board operates means that legal aid is not available under the South African system for proceedings conducted otherwise than in a South African court. It would therefore not be possible for the plain ffs to obt ain l egal *553 aid in South Africa for the conduct of li ga on i n t he UK or Nami b ia. Ther e i s exhibited to Mr Brits' affidavi t a confir mato r y affidavit by Mr Pre tor ius who i s t he director of the South African Legal Aid Board.

Further, it would appear that in April 1998, a firm of Sout h Af ri can a orneys , on t he instruc ons of Mr s Car l son' s Engl ish sol ici tor s, ma de an appl ica on t o t he Sout h Afr ican Legal Aid Board in Pretoria for legal aid to sue in Namibia. A er a si lence of near ly si x months, the applica on wa s ter sel y ref used in the fol lowi ng terms :

‘Legal aid is refused. Applicant wants to sue in foreign country.’

That reac on is unsur pr i si ng in the light of the evi dence of Mr Ga unt le SC, who t el l s me that the Legal Aid Board in South Africa is at the present me in a stat e of financi al crisis, and that there is certainly no money available for extra-territorial li ga on.

Against that evidence I consider it would be quite wrong for me to find that ther e is any ready source of funding from the Legal Aid Board for this li ga on.

The defendants also suggest that it might be possible for the plain ff to obt ain representa on under a con ngency f ee arr angemen t , given t hat such an arr angemen t has now been legi ma t ed by a Sout h Af ri can stat ut e wh i ch i s expected to come i nt o

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force in the course of the next few months. That sugges on howe ver seems to me to be met convincingly by the evidence adduced on behalf of the plain ff that , wha t ever the posi on ma y be in Sout h Af ri ca, con ngency f ees are cont r ary bot h t o s tatute and t he rules of the Law Society in Namibia. The defendant also suggests that the plain ff mig ht be able to obtain representa on on a pr o bono basi s; my concl us i on on that i s that having regard to the magnitude of the task to be undertaken I think it highly unlikely.

The fact is that Mrs Carlson has the benefit of an establ ished legal ai d cer ficate in this country. Following as I do the decision of the House of Lords in Connelly, I am sa sfied that it has not been shown that South Africa or Namibia would be the more convenient forum, and accordingly the applica on for a stay is ref used.

The plain ff's summo n s for consol i da on wi th the Connelly ac on wh i ch is al so bef or e the court, now falls away, having regard to my conclusions in that case.

(Order accordingly)*554

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*854 Connelly Respondent v R.T.Z. Corpora on Pl c. and Anot her Appel lant s

Connelly Appellant v R.T.Z. Corpora on Pl c. and Anot her Respondent s

House of Lords

24 July 1997

[1997] 3 W.L.R. 373

[1998] A.C. 854

Lord Goff of Chi evel ey , Lor d Ll oyd of Berwi ck , Lor d Hoffman n , Lord Hope of Craighead and Lord Clyde

1997 April 24, 28, 29; July 24

Prac ce—S tay of pr oceedi ngs—L egal ai d f actor—C ondi onal fee agr eemen t—Pl ain ff bringing ac on i n Engl and f or dama ges f or personal i nj ur ies sus tai ned wh i le emp l oyed by def endant s i n Namibia—Ac on havi ng mo s t real and subs tan al connec on wi th Nami bi a—Whe t her avai l abil i ty of legal aid or condi onal fee agr eeme nt rel evant in det ermi ni ng appr opr iat e for um for trial —Wh ether English ac on to be stayed— Legal Aid Act 1988 (c. 34), s. 31(1)(b)

The plain ff wor ked f or four year s i n Nami b ia at a urani um mi n e oper ated by a Nami b ian subsidiary of the first def endant , an Engl ish comp any. Thr ee year s l at er he wa s found to be suffer ing from cancer of the thr oat and underwe nt a lar yngectomy . He comme nced pr oceedi ngs in England against the first def endant and one of its Engl ish subs i di ar ies cl ai mi ng dama ges for negligence on the ground that he had contracted the cancer as a result of their failure to provide a reasonably safe system of work affor di ng pr ot ec on f rom t he effects of uranium or e dust while he worked in the mine. On an applica on by the def endant s for an or der stayi ng the proceedings. Sir John Wood, si ng as a j udge of the Que en' s Bench Div ision, found t hat the injury was sustained in Namibia, that the principal witnesses of fact lived in Namibia, that expert witnesses would be drawn from Namibia and elsewhere, that a site inspec on of the mi ne would be necessary and that the Namibian courts had the necessary exper se and effec veness to ensure a fair trial. The judge also found that the plain ff was impe cuni ous and wou l d be unable to obtain any sort of legal aid in Namibia to finance the li ga on whil e in Engl and l egal aid would be available to him to provide the resources to pursue his claim. The judge held, however, that by virtue of sec on 31( 1) (b) of the Legal Ai d Ac t 19881 the court was precluded from taking the availability of legal aid into considera on. The judge concl uded that Nami bi a was the jurisdic on in wh i ch the cl ai m shoul d be heard in the int er ests of al l the par es and f or the ends of jus ce and stayed t he pr oceedi ngs. The pl ai n ff appl i ed f or l eave to appeal , although he accepted that Namibia was the jurisdic on wi th wh i ch the case had the mo s t real and substan al connec on, whi l e t he def endant s conceded t hat the cl aim was such t hat i t would be impossible to pursue in any jurisdic on wi thout *855 professional representa on and expert witnesses. The Court of Appeal granted leave to appeal but dismissed the appeal.

In October 1995 the plain ff's sol i citors i nformed t he def endant s that the plain ff would not proceed with a pe on f or l eave t o appeal to t he House of Lords, but that the sol i citors had entered into a condi onal fee agreeme nt wi th the pl ai n ff pursuant t o sec on 58 of the Cour ts and Legal Services Act 1990 and the Condi onal Fee Agreeme nt s Or der 1995 , and that therefore a summons would be issued seeking the li ing of the stay. The pl ai n ff's legal aid cer ficate was dis char ged, but his sol i citors mad e i t plain t hat ther e was a pos s i bil ity that in t he future the plain ff mig ht agai n appl y f or l egal aid. The plain ff's appli ca on for li ing the stay was dismissed. On the plain ff bei ng grant ed l eave t o appeal , the Cour t of Appeal all owed t he appeal on the ground that the interests of jus ce we i ghed strongl y in favour of the jur i sdi c on where the plain ff coul d assert hi s ri ght s , namel y, Engl and. The def endant s pe oned t he House of Lords for leave to appeal whereupon the plain ff pe oned f or leave t o appeal out of me agai ns t the ear l ier deci si on of the Cour t of Appeal . Leave to appeal wa s gr ant ed in bot h

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cases:-

Held, allowing the plain ff's appeal and dismi s si ng t he def endant s ' appeal ,

(1) that the language of sec on 31( 1) (b) of the Legal Ai d Ac t 1988 did not preclude the court from taking the availability of legal aid into account in considering a stay on the ground of forum non conveniens (post, pp. 868G-869B, 875B-D, 877A-C).

Fakes v. Taylor Woodrow Construc on Ltd. [1973] Q. B. 436, C. A. doubt ed .

(2) (Lord Hoffma nn di ssen ng) , that whe r e a pl ainly mor e appr opr i ate f orum h ad been iden fied, in gener al , the plain ff would have t o take t hat f orum as he found i t , albei t i t was i n certain respects less advantageous to him than the English forum; but that the nature and complexity of the plain ff's case was such t hat i t coul d not be t ried at all wit hout the benefit of financi al assi stance and t hat of exper t s ci en fic evi dence; and t hat, acc ordi ngly, i n the excep onal ci rcums tances , i f the case wa s tri ed i n Engl and, the pl ai n ff woul d ei ther obtai n legal aid or receive the benefit of a condi onal fee agreemen t wi t h hi s sol i citor, so t hat substan al jus ce coul d not be done i n t he appr opr i ate f orum b ut coul d be done whe r e t he appropriate resources were available (post, pp. 872F-H, 873G-874D, 875B-C, 877A-C).

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460, H.L .(E.) cons i der ed .

Decision of the Court of Appeal [1996] Q.B. 361; [1996] 2 W.L.R. 251; [1996] 1 All E.R. 500 reversed .

Decision of the Court of Appeal dated 2 May 1996, The Times, 12 July 1996, affirmed .

The following cases are referred to in their Lordships' speeches:

Abidin Daver, The [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R. 470 , H.L.(E.) .

Amchem Products Inc. v. Bri sh Col umb i a ( Wo r ker s' C omp ensa on Bo ar d) (1 993) 10 2 D.L.R.(4th) 96

Anderson Tulloch & Co. v. J.C. & J. Field Ltd., 1910 1 S.L.T. 401

Andrews (Trustee of the Property of) v. Brock Builders (Kessingland) Ltd. [1997] Q.B. 674; [1997] 3 W.L.R. 124

Fakes v. Taylor Woodrow Construc on Ltd. [1973] Q. B. 436; [1973] 2 W. L. R. 161; [1973] 1 Al l E.R. 670, C.A. .

Ford v. Clarksons Holidays Ltd. [1971] 1 W.L.R. 1412; [1971] 3 All E.R. 454, C.A. . *856

Goodman v. Winchester & Alton Railway Plc. [1985] 1 W.L.R. 141; [1984] 3 All E.R. 594, C.A. .

Jones (Edwin) v. Thyssen (Great Britain) Ltd. (1991) 57 B.L.R. 116, C.A. .

Lane v. Foulds, 1903 11 S.L.T. 118

Oppenheimer v. Louis Rosenthal & Co. [1937] 1 All E.R. 23, C.A. .

Saxton, decd., In re [1962] 1 W.L.R. 968; [1962] 3 All E.R. 92, C.A. .

Sim v. Robinow (1892) 19 R. 665

Smith v. Pearl Assurance Co. Ltd. [1939] 1 All E.R. 95, C.A. .

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Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460; [1986] 3 W.L .R. 972; [1986] 3 All E.R. 843, H.L.(E.) .

The following addi onal cases we r e ci ted in ar gume nt :

Airbus Industrie GIE v. Patel [1997] 2 Lloyd's Rep. 8, C.A. .

Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc. [1986] 2 Lloyd's Rep. 221, C.A. .

Berisford (S. & W.) Plc. v. New Hampshire Insurance Co. [1990] 2 Q.B. 631; [1990] 3 W.L.R. 688 ; [1990] 1 Lloyd's Rep. 454

Bristol Corpora on v. John Ai rd & Co. [1913] A. C. 241, H. L. (E. ) .

Buckwell & Berkeley, In re [1902] 2 Ch. 596, C.A. .

Carter v. Carter [1966] P. 1; [1964] 3 W.L.R. 311; [1964] 2 All E.R. 968

Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557; [1980] 3 W.L.R. 991; [1981] 1 All E.R. 143, H.L.(E.) .

Concha v. Concha [1892] A.C. 670 , H.L.(E.) .

Edwards v. Edwards [1958] P. 235 ; [1958] 2 W.L.R. 956; [1958] 2 All E.R. 179

Knox v. Koch (1883) 2 S.C. 382

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362; [1978] 1 All E.R. 625, H.L.(E.) .

Magnin (Oliver) v. Teledyne Con nent al Mo t or s (1996) 91 F. 3d 1424

Murray (Dominic) v. Bri sh Br oadcas ng Cor por a on ( 1996) 81 F. 3d 287

Na onal Jus ce Compa ni a Nav i era S.A. v. Pruden al Assurance Co. Ltd. [ 1993] 2 Ll oyd' s Rep. 68

Person v. Associa on of the Bar of Ci ty of New Yor k (1977) 554 F. 2d 534

Phillips v. Fothergill (1886) 11 App.Cas. 466, H.L.(E.) .

Piper Aircra Co. v. Reyno (1981) 454 U. S. 52

Reg. v. Bloomsbury and Marylebone County Court, Ex parte Villerwest Ltd. [1976] 1 W.L.R. 362; [1976] 1 All E.R. 897, C.A

Reg. v. Stra or d- on- Avon Di stri ct Counci l, Ex par te Jackson [1985] 1 W. L. R. 1319; [1985] 3 Al l E.R. 769, C.A. .

Roneleigh Ltd. v. MII Exports Inc. [1989] 1 W.L.R. 619, C.A. .

Schapiro, In re (1911) 128 N.Y.Supp. 852

Shell U.K. Explora on and Pr oduc on Ltd. v. Innes , 1995 S.L.T. 807

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Simon Engineering Plc. v. Bu e Mi ni ng Pl c. (No . 2) [1996] 1 Ll oyd' s Rep. 91

Smith Kline & French Laboratories Ltd. v. Bloch [1983] 1 W.L.R. 730; [1983] 2 All E.R. 72 , C.A. .

Société du Gaz de Paris v. S.A. de Naviga on "Les Ar ma t eur s Francai s", 1926 S. C. (H. L. ) 13 , H.L.(Sc.) .

Société Na onal e Indus triel le Aer ospa ale v. Lee Kui Jak [ 1987] A.C. 871; [1987] 3 W.L .R. 59; [1987] 3 All E.R. 510, P.C. .

Tolstoy Miloslavsky v. United Kingdom (1995) 20 E.H.R.R. 442

Wigley v. Wigley [1951] P. 156 ; [1950] 2 All E.R. 1218, C.A. .

Yorke (M.V.) Motors v. Edwards [1982] 1 W.L.R. 444; [1982] 1 All E.R. 1024, H.L.(E.) . *857

Connelly (Respondent) v. R.T.Z. Corpora on Pl c. and Anot her (Appel lant s)

Appeal from the Court of Appeal.

This was an appeal by leaved dated 4 February 1997 of the House of Lords (Lord Browne-Wilkinson, Lord Nicholls of Birkenhead and Lord Clyde) by the defendants, R.T.Z. Corpora on Pl c. and R. T. Z. Overseas Services Ltd., from the judgment of the Court of Appeal (Sir Thomas Bingham M.R., Evans and Ward L.JJ.) on 2 May 1996 allowing an appeal by the plain ff Edwar d Connel l y, from t he judgment dated 27 October 1995 of Mr. David Steel Q.C. si ng as a deput y j udge of the Que en' s Bench Division. The deputy judge had refused the plain ff's appl i ca on t o l i the st ay whi ch had been imposed on his ac on for dama ges agai ns t the def endant s by Si r John Wo od si ng as a judge of the Queen's Bench Division, on 1 March 1995. Prior to the hearing before Mr. David Steel Q.C. the plain ff had appl i ed t o t he Cour t of Appeal for l eave t o appeal from t he order of Sir John Woo d. A er a ful l hear ing on the appl ica on f or l eave t o appeal , the Cour t of Appeal (Nei l l, Wai t e and Swinton Thomas L.JJ.) granted leave to appeal on 18 August 1995, but dismissed the appeal itself.

The facts are stated in the speech of Lord Goff of Chi evel ey.

Sydney Kentridge Q.C., Brian Doctor and Charles Gibson for the defendants. The ques on rai sed is a narrow and singular one of some importance rela ng to the doctrine of for um non conveni ens : whether lack of means to li gat e in the for ei gn jur i sdi c on wi t h whi ch t he ac on c l earl y has t he most real and substan al connec on, as agai nst the avai l abi l ity of pri vate f undi ng by way of a condi onal fee agreeme nt in Engl and, is a legi mat e f act or to be t aken i nto account in s triking t he balance required by Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , 478. If it is, the ques ons ar i se wh et her it is to be taken int o account at the first or the second s tage of the i nqui r y, and what weight ought to be given to it.

Sir Thomas Bingham M.R. held below that faced with a stark choice between one jurisdic on wh er e there could in fact be a trial and another in which there never could because of the absence of funding, "the interests of jus ce" wo ul d tend to we i gh strongl y i n favour of the forme r . Thi s, i t appears, was the inevitable conclusion unless it could be shown that jus ce coul d not be done in thi s forum. It was apparently not found necessary to weigh anything in the balance because nothing could outweigh the plain ff's per sonal advant age of condi onal f ee f undi ng.

The ques on ar i ses wh et her the avai labi lity of condi onal fee f undi ng i s a l egi mate factor at al l. It

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is not. The first stage of the Spiliada inquiry is directed to establishing the "natural forum," that is, "that in which the ac on had the mo s t real and subs tan al connec on:" [1987] A.C. 460 , 478d-e. Lord Goff of Chi evel ey ref er red to "factor s affec ng conveni ence or expense (such as avai l abil i ty of witnesses)" and the law governing the relevant transac on" and "the pl aces wh er e the par es respec vel y res i de or car ry on bus i ness. " He regarded the stat eme nt of Lor d Ki nnear i n Si m v. Robinow (1892) 19 R. 665 , 668 that "the plea [for a stay] can never be sustained unless the court is sa sfied t hat ther e i s some other tribunal , havi ng compe t ent juri sdi c on, i n whic h the case may be tried more suitably *858 for the interests of all the par es and for the ends of jus ce" as express i ng the principle in both English and Sco sh l aw.

At the second stage of the Spiliada inquiry the court is enjoined to consider if there are "circumstances by reason of which jus ce requi res that a stay shoul d never thel ess not be gr ant ed. " It is in this context that the ques on of "a legi mat e per sonal or juri dical advant age" ari ses. Lord Goff of Chi evel ey ma de it cl ear [1987] A.C. 460 , 475h-476b that the formula on by Lor d Di pl ock in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , 812, that the stay must not deprive the plain ff of a l egi mate personal or j uridi cal advantage whic h woul d be avai l able to hi m if he i nvoked the jurisdic on of the Engl ish cour t, had to be appr oached wi th cau on.

Moreover, Lord Goff [1987] A.C. 460 , 482-484, in his considera on of the factor of "l egi mat e personal or juridical advantage," stressed the objec ve appr oach i nher ent i n L or d Ki nnear ' s statement of principles in Sim v. Robinow, 19 R. 665 . The treatment of this factor in the Spiliada case shows that (a) it is not referring to en rel y per sonal and acci dent al me ans of over comi ng a financi al di sabi lity; (b) me r e financi al advant age t o one par t y i s i rrelevant ; (c) the "advant age" mus t be one which li gant s gener al ly coul d r el y on i n t he ci rcums tances and wh i ch r el at es t o t he appropriateness of the forum in an objec ve wa y, and wh i ch can be appl ied in an obj ec ve way ; (d) even objec ve "advant ages" ar e neut ral i f t hey are count er bal anced by di sadvant ages f or t he defendant; and (e) jus ce mu s t be done to bot h si des and not me r el y to the pl ai n ff.

Condi onal fee agreeme nt s are pr i vat e fundi ng ar rangeme nt s betwe en the l i gant and hi s l egal advisers. They are not confined to the poor or to those wh o coul d ot herwi se not afford l i ga on. A statute now provides that in certain limited circumstances they are no longer proscribed: see sec on 58 of the Courts and Legal Services Act 1990 and the Condi onal Fee Agreeme nt s Or der 1995 (S. I. 1995 No. 1674) . They are not "approved" or "encouraged" or morally superior to other forms of private funding. They are a business arrangement between solicitor and client. Outside of personal injury (and certain other limited company law) claims, they are s ll cont rar y to publ ic pol icy, and unprofessional: see the Order of 1995.

The fact that a person has made private arrangements to fund his li ga on i n t his forum b ut not in the other has no similarity to the facts Lord Goff envi saged as cons tu ng "personal or j uridi cal advantages," for (a) it is en rel y per sonal and acci dent al ; (b) it is not a factor wh i ch appl ies gener al ly in this forum, as no solicitor is obliged to enter into such an arrangement; (c) it does not relate to the appropriateness of the forum in an objec ve wa y; and (d) it cannot be appl ied in an obj ec ve way .

In Smith v. Pearl Assurance Co. Ltd. [1939] 1 All E.R. 95 the Court of Appeal held that poverty is not a relevant factor in deciding whether a party should be bound by an arbitra on cl ause and a stay of an ac on imp osed. Thi s has been fol lowe d in Ford v. Clarksons Holidays Ltd. [1971] 1 W.L.R. 1412 ; Fakes v. Taylor Woodrow Construc on Ltd. [ 1973] Q. B. 436 ; Goodman v. Winchester & Alton Railway Plc. [1985] 1 W.L.R. 141 and Edwin Jones v. Thyssen (Great Britain) Ltd. (1991) 57 B.L.R. 116 .

The fact that a poor li tgant coul d get condi onal fee f undi ng onl y abroad has never been r egarded as a legi ma t e advant age to be taken int o *859 account in an -sui t inj unc on cases. In Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557 , 577d-e, Lord Scarman regarded the availability of con ngency f ee f undi ng i n a f or ei gn j ur i sdi c on as en r ely il l egi mate. The House of Lords considered the issue was irrelevant, for those ma er s "have no pl ace in the cri cal equa on" whic h is fundamental to the proper exercise of the discre on i n that case. I n Smith Kline & French Laboratories Ltd. v. Bloch [1983] 1 W.L.R. 730 , 738H, 747H, Lord Denning M.R. and O'Connor L.J.

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held it not to be a legi ma t e jur idi cal advant age. [Ref er ence wa s al so ma de to Société Na onal e Industrielle Aerospa al e v. Lee Kui Jak [1987] A. C. 871 , 899B; Simon Engineering Plc. v. Bu e Mi ni ng Plc. (No. 2) [1996] 1 Lloyd's Rep. 91 , 99; Note 104, 111 and Airbus Industrie GIE v. Patel [1997] 2 Lloyd's Rep. 8 .]

The problem with allowing a condi onal fee agreeme nt to be a factor at al l i s that i f taken i nt o account in the way in which the Court of Appeal has done here, it will tend to overwhelm every other considera on. I f the exi stence of a condi onal fundi ng agreemen t is al l owed t o exerci se decisive influence i t wo ul d me an that i n such cases the cour ts wo ul d no l onger be appl yi ng the doctrine of forum non conveniens.

The absence, in the fiel d of condi onal fee agreemen t s , of an equi val ent to sec on 31 of the Legal Aid Act 1988 is not an indica on that Par l iame nt wi shed to gi ve l i gant s who ent ered i nto such agreements an advantage over other li gant s wh i ch they wo ul d ot herwi se not have if they had pai d for the li ga on out of thei r own r esour ces or obt ained l egal aid. The cour t s ought to i gnor e t he availability of condi onal fee fundi ng as an irrel evant factor in det ermi ni ng for um non conveni ens issues.

If, however, a condi onal fee agreeme nt can be a rel evant factor in sui tabl e ci rcums tances , in the present case it does not jus fy the li ing of the s tay. Such an agreemen t cannot by itself outweigh the real and substan al connec on wi t h t he f oreign f orum t hat the def endant s wi l l al r eady have established.

Unlike the approach of the Court of Appeal, which did not take into account the disadvantages to the defendants, the correct approach would be to weigh this factor against all the other factors, which might include (i) the nature and scope of the proceedings envisaged, and the poten al imp act on the defendant of having to defend the claim in the inappropriate forum; (ii) how viable the agreement is, par cul ar l y wh er e the inevi tabl e cos ts of the pr oposed ac on are out of all propor on to a realis c hope of recover y; (i ii) the strengt h of the factor s wh i ch convi nce the cour t that the foreign forum clearly had the most real and substan al connec on wit h t he ac on; ( iv) whet her t he English court has any connec on at al l wi th thi s cl ai m, apar t from the fact that the pl ai n ff has found funding here: if so, the strength or weakness of any connec ng factor s; (v) the factor s wh i ch strongly pointed to the foreign jurisdic on as bei ng t he onl y nat ur al and appr opr iat e f or um available. Where a plain ff and hi s sol i citor, who s tands to benefit from l i ga on in t his country over and above the usual payment of his costs, by payment of a success fee amoun ng to 25 per cent. of the capital awarded, insist that the claim be li gat ed in thi s inappr opr iat e for um because of the condi onal fee agreeme nt , it wo ul d be rel evant to cons i der wh at ar rangeme nt s they have ma de to cover the defendant's costs in the event of their losing. The Law Society has arranged *860 a form of insurance, but it is not compulsory, is limited to£100,000, and covers only causes of ac on arising in this country.

The present case falls plainly within the observa ons of Lor d Shaw of Dunf erml ine in Société du Gaz de Paris v. S.A. de Naviga on "Les Ar ma t eur s Francai s, " 1926 S. C. (H. L. ) 13 , 20, since all the ma er s to be proved relate to Namibia. Shell U.K. Explora on and Pr oduc on Ltd. v. Innes , 1995, S.L.T. 807, 824 is another example of the courts' reluctance to consider ma er s such as those in the pr esent case.

As to the approach taken by the United States courts, see Oliver Magnin v. Teledyne Con nent al Motors (1996) 91 F.3d 1424 , 1429, 1430; Dominic Murray v. Bri sh Br oadcas ng Cor por a on ( 1996) 81 F.3d 287 and Piper Aircra Co. v. Reyno (1981) 454 U. S. 252 , 262. Rel iance is pl aced on Domi ni c Murray v. Bri sh Br oadcas ng Cor por a on ( 1996) F.3d 287 , 292 para. [ 7] . As t o Canada, t he Canadian Supreme Court in Amchem Products Inc. v. Bri sh Col umb i a (Wo r ker s' Comp ensa on Board) (1993) 102 D.L.R. (4th) 96 followed the approach of the House of Lords in the Spiliada case [1987] A.C. 460 .

It would be wrong for solicitors to persuade the experts to appear on the basis that their fee

Page7

depended on the outcome of the case. It is contra bonos mores. As to the du es and respons i bi li es of expert witnesses, see Na onal Jus ce Compa ni a Nav i era S.A. v. Pruden al Assurance Co. Ltd. [1993] 2 Lloyd's Rep. 68 , 81; the Woolf Report on Access to Jus ce, paras. 25, 26, 27; Ame r i can Law Ins tut e, Restat eme nt of the Law, The Law Gover ni ng Lawy er s , Tent a ve Dra No. 8 (21 Marc h 1997), para. 177; Person v. Associa on of the Bar of Ci ty of New Yor k (1977) 554 F. 2d 534 , 538 ; In re Schapiro (1911) 128 N.Y.Supp. 852, 858 and Chris e, Law of Cont ract in Sout h Af ri ca (1981) p. 346and Knox v. Koch (1883) 2 S.C. 382 .

Ar cl e 6 of the Conven on f or the Protec on of Human Ri ghts and Fundament al Freedoms ( 1953) (Cmd. 8969) has nothing to do with jurisdic on or the doctrine of for um non conveni ens . It does not require a state to extend its jurisdic on or to pr ovi de speci al rul es to obvi at e the di fficul es of any par cul ar l i gant . Ther e are no cases i n t he European Cour t of Human Right s whi ch s uppor t the judgment of the Court of Appeal. [Reference was made to Tolstoy Miloslavsky v. United Kingdom (1995) 20 E.H.R.R. 442 .]

Michael Burton Q.C., Graham Read and Anna Thomas for the plain ff. The ques on i n this case i s to decide where the case should be tried. This is not a case where the defendants would not have jus ce i f the case we r e tri ed bef or e the Engl ish cour ts, wh i le the pl ai n ff cannot obtai n jus ce in Namibia because he cannot bring an ac on ther e. Fur ther , i t i s not a case wh er e ther e i s no connec on wi th Engl and, nor one wh er e Engl and is an inappr opr iat e for um. So far as the legal issues are concerned they can be tried here. The Spiliada case [1987] A.C. 460 lays down a two-stage test in determining whether a stay should be granted. The plain ff can show t hat under the first stage there is no other available more convenient forum. The factor is an ad hominem factor: see Oppenheimer v. Louis Rosenthal & Co. [1937] 1 All E.R. 23 .

Under the second stage of the Spiliada case jus ce requi res that a stay shoul d not be gr ant ed. The plain ff is seri ous l y i ll. He can sue i n t his count r y but not elsewhe r e because, in par cular , funds wi ll be available for *861 him to prosecute his claim in England but not in Namibia. This makes this country, in which there is jurisdic on, the onl y avai labl e for um. Mo r eover , thi s is not a case in wh i ch there is no material connec on wi th the Engl ish for um. The case mu s t ther ef or e be heard her e unless the plain ff's i nabi l ity to l i gate in Nami bi a and t he absence of f undi ng el sewher e than i n England must for some reason be ignored. This is not a case of weighing up a foreign jurisdic on where some jus ce coul d be done ( The Abidin Daver [1984] A.C. 398 ); the posi on i s radi cal ly differ ent wh er e, as her e, no jus ce coul d be done; Ol i ver Mag ni n v. Tel edyne Con nent al Moto r s (1996) 91 F.3d 1424 , 1430 does not address the situa on wh er e the pl ai n ff has an i nabi l i ty to sue in the foreign forum.

The four main submissions of the defendants may be answered shortly. First, it was said that poverty is to be ignored because of the arbitra on cases . Thi s is not so. They are not rel evant and do not support that proposi on. Secondl y, it wa s sai d that con ngency f ees are t o be i gnor ed because of certain injunc on cases . Agai n, the answe r i s i n the nega ve. Such cases l argel y ant edat e t he lawfulness, and therefore acceptability in English eyes, of condi onal fees . Thi rdl y, it wa s submi ed that the availability of legal aid is to be ignored. Again, the answer is in the nega ve. The fact of funding, whether by legal aid or condi onal f ee agreeme nt , cannot be i gnor ed. Fi nal ly, i t wa s submi ed that the exi stence of the condi onal fee agr eemen t is to be i gnor ed. That i s not so. The fact of such funding cannot be discounted or ignored.

Kentridge Q.C. in reply. If the ques on of fundi ng is rel evant at al l it coul d not be a Spiliada stage one issue because it does nothing to weaken or strengthen the connec on wi th any par cul ar forum. A comparison between funds in one jurisdic on and anot her is not a rel evant oper a on on a f orum non conveniens issue. If the plain ff's mea ns can be i nves gated, why i n pr incipl e shoul d not t he defendant's means be inves gat ed? I t i s per nent to ask whe t her this i s the sort of inves ga on that the courts of the United Kingdom should be involved in: contrast Dominic Murray v. Bri sh Broadcas ng Cor por a on, 81 F.3d 287 , 294, par a. 13. It wou l d s et a dangerous precedent and goes against principle.

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As to the alterna ve pos i on, if fundi ng can be t aken i nto account as a f act or can i t be a deci sive factor? If the case proceeds in England then the defendants are faced with the fact that they cannot compel the appearance of the most important witnesses and obtain the most important witnesses. [Reference was made to Bristol Corpora on v. J ohn Ai rd & Co. [ 1913] A. C. 241 , 259 and MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , 812f-g.]

Connelly (Appellant) v. R.T.Z. Corpora on Pl c. and Anot her (Respondent s)

Appeal from the Court of Appeal.

This was an appeal by leave of the House of Lords given at the conclusion of the hearing of the foregoing appeal, by the plain ff from t he j udgmen t dat ed 18 August 1995 of the Cour t of Appeal (Neill, Waite and Swinton Thomas L.JJ.) dismissing his appeal from the order dated 1 March 1995 of Sir John Wood si ng as a j udge of the Que en' s Bench Div ision. The i ssue r ai sed by the plain ff's appeal was (1) whether in light *862 of sec on 31 of the Legal Ai d Ac t 1988 , or at all, the availability of funding for li ga on by way of legal aid i n t his count r y whe n t he def endant s wer e domiciled here coupled with an inability to fund proceedings in the forum with which prima facie the claim had the most real and substan al connec on was (a) deci sive; alt erna vely (b) a factor; or (c) relevant at all in determining whether proceedings in this country ought to be stayed on the grounds of forum non conveniens. (2) If it was a factor, what weight ought to be given to it, and in what circumstances could it be taken into account? (3) In general, whether the Court of Appeal should have reversed the decision of Sir John Wood.

The facts are stated in the speech of Lord Goff of Chi evel ey.

Michael Burton Q.C., Graham Read and Anna Thomas for the plain ff. The cour t has an i nher ent jurisdic on to do wh at is jus t. The pl ai n ff is now l e gal l y ai ded and wi th in a recogni sed excep on to House of Lords Standing Order 5.

It is said that the ques on of legal ai d shoul d be ignor ed, but ei ther the deci si on of Si r John Wo od is wrong or, alterna vel y, i t has been over taken by the fact of the avai labi lity of con ngency f ee funding.

As to sec on 31( 1) (b) of the Legal Ai d Ac t 1988 , the words "the rights conferred by this Act" have no bearing, since it is the absence of jus ce i n Nami bi a al one that i s rel evant . To i gnor e the existence of legal aid (as opposed to any other form of financi al assi stance) is to di scrimi nat e agai ns t a legally aided plain ff. The financi al posi on of a par ty can onl y be consi dered on a s tay appli ca on, so that taking into account the availability of legal aid would not "affect the pr inc i pl es on wh i ch the discre on of the cour t i s norma l ly exer ci sed wi thi n" sec on 31( 1)( b). If, for wha t ever reason, the only place he could li gat e we r e Engl and, a stay wo ul d or coul d be ref used, so the di scre on i s not being differ ent ly exer ci sed by vi rtue of the legal ai d: cf . In re Saxton, decd. [1962] 1 W.L.R. 968 , 971, per Lord Denning M.R. As to the general issue of jurisdic on of the House of Lor ds , the def endant s in their printed case rely on Phillips v. Fothergill (1886) 11 App.Cas. 466 . But the present case falls within Concha v. Concha [1892] A.C. 670 , 674, 675. The House of Lords has an inherent jurisdic on to do jus ce as a super ior cour t. In Reg. v. Bloomsbury and Marylebone County Court, Ex parte Villerwest Ltd. [1976] 1 W.L.R. 362 it was held that the county court has an inherent jurisdic on to extend me . It wo ul d be extraor di nar y if the House of Lor ds had no such inher ent jur i sdi c on. As to the House of Lords being a superior court, see The Oxford Companion to Law (1980), p. 1196. On the issue of waiver or overruling the rules, see Halsbury's Laws of England, 4th ed., vol. 10 (1975), p. 346, para. 755. The House could order a nominal sum to be secured in lieu of £18,000 required under Standing Orders. [Reference was also made to In re Buckwell & Berkeley [1902] 2 Ch. 596, C.A. ; M.V. Yorke Motors v. Edwards [1982] 1 W.L.R. 444 ; Reg. v. Stra or d- on- Avon Di stri ct Counci l, Ex parte Jackson [1985] 1 W.L.R. 1319 ; Roneleigh Ltd. v. MII Exports Inc. [1989] 1 W.L.R. 619 and S. & W. Berisford Plc. v. New Hampshire Insurance Co. [1990] 2 Q.B. 631 .]

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Sydney Kentridge Q.C., Brian Doctor and Charles Gibson for the defendants. Security for costs was not lodged in accordance with the *863 House standing orders. To come to the House of Lords is a privilege; a li gant does not come as of ri ght . Under Standi ng Or der 10 ther e is a speci fic provi sion as to what happens on the death or bankruptcy of a pe oner . Ther e i s no other standi ng order or prac ce di rec on whi ch provi des for a r evi val whe n an appeal has been di smi s sed. In Phi l lips v. Fothergill, 11 App.Cas. 466 , 468, Lord Herschell L.C. expressed the opinion that it would only be on some extremely excep onal and extraor di nar y ground that Standi ng Or der 1 wo ul d be suspended, if it ever could be suspended at all. Concha v. Concha [1892] A.C. 670 was not concerned with waiver or suspension but concerned solely a ques on of cons truc on of a s tandi ng order . The present appeal has to do with a case which stands dismissed. As to Halsbury's Laws of England, 4th ed., vol. 10, p. 346, para. 755, this is not concerned with standing orders or rules dealing with appeals out of me .

Sec on 31 of the Legal Ai d Ac t 1988 has two specific obj ects: (a) a legal ly ai ded li gant shoul d not be put at a disadvantage; and (b) a legally aided li gant shoul d not be pl aced in a pr i vi leged pos i on.

The conclusion of the Court of Appeal that sec on 31( 1) (b) of the Legal Ai d Ac t 1988 precludes reliance on the fact that a party has legal aid when a court exercises its discre on is suppor ted by several other cases: see In re Saxton, decd. [1962] 1 W.L.R. 968 ; Fakes v. Taylor Woodrow Construc on Ltd. [1973] Q. B. 436 ; Edwin Jones v. Thyssen (Great Britain) Ltd. (1991) 57 B.L.R. 116 and Connelly v. R.T.Z. Corpora on Pl c. [1996] Q. B. 361 . [Reference was also made to Wigley v. Wigley [1951] P. 156 ; Carter v. Carter [1966] P. 1 and Edwards v. Edwards [1958] P. 235 .]

There is no merit in the plain ff's sugges on t hat t he s t atut e does not appl y, because what i s important is not that the plain ff is recei ving l egal aid i n t his count r y, but that he i s unabl e t o r ecei ve legal aid in Namibia and cannot therefore li gat e ther e. Hi s lack of funds to l i gat e i n Nami b ia i s matched by his lack of funds to li gat e her e, ma ki ng the factor of hi s pover ty i rrel evant i n the determina on of any per sonal advant age in ei ther jur i sdi c on. It i s onl y the avai l abi l ity of legal aid here that, he contends, makes all the differ ence.

Even if sec on 31( 1) (b) does not pr event t he cour t f rom t aki ng i nt o account i n exer ci si ng i ts discre on t he f act t hat t he pl ai n ff is legal l y ai ded i n thi s jur is dic on, l egal ai d ought t o be disregarded in any event for the same reasons that condi onal fee fundi ng ought to be di sregarded. Alterna vel y, i f i t can be taken int o account , i t cannot be gi ven deci si ve we i ght in the cont ext of forum non conveniens because to do so would eliminate the jurisdic on to stay pr oceedi ngs on that ground.

Since legal aid funding in this country is available to anyone who can show he has an arguable case, whether or not he or his ac on i s connected to thi s j ur i sdi c on, it ought to be gi ven very l i le weight where England is not otherwise the appropriate forum. [Reference was made to Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc. [1986] 2 Lloyd's Rep. 221 and Reg. v. Stra or d- on- Avon Di stri ct Counci l, Ex par te Jackson [1985] 1 W. L. R. 1319 .]

Burton Q.C. replied.

Their Lordships took me for cons i der a on. *864

24 July. Lord Goff of Chi evel ey.

My Lords, there are before your Lordships two appeals, both arising out of the same proceedings. The plain ff in t he ac on i s Edwar d Connel l y, who i s domi c i led i n Scot l and. I n 1971, when he was 21 years old, he went to South Africa. For a period of about five and a hal f year s, bet we en 1977 and 1982, he was employed by Rossing Uranium Ltd. ("R.U.L."), which carried on the business of mining uranium at Rossing in Namibia. He returned to Scotland in about 1983. In 1986 it was discovered that he was suffer ing from cancer of the lar ynx. He subsequent ly underwe nt a lar yngectomy , and has since breathed through a tube in his throat. He claims that his cancer was the result of inhaling silica uranium and its radioac ve decay pr oducts at the mi ne.

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R.U.L. is a subsidiary of the first def endant , the R. T. Z. Cor por a on Plc . ("R. T.Z."), whi ch i s an Engl i sh company with its registered office i n London. In Mar ch 1988 Sco sh sol ici tors ac ng for the plai n ff wrote to R.T.Z. raising the ques on of comp ensa on. R. T.Z. repl i ed t hat the cl aim s houl d be addressed to R.U.L., and forwarded the le er to R. U. L. in Nami bi a. R. U. L. 's insur er s deni ed liabi lity. In February 1990 the Legal Assistance Centre of Windhoek in Namibia lodged a claim for compensa on on behal f of the pl ai n ff under t he Work men' s Compen sa on Act 1941 of South Africa and Namibia . However the Workmen's Compensa on Commi ssi oner rej ected the cl ai m.

On 15 December 1993 the plain ff obt ained a l egal aid cer ficate t o bri ng pr oceedi ngs against R. T.Z. in England, and the writ and statement of claim in the present ac on we r e ser ved on R. T. Z. on 19 September 1994. It was alleged that R.T.Z. had devised R.U.L.'s policy on health, safety and the environment, or alterna vel y had advi sed R. U. L. as to the cont ent s of the pol icy. I t wa s fur ther alleged that an employee or employees of R.T.Z., referred to as R.T.Z. supervisors, implemented the policy and supervised health, safety and/or environmental protec on at the mi ne. Fol lowi ng recei pt of informa on from R. T. Z. 's sol ici tor s that cer tai n of these "R. T. Z. super vi sor s" had been trans fer red to another subsidiary of R.T.Z., R.T.Z. Overseas Services Ltd. ("R.T.Z. Overseas") which was also an English company registered in London, the plain ff obt ained l eave t o amen d his wri t and s tatemen t of claim to join R.T.Z. Overseas as second defendants. This was duly done.

The course of the proceedings

On 28 October 1994 R.T.Z. applied to the High Court in London for a stay of the proceedings on the ground that Namibia was the appropriate forum for the trial of the ac on. It wa s lat er conceded by the plain ff that Nami b ia was pri ma f aci e t he j uri sdi c on wi th whic h the c l ai m ha d t he most real and substan al connec on. The appl i ca on f or a st ay came b efor e Si r John Wood , s i ng as a Hi gh Court judge. He gave his judgment on 28 February 1995. He referred in par cul ar to sec on 31( 1) of the Legal Aid Act 1988 , which provides that:

"Except as expressly provided by this Act or regula ons under i t . . . (b) the ri ght s conferred by this Act on a person receiving advice, assistance or representa on under it shall not affect the ri ght s or l iabi li es of other par es t o the pr oceedi ngs or t he principles on which the discre on of any cour t or tribunal is norma l ly exer ci sed. "

*865 He held that, in deciding whether to exercise his discre on to gr ant a stay, he wa s bound by that subsec on to di sregard the fact that the pl ai n ff was i n recei pt of l egal aid in this count r y; and, having regard to the close connec on of the cl ai m wi th Nami bi a, he deci ded to stay the ac on, notwithstanding that there was no financi al assi stance, i n t he f orm of l egal ai d or ot herwi se, available to the plain ff in Nami b ia t o enabl e him t o pur sue his claim t her e. The plain ff was r efused leave to appeal. On 18 August 1995 the Court of Appeal (Neill, Waite and Swinton Thomas L.JJ.) gave the plain ff leave t o appeal , but di smi s sed hi s appeal . The pri nci pal judgmen t was del i vered by Waite L.J. He concluded that Sir John Wood was right to treat the non-availability of legal aid in Namibia as irrelevant to his decision, the exclusion of considera on of legal ai d bei ng cons i stent wi th sec on 31( 1) (b) of the Legal Ai d Ac t 1988 . Neill and Swinton Thomas L.JJ. considered that the subsec on pl aced an insuper abl e obs tacl e in the wa y of the pl ai n ff.

On 2 October 1995 the plain ff's sol i citors i nformed t he def endant s that the pl ain ff woul d not proceed with a pe on f or l eave t o appeal to t his House; but that the sol i citors had ent ered i nto a condi onal fee agreeme nt wi th the pl ai n ff, and t hat t heref or e a summon s woul d be i ssued seeki ng the li ing of the stay. Condi onal fee agreemen t s bet wee n l egal advi sers and c l i ent s had been authorised by sec on 58 of the Cour ts and Legal Ser vi ces Ac t 1990 , and by the Condi onal Fee Agreements Order 1995 (S.1. 1995 No. 1674) which came into force on 5 July 1995. The plain ff's legal aid cer ficate was dis char ged; but his sol i citors l ater mad e i t plain t hat they coul d not rule out the possibility that at some point in the future the plain ff mi g ht agai n appl y f or l egal ai d. The

Page11

defendants expressed the opinion that it was only a ma er of me bef ore t he plain ff was b ack on legal aid again, in view of the size, scope and cost of the proposed trial. Indeed it became apparent that at that me the condi onal fee agreemen t was l imit ed t o t he appl i ca on t o di scharge t he s t ay and any appeal from it, and certainly did not extend so far as to include the trial of the ac on.

The plain ff's appl i ca on t o l i the st ay came be f or e Mr. D avid Steel Q. C., s i ng as a deput y Hi gh Court judge, on 27 October 1995. Before him, the plain ff's sol i citors stated t hat they wou l d ent er into further condi onal fee agreeme nt s if that wa s "the onl y wa y of ensur ing that the pl ai n ff gets jus ce. " Mr . Steel accept ed that thi s stat eme nt wa s ma de in good fai th, but he concl uded that i t was, to put it at its lowest, astonishingly ambi ous . He took a real is c view o f the s i tua on, and considered that it was almost inevitable that an applica on for l egal ai d wo ul d in due cour se be made. It followed that in reality the situa on had not changed. He ther ef or e di smi ssed the pl ai n ff's applica on, and ref used leave to appeal .

The plain ff appl i ed ex par t e t o t he Cour t of Appeal for l eave t o appeal from Mr. Steel ' s order . On 29 January 1996, the plain ff havi ng offered under t akings t hat he woul d not appl y for l egal aid and t hat his solicitors would con nue t he c ondi onal fee agreemen t on appr opr i ate t erms un l the conclusion of the trial or earlier order, the Court of Appeal (Mille and Wa rd L. JJ.) gr ant ed hi m leave.

*866

On 2 May 1996 the Court of Appeal (Sir Thomas Bingham M.R., Evans and Ward L.JJ.) allowed the plain ff's appeal . The l eadi ng j udgmen t was del i vered by Sir Thomas Bingham M.R . He r eject ed t he realis c appr oach adopt ed by Mr . Steel , especi al ly as the l imi ted condi onal fee agreemen t was supported by the undertakings given by the plain ff's sol i citors on t he appl i ca on f or l eave to appeal. The plain ff was abl e t o proceed wit hout recour se t o l egal aid, and so s ec on 31(1) (b) of t he Act of 1988 no longer stood in his way. Accordingly the court considered the ma er on the basi s of the principles stated by your Lordships' House in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 . On 2 May 1996 they decided to allow the appeal. The decisive considera on is to be found in the following passage from the judgment of Sir Thomas Bingham M.R.:

"But faced with a stark choice between one jurisdic on, a l bei t not t he mo s t appropriate in which there could in fact be a trial, and another jurisdic on, the mo s t appropriate in which there never could, in my judgment, the interests of jus ce wo ul d tend to weigh, and weigh strongly in favour of that forum in which the plain ff coul d assert his rights."

The defendants pe oned t his House f or l eave t o appeal from t his deci sion, and t he plain ff then pe oned f or l eave t o appeal out of me f r om t h e deci s i on of t he Cour t of Appeal of 18 Augus t 1995. Your Lordships' House gave leave in both cases.

There followed a minor complica on. The pl ai n ff lodged a no ce of appeal , but di d not post t he required security. Accordingly on 3 March 1996 his appeal stood dismissed pursuant to Prac ce Direc on 11. 1. The pl ai n ff then pe oned f or his appeal t o be r es t ored, and hi s pe on was granted.

Sec on 31( 1) (b) of the Legal Ai d Ac t 1988

I propose to turn at once to consider the relevance of this subsec on. It wa s regarded as deci si ve, both by Sir John Wood and by the Court of Appeal, in rela on to wh at I wi ll cal l the first appeal . There is no comparable statutory provision in respect of condi onal fee agreeme nt s, and so no argument of this kind is available to R.T.Z. in respect of the second appeal. This of itself presents a remarkable contrast between the two appeals.

I have already set out the terms of the subsec on. The sugges on i s that the subsec on has t he

Page12

effect that , i n the case of an appl ica on f or a s tay of proceedi ngs on t he pri nci ple of forum n on conveniens, the fact that the plain ff is i n r ecei pt of legal aid i n t his count r y cannot be t aken i nto account because the subsec on pr ovi des that the recei pt of l egal ai d "shal l not affect . . . the principles on which the discre on of any cour t or tribunal is norma l ly exer ci sed. " I feel bound to say that I find i t sur pr i si ng that the subsec on shoul d have t his effect. I can f ul ly under s t and t hat, in ma er s ar i si ng in the cour se of legal pr oceedi ngs in thi s count ry, the fact that one par ty is in recei pt of legal aid should not be allowed to distort the legal process, whether as regards the rights or liabili es of ot her par es, or as regards the pri nci ples on whi ch j udi c ial dis cre ons are exer ci sed. The *867 limited purpose of legal aid is, a er al l, to enabl e a per son, wh o wo ul d ot herwi se l ack the means to do so, to li gat e; and i t i s under standabl e that hi s recei pt of l egal ai d shoul d not be allowed to have any such effect . But wh en i t come s to an appl ica on by the other par t y t o s tay proceedings brought in this country by a legally aided plain ff on t he gr ound of forum n on conveniens, it is difficul t to s ee why the fact that the plain ff is l egal l y aided, whi ch wou l d i n t he circumstances be a relevant fact to be taken into account on the applica on, shoul d be excl uded. In such circumstances it is the exclusion of that fact, rather than its inclusion, which would have the effect of di stor ng t he l egal process .

In approaching the ques on wh et her the subsec on has the effect of excl uding t he r ecei pt of l egal aid from the relevant considera ons i n cases of for um non conveni ens , i t i s of some i nt er est to consider the analogous situa on wh er e a stay of pr oceedi ngs i s sought to enabl e the ma er in dispute to go to arbitra on pur suant t o an arbi tra on agreemen t bet wee n t he par es. Unde r sec on 4( 1) of the Ar bi tra on Act 1950 (formerly sec on 4 of the Ar bi tra on Act 1889 ( 52 & 5 3 Vic t. c. 49) ) the court had a discre on to gr ant a stay of pr oceedi ngs br ought in br each of an arbi tra on clause; and, provided the statutory condi ons for the gr ant of a stay we r e sa sfied, t he court woul d grant a stay unless the person resis ng the appl ica on coul d per suade t he cour t that good r eason existed why a stay should not be granted. (For the present law, see sec on 9 of the Ar bi tra on Act 1996 .)

For present purposes the relevant authori es on thi s subj ect begi n wi th Smith v. Pearl Assurance Co. Ltd. [1939] 1 All E.R. 95 , decided before legal aid was made available by the Legal Aid and Advice Act 1949 , in which the provisions of sec on 31( 1) (b) of the Ac t of 1986 first appear ed i n i den cal t erms in sec on 1( 7) (b) of Ac t of 1949. In the case of Smi th the pl ai n ff clai med t hat, by r eason of his poverty, he could obtain assistance from the Poor Persons Commi ee in cour t pr oceedi ngs, but that such assistance was not available to him in arbitra on. The Cour t of Appeal never thel ess stayed hi s ac on to enabl e the ma er to go t o arbi t ra on under an ar bi tr a on cl ause bi ndi ng on hi m, ho ldi ng that poverty did not of itself jus fy the cour t to ref use to gi ve effect to t he agreemen t to arbi t rate. A similar conclusion was reached in Ford v. Clarksons Holidays Ltd. [1971] 1 W.L.R. 1412 , in which no ques on of legal ai d arose. The par ty res i s ng a stay i n t hat case s impl y claimed t hat the cost of arbitra on wa s mu ch great er than the cos t of a Count y Cour t ac on. The Cour t of Appeal , foll owi n g the earlier decision in Smith's case, held that this was not a good reason for refusing a stay.

In In re Saxton, decd. [1962] 1 W.L.R. 968 , the Court of Appeal duly gave effect to sec on 1(7)( b) of the Act of 1949, not in connec on wi th an arbi tra on c lause, but wit h an order mad e i n t he cour se of proceedings in court. An applica on wa s ma de by the pl ai n ff to the t r ial j udge f or an or der t hat the defendants should produce certain documents for examina on by a handwr i ng exper t instructed by the plain ffs. The j udge grant ed t he appl i ca on but, havi ng r egar d to the f act that t he plain ffs wer e l egal l y ai ded, impo sed a condi on t hat t he pl a i n ffs shoul d di sc l ose to t he defendants any report by the expert. The Court of Appeal deleted the condi on, hol di ng that sec on 1(7)(b) of the Act of 1949 required the *868 court to disregard the fact that the defendants were legally aided. However, in Fakes v. Taylor Woodrow Construc on L td. [ 1973] Q. B. 436 the applica on of sec on 1(7)( b) arose i n an acute f orm wi t h r eference t o an arbi t ra on c l ause. The plain ff act ed as plumbi ng subcont r act or to t he def endant s , and c laimed a l arge sum, amou n ng t o over £80,000, from them. The defendants invoked an arbitra on cl ause i n the subcont ract. The plain ff howev er cont ended t hat , by reason of the def endant s ' def aul t , he himse l f had been mad e

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insolvent and his business ruined. Legal aid was available to him in the High Court, but not in arbitra on pr oceedi ngs; and he cl ai me d that , as a resul t of the def endant s' def aul t, he lacked the means to fight the arbi tra on proceedi ngs , or even t o t ake up an arbi t ra on award in hi s favour . The Court of Appeal decided by a majority to refuse a stay. Lord Denning M.R. considered that if, as the plain ff claimed , his i nsol vency arose as the r esul t of the def endant s ' breach of cont r act , it wou l d be a denial of jus ce t o r equi re hi m t o go t o arbi tra on, whi ch he coul d not afford, i nstead of proceeding in the High Court, where he could get legal aid. Sir Gordon Willmer agreed, holding that there was sufficient mat eri al to j us fy the concl usion t hat t here was a reasonabl e pr obabi l i ty that the defendants' breaches of contract induced the plain ff's povert y. They bot h concl uded t hat sec on 1( 7) (b) of the Ac t of 1949 di d not comp el them to reach a di fferent concl usi on. Meg aw L .J., who dissented, held that that subsec on di d indeed comp el the cour t to gr ant a stay. The deci si on in the Fakes case was later followed in Goodman v. Winchester & Alton Railway Plc. [1985] 1 W.L.R. 141 , and considered in Trustee of the Property of Andrews v. Brock Builders (Kessingland) Ltd. [1997] Q.B. 674 , though without reference to the point arising under the Legal Aid legisla on. I need not dwell upon the reasons given by Lord Denning M.R. in the Fakes case for holding that sec on 1(7)(b) did not stand in the way of his conclusion, though I am compelled to say that, as Parker L.J. was subsequently to hold (see Edwin Jones v. Thyssen (Great Britain) Ltd. (1991) 57 B.L.R. 116 , 123-125), that reasoning was not persuasive. Yet the jus ce of the deci si on of the ma j or i ty of the Court of Appeal was very strong; and it is startling that sec on 1( 7) (b) shoul d have the effect of compelling the court to refuse to do jus ce in a case of thi s ki nd. Thi s pr omp t s the ques on whe t her the decision of the majority of the Court of Appeal in the Fakes case can be jus fied on t he bas i s that the subsec on has no appl ica on i n t he case of an appl i ca on f or a st ay under t he Ar bi tr a on Act , where the discre on fal ls to be exer ci sed not in the cour se of the pr oceedi ngs thems el ves (as in In re Saxton, decd. [1962] 1 W.L.R. 968 ), but in deciding whether or not the ac on shoul d be permi ed to proceed at all in court.

For the present purposes it is not necessary for your Lordships to consider that ques on, wh i ch does not directly arise for decision in the present appeal. It is enough that I should record that I entertain serious doubts whether the subsec on wa s i nt ended to appl y i n that si tua on. I am, howev er , sa sfied t hat the subsec on was never i ntended t o appl y in the case of appl i ca ons f or a stay of proceedings on the ground of forum non conveniens. In such a case, the ques on at issue is wh et her "the court is sa sfied t hat ther e i s some other tribunal , havi ng compe t ent juri sdi c on, i n whic h the case may be tried more suitably for the interests of all the *869 par es and for the ends of jus ce: " see Sim v. Robinow (1892) 19 R. 665 , 668, per Lord Kinnear, cited with approval in Spiliada Mari me Corpora on v. Cansul ex Ltd. [1987] A. C. 460 , 474. It would, in my opinion, be strange indeed if the applica on of so br oad a pr inc i pl e of jus ce shoul d be ar ficiall y curtai l ed by sec on 31( 1) (b) of the Legal Aid Act 1988 , so that the receipt by the plain ff of legal aid i s aut oma call y excl uded f r om t h e range of relevant considera ons . Cer tai nl y the pol icy under l yi ng the subsec on, as I have i den fied it, provides no explana on, s l l less j us fica on, for so curt ai l i ng it. For the reasons I have gi ven I am sa sfied t hat on i ts true cons t ruc on, t he subsec on does not have any such effect .

My noble and learned friend, Lord Hope of Craighead, has drawn my a en on t o t he compa r abl e provisions of the Sco sh Legal Aid l egi sla on. The or iginal Sco sh Act, t he Legal Ai d and Sol i ci t ors (Scotland) Act 1949 , received the Royal Assent on the same day as the English Act, the Legal Aid and Advice Act 1949 . The long tles of the two Ac ts are vi rtual ly iden cal , as are man y provi sions of the two Acts. Sec on 1 of each of the two Ac ts cont ai ns onl y one ma t er ial di s nc on, whic h i s that t here is no provision in the Sco sh Act equi val ent to s ec on 1( 7) (b) of t he Engl i sh Act. This di fference has persisted, so that there is s ll no pr ovi si on in the pr esent Legal Aid (Scotland) Act 1986 equivalent to sec on 31( 1) (b) of the English Act of 1988.

I do not know why this dis nc on exi sts bet wee n t he Engl i sh and Sco sh legal ai d l egi sl a on. Whatever the reason, it must transcend any considera on rel a ng t o a stay of proceedi ngs under the Arbitra on Ac t or on the ground of for um non conveni ens . Ne ver thel ess, the resul t i s that in Scotland, the na ve home of the pr inc i pl e of for um non conveni ens now adopt ed in Engl ish l aw,

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there is nothing in the legisla on to pr event the avai labi lity of l egal ai d bei ng taken int o account when that principle is invoked. This being so, it would be most remarkable if in England alone that principle was to be curtailed by excluding any considera on of the avai labi lity of legal ai d. I add for good measure that, if sec on 31( 1) (b) has that effect , this wou l d al so l ead t o t he ext raordinar y result that condi onal fee ar rangeme nt s can be taken i nt o account i n thi s cont ext , but not the availability of legal aid. These consequences for fy me in the vi ew that sec on 31( 1)( b) of the Act of 1988 (and its predecessor sec on 1( 7) (b) of the Ac t of 1949) we r e, on thei r true cons truc on, never intended to have any such effect.

It follows that, in my opinion, for the purposes of considering the ques on i n the pr esent case, sec on 31( 1) (b) can be di sregarded as i rrel evant . Ac cor di ngl y the ques on ar i sing on t he t wo appeals can be considered simply on the basis of the principles applicable in cases of forum non conveniens, in rela on to the avai labi lity ei ther of legal ai d or of a condi onal fee agreemen t . To those principles I now turn.

Forum non conveniens

There are, as I have said, two appeals before your Lordships, one concerned with the impact of a condi onal fee agreeme nt , and the ot her wi th the imp act of the avai labi lity of l egal ai d. I n the former the defendants are the appellants, and in the la er the pl ai n ff is the appel l ant. In point *870 of me , it wa s the forme r (wh i ch I have cal led the second appeal ) wh i ch came first bef ore your Lordships' House, with the leave of this House, although the relevant decision of the Court of Appeal was later than the decision of the Court of Appeal (in what I have called the first appeal ) concer ned with legal aid. The appeal from the la er deci si on wa s onl y added lat er wh en your Lor dshi ps ' House granted leave to appeal to enable the two related ma er s to be cons i der ed toget her . As a resul t, the defendants' wri en case wa s pr ima r i ly di rected towa rds the second appeal , concer ned wi th the condi onal fee ar rangeme nt .

The cases advanced by the two par es bef or e your Lor dshi ps pr esent ed di ame t ri cal ly opposed points of view. Those represen ng the pl ai n ff are pl ai nl y concer ned wi th what t hey see as a poten al deni al of jus ce t o t hei r cli ent . Thei r simpl e pos i on, whic h was accepted as deci s i ve by Si r Thomas Bingham M.R. on the condi onal fee appeal , is that it is imp os si bl e for thei r cl ient ' s case to be presented without financi al assi stance, indeed ver y subs tan al financi al assi stance; and as such assistance is not available to him in Namibia, but is available to him in this country, jus ce requi res that there should be no stay of his ac on her e, as it is onl y her e that hi s case can be tri ed at al l. The commitment of the plain ff's advi sers to his case i s shown, not onl y by his sol i citors ' wil lingnes s to enter into a very substan al condi onal fee agreemen t , but also by his bar r i sters ' readi nes s to act pro bono in the proceedings. Moreover, your Lordships were told that at least some of the expert witnesses who were expected to give evidence on his behalf in the proceedings were also prepared to act on a condi onal fee basi s; though the pr opr iet y of any such ar rangeme nt wa s ques oned by the defendants.

From the defendants' point of view the ma er appeared ver y di fferent l y. They see t he plain ff's claim as being highly specula ve. The first def endant , your Lordshi ps wer e t old, is a hol ding company which has never traded, and has never employed anybody. The second defendant had transferred to it the contracts of employment of certain senior employees of R.U.L. from 1 January 1980, to provide them with a measure of security in the prevailing poli cal si tua on and t o protect their pension en tleme nt s; i ts onl y bus i ness wa s t o second t hese emp l oyees t o R. U. L. , wh i ch exercised full direc on and cont rol over them. The def endant s al so cl ai m that the me di cal evi dence suppor ng the al lega on t hat the def endant s caused t he pl ain ff's cancer i s very t hi n, as i s the evidence for the plain ff's asser on t hat t he fir st defendant devis ed the healt h and saf ety pol icy at Rossing. In addi on, the pl ai n ff's cl ai m is out of me, wi th the resul t t hat an Engli s h court wi l l only hear it if it is prepared to exercise its discre on to do so under sec on 33 of the Li mi ta on Act 1980 ,

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and to decline to apply the relevant Namibian me bar (as requi red by sec on 1 of the For ei gn Limita on Per iods Ac t 1984 ). Furthermore, having regard to the ambi ous scope of the ac on envisaged by the plain ff's sol i citors , invol ving a very wid e r ange of exper t evi dence, the def endant s ' solicitors' es ma t e that the cos ts of the tri al coul d run int o mi llions of pounds , wh er eas the pl ai n ff has contended that, even if he is completely successful, he will recover less than £400,000 including interest. So far as the condi onal fee agreeme nt is concer ned, the def endant s not onl y asser t that the plain ff's sol i citors ' expressed wil lingnes s to ent er i nto s uch an agreemen t for the who l e ac on *871 is, as Mr. David Steel Q.C. held, astonishingly ambi ous , but al so that it is rel evant to cons i der what arrangement the plain ff's sol i citors have mad e t o cover the def endant s ' cost s i n t he event of the plain ff losi ng t he ac on, bear i ng i n mi nd t hat t he only insur ance avai l able for t his purpose fr om the Law Society is to cover causes of ac on ar i si ng in thi s count ry and i s i n any event l imi ted to £100,000.

The unstated implica on under l yi ng these ma ers mus t be t hat the def endant s see t he pur pose of the ac on as bei ng to put them in the pos i on whe r e i t wou l d pay them t o s e l e what t hey see t o be the plain ff's very wea k cl aim f or a subs t an al sum, r ather t han contes t the ac on, however strong a defence they may have, and if successful in their defence find thems el ves f aced wi th irrecoverable costs far exceeding the maximum amount of the claim.

Faced with these diametrically opposed points of view your Lordships should, I suggest, approach the appeals as follows. First, the ques on of a stay of pr oceedi ngs mu s t be cons i der ed on the basi s of the applicable principles. These principles are concerned with the iden fica on of t he appropri ate forum for the trial. They are not concerned with the strength of the plain ff's claim, as to whi ch your Lordships are not at present in any posi on to form a judgme nt . If it is deci ded that a stay shoul d not be granted, then there are mechanisms available within the English trial process, such as an order for a preliminary issue, which can be invoked with a view to shortening the trial and saving costs. Second, if I am right in my view that sec on 31( 1) (b) of the Legal Ai d Ac t 1988 has no applica on in these appeals, it will follow that, given a favourable decision by the Legal Aid authori es , the plain ff wou l d i n al l probabi l ity pur sue hi s cl aim wit h t he suppor t of legal aid r ather than on t he basis of a condi onal fee agreeme nt .

With this by way of introduc on, I tur n to cons i der the appl icabl e pr inc i pl es.

The applicable principles

It is accepted on both sides that these are to be found in the decision of your Lordships' House in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 . I take the liberty of repea ng that the underlying principle, drawn from the judgment of Lord Kinnear in Sim v. Robinow, 14 R. 665 , 668, was stated to be, at p. 476:

"a stay will only be granted on the ground of forum non conveniens where the court is sa sfied t hat ther e i s some other avai l abl e f orum, havi ng compe t ent juri sdi c on, whic h is the appropriate forum for the trial of the ac on, i.e. in wh i ch the case ma y be tri ed more suitably for the interests of all the par es and the ends of jus ce. "

It was further stated that the burden of proof rests on the defendant to persuade the court to exercise its discre on to gr ant a stay. For that pur pose, he has to establ ish that ther e i s anot her available forum which is clearly or dis nctly mo r e appr opr iat e than the Engl ish for um i n wh i ch jurisdic on has been founded by the pl ai n ff as of r ight. In consi deri ng t hat ques on, t he court wi l l look first to see wh at factor s ther e are wh i ch poi nt in the di rec on of anot her forum, i.e. connec ng factors which *872 indicate that it is with the other forum that the ac on has i ts mo s t real and substan al connec on. Thi s i s the first stage. Howeve r , even i f the court concl udes at t hat stage t hat the other forum is clearly more appropriate for the trial of the ac on, the cour t ma y never thel ess

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decline to grant a stay if persuaded by the plain ff, on whom t he bur den of proof then l ies, that jus ce requi res that a stay shoul d not be gr ant ed. Thi s is the second stage.

Before your Lordships it was accepted by the plain ff that the def endant s had di s char ged t he burden on them at the first stage of establ ishi ng that Nami bi a wa s the jur i sdi c on wit h whi ch t he ac on had the cl osest connec on, wi t h t he effect that prima f acie a st ay shoul d be gr anted. The crucial ques on arose, ther ef or e, wh et her a stay shoul d never thel ess be ref used because jus ce so required, on the grounds that the plain ff coul d not proceed wi t h t he t r ial wi t hout financi al assistance and that, whereas no such assistance was available in Namibia, it was available in England, in the form either of legal aid or, failing that, a condi onal fee agreeme nt . The ques on therefore arises whether these circumstances are capable of jus fyi ng a ref usal of a stay in favour of the appropriate forum and, if so, whether the Court of Appeal was jus fied i n hol ding t hat for that reason a stay should be refused on the facts of the present case.

In the Spiliada case [1987] A.C. 460 , 478 it was stated that, at the second stage of the inquiry, the court will consider all the circumstances. Certainly the court is not restricted at this stage to considering factors which may connect the li ga on wit h t he Engl i sh j uri sdi c on. I n suppor t of t his proposi on, rel iance can pr oper l y be pl aced on Oppenhei me r v. Loui s Rosent hal & Co. [1937] 1 Al l E.R. 23 , a case concerned with service out of the jurisdic on in wh i ch the Cour t of Appeal ref used to set aside the service of the writ in Germany in circumstances in which the plain ff, a Ger man na onal of the Jewi sh fai th, mi ght not have been en tled t o t he s ervi ces of an advocate i n t he German court and would have run a grave personal risk if he travelled to Germany to conduct his case in person. A similar point was considered, but rejected on the facts, by the House of Lords in The Abidin Daver [1984] A.C. 398 , a case concerned with lis alibi pendens. Furthermore, some guidance was given in the Spiliada case at pp. 482 et seq. as to the impact of specific advant ages which the plain ff mig ht der i ve f rom t he Engl i sh j uri sdi c on, i f a st ay was not granted, viz. , damage s on a higher scale; a more complete system of discovery; a power to award interest; a more generous limita on per iod. From the di scus si on wh i ch fol lowe d, a gener al pr inc i pl e ma y be der i ved, wh i ch is that, if a clearly more appropriate forum overseas has been iden fied, gener al l y speaki ng t he plain ff wil l have t o t ake t hat forum a s he finds i t, even i f it is in certain respect s less advantageous to him than the English forum. He may, for example, have to accept lower damages, or do without the more generous English system of discovery. The same must apply to the system of court procedure, including the rules of evidence, applicable in the foreign forum. This may display many features which dis ngui sh i t f rom our s, and wh i ch Engl ish l awy er s mi ght t hi nk r ender i t l ess advantageous to the plain ff. Such a r esul t may i n par cular be t r ue of t hose j urisdic ons, of which there are many in the world, which are smaller than our own, and are in consequence lacking in financi al resour ces comp ared wi th our own . *873 But that is not of itself enough to refuse a stay. Only if the plain ff can est abl i sh t hat subs t an al j us ce cannot be done i n the appropr i at e f or um, will the court refuse to grant a stay: see the Spiliada case, at p. 482.

I wish to interpolate at this stage that there is no ques on of the pl ai n ff in this case havi ng f ounded jurisdic on agai ns t the def endant s on wh at ma y be described as an extravagant basi s. I n a case where the plain ff has done so, for exampl e by serving proceedi ngs on an i ndi vidual def endant while on a brief visit to this country, the court may not be prepared to assist him by refusing a stay to enable him to keep the benefit of an advant age avai labl e to hi m i n thi s count ry. Cer tai nl y i n Scotland there has been a marked tendency to grant a stay, despite the availability of an advantage to the plain ff in t hat count r y, whe r e j uri sdi c on has been f ounded on t he extr avagant basi s of arrestment of the defendant's assets within the jurisdic on: see, for examp l e, Lane v. Foulds, 1903 11 S.L.T. 118 and Anderson Tulloch & Co. v. J.C. & J. Field Ltd., 1910 1 S.L.T. 401 . Here, however, the plain ff founded j uri sdi c on as of r ight by s ervi ng t he t wo d efendant s in this count r y, both of t hem being English companies registered here. No doubt their domicile in this country, coupled with the availability of financi al assi stance her e, has encour aged hi m to sel ect them as def endant s in pl ace of R.U.L. But I cannot see that that of itself exposes the plain ff to cri cism. I f he was going t o sue these defendants, this was an appropriate jurisdic on in wh i ch to ser ve pr oceedi ngs on them. It is

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then for the defendants to persuade the court, as they are seeking to do, that the ac on shoul d be stayed on the ordinary principles of forum non conveniens.

I therefore start from the posi on that , at least as a gener al rul e, the cour t wi ll not ref use to gr ant a stay simply because the plain ff has shown t hat no financi al assi stance, f or exampl e in the f orm of legal aid, will be available to him in the appropriate forum, whereas such financi al assi stance wi ll be available to him in England. Many smaller jurisdic ons cannot afford a system o f legal aid. Suppose that the plain ff has been i njured i n a mot or acci dent in such a count r y, and succeeds i n est abl i shi ng English jurisdic on on the def endant by ser vi ce on hi m in thi s count ry wh er e the pl ai n ff is el igibl e for legal aid, I cannot think that the absence of legal aid in the appropriate jurisdic on wo ul d of itsel f jus fy the ref usal of a stay on the ground of for um non conveni ens . In thi s connec on i t shoul d not be forgo en that financi al assi stance f or l i ga on is not neces sar i l y regarded as essen al , even i n sophis cat ed l egal systems . I t wa s not wi del y avai labl e in thi s count ry un l 1949; and even s ince that date it has been only available for persons with limited means. People above that limit may well lack the means to li gat e, wh i ch pr ovi des one reason for the recent legal isa on of condi onal f ee agreements.

Even so, the availability of financi al assi stance in thi s count ry, coupl ed wi th its non- avai labi lity in the appropriate forum, may excep onal ly be a rel evant factor in thi s cont ext . The ques on, howev er , remains whether the plain ff can es t abl i sh t hat subs t an al j us ce wi l l not i n t he par cular circumstances of the case be done if the plain ff has to proceed i n t he appr opr i ate f orum whe r e no financi al assi stance is avai labl e.

*874

This is in effect wh at wa s ur ged upon your Lor dshi ps in the pr esent case. It is cl ear that the nat ur e and complexity of the case is such that it cannot be tried at all without the benefit of financi al assistance. There are two reasons for this. The first is that , as Si r Thoma s Bi ngham M. R. recogni sed, there is no prac cal pos si bi lity of the issues wh i ch ar i se in the case bei ng tri ed wi thout the pl ai n ff having the benefit of pr of essi onal l egal assi stance; and t he second i s that hi s case cannot be developed before a court without evidence from expert scien fic wit nes ses. It i s not in disput e t hat in these circumstances the case cannot be tried in Namibia; whereas, on the evidence before the Court of Appeal and before your Lordships, it appears that if the case is fought in this country the plain ff wil l eit her obt ain assi stance i n t he f orm o f legal aid or, fail ing t hat , recei ve t he benefit of a condi onal fee agreeme nt wi th hi s sol ici tor . Wi th regard to the la er I am, like t he Cour t of Appeal , not prepared to doubt the sincerity of the statement made by the plain ff's sol i citor, Mr. Mee r an, on oath, that he is prepared to enter into a condi onal fee agreeme nt to cover the conduct of the ac on, up to and inc l udi ng the tri al . In these ci rcums tances I am sa sfied t hat t his is a case i n whic h, having regard to the nature of the li ga on, subs t an al j us ce cannot be done i n the appropr iat e forum, but can be done in this jurisdic on wh er e the resour ces are avai labl e.

If the posi on had been, for examp l e, that the pl ai n ff was seeki ng t o take advantage of financi al assistance available here to obtain a Rolls Royce presenta on of hi s case, as opposed to a mo r e rudimentary presenta on i n the appr opr iat e for um, i t mi ght we l l have been necessar y to take a differ ent vi ew. But thi s is not the pr esent case. Ther e is ever y reason to bel ieve that thi s case cal ls for highly professional representa on, by bot h lawy er s and sci en fic expert s , for t he achi evement of substan al j us ce, and t hat such r epr esent a on cannot be ach i eved i n Nami bi a. I n the se circumstances, to revert to the underlying principle, the Namibian forum is not one in which the case can be tried more suitably for the interests of all the par es and for the ends of jus ce.

Conclusion

For these reasons, I would allow the plain ff's appeal in t he first ( legal aid) appeal , and di smiss the defendants' appeal in the second (condi onal fee agreeme nt ) appeal . The def endant s shoul d, in my opinion, pay the plain ff's cost s of the first appeal here and bel ow, a nd hi s costs of t he s econd

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appeal before your Lordships' House.

Postscript

I wish to record that the argument that sec on 31( 1) (b) of the Legal Ai d Ac t 1988 should be held to be inapplicable in the case of an applica on for a stay of pr oceedi ngs on the ground of for um non conveniens was not explored in depth before the Appellate Commi ee. In or di nar y ci rcums tances , therefore, the Commi ee mi ght invi te fur ther submi ssi ons on the poi nt bef or e concl udi ng that i t should affect the out come of the appeal . I have, howe ver , come to the concl us i on that i n the present appeal it is, excep onal ly, unnecessar y and inappr opr iat e for that *875 course to be taken. First, the argument has no impact on what I have called the second appeal, which is concerned not with legal aid but with a condi onal fee agreeme nt . Mo r eover , the pr esent pos i on i s that the plain ff has the benefit of s uch an agreement , but i s not i n recei pt of l egal aid. I t follows t hat t he defendants' applica on for a stay mu s t in any event fai l, regardl ess of thi s ar gume nt . Second, thi s interlocutory ba le has con nued f or near l y three year s, and i t i s highl y undes i rabl e t hat i t shoul d be prolonged by yet another hearing. For these reasons, and bearing in mind that it is in the public interest that the point should be addressed and decided, I would not invite further submissions on the point.

Lord Lloyd of Berwick.

My Lords, I have had the advantage of reading in dra the speech pr epared by my nobl e and learned friend, Lord Goff of Chi evel ey. I agree wi th it and for the reasons wh i ch he gi ves I wo ul d al so al low the plain ff's appeal in t he first appeal and di smiss the defendant s' appeal i n the s econd appeal .

Lord Hoffma nn.

My Lords, I have had the advantage of reading in dra the speech of my nobl e and learned fri end, Lord Goff of Chi evel ey. I agree wi th hi s opi ni on on the cons truc on of sec on 31( 1) (b) of the Legal Aid Act 1988 . I am however in the somewhat invidious posi on of not bei ng in agreeme nt wi th my noble and learned friend's applica on of the pr inc i pl es stat ed in hi s own cl assi c judgme nt in Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 . In my view, the existence of neither legal aid nor a condi onal fee agreeme nt is sufficient t o di splace the pr ima f acie concl usion t hat Nami bi a is the appropriate forum for the trial of this case. Since none of your Lordships share this view, I shall state it with brevity.

In principle I understand your Lordships to accept that the availability in England of one form or another of financi al assi stance to car ry on li ga on i s not a reason f or r efus ing a st ay when anot her country is so much more closely connected with the subject-ma er of the l i ga on as t o make i t clearly the more appropriate forum. But, it is said, there are circumstances which make this an excep onal case. These cons i st of a comb i na on of three f act ors .

First, the plain ff's l ack of mea ns and t he compl exi ty of the l i ga on make i t in prac ce impossi bl e for him to present his case effec vel y bef ore t he cour t s of Nami b ia. Thi s was regarded as the determining factor by Sir Thomas Bingham M.R.:

"Faced with the stark choice between one jurisdic on, al bei t not the mo s t appr opr iat e in which there could in fact be a trial, and another jurisdic on, the mo s t appr opr iat e in which there never could, in my judgment, the interests of jus ce wo ul d tend to we i gh, and weigh strongly, in favour of that forum in which the plain ff coul d assert hi s rights."

My Lords, of course I sympathise with the plain ff, who has cont r act ed a seri ous di s ease whi l e employed in another country and considers that he can demonstrate that it was caused by the condi ons under wh i ch he wo r ked and t hese are a ribut abl e t o t he cul pabl e negl ect of the defendants. *876 But I do not think that the refusal a stay on this ground can be based upon any

Page19

defensible principle. It means that the ac on of a ri ch pl ai n ff will be s t ayed whil e the ac on of a poor plain ff in r espect of pr eci sel y the same t r ansac on wi l l not . It mean s t hat t he mor e specula ve and di fficult the ac on, t he mor e l i kely i t is to be al l owed t o proceed i n thi s countr y wi th the support of public funds. Such dis nc ons wi l l do t he l aw n o c redi t . For my par t , I prefer the eminently ra onal pr inc i pl e stat ed by Sopi nka J . i n Amc hem Pr oducts I nc. v. ( Br i sh Col umbi a) Workers' Compensa on Board (1993) 102 D. L. R. (4t h) 96, 110- 111:

"The weight to be given to juridical advantage is very much a func on of the par es' connec on to the par cul ar juri sdi c on i n ques on. I f a par ty seeks out a jur isdi c on simply to gain a juridical advantage rather than by reason of a real and substan al connec on of the case to the j ur i sdi c on, that i s ordinar i l y condemne d as ' f orum shopping.' On the other hand, a party whose case has a real and substan al connec on with a forum has a legi ma t e cl ai m to the advant ages that that for um pr ovi des . The legi ma cy of thi s cl ai m i s based on a reasonabl e expecta on t hat in t he event of li ga on ari sing out of the t ransac on i n ques on, t hose advant ages wi l l be avail able. "

In my view, the plain ff whi l e empl oyed i n Nami b ia had no l egi mate expect a on that l i ga on arising out of the circumstances of his employment would take place in England. He had abandoned his Sco sh domi c il e of ori gin and emi g rated t o Sout h Afr ica. He had t hen mov ed t o Nami b ia. His posi on wa s ther ef or e no di fferent from t hat of a na ve Nami bi an. Apar t from t h e f act that his employer formed part of a mul na onal group of compa ni es wit h i ts headquar t ers i n Engl and, the transac on had no connec on wit h Engl and.

The second factor relied upon is that the defendants are English companies properly served within the jurisdic on. The Engl ish cour t ther ef or e has per sonal jur i sdi c on over them. But , my Lords, that is always the star ng poi nt f or t he exer ci se of t he j ur i sdi c on on t he gr ound of forum n on conveniens. It is the reason why the burden is on the defendant to sa sfy the cour t, by ref er ence to the subject-ma er of t he l i ga on, t hat t here cl earl y is anot her mor e appropri ate for um. I f, however, the defendant has sa sfied t he bur den, I do not see how t he exi stence of per sonal jurisdic on can wi thout mo r e be a factor to cast int o the bal ance. I say, "wi thout mo r e, " because there may be other reasons why the defendant not only can be sued here but why his presence in the jurisdic on ma kes it mo r e appr opr iat e to sue hi m her e. But ther e is no such factor in thi s case. The defendant is a mul na onal compa ny, present almos t everywhe r e and cert ainly present and ready to be sued in Namibia. I would therefore regard the presence of the defendants in the jurisdic on as a neut ral factor . I f the pr esence of the def endant s, as parent comp any and l ocal subsidiary of a mul na onal , can enabl e t hem t o be sued her e, any mul na onal wi th its parent company in England will be liable to be sued here in respect of its ac vi es anywhe r e i n t he wor l d.

Third and last, there is the fact that the plain ff has , si nce l eavi ng hi s empl oymen t , taken up residence and resumed his domicile of origin in Scotland. In my view, this change which has taken place since the events *877 forming the subject-ma er of the li ga on cannot affect t he ques on of whether the plain ff had a l egi mate expect a on of being abl e t o invoke t he Engli s h jur isdi c on.

For these reasons, I would have allowed the condi onal fee appeal and di smi ssed the l egal ai d appeal.

Lord Hope of Craighead.

My Lords, I have had the advantage of reading in dra the speech wh i ch has been pr epared by my noble and learned friend, Lord Goff of Chi evel ey. I en rely agree wit h i t, and f or the same r easons I also would allow the plain ff's appeal in t he first appeal and di smiss the defendant s' appeal i n the second appeal.

Lord Clyde.

My Lords, I have had the advantage of reading in dra the speech wh i ch has been pr epared by my

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noble and learned friend, Lord Goff of Chi evel ey. I agree wi th it, and for the reasons wh i ch he gi ves , would also allow the plain ff's appeal in t he first appeal and di smiss the defendant s' appeal i n the second appeal.

Representa on

Solicitors for the defendants: Davies Arnold CooperSolicitors for the plain ff: Lei gh, Day & Co.Defendants' appeal dismissed with costs. Plain ff's appeal all owed wit h cost s. Legal aid t axa on.

(J. A. G. )

________________________________________________________________________________________

. Legal Aid Act 1988, s. 31(1)(b): see post, p. 864G-H.

(c) Incorporated Council of Law Repor ng for Engl and & Wa l es© 2011 Swe et & Ma xwe l l

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*50 Amin Rasheed Shipping Corpora on Appel lant s v Kuwa i t Ins ur ance Co. Respondent s

House of Lords

7 July 1983

[1983] 3 W.L.R. 241

[1984] A.C. 50

Lord Diplock , Lord Wilberforce , Lord Roskill , Lord Brandon of Oakbrook and Lord Brightman

1983 May 16, 17, 19; July 7

Conflict of L aws —C ont ract—P r oper l aw—L l oyd' s s tandar d f or m of ma r ine pol icy—P ol icy not specifying governing law—Policy issued and claims payable in Kuwait—Whether English law proper law of contract—Whether jurisdic on t o g r ant l eave t o s er ve n o ce of wr i t ou t of jurisdic on—R el a ve j u ri dical ad vant ages of tr ial in Kuwai t or London—J u dge' s ex erci se of discre on— R.S.C., Ord. 11, rr. 1 (1) (f) (iii), 4 (2)

The plain ffs, a Liber i an corpor a on, whos e busi ness was carri ed on f r om Du ba i , owned a smal l cargo vessel which they insured against war and marine risks under a policy issued by the defendants, a Kuwai insur ance comp any. The form of the pol icy wa s based upon the Ll oyd' s standard form of marine policy with modifica ons but gave Kuwai t as the place of issue and provided for claims to be payable there. There was no provision in the policy as to the law which was to govern the contract. The vessel was detained by Saudi Arabian authori es and the master and crew were imprisoned for some months apparently in connec on wi th a cl ai m, denied by the plain ffs, that the vessel had been engaged i n an a empt t o smugg l e oi l . The plain ffs claimed f or the t otal cons t ruc ve l oss of t he vessel under t he I ns t ute War a nd St r ike Clauses which formed part of the policy. Bingham J. set aside leave which had been granted to the plain ffs under R.S.C., Ord. 11, r. 1 (1) (f) (iii)1 on their ex parte applica on to issue a wr i t and serve no ce of i t on the def endant s in Kuwa i t. The judge hel d that Kuwa i law was the proper law of the contract and, accordingly, there was no jurisdic on to ser ve no ce of the wri t out of the jurisdic on; and fur ther that i f, cont rar y to hi s vi ew, the pl ai n ffs' clai m fe l l with in R.S.C., Ord. 11, he would exercise his discre on agai ns t uphol di ng s er vi ce. The pl ai n ffs appealed. The Court of Appeal (by a majority) dismissed the appeal.

On appeal by the plain ffs: -

Held, dismissing the appeal,

(1) that the proper law of the contract was English law since ( per Lord Diplock, Lord Roskill, Lord Brandon of Oakbrook and Lord Brightman) the provisions of the policy taken as a whole by necessary implica on led to the inevi tabl e concl us i on that it wa s the par es' inten on t hat t heir mutual rights and obliga ons under it shoul d be det ermi ned in accor dance wi th the Engl ish law of marine insurance (post, pp. 62C-D,64F,65D-F,72F - 73C), ( per Lord Wilberforce) objec vel y determined the contract had its closest and most real connec on wi th Engl ish l aw (pos t, pp. 69A-C,71D - 72A). *51

(2) That the court's discre on under R.S.C., Ord. 11, r. 1 , should be exercised in the same way as that stated by the judge at first i ns tance, name l y, i n f avour of the def endant s, f or the plain ffs had not dis char ged t he onus l aid upon t hem u nder Ord. 11, r. 4 (2) , that the case was a proper one for service out of the jurisdic on (pos t, pp. 68B- C, D- F, 72A- B, D- F, F - 73C) .

Per Lord Diplock, Lord Roskill, Lord Brandon of Oakbrook and Lord Brightman. (i) By the "proper law" of a contract is meant the substan ve law of the count ry wh i ch the par es have chosen as that by which their mutual legally enforceable rights are to be ascertained, but excluding any renvoi, whether of remission or transmission, that the courts of that country might themselves apply if the ma er we r e li gat ed bef ore t hem ( pos t , pp. 61H - 62A, 72F - 73C) .

(ii) It would be wholly wrong for the English courts to embark upon the task of making a

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comparison of the rela ve efficiency of t he c i vi l law an d common l aw pr ocedur es f or t he determina on of di sput ed facts (pos t, pp. 67D- F, 72F - 73C) .

Per Lord Wilberforce. In considering the ques on of di scre on t he cour t mus t take i nto account the nature of the dispute, the legal and prac cal i ssues i nvol ved, such ques ons as l ocal knowledge, availability of witnesses and their evidence and expense. The English courts should not embark upon a comparison of the procedures, or methods, or reputa on or standi ng of the courts of one country as compared with those of another (post, p. 72C-D).

Rex v. Interna onal Trus tee for the Pr ot ec on of Bondhol der s Ak engesel l scha [ 1937] A. C. 500 , H.L.(E.) and Bonython v. Commonwealth of Australia [1951] A.C. 201 , P.C. considered.

Decision of the Court of Appeal [1983] 1 W.L.R. 228; [1983] 1 All E.R. 873 affirmed .

The following cases are referred to in their Lordships' opinions:

Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119, C.A.

Bonython v. Commonwealth of Australia [1951] A.C. 201, P.C.

Compagnie Tunisienne de Naviga on S. A. v. Comp agni e d' Ar me me nt Ma r i me S.A. [1971] A.C. 572; [1970] 3 W.L.R. 389; [1970] 3 All E.R. 71 , H.L.(E.).

Hadmor Produc ons Ltd. v. Hami lton [1983] 1 A. C. 191; [1982] 2 W. L. R. 322; [1982] 1 Al l E. R. 1042 , H.L.(E.).

Helbert Wagg & Co. Ltd., In re Claim by [1956] Ch. 323; [1956] 2 W.L.R. 183; [1956] 1 All E.R. 129 .

Rex v. Interna onal Trus tee for the Pr ot ec on of Bondhol der s Ak engesel l scha [ 1937] A. C. 500; [1937] 2 All E.R. 164 , H.L.(E.).

Torni, The [1932] P. 78, C.A.

Vita Food Products Inc. v. Unus Shipping Co. Ltd. [1939] A.C. 277; [1939] 1 All E.R. 513, P.C.

Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1969] 1 W.L.R. 377; [1969] 2 All E.R. 210 , C.A.; [1970] A.C. 583; [1970] 2 W.L.R. 728; [1970] 1 All E.R. 796 , H.L.(E.).

The following addi onal cases we r e ci ted in ar gume nt :

Ak esel skab Augus t Freuchen v. Steen Hansen (1919) 1 L1. L. Rep. 393. *52

Armadora Occidental S.A. v. Horace Mann Insurance Co. [1977] 1 W.L.R. 520; [1977] 1 All E.R. 347 .

A or ney-Gener al of New Zeal and v. Or z [1984] 1 A.C. 1; [1983] 2 W.L .R. 809; [1983] 2 All E.R. 93 , H.L.(E.).

B.P. Explora on Co. (Li bya) Ltd. v. Hunt [1976] 1 W. L. R. 788; [1976] 3 Al l E. R. 879 .

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Coast Lines Ltd. v. Hudig & Veder Chartering N.V. [1972] 2 Q.B. 34; [1972] 2 W.L.R. 280; [1972] 1 All E.R. 451, C.A.

Evans v. Bartlam [1937] A.C. 473; [1937] 2 All E.R. 646 , H.L.(E.).

Evans Marshall & Co. Ltd. v. Bertola S.A. [1973] 1 W.L.R. 349; [1973] 1 All E.R. 992 , Kerr J. and C.A.

Greer v. Poole (1880) 5 Q.B.D. 272 .

Industrie, The [1894] P. 58, C.A.

MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362; [1978] 1 All E.R. 625 , H.L.(E.).

Rossano v. Manufacturers' Life Insurance Co. [1963] 2 Q.B. 352; [1962] 3 W.L.R. 157; [1962] 2 All E.R. 214 .

Trendtex Trading Corpora on v. Cr edi t Sui sse [1980] Q. B. 629; [1980] 3 W. L. R. 367; [1980] 3 Al l E.R. 721, C.A.

United City Merchants (Investments) Ltd. v. Royal Bank of Canada [1983] 1 A.C. 168; [1982] 2 W.L.R. 1039; [1982] 2 All E.R. 720, H.L.(E.)

United Railways of Havana and Reda Warehouses Ltd., In re [1960] Ch. 52; [1959] 2 W.L.R. 251; [1959] 1 All E.R. 214, C.A.

APPEAL from the Court of Appeal.

This was an appeal by the appellants, Amin Rasheed Shipping Corpora on, from the judgme nt dat ed December 15, 1982, of the Court of Appeal (May and Robert Goff L. JJ., Si r John Donal dson M. R. dissen ng) affirming t he j udgment dated Marc h 4, 1982, of Bingham J . whic h or dered t hat t he or der dated May 22, 1981, of Robert Goff J., gr an ng l eave t o t he appel l ant s to i ssue a wri t for servi ce out of the jurisdic on and to ser ve no ce of the wri t upon t he r espondent s , the Kuwai t Insurance Co. , in Kuwait, the writ of summons issued pursuant thereto, the service of the no ce ther eof and al l subsequent proceedings be set aside.

By their writ the appellants, a Liberian shipping company trading in Dubai, claimed for the construc ve tot al los s of thei r vessel Al Wa hab under a cont ract of ma r ine insur ance dat ed Apr i l 29, 1979, and issued in Kuwait by the respondents, an insurance company incorporated in and carrying on business in Kuwait. The claim arose as a result of the deten on of the Al Wa hab by the Saudi Arabian authority on February 28, 1980, at the port of Rasal Kha i.

The facts are stated in the opinion of Lord Diplock.

Colin Ross-Munro Q.C. and Barbara Dohmann for the appellants. Reliance is placed on the following three proposi ons : (1) The pr oper law of the ma r ine pol icy of Apr i l 28, 1979, wa s Engl ish law as wa s found by Sir John Donaldson M.R. and May L.J. below. (2) The view expressed by Bingham J. how he would have exercised his discre on i f Engl ish law we re appl icabl e to the pol icy wa s obi ter di ctum and therefore Hadmor Produc ons Ltd. v. Hami lton [1983] 1 A. C. 191 , has no applica on and the House is free to exercise its own discre on. (3) If, howe ver , it be hel d *53 that Bingham J.'s exercise of his discre on wa s par t of the ra o deci dendi of his j udgmen t then he exerci sed i t wro ngl y and on wrong principles.

(1) The following are ma er s from wh i ch the i nf er ence can be dr awn that Engl ish l aw wa s the proper law: (i) the form, terms and nature of the 1979 policy; (ii) the fact that in April 1979 there

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was no Kuwai ma r ine insur ance law; (i ii) the appel lant s pr ay in ai d, if thi s is permi ssi bl e, the fact that the 1980 policy rela ng to thi s same vessel wa s cl ear l y gover ned by Engl ish law. It is iden cal in form to the 1979 policy and there is no evidence that the 1980 policy was to be governed by a differ ent l aw; ( iv) f rom 1975 onwa rds al l i nsur ance ma ers rela ng t o the Rasheed fleet were nego at ed by Engl ish br oker s in London and as a ma er of prac ce al l premiums were payabl e in London.

(i) There is a strong line of authority from the end of the last century to the present day, showing that the use of a standard form may be a powerful indica on of the par es' deemed i nten on, and a strong connec ng l ink to a par cul ar system o f law. The i mpo r t ance a ached t o this factor arises from the considera on that the terms of a standard form cont ract ma y onl y be i nt er pr et abl e by reference to the system of law under which the standard form has evolved, and that the par es must be deemed to have intended a uniform and predictable interpreta on by ref er ence to that system: see The Industrie [1894] P. 58 , 73, per Lord Esher M.R. Reliance is placed in par cul ar on the decision of the majority of this House in Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1970] A.C. 583 , where it was held that the selec on by the par es of the R.I.B.A. form of contract was the determining factor in favour of English proper law, notwithstanding the very strong factors in favour of Sco sh l aw whi ch i ncl uded Sc otl and as the pl ace of performance. Similar considera ons appl y her e wh er e the Ll oyd form has changed li le i n t he l ast 300 years and has been a prescribed form for English underwriters since 1795 where its clauses have been interpreted by a long series of legal decisions which have built up the complex body of English marine insurance law. Lloyd's marine insurance policy is used so widely and should be deemed to be governed by English law without it contains a choice of law clause. Compagnie Tunisienne de Naviga on S. A. v. Comp agni e d' Ar me me nt Ma r i me S.A. [1971] A.C. 572 does not weaken the above argument based on the nature of the Lloyd's form. It is plain that in that case the form in ques on was hopelessly inappropriate and in any event it contained a choice of law clause.

(ii) Reliance is placed on the judgments of Sir John Donaldson M.R. [1983] 1 W.L.R. 228 , 237F-238D and May L.J. [1983] 1 W.L.R. 228 , 242G-243E. It is to be remembered that Kuwait is a civil code country and that there was no marine insurance code before August 1980. The Kuwai cour ts tryi ng a marine insurance case before 1980 would apply English marine insurance decisions to the facts of the case. In a situa on such as the pr esent one can appl y the officious byst ander t est. If two p ar es signing a form such as the present were informed that there are numerous English decisions which interpret the terms in the form and were then asked whether it was governed by English law they would inevitably reply "Of course."

*54

(iii) For the purposes of determining the proper law of the war risks policy of November 22, 1980, the prior course of dealing between the par es is avai labl e as a rel evant ci rcums tance. In par cul ar, a en on i s drawn t o t he f act that bef ore Nov embe r 22, 1980, the r espondent s express l y requi r ed, and the appellants gave, a no ce of abandonme nt in comp l iance wi th the Engl ish Ma r ine Insur ance Act 1906 . There can therefore be no reasonable doubt that the par es int ended that Ac t to appl y to their contract of insurance. In addi on, the par es cannot have i ntended t he 1980 pol i cy to be governed by the Kuwai Ma r ine I nsur ance Law of Augus t 15, 1980 , because i t i nf ringed the requirements of that law and failed to comply with the form of policy there prescribed (see, for example, ar cl es 269 (1) , (2) and 271 (1) (i) and (iii) ). If a lat er cont ract ma de betwe en the same par es is gover ned by Engl ish law, and an ear l ier cont ract betwe en those par es i s i den cal i n it s terms and there is no evidence to suggest that the par es int ended a di fferent law t o appl y to t hei r earlier contract, no considera ons of logi c or pol icy mi litat e agai ns t the cour t havi ng regard to such later contract. To exclude from considera on the lat er cont ract , and wi th it the unamb i guous cour se of dealing between the par es , wo ul d be hi ghl y ar ficial and contr ary to common sense. On t hi s issue Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1970] A.C. 583 is dis ngui shabl e f or i n t hat case t her e wa s subsequent conduct of t he par es whi ch was not

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admissible but here it is not subsequent ac ngs but the fact that the 1980 pol icy wa s renewe d in terms iden cal wi th those of the 1979 pol icy wh i ch shows that the ear l ier pol icy i s gover ned by English law.

(iv) Other factors which point to English law as the proper law are that the policy was wri en in English and that the sum insured was expressed in sterling and that the premium was payable in sterling. Further, the underlying insurance contract was nego at ed i n L ondon: Compagnie Tunisienne de Naviga on S. A. v. Comp agni e d' Ar me me nt Ma r i me S.A. [1971] A.C. 572 , 576, 583, 584, 591, 609C and Coast Lines Ltd v. Hudig & Veder Chartering N.V. [1972] 2 Q.B. 34 , 50, 51. Alterna vel y, Engl ish l aw i s the l aw gover ni ng the transac on as the l aw mos t cl osel y connect ed with it: see per Sir John Donaldson M.R. [1983] 1 W.L.R. 228 , 237C-E. Reliance is also placed on sec on 30 of the Ma r ine Insur ance Ac t 1906 .

The fact that the Lloyd's policy has changed li le in the l ast 300 year s and that over that per iod there has grown up a body of case law rela ng to its terms is a strong poi nt er to the fact that onl y English law can conveniently interpret the terms of the policy: see Wright and Fayle, A History of Lloyd's (1928), pp. 131, 151, 152. This is reinforced by the Report dated November 20, 1978, of the United Na ons Conf er ence on Trade and Devel opme nt , t he "UNCTAD Repor t"; see especi al ly paragraphs 48, 53-55 of the Report.

It is conceded that the underlying contract of insurance was made in Kuwait but in modern me s with the almost universal use of the telex the place of making the contract is o en for tui tous . As to the fact that the place of performance is also Kuwait, it is conceded that this is a factor to be weighed in the balance but in an insurance contract it is a factor of far less weight than it is, in say, a building contract, which was the subject *55 of the Whitworth Street Estates case [1970] A.C. 583 . Further, as stated above, the premiums were payable in London. True, the head office of the respondent company was in Kuwait but it had other offices throughout the Gul f . The r espondent s rely in support of their conten on t hat t he pr oper l aw i s Kuwa i law o n t he r e-i nsurance arrangements. This factor was rejected both by Bingham J. [1982] 1 W.L.R. 961 , 969F-H, Sir John Donaldson M.R. [1983] 1 W.L.R. 228 , 233H, and May L.J. [1983] 1 W.L.R. 228 , 241D. What however impressed Bingham J. in reaching the conclusion that he did was the interna onal character of the Lloyd's form. But as Sir John Donaldson M.R. observed [1983] 1 W.L.R. 228 , 237G, "I find the concept of a superna onal or transna onal body of law d ifficult t o accept. "

In conclusion on the first issue, the respondent s' cont en on as to t he proper l aw s houl d be r eject ed not only for the reasons given above but also because it is contrary to the balance of probability, for it seems extraordinary that a civil code country such as Kuwait should un l Augus t 14, 1980, have included as part of its laws the immensely complex body of English marine insurance law without any form of statutory incorpora on, and then have los t these laws wi thout trace, and wi thout any repeal, on August 15, 1980, when a body of law very differ ent from the Engl ish came int o for ce.

(2) In the circumstances Bingham J.'s view of how he would have exercised his discre on if Engl ish law applied to the policy is obiter dictum, for once the judge had found that the governing law was not English the court no longer had any jurisdic on i n the ma er. As to wha t cons tutes obi t er dicta, see A or ney-Gener al of New Zeal and v. Or z [1984] 1 A.C. 1 , and Halsbury's Laws of England , 4th ed., vol. 26 (1979), paragraph 574. If the judge's exercise of his discre on wa s obi ter the House will of course a ach we i ght to it, but if it is par t of hi s deci si on then the appel lant s concede that the principles enunciated in Hadmor Produc ons Ltd. v. Hami lton [1983] 1 A. C. 191 , 220, apply to the present case.

(3) On the assump on that Bi ngham J.'s exer ci se of hi s di scre on was a t rue exerci se of dis cre on, the House should nevertheless interfere with it because the judge was clearly wrong and applied wrong principles. Once it is found that the governing law of the policy is English law that becomes the predomina ng f actor and wi thout t her e are ot her f actor s of overwh el mi ng we i ght t o t he contrary the English court is the appropriate forum to decide ma er s ar i si ng under the pol icy. For the ma er s to be taken int o account in exer ci si ng the di scre on r el i ance i s placed on t he j udgmen t s

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of Kerr J. in B.P. Explora on Co. (Li bya) Ltd. v. Hunt [1976] 1 W. L. R. 788 and in Armadora Occidental S.A. v. Horace Mann Insurance Co. [1977] 1 W.L.R. 520 , 526C. Bingham J. failed to have full regard to all the material facts, to the great importance of the applicable law, to the genuine advantages of trial in England, to the lack of prejudice to the respondents, and by his misapprehension of the judgment of Brandon L.J. in Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd's Rep. 119 , 127 in accep ng the respondent s' admi ssi on that a comp ar i son of the Engl ish and the Kuwai tribunal amo unt s to an imp ermi ssi bl e cri que of the f oreign cour t . Acc ordingl y, it i s open to this *56 House to decide how discre on shoul d have been exer ci sed in the pr esent case. Reliance is placed upon the principles enunciated in MacShannon v. Rockware Glass Ltd. [1978] A.C. 795 , 815C, 821A-B, 831B, per Lord Diplock, Lord Salmon and Lord Keith of Kinkel and in Evans v. Bartlam [1937] A.C. 473 , 480, 486, per Lord Atkin and Lord Wright. Trendtex Trading Corpora on v. Credit Suisse [1980] Q.B. 629 is an example of a case where the court entered into a comparison between English law and the foreign system of law in ques on, i n that case, Swi ss l aw. Adrian Hamilton Q.C. and John Thomas for the respondents. (1) As to the effect of R. S. C. , Or d. 11 , ther e is no differ ence betwe en the pr oper law and the gover ni ng law: see Dicey & Morris, The Conflict of Laws , 10th ed. (1980), Vol. 1, notes to rule 24, p. 206. A contract governed by English law is one for which English law is the proper law of the contract. (2) The proper law is to be determined by the English courts because they are the lex fori. There is no doctrine of renvoi in contract: see Dicey & Morris, The Conflict of Laws , 10th ed., vol. 2, rule 145, p. 750, and Cheshire and North's Private Interna onal Law , 10th ed. (1979), p. 198. The authority relied on in these text books is In re United Railways of Havana and Regla Warehouses Ltd. [1960] Ch. 52 , 96-97, 115. An English court cannot refer to Kuwai l aw to ascer tai n wh at i t wo ul d hol d as the pr oper l aw. Kuwa i law c annot be referred to for that purpose. The use by the law of Kuwait of English sources is done so as a ma er of Kuwai dome s c l aw. The concept of curi al law o nl y appl i es to arbi t ra ons and cannot appl y to li ga on i n cour t . A c our t cannot be asked t o use a curi al law o ther than i ts own. In t he present policy there is to be found no express or implied inten on as to wh at is the pr oper law. Thi s is a case in which the proper law is to be discovered by ascertaining the law with which the contract has the closest and most real connec on. Wh at ever be the pr oper l aw i t wi ll appl y to the f orma on, performance and interpreta on of the cont ract because ther e i s onl y one l aw wh i ch gover ns al l three ma er s. [Ref er ence wa s ma de to Di cey & Mo r ri s, The Conflict of Laws, 10t h ed. , vol . 2, rule 149, p. 749.] In the circumstances, as Bingham J. found, the proper law is Kuwai law. Engl ish law is only applicable in so far as the Kuwai cour ts look to Engl ish law as a sour ce. Thi s is not sur pr i si ng for it is exactly akin to the situa on wh er e an Engl ish cour t wi ll di scer n Engl ish l aw f rom, f or example, an American decision where there is no English authority on the point. United City Merchants (Investments) Ltd. v. Royal Bank of Canada [1983] 1 A.C. 168 is an example of a case where the English courts have adopted foreign sources of law, including statutory codes, and made them part of English law. This is in accord with long established custom for it is well known as can be seen from the judgments of Lord Mansfiel d that Engl ish me r can le l aw was expressed t o be der i ved from con nent al law inc l udi ng codes . For the or i gi ns of the Ll oyd' s form: see Wright and Fayle, A History of Lloyd's , pp. 135-136. It appears that it was based originally on Italian marine prac ce. It is therefore not surprising that Kuwai law shoul d adopt the pr inc i pl es of Engl ish ma r ine insur ance law for the purposes of its own law. (3) Further, the evidence shows that over the last few years cases of marine insurance *57 have been heard without any difficul t y i n t he Kuwai court s . On t his point t he observa ons of Bi ngham J. [1982] 1 W.L.R. 961 , 969A-G and Robert Goff L. J. [1983] 1 W. L. R. 228 , 247E-248F, are adopted in their en ret y. In f avour of Kuwa i law h avi ng an avai l abl e mar i ne insurance law, reliance is also placed on the factor of reinsurance. It is conceded that London is an important centre for insurance but it is not the only centre. This is shown by the evidence which showed reinsurance governed by Kuwai law, underwr i en i nterna onal l y. As t o the 1980 Kuwai Ordinance, it is (a) irrelevant as enacted a er thi s cont ract wa s conc l uded; (b) a per fect ly int el ligi bl e code. Admi edl y pr oceedi ngs under i t have to be car ried on in Ar abi c but i t al lows int er na onal forms to be used. (4) The Lloyd's form used in the present case has nothing on its face to connect it

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with England at all. It is dis ngui shabl e from a pur el y Engl ish form l ike the cl assi c R. I.B. A. bui ldi ng contract form, the subject of the Whitworth Street Estates case [1970] A.C. 583 . The Ins tut e Wa r and Strikes Clauses a ached to the pol icy are dr a ed t o be used t hroughout the wor l d. A en on is drawn to clause 4 (3) which excludes "any claim for expenses arising from delay except such expenses as would be recoverable in principle in English law and prac ce under the Yor k- Ant we r p Rules 1950 ." It does not state that English law is to be applied. In favour of English law as the proper law the appellants relied in their printed case on, inter alia, Ak esel skab Augus t Freuchen v. Steen Hansen (1919) 1 L1.L.Rep. 393, 396, but that decision of Greer J. shows an an quat ed a tude towards interna onal trade. In favour of Kuwa i law a s the proper l aw t he r espondent s l y on t he approach adopted in Compagnie Tunisienne de Naviga on S. A. v. Comp agni e d' Ar me me nt Ma r i me S.A. [1971] A.C. 572 , 583, 593, 594, 595, and Coast Lines Ltd. v. Hudig & Veder Chartering N.V. [1972] 2 Q.B. 34 , 46D-H, 50F-G. In the words of Megaw L.J. (p. 46G), "more importance is to be a ached to wh at is to be done under the cont ract - its subs tance - than to cons i der a on of the f orm and formali es of the cont ract...". (5) As to the ques on of cert ainty, all deci sions per t aining t o t he Kuwai form shoul d be uni form and thi s is best achi eved by the Kuwa i cour t s appl ying Kuwai law. The Whitworth Street Estates case [1970] A.C. 583 is dis ngui shabl e. In that case it wa s hel d that the fact that the form was an English form was decisive. It was an English form li le used in Scot land. There was no evidence there that the R.I.B.A. form was used interna onal ly. Cont rast the pr esent case where the Lloyd's form is used all over the world and is adopted accordingly and specifical ly adopted in Kuwait. It is emphasised that the R.I.B.A. form was an exclusively English domes c and was not a Sco sh f orm. (6) Final l y, Sir John Donal dson M.R . err ed i n hol ding t hat the l aw o f Kuwai t , the lex loci contractus and the lex loci solu oni s, had no l aw on ma r ine i nsur ance bef or e 1980. Further, he and May L.J. did not take sufficient account of the f act that the cont r act was mad e i n Kuwait and that Kuwait was the place of performance, especially in view of the fact that the contract was a contract of insurance and of the decisions in Greer v. Poole (1880) 5 Q.B.D. 272 and Rossano v. Manufacturers' Life Insurance Co. [1963] 2 Q.B. 352 .(7) On discre on, it wa s sai d that Bi ngham J.'s observa ons on thi s issue we r e obi ter di cta. Thi s is not so; it wa s a ground of the judge' s deci si on and not a dictum. May L.J. accepted that English law was the proper law of the policy and went on to hold that it was wrong to interfere with Bingham J.'s discre on and that in any event he wo ul d have exercised the discre on in the same wa y. Rel iance is pl aced on Coast Lines Ltd. v. Hudig & Veder Chartering N.V. [1972] 2 Q.B. 34 , 51E-F, per Stephenson L.J. It is to be remembered that Bingham J. had all the evidence before him and took all the relevant factors into account and exercised his discre on under R. S. C. , Or d. 11, not to or der ser vi ce of the wr i t out of the jur i sdi c on. It i s a power which should be sparingly exercised for once it is held that English law is the governing law over all Lloyd's forms wherever they are issued it must be an excep onal case to or der ser vi ce out of the jurisdic on under Or d. 11.

As to B.P. Explora on Co. (Li bya) Ltd. v. Hunt [1976] 1 W. L. R. 788 , that was a case decided very much on its own facts. In Armadora Occidental S.A. v. Horace Mann Insurance Co. [1971] 1 W.L.R. 520 there was no argument on this ques on. The El Amria [1981] 2 Lloyd's Rep. 119 was rightly decided and Brandon L.J.'s observa ons appl y to the pr esent case. None of the excep ons ther e stated apply here.

(8) In conclusion, it is pre-eminently a case which ought to be heard in the courts of Kuwait. The Kuwait insurance company does not operate in London and this form is plainly a Kuwait insurance company's form. Ques ons rai sed at the tri al wi ll be ma i nl y ques ons of fact rela ng t o the ar ea of Kuwait and not difficul t ques ons of l aw. I t is a di spute local t o the Gulf .

Ross-Munro Q.C. replied.

Their Lordships took me for cons i der a on

LORD DIPLOCK.

My Lords, the plain ff/appel l ant ("the assured" ) is a shi ppi ng compa ny i ncorpor ated i n L iber i a, but having its head office and carr ying on i ts bus i nes s i n Dubai . It i s the owne r of a cargo vessel of the

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landing cra type, the Al Wahab ("the vessel") which, at the relevant me , traded in Ar abi an Gul f waters only. In these proceedings, the assured seeks to li gat e in the Engl ish comme r ci al cour t its claim against the defendants/respondents ("the insurers") for a construc ve tot al los s of the vessel which was insured under a hull and machinery policy of insurance against marine and war risks ("the policy") that had been issued in Kuwait by the insurers who have their head office t her e and branch offices elsewhe r e i n t he Gul f , incl udi ng Dubai , but have no office or represent a ve in Engl and.

The policy was on the insurers' standard printed form of hull policy. It was in the English language only. The wording followed me cul ous l y ( wi th mi nor and i n my vi ew i mma t er ial omi ssi ons of express references to London) that of the Lloyd's S.G. policy scheduled to the Marine Insurance Act 1906 , but adapted by typewri en inser ons for use as a me, i nstead *59 of a voyage, policy, and excluding references to "goods and merchandise." It incorporated in the body of the policy the usual F.C. & S. clause from what at that me wa s the Standar d Engl ish Ma r ine Pol icy; but , by a typewr i en inser on, wa s expr essed to be "Subj ect to Ins tute War and Str ikes Clauses Hul l s dat ed 1.10. 70 as a ached" ; and a pr int of those cl auses wi thout any addi ons or amen dmen t s was a ached t o the policy. The policy was expressed to be issued in Kuwait on April 28, 1979, and claims (if any) expressed to be payable in Kuwait.

In order to achieve its object of pursuing its claim against the insurers in the English court, rather than a Kuwai cour t, the assur ed had two obs tacl es to over come :

First, it had to bring the case within R.S.C., Ord. 11, r. 1 (1) , in order to obtain leave to serve a writ on the insurers out of the jurisdic on. Al though the assur ed had or i gi nal ly asser ted that the cont ract of insurance had been made on its behalf by an agent trading in England, this failed on the facts; and in this House the only provision of rule 1 (1) that was relied upon by the assured was that contained in subparagraph (f) (iii) of which the relevant wording is:

"if the ac on begun by the wr i t i s br ought agai ns t a def endant not domi ci led or ordinarily resident in Scotland to enforce... a contract ... being... a contract which... (iii) is by its terms, or by implica on, gover ned by Engl ish law; ..."

I will call this first obs tacl e the jur i sdi c on poi nt.

The second obstacle is that the assured must sa sfy the requi reme nt s of rule 4 (2) which provides:

"No such leave shall be granted unless it shall be made sufficient l y to appear to t he court that the case is a proper one for service out of the jurisdic on under thi s Or der ."

I will call this second obstacle the discre on poi nt .

Leave to issue and serve the writ on the insurers in Kuwait was ini al ly gr ant ed ex par te by Rober t Goff J. A summo ns by the insur er s to set asi de thi s ex par te or der came bef or e Bi ngham J. on Ma rch 4, 1982. He held against the assured on the jurisdic on poi nt , but in case on appeal he shoul d be held to be wrong on that, he also gave full considera on to the di scre on poi nt and hel d agai nst the assured on that point too. He accordingly ordered the issue and service of the writ to be set aside.

On appeal to the Court of Appeal (Sir John Donaldson M.R., May and Robert Goff L. JJ.), the Ma ster of the Rolls held in favour of the assured on both the jurisdic on poi nt and the di scre on poi nt. May L.J. found in favour of the assured on the jurisdic on poi nt , but agai ns t i t on the di scre on poi nt. Robert Goff L. J. f ound agai ns t the assur ed on the j ur i sdi c on poi nt but (regr e ably as I thi nk) refrained from expressing any opinion on the discre on poi nt , despi te the fact that hi s two br et hr en were divided on it. So we are le wi thout any ma j or i ty ra o deci dendi in t he Cour t of Appeal .

In the result, although the assured failed all along the line, in the course of doing so it gave rise to considerable diversity of judicial reasoning. Sir John Donaldson M.R. and May L.J. held that there was *60 jurisdic on to gr ant leave to ser ve the wr i t out of jur i sdi c on; whi l e Rober t Goff L.J. and

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Bingham J. held that there was no such jurisdic on. Ma y L. J. and Bi ngham J. we r e of opi ni on that , given jurisdic on (wh i ch Ma y L. J. thought ther e wa s), the di scre on s houl d be exerci sed agai nst leave being granted; the Master of the Rolls took the opposite view that the discre on shoul d be exercised in favour of gran ng leave, and Rober t Goff L.J . expressed no opi nion on t he poi nt.

The jurisdic on poi nt on wh i ch judi ci al opi ni on in the cour ts bel ow wa s evenl y di vi ded is one wh i ch is of considerable importance in transna onal comme r ci al cont racts, and the appr oach in mo der n me s to the exer ci se of the di scre on i n cases fall ing wi t hin R.S.C., Ord. 11, r. 1 (1) (f) , is also deserving of re-examina on. So, in spi te of the unani mi ty of the resul t in bot h cour ts bel ow, leave to appeal from the decision of the Court of Appeal was given by that court.

The jurisdic on poi nt

My Lords, the jurisdic on poi nt is one that fal ls to be det ermi ned by Engl ish law and by Engl ish law alone. The relevant rules to be applied to its determina on are the Engl ish rul es of conflict of laws, not the conflict rul es of any ot her count ry - wh i ch ma y or ma y not be the same as those of Engl and. In par cul ar , so far as the jur i sdi c on poi nt i tsel f is concerned, it i s i mma t eri al whe t her the cour t s of the only obvious rival forum, a Kuwai cour t, wo ul d take the same vi ew as an Engl ish cour t as to what was the proper law of the policy. The relevance of this only arises if and when one reaches the discre on poi nt .

The applicable English conflict rul es are those f or det ermi ni ng wh at i s t he "pr oper l aw" of a contract, i.e., the law that governs the interpreta on and the val idi ty of the cont ract and the mo de of performance and the consequences of breaches of the contract: Compagnie Tunisienne de Naviga on S. A. v. Comp agni e d' Ar me me nt Ma r i me S. A. [1971] A. C. 572 , 603. To iden fy a par cul ar system of law as bei ng that in accor dance wi th wh i ch the par es to i t i ntended a cont r act to be interpreted, iden fies that system o f law a s the "proper l aw" of the cont r act . The r eason f or this is plain; the purpose of entering into a contract being to create legal rights and obliga ons between the par es to i t, i nt er pr et a on of the cont r act invol ves det ermin ing wha t are t he l egal rights and obliga ons to wh i ch the wo r ds used in it gi ve ri se. Thi s is not pos si bl e except by ref er ence to the system of law by which the legal consequences that follow from the use of those words is to be ascertained. In Vita Food Products Inc. v. Unus Shipping Co. Ltd. [1939] A.C. 277 ,298. Lord Wright said in a passage cited by Upjohn J. in In re Claim by Helbert Wagg & Co. Ltd. [1956] Ch. 323 ,341:

"There were certain differ ences betwe en [The Tor ni [1932] P. 78] and the present. One was that the bills of lading had a clause providing that they were 'to be construed in accordance with English law' not as in the present case 'shall be governed by English law'. In their Lordships' judgment that dis nc on i s mer ely verbal and i s too nar row t o make a substan al di fference. The cons t ruc on of a contr act by Engl i sh l aw i n vol ves the applica on to i ts terms of *61 the relevant English statutes, whatever they may be, and the rules and implica ons of the Engl ish commo n l aw for i ts cons truc on, including the rules of the conflict of laws . In thi s sense the cons trui ng of the cont ract has the effect that the cont ract is to be gover ned by Engl ish law. "

My Lords, R.S.C., Ord. 11, r. 1 (1) (f) (iii), states as the test that is relevant to the jurisdic on poi nt in the instant case that the policy "is by its terms, or by implica on, gover ned by Engl ish law. " Engl ish conflict rul es accor d to the par es to a cont r act a wid e l i ber t y to choose t he l aw b y whi ch t hei r contract is to be governed. So the first step i n the det ermi na on of the j uri sdi c on poi nt i s to examine the policy in order to see whether the par es have, by its expr ess terms or by necessar y implica on f rom the l anguage used, evi nced a commo n i nt en on as to t he system o f law b y reference to which their mutual rights and obliga ons under it ar e to be ascer tai ned. As Lor d At ki n put it in Rex v. Interna onal Trus tee for the Pr ot ec on of Bondhol der s Ak engesel l scha [ 1937] A. C. 500 ,529:

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"The legal principles which are to guide an English court on the ques on of the pr oper law of a contract are now well se led. It is the law wh i ch the par es i ntended t o appl y. Their inten on wi ll be ascer tai ned by the int en on expressed i n t he cont r act i f any, which will be conclusive. If no inten on be expr essed the int en on wil l be presumed by the court from the terms of the contract and the relevant surrounding circumstances."

Lord Atkin goes on to refer to par cul ar facts or condi ons that led t o a pri ma f aci e i nference as to the inten on of the par es to appl y a par cular system of l aw. He g i ves as exampl e s t he l ex l oci contractus or lex loci solu oni s, and concl udes :

"But all these rules but serve to give prima facie indica ons of int en on: they are all capable of being overcome by counter indica ons , howe ver di fficult it may be i n some cases to find such. "

There rs no conflict betwe en thi s and Lor d Si mo nds ' s pi thy defini on of t he "proper l aw" o f t he contract to be found in Bonython v. Commonwealth of Australia [1951] A.C. 201 , 219 which is so o en quot ed, i .e. , "the system of l aw by ref er ence to wh i ch the cont ract wa s ma de or that wi th which the transac on has its cl osest and mo s t real connec on. " I t may be wor t h whi l e poi n ng out that the "or" in this quota on is di sj unc ve, as i s appar ent from t he f act that Lord Simon ds goes on immediately to speak of "the considera on of the la er ques on." If it is appar ent f rom t h e t erms o f the contract itself that the par es int ended it to be int er pr et ed by ref er ence to a par cul ar system of law, their inten on wi ll pr evai l and the la er ques on as t o the s ystem of l aw wi th whic h, i n the view of the court, the transac on to wh i ch the cont ract rel at es wo ul d, but for such int en on of the par es have had the cl osest and mo s t real connec on, does not ari se.

One final comme nt upon wh at under Engl ish conflict rul es i s mea nt by the "proper l aw" of a cont r act may be appropriate. It is the substan ve *62 law of the country which the par es have chosen as that by which their mutual legally enforceable rights are to be ascertained, but excluding any renvoi, whether of remission or transmission, that the courts of that country might themselves apply if the ma er we r e li gat ed bef ore t hem. For exampl e, if a cont r act mad e i n Engl and wer e expressed t o be governed by French law, the English court would apply French substan ve law to it not wi ths tandi ng that a French court applying its own conflict rul es mi ght accept a renvoi to Engl ish law as the lex loc i contractus if the ma er we r e l i gat ed bef ore i t. Conversel y, assumi n g t hat under Engl i sh confli ct rules English law is the proper law of the contract the fact that the courts of a country which under English conflict rul es wo ul d be regarded as havi ng j ur i sdi c on over a di sput e ari sing under the contract (in casu Kuwait) would under its own conflict r ul es have r ecour se t o Engl ish l aw as determina ve of the ri ght s and obl iga ons of the par es, woul d not make the pr oper l aw of t he contract any the less English law because it was the law that a Kuwai cour t al so wo ul d appl y.

I can state briefly wh at Lor d At ki n ref er s to as the rel evant sur roundi ng ci rcums tances , at the me the policy was issued before I come to deal with its actual terms; since although the policy contains no express provision choosing English law as the proper law of the contract, nevertheless its provisions taken as a whole, in my opinion, by necessary implica on poi nt i nel uctabl y t o t he conclusion that the inten on of the par es was that thei r mut ual ri ght s and obl i ga ons under i t should be determined in accordance with the English law of marine insurance.

The policy was the second renewal of similar policies on the vessel of which the first wa s issued on April 29, 1977. The assured by 1977 carried out the insurance of its ships through the London office of an English company that was a member of the Rasheed Group. As brokers for this purpose it used J. H. Minet & Co. Ltd. ("Minets") who also acted as re-insurance brokers for the insurers. Premiums were paid to Minets in London, policies were issued by the insurers in Kuwait and sent on by them to Minets who passed them on in London to the English company. Claims, though expressed by the

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policies to be payable in Kuwait, were in prac ce se led i n r unni ng account s i n s terl ing i n London between Minets and the insurers and between Minets and the assured.

I men on, in passi ng, that in these days of mo der n me t hods of commu ni ca on whe r e i nterna onal contracts are so frequently nego at ed by tel ex, wh et her wh at tur ns out to be the final offer i s accepted in the country where one telex is situated or in the country where the other telex is installed is o en a me r e ma er of chance. In t he r esul t the l ex l oci cont r act us has l ost muc h of the significance in det ermi ni ng wh at is the pr oper law of cont ract that it had cl ose on 50 year s ago wh en Lord Atkin referred to it in the passage that I have cited. As respects lex loci solu oni s the cl oseness of the connec on of the cont ract wi th thi s var ies wi th the nat ur e of the cont ract. A cont ract of insurance is performed by the payment of money, the premiums by the assured, claims by the insurers, and, in the case of marine insurance, very o en in wh at is used as an int er na onal rather than a na onal cur rency. In the ins tant case, the cour se of bus i ness betwe en the insur er s and the assured *63 established before the policy now sought to be sued upon was entered into, ignoring, as it did, the provision in the previous policies that claims were payable in Kuwait, shows how li le weight the par es thems el ves a ached t o t he l ex l oci sol u onis .

The crucial surrounding circumstance, however, is that it was common ground between the expert witnesses on Kuwai law that at the me t he pol i cy was ent ered i nto t her e was no i ndi genous l aw of marine insurance in Kuwait. Kuwait is a country in which the prac ce si nce 1961, wh en it began to develop as a thriving financi al and comme r ci al cent re, has been to fol low the examp l e of the ci vi l law countries and to embody the law dealing with commercial ma er s, at any rat e, in wr i en codes . In Kuwait there had been in existence since 1961 a Commercial Code dealing generally with commercial contracts but not specifical ly wi th cont racts of ma r ine insur ance. The cont ract of ma r ine insurance is highly idiosyncra c; i t invol ves jur i s c concept s that are pecul i ar to i tsel f such as sue and labour, subroga on, abandonme nt and cons truc ve t otal loss ; to give but a f ew e xampl es. The general law of contract is able to throw but li le light upon the ri ght s and obl iga ons under a pol i cy of marine insurance in the mul far ious con ngenci es that may occur whi l e t he cont r act is i n f orce. The lacuna in the Kuwai comme r ci al law has si nce been filled i n 1980 by the promul ga on f or t he first me of a code of mar i ne i nsurance l aw. Thi s code does not simpl y adopt the Engl i sh l aw o f marine insurance; there are significant di fferences. Howev er , it did not come i nto oper a on un l August 15, 1980, and it is without retrospec ve effect . It does not ther efore appl y to t he pol i cy which was entered into at a me bef or e ther e wa s any i ndi genous l aw of ma r ine i nsur ance i n Kuwait.

I add here, in parenthesis, that this does not mean that before the Marine Insurance Code was promulgated Kuwai cour ts we r e di sabl ed from tryi ng cases invol vi ng cont racts of ma r ine insur ance, any more than the Commercial Court in England is disabled from trying a case involving a contract whose proper law is French law. A number of claims under marine insurance policies were in fact tried in Kuwai cour ts bef or e the Kuwa i code of mar i ne i nsurance came i nto effect. The court s were able to undertake this task because the legal system of Kuwait includes a Code of Conflict of Laws. This incorporates ar cl e 59 wh i ch deal s wi th det ermi ni ng the pr oper law of a cont ract. The ar cl e pr ovi des that in the case of a trans -na onal cont r act i t

"shall, from the standpoint of the substan ve condi ons governing i t and t he effects ensuing from its conclusion, be subject to the law of the state... where the contract is concluded... unless the contrac ng par es agree t o t he appl i ca on of anot her l aw or circumstances suggest that another law is the one contemplated for applica on. "

This ar cl e expr essl y recogni ses the dut y of the Kuwa i cour t s to give effect to the subst an ve law of some state other than Kuwait even where the contract is concluded in Kuwait if circumstances suggest that the law of that other state was the one contemplated for applica on; and, as wi ll be seen when I come to the discre on poi nt , a rel evant ci rcums tance in the case of cont racts of ma r ine insurance entered into in Kuwait before the *64 promulga on of the Kuwa i Mar i ne I nsurance

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Code was the non-existence in Kuwait of any indigenous marine insurance law.

Turning now to the terms of the policy itself, the adop on of the obsol et e language of the Ll oyd' s S.G. policy as scheduled to the Marine Insurance Act 1906 makes it impossible to discover what are the legal incidents of the mutual rights and obliga ons accept ed by the insur er s and the assur ed as having been brought into existence by the contract, unless recourse is had not only to the rules for construc on of the pol icy cont ai ned i n the first schedul e , but al so t o man y of the subs t an ve provisions of the Act which is (accurately) described in its long tle as: "An Ac t to codi fy the l aw rela ng to ma r ine i nsur ance. " To gi ve some examp l es : the pol icy i s a val ued pol icy; the l egal consequences of this in various circumstances are prescribed by sec ons 27, 32, 67 and 68 . The policy contained two type-wri en inser ons "War rant ed L loyd' s class to be mai ntained t hroughout the policy period" and "Warranted trading in Arabian Gulf waters only"; the legal consequences of the use of these expressions in a policy of insurance is laid down in sec ons 33 to 35 . On the ot her hand, the printed words include the so-called memorandum: "N.B. The ship and freight are warranted free from average under three pounds per cent. unless general, or the ship be stranded, sunk or burnt," where "warranted" is used in a differ ent sense; to ascer tai n the legal effect of the expression in this context recourse must be had to sec ons 64 to 66 and 76 . The legal effect of the sue and labour clause included in the policy is laid down in sec on 78 . These are but a few examp l es of the more esoteric provisions of the policy of which the legal effect i s undi scover abl e except by reference to the Marine Insurance Act 1906; but the whole of the provisions of the statute are directed to determining what are the mutual rights and obliga ons of par es to a cont r act of mar i ne insurance, whether the clauses of the contract are in the obsolete language of the Lloyd's S.G. policy (which, with the F.C. & S. clause added, is referred to in the Ins tut e Wa r and St ri kes Cl auses Hull-Time, as "the Standard Form of English Marine Policy"), or whether they are in the up-to-date language of the Ins tut e Wa r and St ri ke Cl auses t hat we r e a ached t o t he pol i cy. Except by reference to the English statute and to the judicial exegesis of the code that it enacts it is not possible to interpret the policy or to determine what those mutual legal rights and obliga ons are. So, applying, as one must in deciding the jurisdic on poi nt , Engl ish rul es of conflict of laws, the proper law of the contract embodied in the policy is English law.

How then did it come about that two such experienced commercial judges as Robert Goff L. J. and Bingham J. came to the conclusion that the contract embodied in the policy was not governed by English law? There was evidence, and even in the absence of evidence your Lordships could I think take judicial no ce of the fact, that the St andard Form of Engl ish Ma r ine Pol icy toget her wi th the appropriate Ins tut e Cl auses a ached, was wid el y used on i nsurance mar ket s i n man y count r ies of the world, other than those countries of the Commonwealth that have enacted or inherited statutes of their own in the same terms as the Marine Insurance Act 1906. The widespread use of the form in countries that have *65 not inherited or adopted the English common law led both Bingham J. and Robert Goff L. J. to concl ude that the Standard Form of Engl ish Ma r ine Pol icy and the I ns tute Clauses had become interna onal ised; t he " l ingua f ranca" a nd t he " commo n c ur rency" o f interna onal insur ance we r e the me t aphor s that Bi ngham J. used to describe it; wh i le Rober t Goff L.J. [1983] 1 W.L.R. 228 , 249, iden fied wha t he des cri bed as the bas i c f all acy i n t he argumen t of counsel for the assured as being:

"that, although the historical origin of the policy may be English and although English law and prac ce ma y pr ovi de a usef ul s our ce of per suasi ve aut hor i ty on t he construc on of the pol icy wh er ever i t ma y be used, never thel ess the use of a form which has become an interna onal form of cont ract pr ovi des of itsel f li le connec on with English law for the purpose of ascertaining the proper law of the contract."

My Lords, contracts are incapable of exis ng i n a l egal vacuum. They are me r e pi eces of paper devoid of all legal effect unl ess they we r e ma de by ref er ence to some system of pr i vat e law wh i ch defines the obl iga ons assumed by the par es t o the contr act by t heir use of par cular forms of

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words and prescribes the remedies enforceable in a court of jus ce for fai lur e to per form any of those obliga ons ; and thi s mu s t be so howe ver wi despr ead geographi cal ly the use of a cont ract employing a par cul ar form of wo r ds to expr ess the obl iga ons assumed by the par es may be. To speak of English law and prac ce pr ovi di ng a usef ul s our ce of persuasive authority on the construc on of the pol icy wh er ever i t ma y be used, begs the wh ol e ques on: why i s recour se t o English law needed at all? The necessity to do so is common ground between the experts on Kuwai law on either side; it is because in the absence of an indigenous law of marine insurance in Kuwait English law was the only system of private law by reference to which it was possible for a Kuwai court to give a sensible and precise meaning to the language that the par es had chosen to use in the policy. As the authori es that I have ci ted ear l ier show, under Engl ish conflict rules, whi ch are those your Lordships must apply in determining the jurisdic on poi nt , that ma kes Engl ish law the proper law of the contract.

In agreement with Sir John Donaldson M.R. and May L.J. I would accordingly decide the jurisdic on point in favour of the assured.

The discre on poi nt

My Lords, the jurisdic on exer ci sed by an Engl ish cour t over a for ei gn cor por a on whi ch has no place of business in this country, as a result of gran ng leave under R. S. C. , Or d. 11, r. 1 (1) (f) for service out of the jurisdic on of a wr i t on that cor por a on, is an exorbi t ant juri sdi c on, i .e., it is one which, under general English conflict rul es , an Engl ish cour t wo ul d not recogni se as pos sessed by any foreign court in the absence of some treaty providing for such recogni on. Comi ty thus di ctat es that the judicial discre on to gr ant l eave under thi s paragraph of R. S. C. , Or d. 11, r. 1 (1) shoul d be exercised with circumspec on in cases wh er e ther e exi sts an al ter na ve f orum, viz. the cour t s of the foreign country where the proposed defendant does carry on business, and whose jurisdic on would be recognised *66 under English conflict rul es . Such a for um in the ins tant case wa s afforded by the courts of Kuwait.

In order to decide whether a Kuwai cour t, as we l l as havi ng jur i sdi c on, is also a f orum c onveni ens for the dispute, one must start by seeing what are likely to be the issues between the par es in the proposed ac on. The assur ed' s cl ai m is for a cons truc ve t otal loss of the vessel in c i rcums t ances briefly nar rat ed by Bi ngham J. [1982] 1 W.L.R. 961 , 964:

"On February 28, 1980 the vessel entered Ras A1 Kha i, a sma l l por t in Saudi Ar abi a, just south of Kuwait. The master and crew were seized by the Saudi Arabian authori es and imprisoned. The crew were released in August 1980 and the master in April 1981. The vessel remained where it was with no crew on board, apparently confiscat ed. It appears, although the evidence is scant and the Saudi Arabian decision as translated in evidence before me is somewhat opaque, that the master was thought to be using the vessel to try and smuggle diesel oil from Saudi Arabia to the United Arab Emirates. This accusa on is strongl y deni ed by [the assur ed] and the trut h of it is likel y to be a cent ral issue in the ac on. Ne i ther [ the assur ed] nor , i t wo ul d seem [ the i nsur er s], feel i t prudent to visit Saudi Arabia to inspect the vessel or inves gat e the ma er. [The assured] gave no ce of abandonme nt of the vessel to [the insur er s] on Oc tober 31, 1980, and again on April 28, 1981. On each occasion [the insurers] rejected the no ce but agreed to treat the case as if a writ had been issued on that date."

The central issue in the li ga on, as the j udge poi nts out , wou l d appear to be one of fact : was the vessel engaged in smuggling when she was seized by the Saudi Arabian authori es? If she wa s, the loss was excluded by the excep on i n cl ause 4 (1) ( e) of the I ns tute War and Str ikes Cl auses a ached to the pol icy: "ar rest, restrai nt or det ai nme nt ... by reason of inf ringeme nt of any cus toms regula ons ." Wh et her she wa s or not i s a ques on of fact , whi ch i nvol ves Saudi Arabi an l aw. The

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principal witnesses as to what the vessel was doing. and as to whether what happened a er it wa s seized amounted to a construc ve tot al los s, wo ul d be those wh o we r e the ma ster and crew of the vessel at the me of her sei zur e. They are Indi an and Bangl adesh na onal s and upon r elease by the Saudi Arabian authori es they we r e repat ri at ed to thei r na ve count r ies whe r e, it appear s, they now are. Other principal witnesses would be the Saudi Arabians who seized and detained the vessel and Saudi Arabian officials; they are i n Saudi Arabi a. Kuwai t bei ng on i nterna onal air routes between Europe and India and the Far East is readily accessible to those poten al wi tnesses and to the only poten al wi tnesses wh o are sai d by the assur ed to be in Engl and: the per sons bet we en whom it is said an oral charter of the vessel had been entered into which she was performing at the me of the sei zur e.

Bingham J. was of opinion that the factual ques on coul d be det ermi ned as we l l i n Kuwa i t as in England, possibly be er , and wi th no cl ear over al l bal ance of conveni ence. Hi s own vi ew that the proper exercise of his discre on wo ul d be to ref use leave to ser ve the wr i t out of the jur i sdi c on *67 even if the proper law of the policy were English law, was influenced lar gel y by the fact that the jurisdic on sought to be invoked by the assur ed is an exor bi tant jur i sdi c on, and t hat he had "been given no reason to doubt that a Kuwai judge wo ul d set hi ms el f thor oughl y and jus tly to det ermi ne the truth in this case." ( [1982] 1 W.L.R. 961 , 971) To this I myself would add that a Kuwai judge would be likely to have greater familiarity even than the Commercial Court in England with the sort of thing that goes on in purely local trading in the Arabian Gulf, to which the vessel was by express warranty confined.

Although the issues would appear to be primarily issues of fact, ques ons of l aw wi ll al so be involved rela ng to no ce of abandonmen t and cons t ruc ve total l oss whi c h ar e gover ned by sec ons 60 to 63 of the Ma r ine Insur ance Ac t 1906 . But , as al ready me n oned, it i s commo n ground between the expert witnesses on Kuwai law that Kuwa i judges i n deci ding t hose ques ons woul d, under the Kuwait Code of Conflict of Laws , appl y Engl ish l aw as the pr oper l aw of any pol icy of marine insurance entered into in Kuwait before August 15, 1980, if it were in the terms of the Standard Form of English Marine Policy with Ins tut e Wa r and St ri ke Cl auses a ached. Like Bingham J., I see no reason why a Kuwai cour t shoul d find any difficulty in applyi ng the rel evant Engli s h law to the facts once they had been found.

My Lords, it was urged upon this House, as it had been urged upon the courts below, that since Kuwait is one of those countries whose courts adopt the prac ce and pr ocedur e that is fol lowe d in countries whose legal systems are derived from the civil law and not from the English common law, the ability of a Kuwai cour t to deci de ma ers of disput ed f act i s mar kedl y i nferi or to t hat of the Commercial Court in England. None of the judges in the courts below accepted this invita on to embark on the invidious task of making a comparison of the rela ve efficiency of t he c i vi l law an d common law procedures for the determina on of di sput ed facts. In my opi ni on, it wo ul d have been wholly wrong for an English court, with quite inadequate experience of how it works in prac ce in a par cul ar count ry, to condemn as inf er ior to that of our own count ry a system of pr ocedur e for the trial of issues of fact that has long been adopted by a large number of both developed and developing countries in the modern world. So a natural prejudice in favour of a procedure with which English lawyers are familiar is not a considera on to wh i ch any we i ght ought to be gi ven in determining whether a Kuwai cour t or the Comme r ci al Cour t in Engl and is the for um conveni ens for the present li ga on.

Nor, with respect, can I accept the sugges on of Si r John Donal dson M. R. that , for the pur poses of the applica on by na onal cour t s of the doct rine of comi t y bet wee n one na onal court and anot her, the Commercial Court in London is far more than a na onal or dome s c cour t ; it i s an " interna onal commercial court" and that Bingham J. erred in regarding it otherwise. True it is that either directly through a choice of forum clause in commercial contracts or indirectly through an English arbitra on clause, the Commercial Court in London is much resorted to by foreign na onal s for resol u on of disputes; and true it is that its judges have acquired unrivalled exper se in such ma ers , incl udi ng

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marine insurance *68 where that insurance is governed by English law. The la er fact no doubt accounts for the popularity of the court with foreign li gant s, but thei r submi ssi on to its jur isdi c on in the case of contracts which contain such clauses is voluntary and not, as in the instant case. sought to be forced upon an unwilling defendant in the exercise by an English court of what can be classified onl y as an exor bi tant j ur i sdi c on whi ch i t does not recogni se as pos sessed by f oreign courts.

My Lords, the onus under R.S.C., Ord. 11, r. 4 (2) of making it "sufficient to appear to t he cour t that the case is a proper one for service out of the jurisdic on under thi s or der " lies upon the wo ul d- be plain ff. Ref usal to grant leave i n a case f all ing wi t hin rule 1 (1) (f) does not deprive him of the opportunity of obtaining jus ce, because ex hypot hes i ther e exi sts an al ter na ve f orum, the cour t s of the country where the proposed defendant has its place of business where the contract was made, which would be recognised by the English courts as having jurisdic on over the ma er in dispute and whose judgment would be enforceable in England.

The exorbitance of the jurisdic on sought to be invoked wh er e rel iance is based excl us i vel y upon rule 1 (1) (f) (iii) is an important factor to be placed in the balance against gran ng leave. It is a factor that is capable of being outweighed if the would-be plain ff can s a sfy the Engl i sh court that j us ce either could not be obtained by him in the alterna ve for um; or coul d onl y be obt ai ned at excessi ve cost, delay or inconvenience. In the instant case, the assured failed to sa sfy Bi ngham J. that any of these factors in favour of gran ng l eave t o comp el t he i nsur er s t o submi t t o t he exor bi tant jurisdic on of the Engl ish cour t we r e of sufficient mome nt t o sa sf y the onus. May L . J ., applyi ng the principles laid down by this House in Hadmor Produc ons Ltd. v. Hami lton [1983] 1 A. C. 191 , saw no grounds for interfering with the way in which Bingham J. had said that he would exercise his discre on, but Ma y L. J. added that if he had thought that he hi ms el f had an independent di scre on he too would have exercised it in the same way.

I too see no reason for differ ing from Bi ngham J. on the di scre on poi nt; whi l e, for reasons I have given, I think that Sir John Donaldson M.R. was wrong in supposing that Bingham J. erred in failing to regard the Commercial Court in London as an interna onal comme r ci al cour t and not simp l y a na onal cour t of Engl and. I wo ul d ther ef or e di smi ss the appeal .

LORD WILBERFORCE.

My Lords, the ques on in thi s appeal is wh et her ser vi ce of a wr i t upon the respondent s out si de the jurisdic on of the Engl ish cour ts shoul d be set asi de. The pr ovi si on i n the Rules of the Supreme Court which is relied upon as jus fyi ng such ser vi ce is that cont ai ned in R.S.C., Ord. 11, r. 1 (1) (f) (iii) , which requires, in the case of an ac on bei ng br ought to enf or ce a cont ract , that the cont ract : "i s by its terms, or by implica on, gover ned by Engl ish l aw. " The cont ract i n ques on i s a pol i cy of marine insurance, dated April 28, 1979, between the appellants and the respondents, and the first ques on is, ther ef or e, wh et her thi s cont ract come s wi thi n the quot ed wo r ds . If it is hel d so to do, so that the court has jurisdic on to or der ser vi ce of the wr i t in *69 Kuwait, a second ques on ar i ses whether it should do so in the circumstances of the case.

It has been generally accepted, in my opinion rightly, that the formula used in paragraph (f) (iii) above is equivalent to a requirement that the proper law of the contract should be English law. This involves trea ng the wo r ds "by imp l ica on" as cover i ng bot h t he s i tua on whet her t he par es' mutual inten on can be i nf er red and the si tua on whe r e, no such i nference bei ng pos s i ble, it i s necessary to seek the system of law with which the contract has its closest and most real connec on. Al though these si tua ons mer ge i nto each other , I regard t his case as fall ing r ather within the la er wo r ds si nce I can find no bas i s for i nferr ing, as bet wee n t he par es t o this contr act, an inten on that the cont ract shoul d be gover ned ei ther by Engl ish law or by the law of Kuwa i t. (I should add here that, as was indicated during the hearing, we cannot, consistently with recent authority, have regard to conduct of the par es subsequent to the ma ki ng of the cont ract - her e the original policy of 1977.) The court's task must be to have regard objec vel y to the var ious factor s poin ng one wa y or the ot her and to es mat e, as bes t i t can, whe r e t he preponder ance l ies.

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The search is for the "proper law": the law which governs the contract and the par es ' obl iga ons under it; the law which determines (normally) its validity and legality, its construc on and effect , and the condi ons of i ts di scharge. I t i s cl ear that , as regards thi s cont ract , ther e are onl y two choices, English law and the law of Kuwait. It is worth considering at the outset what these alterna ves invol ve.

The Lloyd's S.G. form of policy, which the policy in this case is with insignificant depar tur es , i ts obsolete and, in parts, unintelligible language, is one which has been used for centuries, almost without change. The Marine Insurance Act 1906 , a codifica on Act , pas sed a er 12 years of gesta on, wh i ch schedul es the Ll oyd' s S. G. pol icy as a permi ssi bl e form of pol icy, al so pr ovi des in the Schedule a number of defini ons . These defini ons may b e regarded as a form of gl ossar y based on established law, and the substan ve pr ovi si ons i n the Ac t (bi ndi ng by stat ut or y for ce onl y i f the proper law is English), as evidence of the established and customary law of marine insurance. I think that we can accept that if Kuwai l aw we r e regarded as the pr oper l aw, i t wo ul d resor t to the defini ons and wou l d have r egard t o comme r cial cust om a s ( inter ali a) man i f est ed by the Act . The expert evidence, in my opinion, establishes so much in rela on to the rel evant law of Kuwa i t pr ior to 1980 when Kuwait introduced its own insurance legisla on. Thus , wh et her Engl ish or Kuwa i law i s the proper law, the terms of the contract would be given the meaning ascribed to them by English statute, custom, and decisions.

There is nothing unusual in a situa on wh er e, under the pr oper law of a cont ract , resor t is had to some other system of law for purposes of interpreta on. In that case, that ot her system become s a source of the law upon which the proper law may draw. Such is frequently the case where a given system of law has not yet developed rules and principles in rela on to an ac vit y whi ch has become current, or where another system has from experience built up a coherent and tested structure - as, for example, in banking, insurance or admiralty law, or where countries exist *70 with a common legal heritage such as the common law or the French legal system. In such a case, the proper law is not applying a "conflicts" rul e (ther e ma y, i n fact, be no for ei gn el eme nt in the case) but me r el y impor ng a for ei gn pr oduct for dome s c use.

There is evidence before us that in rela on to insur ance, and in par cul ar to cases whe r e Lloyd' s S.G. policies are used, courts in Europe do this, and that the courts in Kuwait would act in a similar way, resor ng, as to a sour ce of thei r own dome s c l aw, to Engl i sh l aw d ir ect l y or i ndi r ect l y via Tur ki sh law.

So returning to the choice before us, it is between the proper law being English law, or the proper law being Kuwai law, dr awi ng in par t at least on Engl ish int er pr et a ons . Thi s anal ysi s, if corr ect , thus early in the discussion calls in ques on the val idi ty of one line of ar gume nt used to suppor t the appellants' case (that the governing law is English law). That argument is simply (I am tempted to say simplis cal ly) that si nce thi s cont ract is in Engl ish language and form and emb odi es ma ny techni cal expressions which can only be explained by resort to English law, that shows that the proper law, the law governing the contract, must be English law. There are three reasons why this cannot be correct:

(1) As a ma er of reasoni ng it inver ts the pr ocess wh i ch has to be fol lowe d. Ins tead of ar gui ng from the proper law to that which governs interpreta on i t does the rever se. The form of the cont ract may indeed be a factor to be considered in the search for the proper law - it is so here, and an important one, but one to be considered with other factors.

(2) It is inconsistent with authority including that of this House. In Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1970] A.C. 583 the ques on for deci si on wa s whether the proper law was that of England or of Scotland. The contract was on an English R.I.B.A. form which had "many connec ons wi th Engl ish l aw" (Lor d Hodson, p. 606) . I t had, i n fact, been built up and amended from me to me as the r esul t of Engl i sh deci sions . The deci sion, by a scarcel y discernible majority, was that the proper law was English, but this decision was arrived at by a careful weighing of factors, including the nature and origin of the form. There can be li le doubt

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that on either view, whichever the proper law was held to be, the contract would have fallen to be interpreted according to English law, but this circumstance alone was not regarded as decisive. Similarly, in Compagnie Tunisienne de Naviga on S. A. v. Comp agni e d' Ar me me nt Ma r i me S. A. [1971] A.C. 572 , the use of an English form of charter was regarded as a factor to be considered, and the decision was that the proper law was French. Reliance was placed on some observa ons of Lord Wright in the Privy Council case of Vita Food Products Inc. v. Unus Shipping Co. Ltd. [1939] A.C. 277 , 298. The passage is quoted in part by my noble and learned friend, Lord Diplock. But, as I understand him, Lord Wright was concerned only with the differ ence in termi nol ogy betwe en that case and The Torni [1932] P. 78 . I do not read his observa ons as equa ng t he l aw g overning construc on wi th the pr oper l aw: i f they we r e so int ended, I coul d not , wi th respect, agree wi th them.

(3) The simple proposi on that because a form of cont ract has to be int er pr et ed in accor dance wi th English rules, or even decisions, the proper law must be English law would have very unfortunate consequences. It *71 is well known, and not disputed, that this Lloyd's S.G. policy is widely used, not only in the Bri sh Commo nwe al th, or count ries under Br i sh i nfluence, but elsewher e, i ncluding countries in Europe. It is regularly used in the Middle East and in the Arabian Gulf. It is a strong thing to say that, in the absence of an express choice of law clause, the proper law of all such policies is to be regarded by an English court as English.

The wide use made of this form of policy calls. on the contrary, for a careful examina on in each case of the ques on wh at pr oper law is appr opr iat e, the Engl ish law form or der i va on of the f orm being an (important) factor. I do not believe, with respect, that this argument, which both Bingham J. and Robert Goff L. J. regarded as imp or tant , can be di sposed of by describi ng it as cont endi ng for an interna onal ised, or floa ng, contr act, una ached t o any system of law - t o do so does not do it jus ce. The ar gume nt i s that the Ll oyd' s S. G. form of pol icy i s taken int o a great numb er of l egal systems, some me s by stat ut e, as in Aus tral ia, some mes as a ma er of commer c i al prac ce, as in Belgium or Germany, or in the Arabian Gulf, and that in such cases, though their legal systems may, and on the evidence do, resort to English law in order to interpret its terms, the contract may be regarded as an Australian, Belgian, German, etc. contract. What has to be done is to look carefully at all those factors normally regarded as relevant when the proper law is being searched for, including of course the nature of the policy itself, and to form a judgment as to the system of law with which that policy in the circumstances has the closest and most real connec on.

In my opinion, therefore, the classic process of weighing the factors must be followed, with all the difficul es i nher ent i n the pr oces s. They are wel l and c l earl y li sted i n the j udgment of Sir John Donaldson M.R. I agree with him that the majority of the ingredients said to connect the policy with English law are irrelevant or lacking in weight - these include payment of premiums in sterling in London and the use of J. H. Minet & Co. Ltd., London brokers. The significant factor s rema i n: (1) the use of this form of policy expressed in the English language and requiring interpreta on accor di ng to English rules and prac ce; (2) the na onal i ty of the par es, the defendant s being i ncor porat ed and carrying on business in Kuwait and the plain ffs bei ng Liber i an and r esi dent in Dubai (i.e. nei t her in England nor in Kuwait); (3) the use of English sterling as the money of account; (4) the issue of the policy in Kuwait - this I regard as of li le we i ght ; (5) pr ovi si on in cl ai ms to be pai d in Kuwa i t. Thi s, too, is of minor consequence in view of the prac ce, establ ished at the me of cont r ac ng, of se l ing cl ai ms in London. I thi nk al so, for my sel f, that it is not wi thout imp or tance that the pol icy contains no choice of law clause. With a policy in a form so essen al ly Engl ish, the absence of such a factor leaves the form and language, as a pointer towards English law, without what one would consider as its natural counterweight. I agree that omission of the Lombard Street or Royal Exchange or London clause is insignificant , but I regard the incor por a on of the I ns tute Cl auses , with expr es s reference to English law provisions, as important. With no great confidence, and rel uctant ly di fferi ng as to the ul ma t e concl us i on from Bi ngham J. and Rober t Goff L.J ., who se r easoni ng i n pri nci ple I approve and follow, I *72 have reached the conclusion that English law is the proper law of this par cul ar cont ract .

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That makes it necessary to decide whether, even so, service of this writ outside the jurisdic on should be allowed to stand. R.S.C., Ord. 11, r. 1 merely states that, given one of the stated condi ons , such ser vi ce i s permi ssi bl e, and i t i s s l l necessary f or the pl ain ff (in thi s case t he appellant) to make it "sufficient l y to appear to t he cour t that the case i s a proper one f or servi ce out of the jurisdic on under thi s Or der " (r. 4 (2) ). The rul e does not stat e the cons i der a ons by whi ch the court is to decide whether the case is a proper one, and I do not think that we can get much assistance from cases where it is sought to stay an ac on star ted in thi s count ry, or to enj oi n the bringing of proceedings abroad. The situa ons a r e d i fferent : compa r e t he observa ons of Stephenson L.J. in Aratra Potato Co. Ltd. v. Egyp an Na vi ga on Co. (The El Amr i a) [1981] 2 Lloyd' s Rep. 119 , 129. The inten on mu s t be to imp ose upon the pl ai n ff the burden of s howi ng good reasons why service of a writ, calling for appearance before an English court, should, in the circumstances, be permi ed upon a for ei gn def endant . In cons i der ing thi s ques on t he cour t mus t take into account the nature of the dispute, the legal and prac cal issues invol ved, such ques ons as local knowledge, availability of witnesses and their evidence and expense. It is not appropriate, in my opinion, to embark upon a comparison of the procedures, or methods, or reputa on or standi ng of the courts of one country as compared with those of another (cf. The El Amria [1981] 2 Lloyd's Rep. 119 , 126, per Brandon L.J.). In this case, Bingham J. having first deci ded t her e wa s no jurisdic on to or der ser vi ce in Kuwa i t, then pr oceeded, a er a r evi ew o f the f act ors , to express the opinion that, if there was jurisdic on, he wo ul d not cons i der that it shoul d be exer ci sed. Thi s in my opinion was a substan ve deci si on on the poi nt , vi z. an al ter na ve ground of deci sion of the case before him, not a mere obiter dictum. It is, of course, appealable and was considered, without defini ve r esul t , by the Cour t of Appeal . Hav i ng wei ghed t he f act ors i nvol ved and havi ng t he benefit of the analysis of them by my noble and learned friend, Lord Diplock, I have come to the conclusion that his decision on this point was right.

For this reason I would dismiss the appeal.

LORD ROSKILL.

My Lords, I do not find it sur pr i si ng that thi s case shoul d have gi ven ri se to such a ma rked di fference of judicial opinion and I confess that for a considerable part of the hearing of this appeal I was disposed to accept the view on the jurisdic on poi nt wh i ch appeal ed bot h to Rober t Goff L.J . and t o Bingham J., in substance for the reasons given in their respec ve j udgme nt s. But on f ur ther considera on and havi ng had the advant age of readi ng in dr a the speech of my nobl e and l ear ned friend, Lord Diplock, I have ul ma t el y reached the same concl us i on as he.

On the discre on poi nt I have no doubt that Bi ngham J. reached the cor rect concl us i on, as di d Ma y L.J. With all respect to Sir John Donaldson M.R., I cannot accept his view that the Commercial Court is far more than a na onal or dome s c cour t . It i s not , even t hough muc h of the wor k whi ch i s undertaken by that court is interna onal in character . It wa s *73 this view which I think led him to reach the contrary conclusion on the discre on poi nt . For the reasons gi ven by my nobl e and learned friend on the discre on poi nt al so, I wo ul d rej ect the appel lant s' ar gume nt s and di smi ss thi s appeal.

LORD BRANDON OF OAKBROOK.

My Lords, I have had the advantage of reading in dra the speech pr epared by my nobl e and learned friend, Lord Diplock. I agree with both his reasoning and his conclusions and would dismiss the appeal accordingly.

LORD BRIGHTMAN.

My Lords, I also am in agreement with my noble and learned friend, Lord Diplock, both on the ques on of the pr oper l aw of the pol icy and on the ques on of how t he di s cre on confer red by R.S.C., Ord. 11, r. 4 (2) should be exercised, and would dismiss the appeal.

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Status: Posi ve or Ne ut ral Judi ci al Tr eatme nt

*438 Seaconsar Far East Ltd Appellants v Bank Markazi Jomhouri Islami Iran Respondents

House of Lords

14 October 1993

[1993] 3 W.L.R. 756

[1994] 1 A.C. 438

Lord Templeman , Lord Griffiths , Lord Goff of Chievel ey , Lord Br owne- Wi lk inson and Lord Mus l l

1993 June 14, 15, 16; Oct. 14

Prac ce—Wr it—S ervi ce o ut o f j ur i sdi c on—Ap pl i ca on t o set asi de l ea ve gr a nted ex parte—Establishment of merits of claim—Whether serious issue to be tried—Whether substan al ques on of fact or law ar i si ng on affidavi t s— R.S.C., Ord. 11, rr. 1(1), 4(1)(2)

By a contract dated 30 June 1986, the plain ffs agreed t o s el l a quan t y of ar l l ery shell s to the Iranian Ministry of Defence. Payment was to be by le er of credi t, and on 15 January 1987 the defendant bank opened a le er of credi t in favour of the pl ai n ffs. As amend ed, i t was payabl e at sight on presenta on to a London bank of speci fied documen t s and compl i ance wit h cert ain condi ons . The pl ai n ffs made t wo s hipment s of s hel l s pursuant t o the contr act and made a presenta on of docume nt s to the London bank i n respect of each shi pme nt . The def endant bank failed or refused to make payment in respect of both presenta ons on the ground that the documents presented were not in conformity with the requirements of the le er of credi t. The plain ffs brought proceedi ngs agai nst the def endant bank f or damag es for breach of cont r act , and Hobhouse J. granted them leave ex parte to serve the proceedings on the bank outside the jurisdic on under R.S.C., Ord. 11 . 1 Saville J. dismissed the bank's applica on to set asi de Hobhouse J.'s order in rela on to the first present a on but s et i t aside i n rela on to the second. The plain ffs appeal ed and t he bank cr oss -appeal ed. The Cour t of Appeal by a maj ori ty dismissed the appeal on the ground that the plain ffs had f ail ed t o est abl i sh a good arguabl e case on any of the issues raised by it. They unanimously dismissed the cross-appeal.

On appeal by the plain ffs:-

Held, allowing the appeal, that in considering whether the jurisdic on of the cour t had been sufficient l y est abl i shed under one or mor e of the par agraphs of R.S.C., Ord. 11, r. 1(1) the standard of proof was that of the good arguable case; but that in respect of the merits of the plain ff's claim u nder rules 1(1) and 4 it was sufficient for the plain ff to est abl ish that t here was a serious issue to be tried in that there was a substan al ques on of fact or l aw o r bot h arising on the facts disclosed by the affidavi t s that the plain ff bona fide des i red to have t r i ed; that the plain ffs' assert ed cause of ac on gave r i se to seri ous i ssues t o be t r ied; and t hat, no ques on ar i si ng as t o t he j ur i sdi c on of the cour t , they shoul d have l eave t o s erve t he proceedings out of the jurisdic on (pos t, pp. 446G, 452C- D, 453F, 454C- D, 457A- C, G- H, 458B) .

Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks (1904) 90 L.T. 733, H.L.(E. ) and Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869, H.L.(E.) applied .

Per curiam . The assessment of the merits of the plain ff's cl aim a nd t he appl i ca on of t he principle of forum conveniens are separate and dis nct el eme nt s in the exer ci se of the cour t' s discre on under Or der 11 (pos t, pp. 446G, 456A- C, 458A- B) .

Decision of the Court of Appeal [1993] 1 Lloyd's Rep. 236 reversed .

The following cases are referred to in the opinion of Lord Goff of Chi evel ey:

Badische Anilin und Soda Fabrik v. Chemische Fabrik vormals Sandoz (1903) 88 L.T. 490, C.A. ; sub nom. Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks(1904) 90 L.T.

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733, H.L.(E.) .

Badische Anilin und Soda Fabrik v. W. G. Thompson and Co. Ltd. (1902) 88 L.T. 492n., C.A. . *440

Bankers Trust Co. v. State Bank of India [1991] 2 Lloyd's Rep. 443, C.A. .

Banque Paribas v. Cargill Interna onal S. A . [1991] 2 Ll oyd' s Rep. 19, C. A. .

Great Australian Gold Mining Co. v. Mar n (1877) 5 Ch. D. 1 , C.A. .

Korner v. Witkowitzer (unreported), 28 July 1949, Slade J.; [1950] 2 K.B. 128; [1950] 1 All E.R. 558, C.A. ;

sub nom.Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869; [1951] 2 All E.R. 334, H.L.(E.) .

Malik v. Narodni Banka Ceskoslovenska [1946] 2 All E.R. 663, C.A. .

Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439, C.A. .

Société Commerciale de Réassurance v. Eras Interna onal Ltd. (forme r l y Er as (U. K. )) [1992] 1 Lloyd's Rep. 570, C.A. .

Société Générale de Paris v. Dreyfus Brothers (1885) 29 Ch.D. 239; (1887) 37 Ch.D. 215, C.A. .

Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460; [1986] 3 W.L .R. 972; [1986] 3 All E.R. 843, H.L.(E.) .

The following addi onal cases we r e ci ted in ar gume nt :

American Cyanamid Co. v. Ethicon Ltd. [1975] A.C. 396; [1975] 2 W.L.R. 316; [1975] 1 All E.R. 504, H.L.(E.) .

Atlan c Underwr i ng Agenci es Ltd. v. Compa gni a di Ass i curazi one di Mi l ano S.p.A . [1979] 2 Lloyd's Rep. 240

A ock Ceme nt Co. Ltd. v. Roma ni an Bank for For ei gn Tr ade [1989] 1 W. L. R. 1147; [1989] 1 Al l E.R. 1189, C.A. .

Banque de l'Indochine et de Suez S.A. v. J. H. Rayner (Mincing Lane) Ltd. [1983] Q.B. 711; [1983] 2 W.L.R. 841 ; [1983] 1 All E.R. 468

Commercial Banking Co. of Sydney Ltd. v. Jalsard Pty. Ltd. [1973] A.C. 279; [1972] 3 W.L.R. 566,

Page3

P.C. .

Equitable Trust Co. of New York v. Dawson Partners Ltd. (1926) 27 Ll.L.Rep. 49, H.L.(E.) .

Hagen, The [1908] P. 189, C.A. .

Holland v. Leslie [1894] 2 Q.B. 346, C.A. .

Johnson v. Taylor Brothers & Co. Ltd. [1920] A.C. 144, H.L.(E.) .

Kuwait Asia Bank E.C. v. Na onal Mu t ual Li fe Nomi nees Ltd. [1991] 1 A. C. 187; [1990] 3 W. L. R. 297; [1990] 3 All E.R. 404, P.C. .

Kwik Hoo Tong Handel Maatschappij (N.V.) v. James Finlay & Co. Ltd. [1927] A.C. 604, H.L.(E.) .

Metall und Rohstoff A. G. v. Donal dson Lu in & J enr e e Inc . [1990] 1 Q. B. 391; [ 1989] 3 W. L. R. 563; [1989] 3 All E.R. 14, C.A. .

Mölnlycke A.B. v. Procter & Gamble Ltd. [1992] 1 W.L.R. 1112; [1992] 4 All E.R. 47, C.A. .

Monro (George) Ltd. v. American Cyanamid and Chemical Corpora on [1944] K. B. 432; [1944] 1 All E.R. 386, C.A. .

Ninemia Mari me Cor por a on v. Trave Schi fffahrt s gesel l scha m.b.H . und Co. K. G . [ 1983] 2 Lloyd's Rep. 600

Pendal Nominees Pty. Ltd. v. M. & A. Investments Pty. Ltd. (1989) 18 N.S.W.L.R. 383

Polly Peck Interna onal Pl c. v. Na di r (No . 3) , The Ti me s , 22 Ma rch 1993; Cour t of Appeal (Ci vi l Division) Transcript No. 563 of 1993, C.A. .

Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo) [1949] A.C. 326; [1949] 1 All E.R. 294, H.L.(E.) .

APPEAL from the Court of Appeal.

This was an appeal by the plain ffs, Seaconsar Far East Ltd., by l eave of the Cour t of Appeal (Lloyd, Stuart-Smith and Beldam L.JJ.) from their *441 majority judgment (Stuart-Smith L.J. dissen ng) [1993] 1 Lloyd's Rep. 236 given on 28 October 1992 dismissing the plain ffs' appeal from t he order of Saville J. dated 10 April 1991 that service of the plain ffs' wri t of summo n s on t he def endant s , Bank Markazi Jomhouri Islami Iran (a body corporate), be set aside in so far as it related to the plain ffs' cl aim i n r e spect of the se cond pr esent a on of doc ument s for t he pay ment of U.S.$4,118,660. The Court of Appeal unanimously dismissed a cross-appeal by the defendants in respect of the first pr esent a on, whi ch was not pur sued i n t he House of Lords.

The facts are stated in the opinion of Lord Goff of Chi evel ey.

Sydney Kentridge Q.C. and Simon Rainey for the plain ffs. Under R.S.C., Ord. 11 , a plain ff seeki ng leave to serve out of the jurisdic on i s r equi red t o sa sfy one r equi r emen t : rule 4(2) . This

Page4

requirement has been said to possess three differ ent aspects: see Metall und Rohstoff A. G. v. Donaldson Lu i n & Jenr e e I nc. [1990] 1 Q.B . 391 . A plain ff mus t show ( i ) that hi s cl aim f all s within the le er and spi ri t of a par cul ar head or heads of juri sdi c on set out i n rule 1( 1) ; (ii) that England is "clearly the most appropriate forum" in which the case can suitably be tried (Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , 481); and (iii) that his claim is sufficient l y arguable on its merits. The first aspect spr ings di rectly from the wo r di ng of Or der 11. The second and third do not and are derived from judicial precedents in which the discre on to permi t ser vi ce under Order 11 has been considered: Société Commerciale de Réassurance v. Eras Interna onal Ltd. (formerly Eras (U.K.)) [1992] 1 Lloyd's Rep. 570 , 587-588.

In the final anal ysi s, howe ver , t her e i s onl y one t est t o be sa sfied by a pl ai n ff: in al l t he circumstances, given that jurisdic on is es tabl ished, is the case a pr oper one for ser vi ce out of the jurisdic on? See the Eras Interna onal case [1992] 1 Ll oyd' s Rep. 570 , 588 and Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439 , 448.

In rela on to the sufficiency of t he pl ai n ff' s case on t he mer i ts , un l r ecentl y t he cases spoke i n terms of the plain ff's est abl i shi ng a "good arguabl e case. " The first i ssue t urns on t he content and meaning of that phrase and whether it is to be taken as a correct descrip on of wh at a pl ai n ff needs to show. Decisions on whether a claim falls within a head of jurisdic on appl y a stri cter and accordingly, a differ ent test: see the Eras Interna onal case, p. 587; Metall und Rohstoff A. G. v. Donaldson Lu i n & Jenr e e I nc. [1990] 1 Q.B . 391 ; Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 and A ock Ceme nt Co. Ltd. v. Roma ni an Bank for For ei gn Tr ade Ltd. [1989] 1 W. L. R. 1147 . One does not look at the weight of the case on the merits in abstrac on but asks wh et her it is a proper case for trial in England. Where England is the proper forum, that must weigh heavily: see Spiliada Mari me Cor por a on v. Cansul ex Lt d. [1987] A. C. 460 . It is sufficient i f a pl ain ff establishes that his case on the merits is one that is "worthy of considera on by the cour t" or "arguable but not unarguable;" beyond that, the court is not concerned with an assessment of the rela ve me r its of the cl ai m or of def ences to it: see Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439 , 447-448; Banque Paribas v. Cargill Interna onal S.A. [1991] 2 Lloyd's Rep. 19 , 25; the Eras Interna onal case, pp. 587-588; Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 , 889 and per Stuart-Smith L.J. [1993] 1 Lloyd's Rep. 236 , 248. The majority of the Court of Appeal held that the test to be applied was one of "good arguable case" and considered that, in rela on to the me r i ts of hi s cl ai m, that requi red that a pl ai n ff show at t he Order 11 stage that he had "a good chance of success." That decision was incorrect in principle and inconsistent with the authori es . Ac cor di ngl y, Metall und Rohstoff A. G. v. Donal dson Lu in & Jenre e Inc. [1990] 1 Q. B. 391 , 434, should not be followed. [Reference was also made to Ninemia Mari me Cor por a on v. Trave Schi fffahrt s gesel l scha m.b.H . und Co. K. G. [1983] 2 Lloyd's Rep. 600 , 604.]

Jurisdic on requi res , per haps , mo r e scru ny t han t he mer i ts. The cour t has to mak e up i ts min d once and for all, so the test is higher. There must be a sufficient l y cogent case t o s a sfy the court that it is a proper case for service out. Whether there is jurisdic on or not ma y be an easy ques on, but where, for example, there is a conflict of fact , the cour ts seem to wa nt to be sa sfied t hat t here is a good arguable case, a case with a fair prospect of success. The test cannot be balance of probabili es, because the cour t wi ll not have al l the evi dence bef or e it: see Kor ner ' s case.

The plain ffs have sa sfied two as pects of the Ord. 11, r. 4(2) requirement: (i) the claim falls within two heads of jurisdic on; and (ii) si nce no chal lenge has ever been ma de to it, Engl and can be taken to be clearly the most appropriate forum for trial. In these circumstances, the threshold applicable to the merits of the plain ffs' case wil l be at i ts l owes t , and, provi ded t hat the case has pas sed "a minimum level of convic on" and unl ess the case is "too we ak" to jus fy bri ngi ng t he def endant s here, leave should be granted: see the Eras Interna onal case [1992] 1 Ll oyd' s Rep. 570 , 588. Ques ons of comi ty do not come int o thi s: see Pendal Nomi nees Pt y. Ltd. v. M. & A. Investme nt s Pty. Ltd. (1989) 18 N.S.W.L.R. 383 , 394.

Page5

The plain ffs' case on t he mer i ts i s sufficiently arguabl e and l eave t o ser ve out shoul d accor di ngl y be granted. There are four headings to consider.

(1) The documents were not discrepant. The case is that (i) the discrepancy was trivial and within the allowable margin; (ii) the discrepancy was cured or curable by reference to the other documents presented that showed a clear and sufficient l inkage of the procès- verbal to t he l e er of credi t , i .e. by its iden fica on of t he goods , the s t atement of contr act number , i ts date, t he vessel and i t s counter-signature by the principal: see Banque de l'Indochine et de Suez S.A. v. J. H. Rayner (Mincing Lane) Ltd. [1983] Q.B. 711 , 721.

(2) Bank Melli had no authority to reject. The case is that (a) Bank Melli had no authority pursuant to the provisions of the Uniform Customs and Prac ce f or Docume nt ar y Cr edi ts, 1983 r evi si on ("U.C.P.") which was incorporated into the le er of credi t, to rej ect docume nt s on behal f of the defendants; (b) Bank Melli had no special or specific aut hor i ty conf er red on i t by the def endant s outside the U.C.P. to do so. That follows the reasoning and approach of Stuart-Smith L.J.

*443

(3) There was no rejec on by Bank Me l li. The tel ex of 8 Decemb er 1987 wa s not a rej ec on.

(4) Alterna vel y, ther e wa s no rej ec on i n me. Rejec on mus t be communi c at ed to the benefici ary within two days in London prac ce: see Bankers Trust Co. v. State Bank of India [1991] 2 Lloyd's Rep. 443 ; Paget's Law of Banking, 10th ed. (1989), pp. 642-643 and Professor E. P. Ellinger, "Reasonable me for exami na on of documen t s :" [1985] J.B.L . 406.

The court has a wide discre on under Or der 11 to permi t ser vi ce i n any case wh er e i n al l the circumstances it is a proper case for service out. Since the same issues will arise for trial in the jurisdic on in any event in rel a on t o t he first presenta on, and i t is not ques oned t hat England is the most appropriate forum for the resolu on of the di sput es betwe en the par es under the l e er of credit, the threshold that the plain ffs have t o surmou nt in r ela on t o the meri t s of t he c l ai m on the second presenta on is ver y low indeed, ac ng onl y as a filter t o excl ude cases t hat at a gl ance can be seen to be hopeless or unarguable. The approach of Stuart-Smith L.J. is correct in principle and accords with the approach to Order 11 followed in Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439 and the Eras Interna onal case [1992] 1 Lloyd's Rep. 570 , i.e. that the paramount considera on in the exer ci se of the di scre on i s whe t her "the case is a proper one for service out."

Nicholas Chambers Q.C., Mark Hapgood and Alan Roxburgh for the defendants. There is a threefold burden on a plain ff who seeks Order 11 l eave f or servi ce out of the j uri sdi c on. ( 1) He must establish that he has a good arguable case on the merits and on any addi onal ma ers on whi ch he relies to bring his claim within the relevant paragraph of rule 1(1). (2) He must show that his claim falls clearly within the le er and the spi ri t of the rel evant paragraph of rul e 1( 1) . (3) He mu s t ma ke it sufficient l y appear to t he cour t that the case i s a proper one f or servi ce out of the j uri sdi c on. This requires the plain ff to est abl i sh t hat Engl and i s clear l y the appr opr i ate f orum f or the t rial of the ac on: Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 , 481D. [Reference was also made to Société Générale de Paris v. Dreyfus Brothers (1885) 29 Ch.D. 239, 243; (1887) 37 Ch.D. 215 ; Great Australian Gold Mining Co. v. Mar n (1877) 5 Ch. D. 1 and Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks (1904) 90 L.T. 733 , 734-735.]

The nature of the test has been characterised as "a good arguable case" see Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 , 875, 880, 884. This standard provides the "minimum level of convic on about the soundness of the cl ai m" (the Eras Interna onal case [1992] 1 Ll oyd' s Rep. 570 , 588) and is "the [necessary] threshold of persuasion:" Polly Peck Interna onal Pl c. v. Na di r (No . 3) , The Times, 22 March 1993; Court of Appeal (Civil Division) Transcript No. 563 of 1993 . Korner's case also confirme d that the test of a good ar guabl e case appl ies not onl y to the me r i ts of the cl ai m but also to any other ma er on wh i ch the pl ai n ff relies t o br ing hi s cl aim wi th in one of t he paragraphs of Ord. 11, r. 1(1) . If this were not so, the court would have to apply a differ ent standard to the

Page6

same ques ons accor di ng to the stage of the inqui ry at wh i ch they ar i se. The pr inc i pl e that ther e is no dual standard has the *444 further effect that the standard is the same wh et her or not an issue that is essen al to jur i sdi c on wil l ari se agai n at trial. The Order 11 j uri sdi c on i n it s present f orm has stood for a considerable me and wo r ked we l l. [Ref er ence wa s ma de to The Hagen [1908] P. 189 , 201; Johnson v. Taylor Brothers & Co. Ltd. [1920] A.C. 144 ; George Monro Ltd. v. American Cyanamid and Chemical Corpora on [1944] K. B. 432 ; Malik v. Narodni Banka Ceskoslovenska [1946] 2 All E.R. 663 and Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo) [1949] A.C. 326 , 353-354.]

Before the Court of Appeal, the plain ffs took t hree poi nts i n r ela on t o the t est of a good ar guabl e case: (i) that, on merits, the threshold of a good arguable case is low; (ii) alterna vel y, that , if the plain ff est abl i shes that Engl and i s the appr opr i ate f orum, on t he mer i ts he need onl y est abl i sh a claim worthy of considera on; (i ii) that a deficiency i n t he mer i ts of a claim c an be mad e good by the existence of another claim raising similar issues in rela on to wh i ch Or der 11 leave has been or wi ll be granted. The plain ffs are wro ng on each of these poi nts .

As to (i), (1) a good arguable case is a case of the nature described by Mus ll J. in Ninemia Mari me Corpora on v. Tr ave Schi fffahr t sgesel l scha m.b. H. und Co. K.G. [ 1983] 2 Ll oyd' s Rep. 600 , 604-605; by the Court of Appeal in the Eras Interna onal case [1992] 1 Ll oyd' s Rep. 570 , 588; and by Lloyd L.J. [1993] 1 Lloyd's Rep. 236 , 242-243. It is a case which is be er than me r el y ar guabl e, yet not necessarily one which is shown to have a be er than evens chance of success. The pl ai n ff must establish something more than a case which would survive an applica on to stri ke out . [Ref er ence was made to A ock Ceme nt Co. Ltd. v. Roma ni an Bank for For ei gn Tr ade [1989] 1 W. L. R. 1147 .] (2) This standard accords with many other ways in which the test was judicially formulated between 1883 and 1951: see Société Générale de Paris v. Dreyfus Brothers, 37 Ch.D. 215 , 223; Badische Anilin und Soda Fabrik v. W. G. Thompson and Co. Ltd. (1902) 88 L.T. 492n ., 494, Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks, 90 L.T. 733 , 735 and , 884. (3) The expression "good arguable case" has acquired a currency both here and in other common law jurisdic ons (see Kuwait Asia Bank E.C. v. Na onal Mu t ual Li fe Nomi nees Ltd. [1991] 1 A. C. 187 ) that a ribut es to it a certain weight.

There are powerful reasons why the test of a good arguable case is the appropriate test. (1) Without being unduly onerous, it gives substance to the requirement that the plain ff mus t depose t o a belief in a good cause of ac on. Howe ver genui ne the pl ai n ff's bel i ef, it is obvi ousl y appropri ate that the court should judge for itself whether the cause of ac on i s good. (2) The test pr oper l y reflects the pr inc i pl e that has long been recogni sed in Engl and that a for ei gner res i dent abr oad wi ll not lightly be subjected to the local jurisdic on: see Soci ét é Générale de Paris v. Dreyfus Brothers, 29 Ch.D. 239 , 242-243; Metall und Rohstoff A. G. v. Donal dson Lu in & J enr e e Inc. [1990] 1 Q. B. 391 , 435 and Kuwait Asia Bank E.C. v. Na onal Mu t ual Li fe Nomi nees Ltd. [1991] 1 A. C. 187 , 211. (3) It is one that can appropriately be applied at both the jurisdic on and the me r i ts stages of the inquiry and is therefore the test most likely to avoid dual standards. There is no reason why the court should not apply the same *445 test, high or low, to every aspect that it has to consider in considering whether it has jurisdic on: s ee Ninemia Mari me C or por a on v. Tr ave Schifffahr tsgesel lscha m. b .H. und Co. K. G. [1983] 2 Ll oyd' s Rep. 600 and Atlan c Underwr i ng Agencies Ltd. v. Compagnia di Assicurazione di Milano S.p.A. [1979] 2 Lloyd's Rep. 240 , 241. (4) In circumstances where a formula is to be of repeated applica on, i t i s essen al, in t he i nterest s of fairness and clarity, that those applying it should be aware of a consistent basis for its applica on. [Reference was made to Mölnlycke A.B. v. Procter & Gamble Ltd. [1992] 1 W.L.R. 1112 and Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439 .]

As to (ii), the plain ffs' argumen t amou nt s to s ayi ng t hat a plain ff who h as a strong case on for um need not show a good arguable case on merits. This is wrong for two reasons. (1) The effect of Spiliada Mari me Cor por a on v. Cansul ex Ltd. [1987] A.C. 460 is that a plain ff seeki ng Order 11 leave must show that England is clearly the appropriate forum for the trial of the ac on. If a pl ai n ff

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sa sfies this test , it i s difficult t o see how muc h s tr onger hi s case on for um can be. ( 2) There i s no obvious connec on betwe en the strengt h of a case and the appr opr iat eness of a par cul ar forum for its determina on. If Engl and is not the appr opr iate for um, i t does not become so because the claim is strong on the merits. Neither does a strong case on forum assist the plain ff to show a good case on merits. The correct approach is that the plain ff mus t di s char ge t he t hreef old bur den described above. This approach is simple, fair and conducive to consistency.

As to (iii), it is clearly not the law: see Holland v. Leslie [1894] 2 Q.B. 346 and N.V. Kwik Hoo Tong Handel Maatschappij v. James Finlay & Co. Ltd. [1927] A.C. 604 . The court examines each claim before it for which Order 11 leave is sought: see Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 , 880-881, and Metall und Rohstoff A. G. v. Donal dson Lu in & J enr e e Inc ., pp. 401E, 435B, 436D. It is not unfair that a person who cannot establish a good arguable case should be le to pursue his claim elsewhere if he so wishes.

On an applica on for leave under Or der 11, and on an appl ica on t o s et asi de under Order 12 , the court does not try the ac on. I t appl ies a standard wh i ch, howe ver defined, is not exact and i s therefore one in the applica on of wh i ch di fferent judges may reasonabl y di ffer. Accordi ngly, an appellate court should be slow to interfere unless it is apparent that the court below applied the wrong test or that its assessment of the merits was manifestly wrong: see Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks, 90 L.T. 733 , 734, 735. The Court of Appeal applied the correct test and their view on the merits was plainly within their discre on. In any event , they hel d that the plain ff had f ail ed t o mee t the l ower test on t he mer i ts for whi ch t hey cont ended: see [1993] 1 Lloyd's Rep. 236 , 244, 256.

On the discrepancy point, the procès-verbal did not comply with the terms and condi ons of the credit that all documents should bear the le er of credi t numb er and the name of the def endant s' principal and clearly did not sa sfy the standard of stri ct comp l iance by wh i ch docume nt s pr esent ed under le er s of credi t are judged: see Equitable Trust Co.of New York v. Dawson Partners Ltd. (1926) 27 Ll.L.Rep. 49 and Commercial Banking Co. of Sydney Ltd. v. Jalsard Pty. Ltd. [1973] A.C. 279 . The process of linkage for which the plain ffs cont end i s not appl i cabl e t o a situa on i n whic h there has been a failure to observe an express condi on of the credi t. Si nce the pl ai n ffs fai led t o pr esent conforming documents they are prima facie not en tled to be pai d under the credi t and are le to such remedies as they may have against the buyer or other par es , e. g. , the car rier .

Bank Melli's telex of 8 December 1987 was unarguably a no ce of ref usal wi thi n ar cle 16( d) of the U.C.P. The plain ffs' poi nt that Bank Mel l i had no aut hor i ty to r eject the documen t s was corr ect l y described by Lloyd L.J. [1993] 1 Lloyd's Rep. 236 , 241 as "incredible." As to their point that the rejec on wa s too lat e, they conceded bef or e Savi lle J. and in thei r ame nded no ce of appeal to t he Court of Appeal that as a ma er of London banki ng pr ac ce five days was a reasonabl e peri od f or the examina on and rej ec on of documen t s by Bank Mel l i. In any event , the documen t s arr i ved i n the post (it is not clear whether by first or second pos t) on Thur sday, 3 Decemb er 1987, and the rejec on tel ex wa s sent out at 9. 48 a. m. on Tuesday, 8 Decemb er , i.e. the pr ocess of exami na on and rejec on took about thr ee wo r ki ng days.

Kentridge Q.C. in reply. Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 concerned only jurisdic on. Hoffman n L .J . in Pol l y Peck I nterna onal Plc. v. Nadi r (No. 3), The Ti mes, 22 Marc h 1993 was wrong in thinking that that case went on the merits. The majority test (on jurisdic on) wa s "good arguable case," i.e. "capable of serious argument," not probable success. It is at that stage that discre on come s in. Mu s l l L. J . in Société Commerciale de Réassurance v. Eras Interna onal Ltd. (formerly Eras (U.K.)) [1992] 1 Lloyd's Rep. 570 , said that the test was flexi bl e, but in gener al it should be no higher than that in American Cyanamid Co. v. Ethicon Ltd. [1975] A.C. 396 , 407: whether there is "a serious ques on to be tri ed. " Is the case too we ak to put the def endant to the trouble of coming here, however strong the other factors are?

On the merits, it is not right to speculate without evidence about the bank's authority. Saville J. said that only the issuing bank had authority. There must be a serious case to go to trial. It should not be

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assumed that the advising bank has authority to reject.

Their Lordships took me for cons i der a on. 14 Oct ober . LORD TEMPL EMAN .

My Lords, I have had the advantage of reading in dra the speech pr epared by my nobl e and learned friend, Lord Goff of Chi evel ey, and for the reasons he gi ves I, too, wo ul d al low the appeal .

LORD GRIFFITHS.

My Lords, for the reasons given in the speech to be delivered by my noble and learned friend, Lord Goff of Chi evel ey, wh i ch I have had the oppor tuni ty of readi ng in dr a and wi t h whi ch I agree, I would allow this appeal.

LORD GOFF OF CHIEVELEY.

My Lords, this appeal is concerned with an applica on for leave, under R.S.C., Ord. 11 , to serve a writ out of the *447 jurisdic on; and it rai ses in par cul ar the ques on of t he extent t o whic h the plain ff has to est abl i sh, in r ela on t o such an appl i ca on, a suffici ently s t rong case on the meri t s of his claim.

The appellant, Seaconsar Far East Ltd. ("Seaconsar"), is a Hong Kong company which deals in arms. The respondent, Bank Markazi Jomhouri Islami Iran ("Bank Markazi"), is an Iranian bank. Under a contract of sale dated 30 June 1986 Seaconsar agreed to sell a large quan ty of ar l lery shel l s to t he Iranian Deputy Ministry of Defence for Logis cs for a tot al pr i ce of U. S. $193m. Payme nt wa s to be made by le er of credi t. On 15 January 1987 Bank Ma rkazi opened a le er of credi t i n f avour of Seaconsar, covering shipment of "special equipments" (i.e. ar ller y s hel ls) , i n a s um o f U.S.$18,600,000, valid un l 17 Ma rch 1988. The le er of credi t was unconfirmed, and was avai l able at sight in London at the counters of Bank Melli Iran. It permi ed par al shi pmen t s , and was expressed to be subject to the Uniform Customs and Prac ce f or Docume nt ar y Cr edi ts, 1983 revision (Interna onal Chamb er of Comme r ce Publ ica on No. 400) ("the U.C .P." ). Bank Mel l i advi sed Seaconsar of the opening of the credit by le er dat ed 16 January 1987.

The credit (as amended) was payable at sight on presenta on to Bank Me l li in London of the or i gi nal set of a number of specified docume nt s, inc l udi ng "pr ocess ver bal of goods confirmed by order er' s authorised rep. who will be fully iden fied l ater on. "

Under the heading "other condi ons , " ther e appeared (int er al ia) the fol lowi ng pr ovi si on: "Our L. C. no. and our principal's name should appear on all docs. and packages."

It is this la er pr ovi si on wh i ch i s the pr inc i pal sour ce of the cont rover sy i n the pr esent case, a ques on havi ng ar i sen from the fact that the det ai ls ther e speci fied wer e omi ed f r om t h e "proces s verbal of goods," which was interpreted as meaning a list of the goods shipped.

Pursuant to the contract of sale, Seaconsar made two shipments of ar ller y shel ls from Set ubal in Portugal to Bandar Abbas in Iran. The first shi pme nt wa s ma de on 29 Sept emb er 1987, and the second on 1 December 1987. Seaconsar made a presenta on of docume nt s to Bank Me l li in London in respect of each shipment, the first pr esent a on bei ng mad e on Thur sday, 1 Oct ober 1987, and the second on Thursday, 3 December 1987. Bank Markazi has failed or refused to make payment in respect of both presenta ons , on the ground that the docume nt s pr esent ed we r e in cer tai n respects not in conformity with the requirements of the le er of credi t. So far as appear s from the ma t er ial before your Lordships, both consignments have been discharged in Iran but neither has been paid for, and the balance of the contract has been cancelled.

The present proceedings are concerned with a claim by Seaconsar against Bank Markazi for damages for breach of contract in respect of Bank Markazi's failure to pay against both presenta ons . Leave to ser ve the pr oceedi ngs on Bank Ma rkazi out si de the jur i sdi c on was grant ed to Seaconsar ex parte by Hobhouse J. Bank Markazi then applied to set aside the order of Hobhouse J. in respect of both presenta ons . Savi lle J. di smi ssed Bank Ma rkazi 's appl ica on so f ar as i t related to the first pr esent a on, but he set asi de t he order of Hobhouse J . in r ela on t o the *448 second. Seaconsar then appealed to the Court of Appeal against the la er par t of Savi lle J.'s or der , and Bank

Page9

Markazi cross-appealed against the former. The Court of Appeal (Lloyd, Stuart-Smith and Beldam L.JJ.) [1993] 1 Lloyd's Rep. 236 dismissed both Seaconsar's appeal and Bank Markazi's cross-appeal, Stuart-Smith L.J. dissen ng on the di smi ssal of Seaconsar ' s appeal . Seaconsar now appeal s to your Lordships' House, with leave of the Court of Appeal, against the dismissal of its appeal. Bank Markazi no longer pursues its cross-appeal. It follows that your Lordships' House is directly concerned only with the second presenta on.

Seaconsar applied for leave to serve proceedings out of the jurisdic on under ei ther paragraph (d) or paragraph (e) of R.S.C. , Ord. 11, r. 1(1) . The applica on under paragraph (d) wa s ma de ei ther under sub-paragraph (i), on the basis that the contract was made within the jurisdic on, or under sub-paragraph (ii), on the basis that the contract was made by or through Bank Melli, as agent trading within the jurisdic on, for Bank Ma rkazi , wh i ch wa s out si de the jur i sdi c on. The appl i ca on under paragraph (e) was on the basis of breach of contract within the jurisdic on, vi z. ref usal to pay at the counters of Bank Melli in London. Bank Markazi has never disputed that the case fell under either paragraph (d) or paragraph (e), its sole conten on bei ng that Seaconsar had not establ ished a sufficient l y strong case on t he mer i ts of its cl aim. On t his poi nt, the i ssues whi ch have ari sen i n respect of both presenta ons are ver y simi lar . In subs tance, they are as fol lows . (1) Wh at is the test of a sufficient l y st rong case on t he mer i ts to j us fy the gr ant t o a pl ai n ff of leave t o serve proceedings out of the jurisdic on under Order 11 ? (2) Whether Seaconsar has sa sfied t his test in rela on to the me r i ts of the fol lowi ng issues : (a) wh et her the docume nt s we r e in conf ormi ty wi th the requirements of the le er of credi t and/or di d not gi ve ri se to a ri ght of rej ec on by Bank Markazi; (b) if not, whether Bank Melli had the authority of Bank Markazi to reject the documents; (c) if so, whether Bank Melli did in fact reject the documents; (d) if so, whether such rejec on took place within a reasonable me as requi red by ar cle 16 of the U.C .P.

In addi on, in rel a on t o t he s econd present a on t here has arisen a third i s sue, viz. (3) whet her t he court should take into account, in exercising its discre on in respect of the second pr esent a on, the fact that Seaconsar's claim rela ng to the first present a on wi l l be determi ne d i n Engl and i n any event.

So far as the first pr esent a on was concerned, the cruci al poi nt whi ch per suaded Savi l le J . to r efuse to set aside the order order of Hobhouse J. was that, in his opinion, Seaconsar had established a sufficient case on t he mer i ts that ther e was no r ejec on of t he document s by Bank Mel l i at t he material me . In the case of the second pr esent a on, howev er , he hel d t hat Seaconsar had f ail ed t o establish a sufficient case on t he mer i ts on any of the f our i ssues l isted above as (2)( a) to ( d), and s o he allowed Bank Markazi's applica on.

In the Court of Appeal, however, it was held that Saville J. had erred in applying too strict a standard on the ques on wh et her Seaconsar had establ ished a sufficient case on t he meri t s, Savi l l e J. havi ng proceeded on the basis that Seaconsar must establish its case on the balance of *449 probabili es . The Court of Appeal, which was united in the opinion that Saville J. had applied too strict a standard, was divided on the proper standard to apply. Lloyd and Beldam L.JJ. considered that Seaconsar had to establish a good arguable case on the merits, whereas Stuart-Smith L.J. was of the opinion that it was enough for Seaconsar to show that it had a case on the merits which was worthy of considera on. Al l we r e agreed, howe ver , that in any event Bank Ma rkazi 's cros s-appeal on the first presenta on mu s t f ai l. On Seaconsar ' s appeal , t he ma j or i ty hel d t hat Seaconsar had f ai led t o establish a good arguable case on any of the four issues raised by it. Stuart-Smith L.J. however considered that Seaconsar had established a case worthy of considera on on al l four issues . He al so considered, in disagreement with the majority, that it was relevant to take into account the fact that proceedings in respect of the first pr esent a on wou l d i n any event take place i n Engl and, and t hat this factor provided an addi onal and cogent reason wh y the cour t shoul d exer ci se its di scre on i n favour of Seaconsar in rela on to the second pr esent a on.

In argument before the Appellate Commi ee, a en on was was concentr ated upon t he ques on of the strength of the case on the merits which a plain ff has to est abl i sh i n order to j us fy the gr ant of

Page10

leave to serve proceedings out of the jurisdic on under Or der 11. On thi s ma er your Lordshi ps had the benefit of a ful l ci ta on of aut hor i ty, and wer e muc h assi sted by the admi r abl e argumen t s presented to them, both by Mr. Kentridge for Seaconsar and by Mr. Chambers for Bank Markazi. It became apparent, however, in the course of argument that this point cannot be considered in isola on, but mu s t be exami ned i n i ts cont ext , toget her wi th the ot her ma ers whi ch f all for considera on by the cour t wh en i t i s cal led on to exer ci se i ts j ur i sdi c on under Order 11. It i s necessary therefore to look at the jurisdic on as a wh ol e, bef or e reachi ng a concl us i on on the ques on di rectly at issue in the pr esent case.

I start, as I must, with the relevant provisions of Order 11. Ord. 11, r. 1(1) provides that, subject to certain specified excep ons , "servi ce of a wri t out of the j uri sdi c on i s permi ss ibl e wi th the l eave of the court if in the ac on begun by the wr i t," and ther e fol lows a list of 20 speci fied c ircums t ances, set out in paragraphs le er ed ( a) to ( t) respec vel y, in whi ch s ervi ce out of the j uri sdi c on i s permissible. These le er ed paragraphs cover a wi de range of ci rcums tances . The paragraphs mo s t commonly invoked are (d) and (e), concerned with contractual claims; indeed many of the decided cases are concerned with one or other or both of these two paragraphs. But the problem which has arisen in the present case is not confined to these two paragraphs and ma y, in theor y at least, ar i se under others. For this reason alone, it is essen al not to cons i der the pr obl em onl y in rel a on t o t he facts of the present case, or to paragraphs (d) and (e), but also in rela on to ot her fact-si tua ons and other paragraphs of rule 1(1) . I myself have found this exercise both helpful and revealing, especially as it so happens that paragraphs (d) and (e) are, for present purposes, more complicated in their effect than mo s t, if not al l, of the ot her paragraphs of the rul e.

The other rule in Order 11 which is relevant for present purposes is rule 4 , of which we are only concerned with paragraphs 1 and 2. These provide as follows: *450

"(1) An applica on for the gr ant of l eave under rul e 1( 1) mu s t be suppor ted by an affidavi t sta ng - (a) t he gr ounds on whi c h the appl i ca on is made, ( b) that i n the deponent's belief the plain ff has a good cause of ac on, ( c) i n what place or count r y the defendant is, or probably may be found, and (d) where the applica on i s ma de under rule 1(1)(c), the grounds for the deponent's belief that there is between the plain ff and t he per son on whom a wri t has been served a r eal issue whi ch t he plain ff may reasonably ask the court to try. (2) No such leave shall be granted unless it shall be made sufficient l y to appear to t he cour t that the case i s a proper one f or servi ce out of the jurisdic on under thi s Or der ."

When construing the relevant provisions of these rules, and in par cul ar the rel a onshi p bet wee n rules 1(1) and 4 , it is helpful first to look at the hi stor i cal background to the rul es in thei r pr esent form. Order 11 in its original form was one of the Rules of Court scheduled to the Supreme Court of Judicature Act 1873 (36 & 37 Vict. c. 66) . Rule 1 contained a list of circumstances (shorter than the present list) in which service of a writ outside the jurisdic on mi ght be al lowe d in the di scre on of the court, and rule 3 required an affidavi t to be swor n i n suppor t of an appl i ca on f or l eave f or such service, in which the deponent was required to state, inter alia, the grounds upon which the applica on wa s ma de. At first ther e was doubt whe t her evi dence mus t be provi ded of the exi stence of the cause of ac on rel ied upon, a doubt accent uat ed by the di fferi ng prac ces on t hi s poi nt previously applicable respec vel y in the Chancer y and commo n law cour ts. It wa s deci ded that such evidence was required, as part of the affidavi t evi dence r equi r ed t o s tate t he grounds on whi ch t he applica on wa s ma de; and that such stat eme nt mu s t i den fy and subs t an ate a cause of ac on falling within one of the authorised heads of jurisdic on. For t hat pur pose, howe ver , i t wa s considered that very probably it would be sufficient i f an appr opr i ate deponent swor e an affidavit iden fyi ng the rel evant cause of ac on, and s ta ng t hat t here was i n hi s bel i ef a good cause of ac on: see Great Australian Gold Mining Co. v. Mar n (1877) 5 Ch. D. 1 , especially per Bramwell J.A., at pp. 16-18,and the report of the further hearing of the Court of Appeal, at pp. 18-19. When Order

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11 came to be revised in 1883, it is plain that the former rule 3 was amended (in the new rule 4) to give effect to the deci si on of the Cour t of Appeal in that case. In the resul t, the affidavi t was r equi r ed in addi on to stat e that in the bel ief of the deponent the pl ai n ff had a good cause of ac on; and there were added to the rule the words now found in the present rule 4(2). From this it follows that the grounds upon which the applica on i s ma de, requi red to be stat ed i n t he affidavi t , were understood to embrace not merely the head of jurisdic on rel ied upon but al so the cause of ac on invoked by the plain ff as fall ing wit hin t hat head of juri sdi c on. Howeve r , although under t he new rule 4 the deponent had to state his belief that the plain ff had a good cause of ac on, i t was l ater held that that would not necessarily be enough for this purpose to establish the existence of the relevant cause of ac on, because t he cour t had s l l to deci de whe t her i t shoul d exerci se i t s discre on to gi ve leave; and for that pur pose it had to cons i der wh et her the evi dence showe d that *451 the cause of ac on rel ied upon by the pl ai n ff was suffici entl y firml y est abli shed: see Soci été Générale de Paris v.Dreyfus Brothers (1885) 29 Ch.D. 239; (1887) 37 Ch.D. 215 . In this connec on, the concluding words of the new rule 4 (now rule 4(2) ) were not regarded as relevant, for they are directed not to the existence of the cause of ac on but to the ques on whe t her the plain ff has sufficient l y est abl i shed t hat the case f all s wit hin one of the heads of juri sdi c on speci fied in rule 1 .

For the purpose of considering whether the existence of the relevant cause of ac on has been sufficient l y est abl i shed, a numbe r of different t ests have been s t ated by j udges as being appos i t e. For example, in the Dreyfus case, which appears to have been the first repor ted case a er the amendment of Order 11 in 1883, Pearson J. at first ins tance cons i der ed (see 29 Ch.D. 239 , 245-246) that it was enough that there was "a very serious ques on to be tri ed betwe en the par es. " I n t he Court of Appeal, both Co on and Li ndl ey L. JJ. pr ef er red the test of "a pr obabl e cause of ac on" and Lopes L.J. the test of "a prima facie case" (see 37 Ch.D. 215 , 222-223, 225 and 226 respec vel y) . We find a comp arabl e di ver gence of opi ni on i n the j udgme nt s i n the Badi sche Ani lin l i ga on: s ee Badische Anilin und Soda Fabrik v. W. G. Thompson and Co. Ltd. (1902) 88 L.T. 492n. (Court of Appeal ); Badische Anilin und Soda Fabrik v. Chemische Fabrik vormals Sandoz (1903) 88 L.T. 490 (Court of Appeal ) and Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks (1904) 90 L.T. 733 (House of Lords ). This divergence of opinion reflects a numb er of c onflic ng considera ons . Per haps the cl earest and mo s t aut hor i ta ve s tatemen t of the pos i on i s to be f ound in the speech of Lord Davey, 90 L.T. 733 , 735, where he said:

"An injunc on i s sought to restrai n the def endant s from doi ng some act wi thi n the jurisdic on. Rul e 4 of [Or der 11] pr escribes that the appl ica on i s to be suppor t ed by evidence sta ng that in the bel ief of the deponent the pl ai n ff has a good cause of ac on, and no such leave is to be gr ant ed unl ess it be ma de sufficientl y to appear t o the court or judge that the case is a proper one for service out of the jurisdic on under this Order. This does not, of course, mean that a mere statement by any deponent who is put forward to make the affidavi t that he bel i eves that ther e i s a good cause of ac on is sufficient. On t he ot her hand, t he court i s not, on an appl i ca on for leave t o serve out of the jurisdic on, or on a mo on mad e t o di s char ge an order for such service, called upon to try the ac on or expr ess a pr ema tur e opi ni on on its me r i ts, and where there are conflic ng statemen t s as to mat eri al fact s, any such opi nion mus t necessarily be based on insufficient mat eri als. But I think that the appl i ca on shoul d be supported by an affidavi t st a ng f ac ts whi c h, i f proved, woul d be a s uffici ent founda on for the al leged cause of ac on, and, as a r ule, the affidavit shoul d be by some person acquainted with the facts, or, at any rate, should specify the sources or persons from whom the deponent derives his informa on. A mo r e di fficult ques on is where it is in dispute whether the alleged or admi ed facts wi ll, as a ma er of law, en tle the pl ai n ff to the r eli ef whic h he s eeks . I f the court i s judic i al ly sa sfied that the alleged facts, if proved, will not support the ac on, I thi nk the cour t *452 ought to say so, and dismiss the applica on or di scharge t he or der . But wh er e t her e i s a substan al l egal ques on ari sing on t he f act s di s cl osed by the affidavit s whi ch the

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plain ff bona fide desi r es t o tr y, I thi nk t hat t he court shoul d, as a rul e, all ow t h e service of the writ. The words at the end of the Order do not, I think, mean more than that the court is to be sa sfied t hat the case comes wit hin t he class of cases i n whi ch service abroad may be made under the first rul e of the Or der ."

On this approach, if in support of the plain ff's ex par t e appl i ca on an affidavit i s sworn i n proper form deposing to facts which, if proved, provide a sufficient founda on f or t he al l eged cause of ac on, that shoul d gener al ly be enough for pr esent pur poses . Thi s is no doubt wh at a numb er of judges have referred to when they have used the expression "prima facie case" in this context. The problem arises from the fact that the court will consider, on an applica on to set asi de l eave so given, affidavi t evi dence on t he par t of the def endant , and wi l l take such evi dence i nto account when deciding whether or not to exercise its discre on i n favour of the pl ai n ff. But t he court cannot resolve disputed ques ons of f act on affidavi t evi dence; and i t is consi s tent wi t h the statement of the law by Lord Davey that if, at the end of the day, there remains a substan al ques on of fact or law or bot h, ar i si ng on the facts di scl osed by the affidavi t s, whic h the pl ai n ff bona fide des i res to try, the cour t shoul d, as a rul e, al low the ser vi ce of the wr i t. If thi s appr oach is correct, the standard of proof in respect of the cause of ac on can br oadl y be stat ed to be wh et her , on the affidavi t evi dence bef ore t he cour t , ther e i s a seri ous ques on t o be t r ied.

The ques on arose agai n, though indi rectly, bef or e your Lor dshi ps ' House in Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 , which was concerned, primarily at least, not with the strength of the plain ff's case on t he mer i ts, but wi t h t he s tandar d of proof appl i cabl e whe n cons i der i ng whether the jurisdic on of the cour t has been sufficientl y establ i s hed under one or more of t he paragraphs of Ord. 11, r. 1(1). The plain ff's claim was advanced under wha t is now p ar agraph ( e), it being alleged that the claim was brought in respect of a breach commi ed wi thi n the jur i sdi c on of a contract made within or out of the jurisdic on. The pl ai n ff brought an ac on in 1946 cl aiming arrears of pension and salary which he said were due to him from the defendant company, which was incorporated in Czechoslovakia. In support of his case that his claim fell within paragraph (e), he relied on an oral agreement which he said had been made early in January 1929, in Czechoslovakia, with the general manager of the defendant company, that he should receive payment of his pension from the defendants in the country in which he might be living at the me wh en it accrued. It wa s on this basis, inter alia, that he contended that the defendant company was bound to pay him his pension in London and that its failure to do so cons tut ed a br each of cont ract wi thi n t he jurisdic on. Sl ade J . ( unr epor ted) , 28 J ul y 1949 r ef used hi s appl ica on f or l eave t o s erve t he proceedings outside the jurisdic on. In so doi ng, he rel ied upon a stat eme nt of the l aw by Lor d Goddard C.J. in Malik v. Narodni Banka Ceskoslovenska [1946] 2 All E.R. 663 , a case also concerned with what is now paragraph (e) of Ord. 11, r. 1(1) , in which Lord *453 Goddard, at pp. 664-665, appears to have drawn a dis nc on bet wee n, on t he one hand, the ques ons ( 1) whet her t here was a contract and (2) whether there had been a breach of the contract, and on the other hand the ques on (3) wh et her such br each had been commi ed wit hin t he j uri sdi c on. Lord Goddar d st ated that, so far as the first two ques ons wer e concerned, the plain ff was o nl y r equi r ed to show "a case which can be properly put before the court and argued;" but so far as the third ques on wa s concerned, Slade J. understood him to say that the plain ff had t o s a sfy the court on t he c i vi l burden of proof. Applying the la er test, Sl ade J. cons i der ed that the pl ai n ff had not so sa sfied him that the alleged breach had been commi ed wi thi n the jur i sdi c on. In t he Cour t of Appeal ( Korner v. Witkowitzer [1950] 2 K.B. 128 ), there was some differ ence of opi ni on betwe en the members of the court as to the applicable principle; but the majority of the court held that the plain ff's appeal mus t be all owed .

The case was therefore in some disarray when it came before the House of Lords. This House took the view that Lord Goddard's statement of the law in Malik , or at least Slade J.'s understanding of it, was erroneous in so far as it required that the plain ff mus t sa sfy the court on t he c i vi l burden of

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proof that his case fell within one of the heads of jurisdic on i n Or d. 11, r. 1( 1) . The appl icabl e standard was laid down in Ord. 11, r. 4(2) , which required no more than that it should be made sufficient l y to appear to t he cour t that the case was a proper one f or servi ce out of the j uri sdi c on, a requirement which was inconsistent with a standard of proof "which in effect amo unt ed to a tri al of the ac on or a pr ema tur e expr essi on of opi ni on on i ts me r i ts:" see per Lord Simonds, at p. 879. Equally, the expression "prima facie case" was rejected as inappropriate, because a conflict ma y arise on the material before the court, which has to reach a conclusion on all the materials then before it. In an endeavour to assist on the degree of sufficiency requi r ed by rule 4(2) Lord Simon ds (with whom Lord Normand, at p. 881, agreed) said, at p. 880, that "the descrip on 'a good ar guabl e case' has been suggested [by counsel for the plain ff] and I do not quar rel wi t h i t ;" and Lord Radcliffe (wi th wh ose stat eme nt of pr inc i pl e Lor d Tucker , at p. 890, agreed) used the expr essi ons "a strong argument," at pp. 883 and 885, and "a strong case for argument," at p. 884. There is no reason to suppose that there is any material differ ence betwe en these var ious expr essi ons , from which is derived the "good arguable case" test which has been applied in innumerable cases since. At all events, the House of Lords held unanimously that, on that test, the plain ff was en t led t o succeed, and so dismissed the appeal.

For present purposes, it is relevant to consider to which elements in what is now paragraph (e) of Ord. 11, r. 1(1) the House of Lords concluded that the "good arguable case" test should be applied. Lord Radcliffe, at pp. 883- 884, wa s of the opi ni on that he wa s unabl e to be "sa sfied as t o wher e a breach of contract had taken place without being at any rate as much sa sfied t hat the cont r act existed and had been broken." On this approach (with which, as I understand it, Lord Tucker was in agreement) it will be necessary for the purpose of establishing jurisdic on under paragraph (e) not merely to show (to the extent required *454 by rule 4(2)) that, if there was a contract and it had been broken, such breach was commi ed wi thi n the jur i sdi c on ( whi ch had been t he view o f Lord Goddard C.J. in Malik ) but so to establish all three elements of contract, breach and place of breach. Likewise, Lord Simonds considered, at p. 879, that the plain ff's prospect s of est abl i shi ng t he existence of the oral agreement on which he relied were relevant to the ques on of jur i sdi c on. Lord Normand agreed generally with Lord Simonds; and Lord Oaksey expressed no opinion on the point. It follows that four members of the Appellate Commi ee mu s t be taken to have deci ded that , when considering what is now paragraph (e), all three elements of contract, breach and place of breach must be established, to the extent required by rule 4(2), before the plain ff can success full y invoke the jurisdic on of the cour t under that paragraph. It al so fol lows that , under that paragraph, no separate issue will arise on the merits of the plain ff's claim t o whi ch a l ower standar d of proof might be applied; and for that reason no ques on arose di rectly as to the standard of pr oof applicable to the merits of the plain ff's claim i n Kor ner ' s case, though t he poi nt was advert ed t o by Lord Tucker. I wish to record in parenthesis my suspicion that a failure to appreciate this point has led to a belief that the "good arguable case" test established in Korner's case is as applicable to the merits of the plain ff's case as i t i s to t he ques on of j uris dic on under Or d. 11, r . 1(1) - as indeed has been stated in successive edi ons of The Supreme Court Prac ce : see the 1993 edi on, para. 11/1/6, p. 85.

But the same does not apply in the case of other paragraphs of rule 1(1). Under many paragraphs, once the plain ff's cl aim i s shown t o have been mad e under a cert ain s tatutory provi sion, the jurisdic on of the cour t i s es tabl ished; and a separat e ques on wi l l ari se as to t he mer i ts of the plain ff's cl aim: see, e.g., par agraphs (q), (r) and ( s). Anot her obvi ous exampl e i s to be f ound i n paragraph (a), concerned with relief sought against a person domiciled within the jurisdic on. Ther e, once the plain ff has est abl i shed, to t he s tandar d r equi r ed by rule 4( 2), that the def endant is domiciled within the jurisdic on, j ur i sdi c on under par agraph ( a) is est abl i shed and a separ ate ques on wi ll ar i se as to the me r its of hi s cl ai m. Paragraph (d) , the ot her paragraph concer ned wi th contractual claims, and one which is relevant in the present case, is more complex. It provides:

"(d) the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract, or to recover damages or obtain other relief in respect of the breach of a

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contract, being (in either case) and contract which - (i) was made within the jurisdic on, or ( i i) wa s ma de by or thr ough an agent tradi ng or res i di ng wi thi n the jurisdic on on behal f of a pr inc i pal tradi ng or res i di ng out of the jur i sdi c on, or (ii i) is by its terms, or by implica on, gover ned by Engl ish law, or (iv) cont ai ns a term to the effect that the Hi gh Cour t shal l have jur i sdi c on t o hear and det ermin e any ac on i n respect of the contract; . . ."

As I read the paragraph, however, and having regard to the view formed in Korner's case [1951] A.C. 869 , I am of the opinion that what has to be sufficient l y shown by t he plain ff for the pur pose of establishing jurisdic on is, in the case of , for examp l e, sub- paragraph (i), not me r el y *455 that (1) there was a contract, and (2) such contract was made within the jurisdic on. Li kewi se, under sub-paragraphs (ii), (iii) and (iv), the existence of the relevant contract has to be sufficient l y proved. But, once that is done, there arises a separate ques on as to the me r i ts of the pl ai n ff's cl ai m rela ve to that cont ract . That ques on was howev er not addr essed by thei r Lordshi ps i n Kor ner ' s case, with the excep on of Lor d Tucker , wh o expr essed the opi ni on, at p. 889 (wi th ref er ence to claims founded on a tort under paragraph ( ee ), now paragraph (f)), that a lesser burden will fall on the plain ff wit h r egard t o t he mer i ts of his claim, viz. whe t her the affidavit s discl ose a case whi ch appears to merit considera on at the tri al - a test cons i stent wi th the appr oach of Lor d Davey in the Badische Anilin case, 90 L.T. 733 , and indeed with that of Lord Goddard C.J. in Malik in so far as he was not concerned with the ques on of jur i sdi c on under rule 1(1).

This approach is consistent with rule 4(1)(d) of Order 11 , concerned with applica ons ma de under rule 1(1)(c) . Moreover, support for this approach is to be derived from the development of the requirement of forum conveniens as an element in the exercise of the court's discre on under Or der 11. It has been consistently stated, at least since the judgment of Pearson J. in the Dreyfus case, 29 Ch.D. 239 , that it is a serious ques on wh et her the jur i sdi c on under Order 11 ought to be i nvoked, to put a person outside the jurisdic on to the "i nconveni ence and annoyance of bei ng br ought to contest his rights in this country:" pp. 242-243. It is, of course, true to say that any inconvenience involved has been much reduced by modern methods of communica on; but the poi nt of pr inc i pl e remains. This is however very largely met by the applica on in thi s cont ext of the pr inc i pl e of for um conveniens (as to which see Spiliada Mari me Cor por a on v. Cansul ex Lt d. [1987] A. C. 460 , 481-482). The effect of thi s devel opme nt is that , gi ven that jur i sdi c on i s est abl i shed under one of the paragraphs of rule 1(1) and that proper regard is paid to the principle of forum conveniens, it is difficul t to s ee why t he f act that the wri t i s to be served out of the j uri sdi c on shoul d have any par cul ar imp act upon the standard of pr oof requi red in respect of the exi stence of the cause of ac on. On thi s poi nt , I find mys el f in r espec ul disagreement with the opini on expr es sed by L l oyd L.J. to the contrary in the Court of Appeal [1993] 1 Lloyd's Rep. 236 , 242. I prefer the approach of Stuart-Smith L.J. when, at p. 248, he commended his preferred view as consonant with common sense and policy, and con nued:

"It seems to me to be wholly inappropriate once the ques on[ s] of j ur i sdi c on and forum [conveniens] are established for there to be prolonged debate and considera on of the me r i ts of the pl ai n ffs' clai m at t he i nter locut or y stage. "

It has been suggested that, since both the assessment of the merits of the plain ff's claim a nd t he principle of forum conveniens fall to be considered as elements in the exercise of the court's discre on, these shoul d be regarded as int er rel at ed in the sense that "the mo r e conspi cuous the presence of one element the less insistent the demands of jus ce that the ot her shoul d al so be conspicuous:" see Société Commerciale de Réassurance v. Eras Interna onal Ltd. (forme r l y Er as (U.K.)) [1992] 1 Lloyd's Rep. 570 , 588, per Mus ll L. J. Thi s appr oach or i gi nat ed in the speech of Lor d Oaksey in Korner's case, at pp. 881-882, to the effect that the strengt h of the evi dence in that case

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as to forum conveniens was such that only the slightest evidence was required of there having been a breach of contract within the jurisdic on. Lor d Oa ksey' s speech al so pr ovi ded the inspi ra on f or an expression of opinion by Parker L.J. to the effect that , i f ther e i s overwh el mi ng evi dence that England is the appropriate forum, it will be enough that, on the merits, the plain ff's case i s wor t hy of serious considera on: see Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439 , 448, and see also Banque Paribas v. Cargill Interna onal S. A. [1991] 2 Lloyd's Rep. 19 , 25. I must however express my respec ul di sagreeme nt wi th thi s appr oach. Suppose that, for example, the plain ff's case i s very strong on t he mer i ts. If so, I cannot see t hat a case par cul ar l y strong on the me r i ts can comp ensat e f or a we ak case on f or um conveni ens . Likewise, in my opinion, a very strong connec on wi th the Engl ish for um cannot jus fy a wea k case on the merits, if a stronger case on the merits would otherwise be required. In truth, as I see it, the two elements are separate and dis nct. The invoca on of the pri nci ple of forum c onveni ens spri ngs from the o en expr essed anxi et y that great care shoul d be taken in br ingi ng bef or e the Engl ish cour t a foreigner who owes no allegiance here. But if jurisdic on is es tabl ished under rul e 1( 1) , and it is also established that England is the forum conveniens, I can see no good reason why any par cul ar degree of cogency should be required in rela on to the me r i ts of the pl ai n ff's case.

I wish also to refer to the view expressed by Stuart-Smith L.J. in the Court of Appeal that it was relevant to take into account the fact that proceedings in respect of the first pr esent a on wou l d i n any event take place in England, and that this factor provided an addi onal and cogent reason wh y the court should exercise its discre on in favour of Seaconsar in rel a on t o t he second present a on: see at p. 250. However, if the plain ff's case i s not sufficiently strong on the mer it s , I cannot s ee that that weakness can be compensated for by the fact that other related proceedings are to proceed within the English jurisdic on. That i s a ma er whi ch may be r elevant to t he ques on whet her England is the forum conveniens for the proceedings in ques on. In the pr esent case, howe ver , there is no issue between the par es on for um conveni ens , and I cannot ther ef or e see that the fact that the proceedings in respect of the first pr esent a on are goi ng t o proceed i n t his count r y i n any event has any bearing on the issues in the present appeal.

Once it is recognised that, so far as the merits of the plain ff's cl aim a re concerned, no mor e i s required than that the evidence should disclose that there is a serious issue to be tried, it is difficul t to see how this ma er , al though it fal ls wi thi n the amb i t of the cour t' s di scre on, has not in prac ce to be established in any event. This is because it is very difficul t to concei ve how a j udge coul d, in the proper exercise of his discre on, gi ve l eave wh er e ther e wa s no ser ious i ssue to be tri ed. Accordingly, a judge faced with a ques on of leave to ser ve pr oceedi ngs out of the jur i sdi c on under Order 11 will in prac ce have t o cons i der bot h ( 1) wh et her j ur i sdi c on has been sufficiently established, on the criterion *457 of the good arguable case laid down in Korner's case, under one of the paragraphs of rule 1(1), and (2) whether there is a serious issue to be tried, so as to enable him to exercise his discre on to gr ant l eave, bef or e he goes on to cons i der the exer ci se of that discre on, wi th par cul ar reference t o t he i ssue of forum c onveni ens .

For these reasons I have come to the conclusion that, at least so far as sub-paragraphs (d)(i) or (ii) of rule 1(1) are concerned, the majority of the Court of Appeal erred when they held that Seaconsar had to establish under either of those sub-paragraphs a good arguable case on the merits. In my opinion, it was enough for Seaconsar to establish under either of those sub-paragraphs that there was, in respect of one or more of the four points arising on the second presenta on, a ser ious issue to be tried. It follows that the Court of Appeal erred in the exercise of their discre on wh en they refused leave to Seaconsar to serve proceedings out of the jurisdic on, and i t and i t i s now necessary for your Lordships to consider whether, in the exercise of your discre on, such l eave should be given.

As I have already indicated, the four points which arose on the second presenta on we r e ( 1) whether the documents conformed to the le er of credi t; (2) i f not , wh et her Bank Me l li had the authority of Bank Markazi to reject the documents; (3) if so, whether Bank Melli did in fact reject the

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documents; and (4) if so, whether such rejec on took pl ace wi thi n a reasonabl e me as requi r ed by ar cl e 16 of the U. C. P.

I can deal with this aspect of the appeal quite briefly. I take first poi nt (2). It appear s that the U.C .P. do not posi vel y conf er aut hor i ty on the advi si ng bank to rej ect the docume nt s. Indeed, ar cle 16( d) speaks in terms of the decision to refuse the documents being made by the issuing bank. If that is right, the ques on wh et her Bank Me l li had the necessar y aut hor i ty from Bank Ma rkazi is a ma er of evidence; and, on the evidence presently available, I am not prepared to hold that there is no serious issue to be tried as to the existence of the relevant authority. Turning next to point (4), Seaconsar first put for wa rd its case on the basi s that a reasonabl e me f or rejec ng t he document s under ar cl e 16( c) of the U. C. P. wa s five wor king days. But , bef ore t he Cour t of Appeal , it indi cated that it wished to argue that a period of five wo r ki ng days wa s in fact too long a me, and t hat a reasonable me for obj ec on i n t he ci rcums t ances of the present case was no mor e t han t wo working days. If this la er pr opos i on i s corr ect , it appear s on t he evi dence t hat the r ejec on was not made in me . In suppor t of thi s pr opos i on Seacons ar seeks to r el y on Bankers Trust Co. v. State Bank of India [1991] 2 Lloyd's Rep. 443 , and on passages in certain textbooks, in par cul ar Paget 's Law of Banking, 10th ed. (1989), p. 643. I myself do not consider that Seaconsar should be shut out from advancing this second proposi on, even though it ma y be handi capped by its pr evi ous stance as to the relevant period of me ; and on thi s basi s, I cons i der that ther e is a ser ious issue to be tri ed on point (4) as well. For these reasons, the claim iden fied by Seaconsar gives rise t o s eri ous i ssues to be tried, and in the circumstances, it is unnecessary for me to say anything about points (1) and (3).

I would therefore allow the appeal, and I propose that leave be given to Seaconsar to serve the proceedings outside the jurisdic on in respect of *458 the second presenta on, as we l l as the first. From this it follows that the orders of Saville J. and of the Court of Appeal should be set aside. I also propose that Bank Markazi be ordered to pay the costs of Seaconsar before your Lordships' House, but that costs incurred at first ins tance and in the Cour t of Appeal be cos ts in the cause.

LORD BROWNE-WILKINSON.

My Lords, for the reasons given in the speech prepared by my noble and learned friend, Lord Goff of Chieveley, I, too, would allow the appeal.

LORD MUSTILL.

My Lords, I have had the advantage of reading in dra the speech pr epared by my nobl e and learned friend, Lord Goff of Chi evel ey, and for the reasons wh i ch he gi ves I, too, wo ul d al low the appeal .

Representa on

Solicitors: Clyde & Co. ; Stephenson Harwood Appeal allowed with costs in House of Lords. Order of Hobhouse J. restored. Costs at first ins tance and in Cour t of Appeal to be cos ts in cause. (M. G. )

________________________________________________________________________________________

R.S.C., Ord. 11, r. 1(1) : see post, p. 449E-F. R. 4(1)(2): see post, p. 450A-B.

(c) Incorporated Council of Law Repor ng for Engl and & Wa l es© 2012 Swe et & Ma xwe l l

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Status: Posi ve or Neut ral Judi ci al Tr eatme nt

*845 Carvill America Inc & Anor v Camperdown UK Ltd & Ors.

Court of Appeal (Civil Division)

27 May 2005

[2005] EWCA Civ 645

[2005] 1 C.L.C. 845

Ward, Clarke and Longmore L JJ

Judgment delivered 27 May 2005

Insurance—Reinsurance—Brokerage—Service out of jurisdic on—S er ious i ssue t o b e tried—Necessary or proper party—Arbitra on cl auses—U S rei nsur ance comp any appoi nt ed US reinsurance broker—Termina on of ret ai ner—P r emi ums pai d to new br oker s—B r oker claimed for unpaid brokerage—Whether broker en tled t o br okerage f rom Eur opean reinsurers on basis of custom and prac ce or i mp l ied t erm—A l ter na ve cl aim a gai nst reinsured—Arguable that retainer properly construed imposed obliga on on rei nsur ed to pay gross premium to reinsurers—Joinder of reinsured not breach of or interference with rights under reinsurance trea es inc l udi ng right to ar bi trat e al l di sput es ar i si ng—R ei nsur ed necessary or proper party to claim against reinsurers—Civil Procedure Rules 1998, r. 6.20(3), 6.21(2).

This was an appeal by the 14th defendant, XL Specialty Insurance Co Ltd (‘XL’), against the dismissal of its applica on to set asi de the or der for ser vi ce of the cl ai m for m upon it out of the jurisdic on. XL and the first claiman t , Car vi l l Amer i ca, wer e bot h Del awar e companies and had their principal places of business in the US. Carvill America was a reinsurance broker and XL was a US insurance company. The second claimant, Carvill UK, was a UK subsidiary or associate of Carvill America. In 1999 XL appointed Carvill America to act as its reinsurance broker on the terms of a reinsurance broker of record appointment le er . The le er provi ded t hat remun er a on earned by Carvi l l woul d be paid en rel y by the rei nsur er (s) to wh i ch XL ' s pr emi um wa s ceded as wa s cus toma ry in the industry.

Pursuant to its retainer, Carvill America placed two trea es of rei nsur ance, or ma de two ‘Program placements’, on behalf of XL. Cover under both trea es wa s subscribed in par t in the US market by US reinsurers and in part in the London and European market by European reinsurers. Carvill America procured the cover from the US reinsurers and Carvill UK, ac ng on behal f of Car vi ll Ame r i ca, pr ocur ed the cover from the Eur opean reinsurers. Cover under the trea es wa s r enewe d f rom year t o year . The t rea es themselves provided for a total gross premium to be paid to reinsurers which was calculated by reference to a percentage of XL's gross premium income as insurer of the reinsured risks or rela ng to the pol ici es ceded. The trea es cont ained an arbi t ra on clause providing that all disputes or differ ences betwe en XL and rei nsur er s shoul d be referred to arbitra on in Connec cut .

*846

In 2003 differ ences arose betwe en Car vi ll and XL over the amo unt of br oker age wh i ch Carvill was earning under the trea es . XL requested the ret ur n of a por on of the brokerage that had been earned. Carvill refused to repay any of the brokerage. As a

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result, XL gave no ce that i t wa s termi na ng Car vi l l's retainer , even t hough t hat was mid-way through a period of cover. From the moment the appointment was terminated, Carvill ceased to receive brokerage because XL ceased paying to Carvill the reinsurance premium from which Carvill had deducted its brokerage. Instead XL paid premiums to new brokers it had retained.

Carvill claimed in US proceedings against the US insurers for unpaid brokerage and in English proceedings for unpaid brokerage against the European reinsurers. Carvill claimed the European brokerage from the European reinsurers on the basis of custom and prac ce and/ or an imp l ied cont ract. Car vi ll's pr ima r y case wa s that it wa s en tled to recover the brokerage from the reinsurers but, in case that failed, it advanced an alterna ve cl ai m agai ns t XL , on the basi s of expr ess or imp l ied terms of the ret ai ner le er . The Eur opean rei nsur er s deni ed liabi lity.

Carvill obtained permission to serve XL on the basis that XL was a necessary or proper party to the claim against the reinsurers. XL's applica on chal lenged the jur i sdi c on of the court on the basis that there was no serious issue to be tried against it on the merits; and that there was no good arguable case that XL was a necessary or proper party for the purposes of CPR, r. 6.20(3). The judge rejected those arguments and XL appealed. XL's case was that the retainer le er ma de it pl ai n, as a ma er of language, that it was the reinsurers who were liable to Carvill for the brokerage earned by Carvill in placing and administering the reinsurance contracts. Thus XL was not even arguably liable for the brokerage. XL further submi ed t hat t he r esol u on of the ques on whether XL was liable to Carvill would or might infringe XL's rights to arbitrate all disputes and differ ences ar i si ng out of or connected wi th the rei nsur ance trea es. XL submi ed that in those ci rcums tances it wa s not a necessar y or pr oper par ty and that Carvill should be le to br ing any cl ai m agai ns t XL in Connec cut.

Held, dismissing the appeal:

1 There was a triable argument as to the meaning and effect of the ret ai ner le er. It was arguable that it was an implied term of the retainer le er that Car vi ll wo ul d pay gross premiums either to the reinsurers or to Carvill and/or that it would not fail to do one or the other so as to deprive Carvill of its brokerage. It was arguable that XL was in breach of contract in failing to pay the gross premium because it was arguable that that failure caused Carvill to be deprived of its brokerage. There was therefore a serious ques on or issue betwe en them to be tri ed wi thi n the me ani ng of CPR, r. 6.21(2).

*847

2 XL was a proper party to the claim against the reinsurers and the judge was correct to hold that Carvill had demonstrated a strong argument to that effect. It wa s cl ear that Carvill's claim for brokerage against the reinsurers was closely bound up with the alterna ve cl ai m for br oker age or dama ges agai ns t XL. Wh i le it wa s not inevi tabl e that Carvill would succeed against either the reinsurers or XL, it seemed likely that they would succeed against one or the other. If the claims were brought in England, without the necessity of serving the claim forms out of the jurisdic on, ther e wa s no doubt that they would be tried together. Carvill's claims against the reinsurers and XL depended on one inves ga on, even i f i t was pos s i ble t hat the al t erna ve cl ai ms a gai nst the reinsurers and the reinsured could both fail. It was immaterial that the alterna ve claims did not arise under one and the same transac on. Ther e wa s a commo n thr ead to the claims in the custom and prac ce of the ma r ket . ( Petroleo Brasiliero SA v Mellitus

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Shipping Inc (The Bal c Fl ame ) [2001] CLC 1151 appl ied .)

3 The existence of the arbitra on agreeme nt s betwe en XL and the rei nsur er s mi ght have some relevance to the ques on wh et her XL wa s a pr oper par ty but shoul d be given li le, i f any, we i ght . Car vi ll we r e not par es to t he cont r act s cont aining t he arbitra on cl auses . The joi nder of XL as a par ty to the ac on, in whi ch Car vi l l claimed brokerage from the reinsurers, was not a breach of or interference with XL's rights, including its arbitra on ri ght s, under the trea es.

The following cases were referred to in the judgment of Clarke LJ.

Alpha Trading Ltd v Dunnshaw-Pa en Ltd [1981] 1 Ll Rep 122 .

Lord Norreys v Hodgson (1897) 13 TLR 421.

McNeil v Law Union & Rock Insurance Co Ltd (1925) 23 Ll L Rep 314.

Moles na v Pont on [2001] CLC 1412 .

MRG (Japan) Ltd v Engelhard Metals Japan Ltd [2004] 1 Ll Rep 731.

Petroleo Brasiliero SA v Mellitus Shipping Inc (The Bal c Fl ame ) [2001] CLC 1151 .

Pryke v Gibbs Hartley Cooper Ltd [1991] 1 Ll Rep 602.

Seaconsar (Far East) Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438.

Velos Group Ltd v Harbour Insurance Services Ltd [1997] 2 Ll Rep 461.

Representa on

Richard Mille QC and Phi lippa Hopki ns ( ins tructed by Leboeuf , Lamb , Gr eene & Macrae) for the 14th Defendant.

Barbara Dohmann QC and Andrew Green (instructed by DLA Piper Rudnick Gray Cary UK LLP) for the Claimants.

Timothy Howe and Tamara Oppenheimer (instructed by Reynolds Porter Chamberlain) for the 1st to 12th Defendants. *848

JUDGMENT

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Clarke LJ:

Introduc on

1 This is an appeal from an order made by HHJ Havelock-Allan QC in the Commercial Court on 2 September 2004 in which he dismissed the applica on of the appel lant and 14th defendant, XL Specialty Insurance Co Ltd (‘XL’), to set aside the order for service of the claim form upon it out of the jurisdic on ma de by Mo r i son J on 26 Febr uar y 2004. The claimants, to whom (like the judge) I shall refer collec vel y as ‘Car vi ll’ and (for the most part) individually as ‘Carvill America’ and ‘Carvill UK’ respec vel y, obt ai ned permission to serve XL on the basis that XL was a necessary or proper party to an exis ng cl ai m agai ns t thi rteen ot her def endant s. Bot h the cl ai ma nt s and the 1st to 12t h defendants are respondents to this appeal, which is brought with the permission of Po er LJ . As I under stand it, the thi rteent h def endant is not a par ty to thi s appeal .

2 XL's applica on chal lenged the jur i sdi c on of the cour t under CPR Part 11 on three bases as follows: (i) that there was no serious issue to be tried against it on the merits;

(ii) that there was no good arguable case that XL was a necessary or proper party for the purposes of CPR 6.20(3); and

(iii) that England was not the forum conveniens for the trial of this ac on, gi ven par cul ar l y that the same i ssues are the subj ect of pr oceedi ngs br ought by Car vi ll America in the courts of Connec cut .

3 The judge rejected XL's challenge on each of those bases but XL appeals only in respect of the first two . It does not seek to chal lenge the judge' s deci si on on the thi rd. On the foo ng that ther e wa s a ser ious issue to be tried agai ns t XL on the me r i ts and that there was a good arguable case that XL was a necessary or proper party for the purpose of CPR 6.20(3), the judge held that the claimants had shown that England was the proper place in which to bring the claim within the meaning of CPR 6.21(2A).

4 Mr Richard Mille QC submi ts on behal f of XL that nei ther of the two issues wh i ch arise in this appeal involves any real element of discre on. He says that the first i ssue turns on the construc on of a shor t wr i en cont r act , whi l e t he second i ssue i nvol ves a considera on of the par cul ars of claim, the cont r act bet wee n Car vi l l and XL and t he contract between XL and the other defendants. He submits that the judge misdirected himself in law in the case of both issues and that if XL succeeds on either issue the appeal must be allowed and the service of the proceedings set aside.

*849

The facts

5 The facts are set out in some detail in the judgment. In so far as it is necessary to recite them here I can do so shortly, principally on the basis of the judgment. The

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dispute concerns brokerage under reinsurance trea es of non- ma r ine ri sks pl aced by Carvill as broker for XL as reinsured with the first to thi rteent h def endant s as rei nsur er s (‘the reinsurers’). The substan al issues are: (1) wh et her the br oker age wa s earned on placement or only earned when the premium in ques on wa s due and payabl e or wa s paid, and (2) whether the reinsurers or XL are liable to Carvill for the amount of the brokerage. The first issue ar i ses because XL termi nat ed Car vi ll's appoi nt me nt as br oker mid-way through a period of cover. The second issue arises because XL has withheld an amount equivalent to brokerage from its premium payments to reinsurers from the date of termina on of Car vi ll's appoi nt me nt , wi th the resul t that payme nt of Car vi ll's remunera on ceased as soon as its appoi nt me nt as br oker wa s termi nat ed.

6 Carvill America and XL are both Delaware companies and have their principal places of business in Atlanta, Georgia and Wilmington, Connec cut respec vel y. Car vi l l Amer i ca is a reinsurance broker, whereas XL is an American insurance company. Both have subsidiary or associated companies incorporated in England which carry on insurance business in London. Carvill UK is a subsidiary or associate of Carvill America.

7 In 1999 XL appointed Carvill America to act as its reinsurance broker on the terms of a ‘Reinsurance Broker of Record Appointment Le er ’ dat ed 26 Augus t 1999. It pr ovi ded, so far as relevant, as follows:

‘1. Effec ve on 8/ 26/99 Ex ecu ve Li abil i ty Unde rwr i t ers, an XL Speci al ty Division (“ELU”) hereby appoints Carvill America (“Carvill”) as its exclusive reinsurance Broker of Record for the purpose of procuring and servicing the Reinsurance program(s)/contract(s) specified i n Addendum B ( “the Pr ogram placement(s)”).

2. This appointment shall con nue i n f or ce u n l Ca r vi l l re si gns th i s appointment, ELU terminates this appointment, or ELU appoints a successor broker of record, any of which may be done at any me .

3. At least quarterly, Carvill will render accounts to ELU accurately detailing all material transac ons , i nc l udi ng i nf orma on ne cessary to su ppor t al l commissions, charges and other fees received by, or owing to, Carvill from ELU. Carvill will remit all funds due to ELU within 30 days of receipt.

4. All funds collected for ELU's account will be held by Carvill in a fiduci ar y capacity in a bank acceptable to the regulatory authori es i nvol ved. Car vi ll's records shall iden fy ELU' s own er shi p int er est in any funds hel d for mo r e than *850 one insurance company. Upon request from ELU, Carvill shall furnish copies of records rela ng to depos i ts and wi thdr awa l s for or on behal f of ELU. It is understood and agreed that all fees and expenses charged by the bank(s) for service shall be paid by Carvill, and any interest on said funds shall accrue to Carvill. It is further understood that Carvill's obliga ons under thi s paragraph are in addi on to its obl iga ons under any f eder al law.

5. A er expi ra on or termin a on of each Pr ogram pl acement t ransacted through Carvill for ELU, for a period of me at l east equal t o t he per i od specified b y t he r egul at or y a ut hor i es ha vi ng j u ri sdi c on ove r t hi s appointment, Carvill will keep a complete record for each transac on, showi ng the following:—

…

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f. Rates of all reinsurance commissions …

10. It is understood that Carvill has not been granted authority to establish terms and condi ons of t he Pr ogram pl aceme nt (s) nor t o ma ke t he final selec on of the rei nsur er (s) al lowe d to par cipat e i n t he Progr am p lacemen t ( s). Nor is Carvill granted any authority to effect cl ai m or ot her se lemen t s on behalf of the ELU without prior wri en aut hor i ty from the ELU. Thi s aut hor i ty rests solely with ELU. There are no fees or other remunera on to be pai d to Carvill by ELU under this appointment le er . Remu ner a on ear ned by Car vi l l is to be received from the reinsurer(s) to which ELU's premium is ceded as is customary in the industry.’

8 There was an addendum to the le er wh i ch pr ovi ded by cl ause 1 t hat Car vi ll's appointment was to last for a minimum of 5 years and that any termina on of the appointment was to take effect at t he dat e of r enewa l of Car vi ll's r ei nsur ance placements. It also included these two clauses, which (like the judge) I have included because Carvill say that they form part of the factual matrix against which the cri cal le er dat ed 2 Oc tober 2002 fal ls to be cons trued:

‘2. Brokerage: ELU confirms Car vi ll's under standi ng t hat i t has cont ractual en tleme nt to f ul l br oker age remu ner a on f or al l bus i nes s ceded t o Car vi l l Program placement years, including brokerage on any future adjustment and reinstatement premiums arising therefrom. Carvill agrees to return brokerage on any premiums.

3. Servicing: It is agreed that where ELU appoints a successor intermediary to procure and service placement(s) covering the same class(es) of business, Carvill's servicing obliga ons wi ll cease wi th effect from t he dat e of termin a on of Carvill's appointment without any diminu on o f C ar vi ll's b r oker age en tleme nt as speci fied i n 2 above. ’

*851

9 Notwithstanding the terms of the addendum, the le er quot ed above wa s repl aced by a further appointment le er dat ed 2 Oc tober 2002, wh i ch pr ovi ded for the ret ai ner to con nue wi th effect from 1 J anuar y 2002. The second appoi ntmen t le er was i n almost iden cal terms to the first, except that the wor ding of cl ause 10 was sl i ght l y differ ent and i t cont ai ned no addendum. As the judge obser ved, the di fference i n t he wording of clause 10 was very slight. In the last sentence the phrase ‘is to be received from’ was replaced by the phrase ‘will be paid en rel y by’ , so t hat t he l ast t wo sentences of clause 10 now read as follows:

‘…There are no fees or other remunera on to be pai d to Car vi ll by ELU under this appointment le er . Remu ner a on ear ned by Car vi l l wil l be pai d en r ely by the reinsurer(s) to which ELU's premium is ceded as is customary in the industry.’

10 There was no addendum to the second appointment le er because in the Un i ted States it is a requirement of the NAIC (Na onal As soci a on of Insurance Commi s si oner s )

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model law (and seemingly of the law of the state of Connec cut ) that a rei nsur ance agency should be terminable at will. In these circumstances it is common ground that Carvill's retainer was terminable at will. It is this second le er , wh i ch wa s ref er red to in argument as ‘the BOR le er ’ (BOR standi ng for Br oker of Recor d) , wh i ch forme d the relevant contract between the par es and it is upon the true cons truc on of that le er that the first i ssue i n the appeal depends . That i s because al l the cl ai ms br ought by Carvill arose in the period a er 1 Januar y 2002.

11 Pursuant to its retainer, Carvill America placed two trea es of rei nsur ance, or ma de two ‘Program placements’, on behalf of XL. The first wa s an Excess of Los s Rei nsur ance Treaty. The second was an Excess Cession Reinsurance Treaty. The risks reinsured were classified as Di rector s' and Officers' l iabil i ty, Gene r al Part ners ' l iabil i ty, Empl o yment Prac ces l iabi lity, Pens i on Fi duc i ar y l iabi lity, Fi del ity Bonds , Fi nanci al Ins tu on Er rors and Omissions liability and Mul -Li ne comb i ned pr ogramme s. Cover under bot h trea es was subscribed in part in the US market by US reinsurers and in part in the London and European market by European reinsurers. Carvill America procured the cover from the US reinsurers and Carvill UK, ac ng on behal f of Car vi ll Ame r i ca, pr ocur ed the cover from the European reinsurers. Cover commenced on 12 July 1999 and ran ini al ly to the end of that year. Therea er it wa s renewe d thr ough Car vi ll for 12 mo nt h per iods from 1 January 2000, 1 January 2001, 1 January 2002 and 1 January 2003. Not all of the European reinsurers subscribed to the cover in each period or for the same percentage of risk from year to year, but that is immaterial to the issues both before the judge and in this appeal.

12 The cover was effected in the conven onal man ner by Car vi l l presen ng s l ips t o the reinsurers which the reinsurers signed. The slips contained details of the risk, the premium and the brokerage or commission payable to Carvill. Cover notes were then prepared and sent to XL. They contained details of the propor on of the ri sk wh i ch each reinsurer had underwri en on the terms of the treat y and det ai ls of the *852 premium payable to that reinsurer. The cover notes said nothing about the details of the brokerage. The trea es thems el ves pr ovi ded for a tot al gros s pr emi um to be pai d to reinsurers which was calculated by reference to a percentage of XL's gross premium income as insurer of the reinsured risks or rela ng to the pol ici es ceded. The trea es contained, in iden cal terms , two ot her pr ovi si ons to wh i ch I shoul d ref er . The first i s an arbitra on cl ause pr ovi di ng that al l di sput es or di fferences bet wee n XL and r einsurers should be referred to arbitra on i n Ha r ord, Connec cut and t hat t he ar bi tr a on should be conducted in accordance with the procedures of the AAA (American Arbitra on As soci a on) . The second i s an i ntermed i ary clause express l y recording t hat Carvill America was recognised by the par es as t he i nt erme di ar y nego a ng t he agreements.

13 In about March 2003 differ ences arose betwe en Car vi ll and XL over the amo unt of brokerage which Carvill was earning under the trea es . The rat e bei ng charged i n respect of the European reinsurers was about 10 per cent of the gross premium. Carvill says that this was within the normal range for the European market. It would appear that XL disagreed. XL requested the return of a por on of the br oker age that had been earned. In other words, as the judge put it, XL demanded a rebate. Carvill refused to repay any of the brokerage. As a result, on 14 July 2003 XL wrote to Carvill America giving no ce that i t wa s termi na ng Car vi l l's retai ner wit h effect f rom 13 Augus t . It is

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common ground that, in accordance with that no ce, Car vi ll's appoi nt me nt as XL ' s reinsurance broker came to an end on 13 August 2003, although cover under the trea es wa s not due to be renewe d un l 1 J anuar y 2004.

14 From the moment the appointment was terminated, Carvill ceased to receive brokerage. Un l then Car vi ll had been pai d br oker age cal cul at ed as a per cent age of the premium paid by XL to reinsurers in respect of each line of cover, in accordance with formulae set out in the reinsurance slips. However, in prac ce, at least in rel a on t o t he European reinsurance, brokerage was accounted for by being deducted by Carvill from the gross premiums which XL paid to Carvill for onward transmission to the reinsurers. The result was that premiums were paid by Carvill to the European reinsurers net of the commission which had been agreed between Carvill and the reinsurers at the me the slip was signed. As soon as Carvill's appointment was terminated, XL ceased paying premiums to Carvill. So Carvill was unable to deduct its brokerage. Instead XL paid premiums to the new brokers it had retained, which I will call ‘Benfiel d’ . XL ins tructed Benfiel d to deduct f rom the pr emi ums an amo unt appr oxi ma t el y equi val ent to the brokerage which Carvill would have deducted and hold it in one or more segregated bank accounts to the order of XL. XL gave this instruc on wh i lst at the same me wri ng to rei nsur er s bot h in Eur ope and in the Un i ted Stat es to reassur e them that the switch from Carvill to Benfiel d dur i ng the per iod of cover wo ul d not expose them to the risk of having to pay brokerage twice

15 On 1 December 2003 XL wrote a le er to one of the London rei nsur er s i n these terms: *853

‘We have instructed Benfiel d that the “br oker age” segregat ed account (wh i ch Benfiel d hol ds to XL ' s or der ) wi ll be ma i nt ai ned pendi ng a resol u on of the XL/Carvill dispute as to brokerage. In this regard, XL agrees that if a court or arbitrator final ly deci ded i n favor of Car vi ll (we r e the di sput e to go down a li gi ous rout e) , then XL wo ul d honor thei r obl iga on ( to Car vi l l) and t her efore authorize the release of the appropriate amount of such monies held in the segregated accounts either directly to Carvill or, in the event reinsurers were held liable for these monies, to reinsurers so that they could duly release such monies to Carvill.

Alterna vel y, i f X L p r evai ls, t he mo ni es wi ll b e p ai d t o X L. I n t hese circumstances, we cannot immediately see why Carvill would therea er have the right to pursue underwriters for brokerage.’

The proceedings

16 The claim in this ac on is for unpai d br oker age and br oker age adj us tme nt s in respect of premiums paid to the European reinsurers under both trea es ( ‘the Eur opean brokerage’). The total sum claimed is about US$4.7 million, of which US$180,000 relates to cover in 2002 and the remainder to cover in 2003. The first to el event h def endant s are reinsurers at Lloyd's, the twel h def endant i s Hannover Re and the thi rteent h defendant is a Swiss reinsurance company called Converium Limited. All of these defendants have been duly served with the claim form and have accepted the jurisdic on of the Engl ish cour t. The first to t wel h defendant s are repres ented by

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Reynolds Porter Chamberlain and have served a common defence. Converium is separately represented and has also served a defence. So far as I am aware, there is no relevant differ ence f or t he pur poses of t hi s appeal betwe en t he first to t wel h defendants.

17 The claim form in the ac on wa s i ssued on 8 Ma r ch 2004. Lat er i n Ma r ch, two ac ons we r e comme nced i n the Super i or Cour t of the Judi ci al Di stri ct of Ha r ord i n Connec cut , one by XL and one by Car vi ll Ame r ica. The judge described the Ame r i can proceedings in paragraphs 15 to 21 of his judgment. It is not necessary to repeat that descrip on her e in or der to det ermi ne the issues wh i ch ar i se in thi s appeal , except to note that Carvill claims American brokerage in the American ac on and Eur opean brokerage in this ac on.

18 Like the judge I set out here the two bases on which Carvill claims the European brokerage from the European reinsurers in this ac on. The two bases are first cust om and prac ce and second imp l ied cont ract and ar e pl eaded in paragraphs 12 and 13 of the par cul ar s of cl ai m as fol lows :

‘12. The Reinsurers are liable to pay all such outstanding brokerage (including brokerage adjustments) to the First and Second Claimants pursuant to:

*854 12.1 A custom or prac ce i n the London and Eur opean r ei nsur ance markets whereby a reinsurance broker is paid brokerage by the reinsurer out of the premium paid to that reinsurer on the reinsurance cover placed with it by the reinsurance broker. The said custom and prac ce wa s expr essl y ref er red to in clause 10 of each Appointment Le er wh i ch stat ed that “Remu ner a on earned by Carvill is to be received from the reinsurer(s) to which [XL's] premium is ceded as is customary in the industry.

12.2 Further or alterna vel y, an imp l ied cont ract (by reason of the sai d cus tom or prac ce) betwe en each of the Rei nsur er s and the Fi rst and Second Cl ai ma nt s, as reinsurance brokers, whereby each of the Reinsurers agreed to pay the First and Second Claimants brokerage calculated by reference to the premium due and payable to each of the Reinsurers on the reinsurance cover placed with it by the First and Second Claimants. The said implied contract was entered into by each of the Reinsurers at such me as it ent er ed int o a rei nsur ance cont ract placed by the First and Second Claimants.

13. The en tleme nt to br oker age ar ose wh en the rei nsur ance cover wa s pl aced by the First and Second Claimants (i.e. when each of the Reinsurers entered into a reinsurance contract), and such brokerage became due and payable to the First and Second Claimants at the same me as pr emi um and/or pr emi um adjustments became due and payable by XL to the Reinsurers in respect of such cover. The First and Second Claimants rely upon:

13.1 A custom or prac ce in the London and Eur opean rei nsur ance ma r ket s to that effect.

13.2 Further or alterna vel y, an imp l ied term to that effect in t he sai d i mpl i ed contract (such term being implied by reason of the said custom or prac ce and/or as being the obvious inten on of the par es) . ’

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19 Carvill's primary case is that it is en tled t o r ecover t he br oker age f rom t he reinsurers but, in case that fails, it advances an alterna ve cl ai m agai ns t XL , wh i ch i s pleaded in paragraphs 15 and 16 of the par cul ar s of cl ai m as fol lows :

‘15. Alterna vel y, if the Rei nsur er s ar e not liabl e to pay out standi ng br oker age (including brokerage adjustments) due in respect of the placement of the aforesaid reinsurance cover, the First and Second Claimants contend that XL is liable to pay all such outstanding brokerage (including brokerage adjustments) pursuant to the retainer on the basis that:

15.1 It was an express term of the retainer that the Claimants would be paid brokerage, such express term being contained in or evidenced by clause 10 of each Appointment Le er , and

*855 15.2 It was an implied term of the retainer that XL would be liable to pay such brokerage (even though clause 10 of each Appointment Le er pr ovi ded that, as a ma er of me chani cs, such payme nt wo ul d be “… recei ved from the reinsurer(s)” [“paid en rel y by the rei nsur er (s)”] ). The sai d term wa s imp l ied as being the obvious inten on of the par es to t he r etainer and/or so as to give business efficacy to t he r etainer .

16. It was a further implied term of the retainer that the en tleme nt t o brokerage (including brokerage adjustments) arose when the reinsurance cover was placed by the First and Second Claimants, and that such brokerage (including brokerage adjustments) became due and payable to the Claimants at the same me as pr emi um and/ or pr emi um adj us tme nt s became due and payable by XL to the Reinsurers. The First and Second Claimants rely on a custom or prac ce i n the London and Eur opean rei nsur ance ma rket s to that effect, al ter na vel y t he same i s to be i mpl i ed as bei ng t he obvi ous i nten on of the par es . ’

20 Although pleaded as implied terms, Carvill advance similar arguments by way of construc on of the BOR l e er. Fur t her , since t he hear i ng bef ore t he j udge t hey have amended (or re-amended) the par cul ar s of cl ai m to cl ai m dama ges in the amo unt of the unpaid brokerage for alleged breach of contract as follows:

‘17A. Alterna vel y, XL has acted in br each of the ret ai ner in the event that (1) Reinsurers are liable to pay outstanding brokerage (including brokerage adjustments) due in respect of the placement of the aforesaid reinsurance cover, but (2) Reinsurers' liability to make such payment only arises once XL has remi ed t o Rei nsur er s t he g ros s pr emi um f rom wh i ch s uch out standi ng brokerage would be paid.

17A.1 It was an implied term of the retainer that XL would not deprive the Claimants of the opportunity of earning brokerage (including brokerage adjustments) in respect of any cover placed by the Claimants with any reinsurers pursuant to the retainer. The said term was implied so as to give business efficacy to t he r etainer or as bei ng t he obvi ous i nten on of t he par es to the retainer (given that, on this alterna ve case, the Cl ai ma nt s had no ot her means of earning commission under the retainer).

17A.2 XL has prevented the Claimants from earning brokerage (including

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brokerage adjustments) in respect of the placement of the aforesaid reinsurance cover in that it has failed and/or refused to remit to Reinsurers the gross premium from which the brokerage (including the brokerage adjustments) pleaded in paragraph 11 above would have been paid by Reinsurers to the Claimants.’

21 The judge described the stance of the European reinsurers in paragraph 24 of his judgment. They deny liability. Pending the provision by XL of full par cul ar s of the grounds on which it claims to be en tled t o wi thhol d t he br oker age f rom Car vi ll, *856 they reserve the right to deny that Carvill is en tled to be pai d any br oker age on premiums paid a er the dat e on wh i ch the termi na on of Car vi l l's appoi ntmen t took effect. Thei r pr ima ry def ence, howe ver , i s that they deny that ther e i s any cus tom or prac ce in the London and Eur opean rei nsur ance ma rket s wh er eby br oker age is pai d by the reinsurer and consequently they deny the alleged implied contract which is said by Carvill to arise by reason of that custom and prac ce. They cont end that Car vi ll acted at all me s as agent of XL and that no cont ractual rel a onshi p, express or impl i ed, arose between Carvill and the European reinsurers. Hannover Re and Converium addi onal ly refer to the fact that reinsurance business in the German and Swiss reinsurance markets is predominantly transacted directly between reinsurers and reinsured without the interven on of rei nsur ance br oker s or int erme di ar ies . Hannover Re al so cont ends that the ques on wh et her i t i s l iabl e to pay br oker age to Car vi ll a er 13 August 2003 i s governed by German law and that in German law the liability lies upon XL rather than Hannover Re.

22 In short, the European reinsurers say that it is XL, as reinsured, which is liable to pay any outstanding brokerage. They further say that Carvill is not en tl ed to any br oker age a er the termi na on of its retainer by XL or that , if they wer e under any l iabi l ity to pay brokerage to Carvill a er 13 Augus t 2003, the br oker age di d not become due and payable unless and un l they we r e pai d the gros s pr emi um by XL. I shoul d add that in the counterclaim the reinsurers claim declara ons wh i ch inc l ude a decl ar a on t hat XL i s liable to Carvill. However, it is fair to say that the declara ons are sought onl y agai ns t Carvill and not against XL and in the course of the argument we were told on behalf of the reinsurers that they would not seek a declara on to the effect that XL was l iabl e t o Carvill, either as against Carvill or as against XL.

Serious ques on to be tried

23 XL's case can be shortly summarised in this way. The claim brought by Carvill against XL rests in contract, namely the BOR le er . The BOR le er mad e i t plain, as a ma er of language, that it was the reinsurers who were liable to Carvill for the brokerage earned by Carvill in placing and administering the reinsurance contracts. Mr Mille focuses in par cul ar on the last two sent ences of cl ause 10, wh i ch it wi ll be recal led pr ovi de:

‘There are no fees or other remunera on to be pai d to Car vi ll by ELU under thi s appointment le er . Remu ner a on ear ned by Car vi l l wil l be pai d en rel y by the reinsurer(s) to which ELU's premium is ceded as is customary in the industry.’ (Mr Mille ' s emp hasi s)

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To hold XL even arguably liable for the brokerage is thus directly contrary to the express language of the BOR le er . Any cons truc on or impl i ed t erm c ont ended f or by Carvill is misconceived and bound to fail. There is accordingly no serious issue to be tried.

*857

24 It is common ground between the par es that the me r i ts test under CPR 6.20 is in substance no differ ent from the test of a real pr ospect of success under CPR 3.4 or 24.2: see e.g. Moles na v Pont on [ 2001] CLC 1412 per Colman J at p 1423 and MRG v Engelhard Metals Japan [2004] 1 Ll Rep 731 per Toulson J at p 732. As Toulson J put it, the underlying ra onal e i s t hat t he cour t shoul d not subj ect a f or ei gn l i gant to proceedings which the defendant would be en tled to have summa r i ly di smi ssed. It is, however, important in my opinion to have in mind that the test is not a high one. claimant has a real prospect of success if its chances of success are not fanciful.

25 I should add that, as Colman J said in Moles na v Pont on in paragraph 3.6, there may in some cases be good reason to determine a ques on of law at the appl ica on s tage. This is not, however, such a case. As appears above, there are issues between the par es in respect of the cus tom and pr ac ce of the London and European r einsurance markets as to the existence and/or scope of the reinsurers' liability to pay brokerage to a reinsurance broker. Those issues arise as between all three par es and rai se ques ons to be tried upon which evidence is likely to be required. The BOR le er itsel f ref er s to ‘ELU's premium’ being ‘ceded as is customary in the industry’. The ques ons wh i ch industry and what is customary are likely to form part of the debate at the trial. These considera ons to my mi nd ma ke thi s an unsui tabl e case to deci de the appl ica on as a pure ques on of law at thi s stage.

26 It is, as I understand it, common ground that the BOR le er is gover ned by the law of Connec cut and ther e wa s some evi dence of that l aw bef or e the judge, al though he held that the evidence of it was incomplete. The precise relevance of that evidence is not en rel y cl ear to me . Car vi ll have not pl eaded rel iance upon the law of Connec cut in support either of their case on the true construc on of the cont ract or of thei r alleged implied terms. As to XL, in its supplementary skeleton argument, it relies on English law and submits that, given that Carvill have not pleaded Connec cut law, the judge should simply have decided the ques on wh et her ther e wa s a real ques on or issue to be tried as between Carvill and XL on the basis of English law. There seems to me to be some force in that submission and I shall therefore consider the ques on whether the judge was correct to hold that Carvill have a real, as opposed to a fanciful prospect of success, against XL on the basis that, although the BOR le er is subj ect to Connec cut law, that law is (or is pr esume d to be) the same as Engl ish law.

27 I agree with the view expressed by the judge in paragraph 33 of his judgment that it is at least arguable that, in construing the BOR le er under Engl ish law, the cour t shoul d have regard to the circumstances surrounding the first le er, dat ed 26 August 1999, as part of the factual matrix or background to the BOR le er wh i ch repl aced it. I al so agree with the judge that it is at least arguable that those circumstances include the genesis of clause 10 of the le er and cl auses 2 and 3 of the addendum.

28 Mr Mille submi ts that the terms of the rei nsur ance trea es also f orm p ar t of the

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relevant matrix against which the BOR le er s, and i n par cul ar the second l e er *858 should be construed. By the me of the second l e er the t rea es had been operated by the par es , that is Car vi ll, XL and the rei nsur er s for some me and, for my part, I would accept the submission that both the trea es and the wa y they oper at ed were part of the background circumstances relevant to the construc on of the second BOR le er . As I see it, the rel evant terms of the trea es i ncl ude t he arbi t ra on c l auses and the provisions that XL was to pay premiums gross.

29 The way in which the contract operated under the first le er, and i ndeed under the second le er un l 13 August 2003, was (as stated above) as fol l ows . XL pai d gross premium to Carvill for onward transmission to the reinsurers. Carvill deducted its brokerage and accounted to the reinsurers for the net commission. Carvill's case is that it earned brokerage on placement and, moreover, that it did so even though it owed du es under the cont ract to ser vi ce the rei nsur ance pr ogramme a er the progr amme had been placed. That case is consistent with the view expressed by HHJ Hallgarten QC in Velos Group Ltd v Harbour Insurance Services Ltd [1997] 2 Ll Rep 461 at 463. It is to my mind plainly arguable but it is not the point raised in this applica on.

30 Mr Mille ' s submi ssi on is that , wh enever the br oker age wa s earned, it is not XL but the reinsurers who are liable to pay it. In so far as custom and prac ce i n t he reinsurance market in Europe or London is relevant in the light of the last few words of clause 10, he submits that the custom and prac ce of the London ma r ket (and I thi nk he also says the European market and indeed the American and Connec cut ma rket s) ar e that the broker is agent of the assured but is paid by the underwriter. As the judge observed in paragraph 29 of his judgment, he submits that this was se led as a ma er of English law by such cases as Lord Norreys v Hodgson (1897) 13 TLR 421, McNeil v Law Union & Rock Insurance Co Ltd (1925) 23 Ll L Rep 314 and Pryke v Gibbs Hartley Cooper Ltd [1991] 1 Ll Rep 602. He also points to the Velos case p 463 and to what he says is a similar unanimity of view in the English textbooks: see Reinsurance Prac ce and the Law (edited by Barlow Lyde & Gilbert) at sec on 13. 3, The Law of Reinsurance by O'Neill and Woloniecki at paragraphs 9–24 and 11-08, Colinvaux's Law of Insurance (7th ed) at paragraph 15–37 and Kluwer's Reinsurance Law, Chapter D.3.2.

31 Mr Mille submi ts that that pr ac ce i s cons i stent wi t h t he l ast two sent ences of clause 10, upon which he relies. Thus he says that the posi on is cl ear . The rei nsur er s and not XL are liable for the brokerage and the judge should have held that XL is not liable for the brokerage. There is undoubtedly considerable force in these submissions. The ques on is, howe ver , wh et her a cont rar y case is sufficientl y arguabl e.

32 It has seemed to me throughout the argument that the contrary must be at least arguable. It must be assumed for the purpose of this argument that Carvill earned its brokerage when the business was placed, although whether that is so or not will be a ma er for tri al . Under the trea es i t was XL' s dut y to pay gross premi u ms . Ther e are *859 two possible views of XL's obliga ons under the BOR le ers . The first i s that i t was its duty to pay the gross premiums to Carvill and the second is that it was its duty to pay the gross premiums to the reinsurers. In the first case, i t wa s then for Car vi ll to remi t the premiums to the reinsurers (or at least to account to them for the premiums) but Carvill was en tled to deduct its br oker age and remi t or account for the net pr emi ums to the reinsurers. In the second case, if (as Mr Mille submi ts wi th for ce) i t wa s the reinsurers' obliga on to pay br oker age, it seems to me to be at least ar guabl e that that

Page14

obliga on onl y arose on recei pt of the pr emi ums . Thus the rei nsur er s wo ul d di schar ge their obliga on t o pay br oker age, ei ther on r ecei pt of pr emi ums or , i f t he gros s premiums were paid to Carvill (as contemplated in the le er s) on recei pt by Car vi ll of the gross premiums, when the reinsurers must be treated as authorising Carvill to deduct the brokerage before remi ng t he net premi u m.

33 On that foo ng, i n the ins tant case, the ar gume nt i s that XL has fai led to pay the gross premiums to the reinsurers, either directly or through Carvill but has paid them to Benfiel d and ins tructed them nei ther to pay the gr os s pr emi ums to the rei nsur er s nor to pay the brokerage to Carvill, but to hold the amount that would have been paid to Carvill to its order. It has indicated in the le er of 1 Decemb er 2003 quot ed above that , if it is subsequently held that Carvill is en tled to the br oker age, i t wi ll ‘honour [its] obliga on (to Car vi ll) and ther ef or e aut hor i ze the rel ease of the appr opr iat e amo unt to Carvill’. As that le er shows , the real issue in thi s wh ol e affair i s bet wee n Car vi l l and XL as to whether Carvill should be en tled to the br oker age. In these ci rcums tances it is to my mind difficul t to s ee how i t can f air ly be concl uded t hat ther e i s no seri ous ques on or issue between them to be tried.

34 The considera ons i n t hose t wo paragraphs s tem f rom a cons i der a on of the rela ve pos i ons of the par es. I turn to consi der t he t erms o f t he BOR l e er . Ms Barbara Dohmann QC submits that the points iden fied above are at least arguabl e, either by way of construc on or thr ough the imp l ica on of appr opr i ate i mpl i ed t erms. She recognises of course the force of Mr Mille ' s submi ssi ons based on the l ast two sentences of clause 10. However, she points to the dis nc on bet wee n ‘ ear ned’ and ‘paid’ in the last two sentences and submits that clause 10 must be construed in the context of the contract as a whole and of the other terms of it, including in par cul ar , clause 3.

35 As to clause 10, she notes that the last sentence makes it clear that Carvill earned the commission but otherwise simply provides for the mechanics of the payment of that commission, namely ‘by the reinsurers to which [XL's] premium is ceded as is customary in the industry.’ It is strongly arguable that that expression contemplates the payment of gross premium by XL to the reinsurers, with Carvill to be paid by the reinsurers out of that premium. Thus clause 10, either by a process of construc on or of imp l ied term, imposes an obliga on upon XL owe d to Car vi ll to pay gros s pr emi um to the rei nsur er s in order to enable them to pay the brokerage to Carvill.

*860

36 Ms Dohmann also relies upon clause 3, which provides:

‘At least quarterly, Carvill will render accounts to ELU accurately detailing all material transac ons , i nc l udi ng i nf orma on ne cessary to su ppor t al l commissions, charges and other fees received by, or owing to, Carvill from ELU. Carvill will remit all funds due to ELU within 30 days of receipt.’

Ms Dohmann submits that clause 3 supports the case that brokerage is or may be owing to Carvill from XL, so that, read together, clauses 3 and 10 support the conclusion that XL is liable to Carvill for the brokerage but that it is to be paid in the way described above, by deduc on f rom t he gros s pr emi ums pai d t o Car vi ll by XL f or onwa rd transmission to the reinsurers net of the brokerage. Further or in the alterna ve she

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submits that clause 3 at least arguably makes it clear that XL is to be liable to Carvill for commission in circumstances in which, for any reason, it is not paid by the reinsurers.

37 Mr Mille submi ts in XL ' s suppl eme nt ar y skel et on ar gume nt that ‘commi ssi on’ does not mean or include brokerage and that the judge was wrong to say in paragraph 34 of his judgment that ‘commission’ was the word used in the United States to describe brokerage. It may be that the evidence does not go so far but it seems to me that, simply as a ma er of c ons truc on of cl ause 3, it i s at least ar guabl e t hat ‘a ll commissions … owing to Carvill from ELU’ is wide enough to include brokerage. I recognise that it is also arguable that ‘commissions’ does not include brokerage because brokerage is Carvill's remunera on and remu ner a on i s express l y deal t wit h i n t he l ast two sentences of clause 10.

38 In my opinion the construc on pr oposed by Ms Dohma nn i s at l east ar guabl e. I would reach that conclusion without regard to the terms of the addendum but, it seems to me to be arguable that, if regard is had to clauses 2 and 3 of the addendum, that construc on ar gume nt recei ves some suppor t.

39 There were two further points which struck the judge and which he discussed in paragraphs 35 and 36 of his judgment. For present purposes it is I think only necessary to refer to the first of them. The judge sai d in par agraph 35:

‘The first i s Mi ss Dohma nn' s cont en on t hat i f the l ast sent ence of clause 10 exonerates XL from liability for Carvill's remunera on, it does so onl y so long as XL con nues t o cede pr emi um t o t he r ei nsur er s “as i s cus toma ry i n t he industry”. One aspect of customary prac ce wh i ch wa s commo n ground in the argument before me was that the reinsured remits the gross premium to the broker for onward transmission to the reinsurer and the broker deducts his commission on the way. A er 13t h Augus t 2003 XL ceased remi ng gross premium to the reinsurers via Benfiel d and i ns tead i ns tructed Benfield t o withhold a sum in a separate account equivalent to the brokerage that would have been due to Carvill before Carvill's appointment was terminated. In those circumstances it seems to *861 me to be fairly arguable (I put it no higher) that the liability to pay that brokerage reverted to XL, always assuming that Carvill is right in saying that the brokerage was earned. The contrary argument advanced by Mr Mille is that the wo r ds “to wh i ch ELU' s pr emi um i s ceded” in the last sentence of clause 10 merely iden fy the rei nsur er s and mu s t be read as if they said “to which ELU's premium is cedable”. To my mind this riposte merely serves to indicate that there is a triable argument as to the meaning and effect of the last sentence of clause 10.’

I agree.

40 I would also add that it seems to me that, notwithstanding Mr Mille ' s submi ssi ons to the contrary, it is arguable that a term of the kind pleaded in paragraph 17A.1 of the amended par cul ar s of cl ai m shoul d be imp l ied int o the cont ract. XL accept s that the court will imply a term into the BOR le er that XL wi ll not br each or fai l to per for m the reinsurance contracts by failing to pay premiums in accordance with their terms so as to deprive Carvill of their remunera on. That concessi on i s ma de on the basi s of the decision of this court in Alpha Trading Ltd v Dunnshaw—Pa en Ltd [1981] 1 Ll Rep 122 ,

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especially per Brandon LJ at p 128. However, XL submits that the alleged implied term is much wider than that because it amounts to an unqualified restri c on on XL doi ng anything to deprive Carvill of the opportunity of earning brokerage.

41 It appears to me that, once it is accepted that a term should be implied, there is plenty of scope for debate as to the precise form of the term. However, for the reasons already given, it is in my opinion arguable that it was an implied term of the BOR le er that Carvill would pay gross premiums either to the reinsurers or to Carvill and/or that it would not fail to do one or the other so as to deprive Carvill of its brokerage. It appears to me to be arguable that XL was in breach of contract in failing to pay the gross premium because it is arguable that that failure caused Carvill to be deprived of its brokerage. Whether it in fact had that effect depends upon the out come of the di sput e between Carvill and the reinsurers.

42 For all these reasons, I have reached the clear conclusion that, if the issue is to be determined under English law, the ques on wh et her XL i s l iabl e t o Car vi ll f or commission raises an issue to be tried and that the judge was correct to hold that there is between Carvill and XL ‘a real issue which it is reasonable for the court to try’ within the meaning of CPR 6.21(2). In these circumstances I do not think that it is necessary for me to consider the relevance and possible effect of such evi dence of t he l aw of Connec cut as wa s put bef or e the judge. Nor is it necessar y to expr ess a vi ew on any of the other points made in the skeleton arguments, including those in the respondents’ no ces . I wo ul d onl y add that , so far as Connec cut law i s concerned, it does seem t o me that the precise basis upon which it is said by any party that such law is relevant and admissible should be clarified at a case ma nageme nt conf er ence we l l in advance of the trial.

*862

43 Finally, I should stress that, in reaching the conclusions set out above, I intend to express no view upon the likely construc on of the BOR le er. The t rue cons t ruc on of the le er and the ques on wha t , if any, terms shoul d be i mpl i ed i nto i t are ma ers to be determined at the trial.

Necessary or proper party

44 Under CPR 6.20(3) a claim form may be served out of the jurisdic on if

‘(3) a claim is made against someone on whom the claim form has been served or will be served and—

(a) there is between the claimant and that person a real issue which it is reasonable for the court to try; and

(b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.’

45 As to paragraph (a), it is not in dispute that there is a real issue to be tried between Carvill and the reinsurers. The ques on i s wh et her XL i s a pr oper par ty to that cl ai m

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within the meaning of paragraph (b). The judge correctly held in paragraph 39 of his judgment that the test is that of a ‘good arguable case’: Seaconsar (Far East) Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438, especially per Lord Goff of Chi evel ey at 453D-G. As the judge observed, that test is somewhat higher than the test under CPR Part 24, but less stringent than a balance of probabili es : see MR G v Engel hard Me t al s Japan [2004] 1 Ll Rep 371 per Toulson J at 732 paragraph 9. It was thus for Carvill to demonstrate a strong argument which was short of a balance of probabili es that XL was a necessary or proper party to the ac on i n L ondon agai ns t t he Eur opean reinsurers. The judge rejected Mr Mille ' s submi ssi on that they coul d not do so. The ques on in thi s par t of the appeal is wh et her he wa s cor rect to rej ect that submi ssi on. Since it is sufficient for a claiman t to show t hat a propos ed par t y i a necessary or proper party, the ques on is wh et her XL is a pr oper par ty to the cl ai m agai ns t the rei nsur er s.

46 I have reached the conclusion that XL is indeed a proper party to the claim against the reinsurers and that the judge was correct to hold that Carvill had demonstrated a strong argument to that effect. In my judgme nt , it is cl ear from the above di scus si on on the first issue that Car vi ll's cl ai m for br oker age agai ns t the rei nsur er s is cl osel y bound up with the alterna ve cl ai m for br oker age or dama ges agai ns t XL. Wh i le I accept that it is not inevitable that Carvill will succeed against either the reinsurers or XL, it seems to me to be likely that they will succeed against one or the other. In any event, if these claims were brought in England, without the necessity of serving the claim forms out of the jurisdic on, ther e can be no doubt that they wo ul d be tri ed toget her .

*863

47 If there were no complica on der i ved f rom the fact that ther e i s an ar bi tra on clause in the reinsurance contracts, I can see no sensible basis for concluding that XL was not a proper party to the claim against the reinsurers. The contracts are closely related, as are the rela onshi ps betwe en t he t hr ee en es, the r ei nsur ed, t he reinsurers and the brokers. Good sense suggests that any ques ons of imp l ied cont ract or of custom and prac ce shoul d al l be tried toget her in one ac on.

48 In Petroleo Brasiliero SA v Mellitus Shipping Inc (The Bal c Fl ame ) [2001] CLC 1151 , Po er LJ , wi th wh om Jonat han Par ker and Sedl ey L JJ agreed, sai d at paragraph 33, dismissing an appeal from a decision of Longmore J:

‘Although the wording of r. 6.20 and 6.21 differ s from that of the forme r O. 11, r. 1(1) and r. 4, the principles expounded in former authori es rel a ng t o O. 11 remain applicable. That being so, the star ng poi nt for the gr ant of leave is that generally a person who may be joined in proceedings in accordance with the rules as to joinder [of] par es is a “pr oper par ty” and that , wh en the liabi lity of several persons (whether cumula ve o r a l ter na ve) de pends on on e inves ga on, if one of them i s a f oreigner resi ding out of the j uri sdi c on t hen CPR, r. 6.20 applies: see Massey v Haynes (1881) 21 QBD 330.’

49 The judge applied that principle to the facts of this case and held, in my opinion correctly, that it is unques onabl y t he pos i on t hat Ca r vi l l's cl aims agai nst the reinsurers and XL depend on one inves ga on, even i f it i s pos s i ble t hat the alt erna ve claims against the reinsurers and the reinsured could both fail. The judge said that it was in his view immaterial that the alterna ve cl ai ms do not ar i se under one and the

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same transac on. Ther e is, he sai d, a commo n thr ead to the cl ai ms in the cus tom and prac ce of the ma rket wh i ch, on Car vi ll's case, pl ays a cent ral rol e i n each. I en rely agree.

50 The principal point advanced by Mr Mille on behal f of XL under thi s head wa s based upon the arbitra on cl auses in the trea es. He submi t s that , given t he s tance of the reinsurers in these proceedings (viz. that it is XL and not the reinsurers themselves which is liable to Carvill for brokerage), the resolu on of the ques on whe t her XL i s liable to Carvill will or may prejudice XL's right to arbitrate all ‘disputes and differ ences arsing out of or connected with’ the reinsurance trea es , t hei r i nt er pr et a on or implementa on. He submi ts that in these ci rcums tances Car vi ll shoul d be le to bri ng any claim they may have against XL in Connec cut .

51 Mr Mille put s hi s rel iance upon the ar bi tra on c lauses i n a numbe r of way s but , in my opinion, the judge was correct to reject all his submissions in this regard. The ques on is wh et her XL is a pr oper par ty to the cl ai m betwe en Car vi ll and the rei nsur er s. In my judgment, that ques on shoul d be det ermi ned by the appl ica on of the pri nci ples set out in The Bal c Fl ame to which I have referred. The existence of the arbitra on agreements between XL and the reinsurers may have some relevance *864 to that ques on but I wo ul d gi ve them l i le, if any, wei ght . Car vi l l are not par es t o the contracts containing the arbitra on cl auses .

52 The issues in this ac on invol ve the det ermi na on of the r ight s and obl i ga ons as between Carvill and the reinsurers and as between Carvill and XL but not as between the reinsurers and XL. As I see it, no issue is joined between XL and the reinsurers. If any dispute between them fell within the terms of the arbitra on cl auses , a cl ai m to that effect coul d be me t by an appl ica on f or a stay under sec on 9 of the Ar bi tra on Act 1996. Any such dispute could then be determined in arbitra on on wh at mi ght be differ ent evi dence. It is howe ver to be not ed in thi s regard that , as I indi cat ed above, the reinsurers have undertaken not to claim in this ac on a decl ar a on t hat XL i s l iabl e to Carvill.

53 In their supplementary skeleton argument Carvill submit that it cannot fairly be said that the existence of an arbitra on cl ause in a cont ract betwe en A and B can oper at e to prevent C from bringing court proceedings against both A and B jointly. In such proceedings neither A nor B could obtain a stay of such proceedings under sec on 9 of the 1996 Act for the very good reason that C is not a party to the contract containing the arbitra on cl ause. In shor t C is en tled t o bri ng separ ate proceedi ngs agai nst A and B without infringing the arbitra on cl ause and ther e is no reason wh y C shoul d not joi n them both in the same proceedings. I would accept those submissions.

54 In all the circumstances, I am not persuaded that the joinder of XL as a party to this ac on, i n wh i ch Car vi ll c l ai ms br oker age f rom t he r ei nsur er s, i s a br each of or interference with XL's rights, including its arbitra on ri ght s, under the trea es. Nor am I persuaded that such joinder is in any way inappropriate. On the contrary, the judge was correct to hold that XL was a necessary or proper party to the claim against the reinsurers.

Conclusion

55 For the reasons set out above, I agree with the judge that there is a serious issue to

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be tried against XL on the merits and that Carvill have shown that there is a strong case for argument that XL was a necessary or proper party to their claim against the reinsurers. I would therefore dismiss the appeal.

Longmore LJ:

56 I agree. The fact that XL has felt it necessary to promise the European reinsurers that, if by any unhappy chance, reinsurers were to be held liable to Carvill for sums which reinsurers never themselves received, XL will discharge that liability on their behalf only emphasises the ar ficiali ty of XL' s pos i on. XL i s seeki ng t o pr event t he English court from fastening on it any liability of its own in a situa on wh er e i t i s prepared to pay up if the liability is a ribut abl e to the onl y ot her candi dat e for such *865 liability. It is, to my mind, clear that there should be one inves ga on as to liability for European brokerage and that both XL, as reinsured, and the European reinsurers should be par es to that one inves ga on.

Ward LJ:

57 I agree.

(Appeal dismissed)*866

© 2012 Sweet & Maxwell

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Status: Mixed or Mildly Nega ve Judi ci al Tr eatme nt

Vishal Harish Chellaram, Ashwin Harish Chellaram v Lokumal Kishinchand Chellaram, Murli Tahilram Chellaram, Lal Lokumal Chellaram, Sham Lokumal Chellaram, Pishu Tahilram Chellaram, Chellwood Holdings Limited, Bermuda Trust Company Limited, Mohan Shewakram Chellaram

HC 01 01700

High Court of Jus ce Chancer y Di vi si on

16 April 2002

[2002] EWHC 632 (Ch)

2002 WL 347203

Before: Mr Jus ce Lawr ence Col lins

Tuesday 16th April, 2002, Hearing: February 22, 25, 2002

Representa on

Mr Patrick Lawrence (instructed by Anderson's ) for the Claimants.

Mr Antony White QC (instructed by Wedlake Bell ) for the Second and Fi h Def endant s and (instructed by Herbert Smith ) for the Third, Fourth, and Sixth Defendants.

Mr Colin Nasir (of Linklaters & Alliance ) for the Seventh Defendant.

Mr James Pickering (instructed by Singh Karron & Co ) for the Eighth Defendant.

JUDGMENT

I Introduc on

1. The Chellaram family is a well known trading family, of which the claimants and all of the non-corporate defendants are members. The family is no stranger to li ga on. Ther e has alr eady been li ga on i n Singapor e, in London, in Bomba y and i n Ber mud a whi ch has some r elevance t o t he background to, or the issues in, this case. The li ga on i n London r esul t ed i n t he deci sion of Sco J (as he then was) in Chellaram v. Chellaram [1985] Ch 409 in proceedings to which I shall refer as Chellaram v. Chellaram (No.1) .

2. These proceedings were brought by the claimants for relief in connec on wi th wh at they cl ai me d were breaches of trust in rela on to four se lemen t s , one mad e i n 1943, one i n 1946 and t wo i n 1975. The claimants were benefici ar ies under each of these trus ts. The 1943 and 1946 trus ts we r e established by their great grandfather, and the assets of those trusts are buildings in Bombay. The claimants have alleged that their father's cousins and their uncle, the trustees, have been in breach of trust by le ng t he proper es at a loss to persons connect ed wi th themsel ves and have f ailed t o provide proper accounts.

3. The 1975 trusts were established by their father and their uncle, and the trust assets consisted of shares represen ng par t of the bus i nesses run by thei r cous i ns out si de Indi a. The al lega ons rela ng to those trusts will be set out in detail later, but (at the risk of oversimplifica on) they are t hat thei r cousins, the trustees, diminished the value of the trust assets and later, as part of the se leme nt of Chellaram v. Chellaram (No.1) , procured their sale at an undervalue to themselves or to companies controlled by them.

4. All of the defendants are, or are alleged to be, outside the jurisdic on. Two of the def endant s were purportedly served by the pos ng of the cl ai m form and par cul ars of claim t o addr esses i n

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London, and the other defendants were the subject of a series of orders made on June 27, 2001 giving permission to effect ser vi ce out si de the j ur i sdi c on ( even t hough, on t he cl aiman t s ' case, permission was not required in rela on to two of the def endant s).

5. These are applica ons by the def endant s (ot her than the first def endant , who has not been served) to set aside the orders, or for declara ons to the effect that servi ce has not been proper l y effected or that the cour t has no jur i sdi c on ( or for order s that i f the cour t has j uri sdi c on, i t shoul d not be exercised). The case raises a number of novel points on jurisdic on and choi ce of l aw i n rela on to trus ts, and an imp or tant poi nt on pos tal ser vi ce under the CPR.

6. The claimants have discon nued the pr oceedi ngs in so far as they rel at e to the 1943 and 1946 se leme nt s, but the se lemen t s are r elevant not onl y by way of background, but also because t he defendants claim that (a) orders for service outside the jurisdic on in thi s ac on shoul d be s et asi de because (among other reasons) the claimants did not disclose the existence of proceedings in India which claimed an interest in property which was subject to the 1943 and 1946 se leme nt s, and (b) the existence of those proceedings is one factor (among others) tending to show that England is not the forum conveniens for the proceedings in rela on to the 1975 trus ts.

II Drama s per sonae

7. The Chellaram trading enterprise was originally based in Bombay, India and was started by Kishinchand Chellaram (“Kishinchand”), who died in 1951, leaving three sons. There had been another son, Asandas, who effected a par on of his share in the f amil y proper t y in 1932, and who does not play a part in the story.

8. A family tree (showing the male line of the relevant parts of the family) is set out in an appendix to this judgment. Kishinchand's eldest son Tahilram Chellaram (“Tahilram”) died in 1943, leaving three sons, all of whom worked with him in the business: Ram Chellaram (“Ram”), who died in 1987, and Murli Chellaram (“Murli”), the second defendant, and Pishu Chellaram (“Pishu”), the fi h defendant.

9. His second son, Shewakram Chellaram (“Shewakram”), died in 1949, and he and his wife Lachmibai Chellaram (“Lachmibai”), who died in 1997, had two sons, Mohan Chellaram (“Mohan”), the eighth defendant, and Harish Chellaram (“Harish”), who died in 1990. Harish was married to Radhika Chellaram (“Radhika”), who is s ll al ive, and they had two sons , Vi shal Chel lar am (“Vi shal ”) and Ashwin Chellaram (“Ashwin”), who are the claimants.

10. His third son was Lokumal Chellaram (“Lokumal”), the first def endant , and he and hi s wi fe Kamlabai Chellaram (“Kamlabai”) had two sons, Lal Chellaram (“Lal”) and Sham Chellaram (“Sham”), the third and fourth defendants.

11. According to the defendants, a er the deat h of Ki shi nchand, the fami ly bus i ness traded as thr ee branches. The Lokumal Group is the business run and owned by Lokumal, Lal and Sham. The Tahilram Group is the business run and owned by Murli and Pishu (Ram having died in 1987). Murli is unable to manage his own affai rs, as a resul t of inj ur ies sus tai ned in an acci dent last year . The Shewakram Group comprised, following the death of Shewakram, the assets owned by or on behalf of Lachmibai (who died in 1997), Mohan, Harish (who died in 1990), Radhika, and the claimants.

12. According to the claimants, the original business eventually traded as two branches, the Lokumal Group and Tahilram Group, and not three. The Shewakram Group had interests in both the other two branches, and did not control any part of the original enterprise. Any businesses in which the Shewakram Group had an interest were controlled by either the Lokumal or Tahilram Group. Nothing turns for present purposes on this differ ence of emp hasi s.

13. Chellwood Holdings Ltd. (“Chellwood”), the sixth defendant, is a Gibraltar company in the Lokumal Group and is owned by Lal and Sham. In 1985 Chellwood purchased shares (represen ng interests in the Lokumal Group businesses) which were subject to the 1975 trusts.

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14. Bermuda Trust Co. Ltd. (“Bermuda Trust”), the seventh defendant, is a Bermudan company and the trustee arm of the Bank of Bermuda. It became a trustee of the 1975 trusts in 1985.

15. Mr H. G. Advani (“Mr Advani”) was an adviser of very long standing (since the early 1930s) to Kishinchand and to the family. He was a senior lawyer, and was described in the Chellaram v. Chellaram (No.1) proceedings as the doyen of the Bombay bar. He was a trustee of three of the four trusts which are the subject ma er of these pr oceedi ngs, he advi sed on sever al of the imp or tant steps taken by the family, and dra ed ma ny of the docume nt s, and acted as an arbi trat or in val ui ng shares in the family businesses which the Shewakram Group sold to the other groups in 1985. He died in 1991.

III Jurisdic on

16. The principal ques ons on the exi stence of jur i sdi c on ( as dis nct f rom di scre on to exerci se jurisdic on) wh i ch ar i se in thi s case are (a) wh et her Sham wa s pr oper l y ser ved by pos t at an addr ess in London which the claimants say was his last known residence; (b) whether any of the defendants is domiciled in England for jurisdic onal pur poses ; (c) wh et her any of the def endant s is domi ci led in a State or territory to which the Brussels Conven on on j ur i sdi c on and t he enf orcemen t of judgments in civil and commercial ma er s of 1968 ( “the 1968 Conven on”) appl i es, and, if so, whether the court may assume jurisdic on under the pr ovi si on in the 1968 Conven on r ela ng t o trusts; (d) which of the defendants are domiciled in countries or territories to which the 1968 Conven on does not appl y, and wh et her the pr ovi si ons in CPR 6. 20 aut hor i si ng ser vi ce on necessar y and proper par es , and on trus tees , appl y to them.

17. The following countries are (or may be) relevant countries for the purposes of domicile or residence: (a) England, where Lal and Sham, the third and fourth defendants, are (or were) said to have residences to which the claim form and par cul ar s of cl ai m we r e sent by pos t in June 2001, and from where the claimants have suggested that Chellwood, the sixth defendant, is managed; (b) Hong Kong, where Lokumal, the first def endant , is domi ci led, and wh er e Sham, the four th def endant , says he is resident; (c) India, where Murli and Pishu, the second and fi h def endant s , are domi c il ed, and where Mohan, the eighth defendant, says he is domiciled; (d) Spain, where Lal says he is domiciled; (e) Gibraltar, where Chellwood is incorporated, and where the claimants say that Mohan, the eighth defendant, is domiciled; and (f) Bermuda, where Bermuda Trust, the seventh defendant, is incorporated.

18. The 1968 Conven on is gi ven effect by the Civil Jurisdic on and Judgme nt s Ac t 1982 (“the 1982 Act”). It applies to Spain as a Contrac ng Par ty. It al so appl ies to Gi br al tar as a resul t of the Civil Jurisdic on and Judgme nt s Ac t 1982 (Gi br al tar ) Or der 1997 , S.I. 1997 No. 2602, made under the power in sec on 39 of the 1982 Act to make provision to regulate as between the United Kingdom and specified ter ri tor ies (inc l udi ng any col ony) jur i sdi c on and t he enf orcemen t of judgmen t s .

19. Where the 1968 Conven on appl ies , a def endant wh o is domi ci led in anot her Stat e or ter ri tor y to which it applies can only be sued in the United Kingdom by virtue of the rules set out in the Conven on: Ar cles 2 and 3. As from Mar ch 1, 2002, the 1968 Conven on ( and t he paral l el Lugano Conven on ) wi ll for mo s t Cont rac ng States be r epl aced, as regards proceedi ngs comme n ced f rom that date, by Council Regula on 44/2001, but the rel evant pr ovi si ons of the Counci l Regul a on are not materially differ ent .

20. The English court can only have jurisdic on in rel a on t o def endant s domi c il ed out s ide count r ies or territories to which the 1968 Conven on (or the Lugano Conven on ) appl i es i f (a) they submi t to the jurisdic on (wh i ch none has); or (b) they have been val idl y ser ved wi thi n the jur i sdi c on ( as the claimants allege Sham has been); or (c) they fall within one of the heads of CPR 6.20 pursuant to which permission to serve a defendant outside the jurisdic on ma y be obt ai ned.

Domicile

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21. The effect of Ar cle 52( 1) of the 1968 Conven on i s that whet her a part y is domi c i led i n the United Kingdom depends on the law of the United Kingdom. For the purpose of proceedings in England, an individual will be domiciled in England if and only if (a) he is resident in England and (b) the nature and circumstances of his residence indicate that he has a substan al connec on wi t h England: 1982 Act, sec on 41( 3) . If a party is not domiciled in the United Kingdom then, in order to determine whether that party is domiciled in another Contrac ng Stat e, the Engl ish cour t appl ies the law of that State: Ar cl e 52( 2) . Res i dence is not defined but mea ns a se l ed or usual place of abode, which connotes some degree of permanence or con nui ty: Bank of Dubai Limited v. Abbas [1997] ILPr 308, 311(CA) .

22. The domicile of a company is its seat, and in order to determine the seat, the court applies its rules of private interna onal law: Ar cle 53( 2). The r el evant rules of pri vate i nterna onal l aw ar e enacted in the 1982 Act, sec on 42 . A foreign corpora on wi ll have i ts seat in Engl and onl y i f its central management and control is exercised in the United Kingdom, and that management and control is exercised in England or it has a place of business in England: sec on 42 (3) , (4) ). It will have its seat in another State or territory to which the 1968 Conven on appl ies , if it is incor por at ed under the law of that State or territory and has its registered office t her e, or i ts cent r al man agemen t and control is exercised there (unless the courts of that State or that territory would not regard it as having its seat there): sec on 42( 6) , (7) .

23. The domicile of the defendants is only in part common ground. Where it is not common ground, the onus is on the claimants to show a good arguable case if they wish to establish that a defendant is domiciled in a par cul ar St at e or ter ri tor y: Seaconsar Far East Ltd. v. Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 ; Canada Trust Co. v. Stolzenberg (No. 2) [2002] 1 AC 1 , 13. The standard is therefore more stringent than that of showing merely a serious issue to be tried, but less stringent than proof on the balance of probabili es .

24. The posi on of the par es on domi c il e, and, whe r e t hey differ, my fi ndings are t hese: (a) It is accepted that Lokumal, the first def endant , is domi ci led in Hong Kong.

(b) It is accepted that Murli and Pishu, the second and fi h def endant s , are domi c il ed i n I ndi a.

(c) Lal, the third defendant, is domiciled in Spain, where he has been resident for 15 years, and whose law regards him as domiciled there (Ar cl e 52, 1968 Conven on) ; Vi s hal , the fir st claimant, said that un l evi dence wa s ser ved he cons i der ed that Lal wa s res i dent in London, and that the London address at which he was purportedly served was his usual residence, but the claimants now accept that he is domiciled in Spain.

(d) Sham, the fourth defendant, is resident in Hong Kong, and the nature and circumstances of his residence establish that he is domiciled there. The claimants have asserted, but have not put forward any cogent evidence, that he is domiciled in England. He holds a United Kingdom passport, and he occasionally stays at a flat in St John' s Wo od wh i ch is own ed by a fami ly trus t. But he has been a permanent resident of Hong Kong since 1984. From that me he has ma naged and run his business from Hong Kong where his principal ac vi ty is in shi ppi ng. Al l hi s chi ldr en were brought up and received the major part of their educa on i n Hong Kong. He spends approximately 9 to 10 months a year in Hong Kong and the remaining 2 to 3 months mostly on business in Asia. From December 1999 un l the i ncep on of these proceedi ngs he was i n London for a total of about 5 days on transit from the United States to Hong Kong. The evidence is clear in the sense that there is neither the requisite residence in, nor substan al connec on with, England.

(e) Chellwood, the sixth defendant, has its seat (and therefore its domicile) in Gibraltar, where it is incorporated and registered, and the claimants have not supported or pursued their asser on that it is run from England with any evidence.

(f) It is accepted that Bermuda Trust, the seventh defendant, has its seat (and therefore its domicile) in Bermuda, where it is incorporated and registered.

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(g) Mohan, the eighth defendant, says that he is domiciled in India. The claimants say that he is resident and domiciled in Gibraltar. But the evidence on his behalf is that although he does visit Gibraltar for a few months each year, he has his residence in India, and visits Gibraltar only on a tourist visa. I am sa sfied t hat the cl aiman t s have not shown a good arguabl e case t hat he i s domiciled in Gibraltar, and I will proceed on the basis that he is a non-Conven on def endant .

Jurisdic on under CPR 6. 20

25. The claimants sought and obtained permission to serve Lokumal, Murli, Pishu and Bermuda Trust pursuant to CPR 6.20(3) and 6.20(11). Under CPR 6.20(3) permission may be given to serve a defendant outside the jurisdic on wh er e the def endant i s a necessar y or pr oper par ty to a cl ai m made against someone on whom the claim form has been or will be served (whether the service is in England or outside England, and whether it is within or without a 1968 Conven on count ry) . Thi s is of prac cal rel evance wh er e ther e is no independent head of jur i sdi c on agai nst a def endant who i s not domiciled in a 1968 Conven on count ry or ter ri tor y, but ot her def endant s can be ser ved i n England, or in non-Conven on or Conven on count r ies.

26. Permission may be granted under CPR 6.20(11) to serve out of the jurisdic on if

“a claim is made for any remedy which might be obtained in proceedings to execute the trusts of a wri en ins trume nt wh er e —

(a) the trusts ought to be executed according to English law; and

(b) the person on whom the claim form is to be served is a trustee of the trusts.”

27. I should also men on (al though they have not been rel ied on by any par ty) CPR 6. 20( 14) and (15) which provide for jurisdic on, in the case of cl ai ms in cons truc ve t rust and r es tu on, where t he defendant's alleged liability arises out of acts commi ed wi thi n the jur i sdi c on.

Jurisdic on under the 1968 Conven on

28. So far as defendants who are domiciled in 1968 Conven on count ries are concer ned, Ar cle 6(1) (jurisdic on over addi onal par es by vi rtue of proceedi ngs agai nst defendant domi c i led i n the forum) has no applica on because it is not now argued that any def endant is domi ci led in Engl and. The only head of jurisdic on on wh i ch the cl ai ma nt s rel y is Ar cle 5(6), whi ch provi des :

“A person domiciled in a Contrac ng St at e ma y, in anot her Cont rac ng State, be sued ….—

As se lor , trus tee or beneficiary of a t rust creat ed by the oper a on of a st atut e, or by a wri en ins trume nt , or creat ed or al ly and evi denced in wr i ng, in t he cour t s of the Contrac ng Stat e in wh i ch the trus t is domi ci led. ”

29. The effect of Ar cle 53( 2) of the 1968 Conven on i s that i n pr oceedi ngs i n Engl and t he domi c i le of a trust depends on the law of the United Kingdom. By sec on 45( 3) of the 1982 Act, a trust is domiciled in England if and only if English law is the system of law with which the trust has its closest and most real connec on.

Service

30. I will proceed on the basis that, except in the case of Sham, where the ques on of the val idi ty of service has an important prac cal effect , it i s not necessary f or present pur pos es to mak e any findi ng wi th regard to the val idi ty of ser vi ce, si nce (wh er e ser vi ce has not been val idl y effect ed) it can be effected agai n if the Engl ish cour t has jur i sdi c on. The claiman t s have pur por t ed t o s erve all the defendants, except Lokumal, the first def endant . They have accept ed that thei r pur por ted service in India on Murli, the second defendant, and Pishu, the fi h def endant , was i nval i d because

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personal service was not effected and because the ser vi ce wa s effect ed by per sons wit hout proper authority.

IV The issues

31. The principal issues are these. The first i s wh et her the Civil Procedure Rules have effected a major change to the rules of jurisdic on, so that a def endant wh o i s not domi ci led or pr esent in England can now be sued here by virtue of service on him at his last known residence. That in turn depends on whether the effect of the deci si on of the House of Lords in Barclays Bank of Swaziland Ltd v. Hahn [1989] 1 WLR 506 (that under the RSC service by post within the jurisdic on wa s onl y permissible if the defendant was in England at the me the wr i t wa s ser ved or deeme d to be ser ved) survives the introduc on of the CPR.

32. The prac cal effect of this poi nt is that Sham was not present in Engl and whe n t he claim f orm was sent by post to the address at which he stays when he is in London. If service is valid then the court would have jurisdic on over Sham, and the cour t coul d gi ve permi ssi on for ser vi ce on ot her non-Conven on def endant s as necessar y or pr oper par es under CPR 6.20( 3). Since t his poi nt does not depend on an apprecia on of the facts of the case it wi ll be deal t wi th in the next sec on.

33. The second set of issues also relates to the non-Conven on def endant s. It inc l udes the ques on of the applicability and interpreta on of CPR 6. 20( 11) concer ni ng cl ai ms in rel a on t o t rust s. It also raises the issues (a) whether the claimants can sa sfy the cour t that Engl and is the forum conveniens for the claims against those defendants; (b) whether the permission granted by Master Bragge to serve these defendants outside the jurisdic on shoul d be set asi de f or non- di scl osur e; and ( c) whether the claimants have established a serious issue to be tried on the merits of their claim.

34. The third set of issues relates to the ques on wh et her the 1968 Conven on def endant s ( Lal and Chellwood) can be sued under Ar cl e 5( 6) of the 1968 Conven on.

35. The applicability of CPR 6.20(11) and Ar cl e 5( 6) rai ses some novel and di fficult ques ons. There are more than 800 pages of evidence on these applica ons , but ther e is not mu ch di sput e about the essen al hi stor y. Wh er e the par es di ffer, I wil l not of course make any findings , except t o the extent that it is necessary, in par cul ar , to deci de wh et her the cl ai ma nt s have establ ished a good arguable case for jurisdic on and (for CPR 6. 20 pur pos es) a ser ious issue to be tri ed on the me r i ts. But because the jurisdic onal issues cannot be ful ly appr eci at ed wi thout an under standi ng of the factual circumstances they will be dealt with in sec on XI II.

V Service under CPR 6.5 and the decision in Barclays Bank of Swaziland Ltd. v. Hahn

36. The effect of CPR Par t 6 is that a cl ai m form ma y be ser ved by (amo ng ot her me t hods ) first-class post, and for that purpose by CPR 6.5(6) the place of service of an individual is the “usual or last known residence”. By CPR 6.7(1) a document served by first-cl ass pos t is deeme d to be ser ved the second day a er it wa s pos ted (excl udi ng Sat ur day, Sundays and publ ic hol idays).

37. The claim form and par cul ar s of cl ai m we r e sent by first-class pos t under cover of a l e er f rom the claimants' solicitors dated June 7, 2001, addressed to Sham at a flat in Imp er ial Cour t, Pr ince Albert Road, St John's Wood, London. Sham is resident in Hong Kong. The flat bel ongs to a fami ly trust, and he and members of his family stay in the property if and when they visit England. He was not at that address in June 2001.

38. The deemed date of service was June 11, 2001 (because June 9 and 10 were a Saturday and Sunday). Sham was in Hong Kong un l June 9, 2001 and in Bomb ay from June 10 to 16, 2001.

39. Lal was served in the same way at another flat in London, but no issue ar i ses wi th regard to Lal in this regard, because he is domiciled in Spain, and the English court can only assert jurisdic on over him if it is authorised to do so by the 1968 Conven on.

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40. The defendants rely on Barclays Bank of Swaziland Ltd v. Hahn [1989] 1 WLR 506 and Dicey and Morris, Conflict of Laws , 13th edi on, 2000, para 11–084, for the pr opos i on t hat , for juri sdi c onal purposes, it is not necessary that the defendant be in England when the proceedings are issued, but he must be in England when they are served.

41. Barclays Bank of Swaziland Ltd v. Hahn was a decision on the provision in RSC Order 10, r. 1(2) that: “A writ for service on a defendant within the jurisdic on ma y, i ns tead of bei ng ser ved personally on him, be served — (a) by sending a copy of the writ by ordinary first-cl ass pos t to the defendant at his usual or last known address, or (b) if there is a le er box for that addr ess, by inser ng thr ough the le er box a copy of the wri t encl osed i n a seal ed envel ope addr essed t o t he defendant …”. The date of service was, unless the contrary was shown, deemed to be the seventh day a er the dat e on wh i ch the copy wa s sent to the addr ess: Order 10, r. 1(3) .

42. In that case the defendant's wife rented a flat in Engl and, and he and hi s wi fe spent no mo r e than three months a year there. A copy of the writ was inserted through the le er box about two hours before the defendant arrived in England. Having been warned that the envelope had been put through the le er box, he di d not go to the flat, and r eturned t o Geneva t he next day. The r esul t of the deeming provisions was that the writ was deemed to be served a week later, when the defendant was s ll in Geneva. It wa s hel d that for the pur poses of RSC Order 10, r.1 the defendant had to be within the jurisdic on at the me of servi ce of the wri t, but that he was dul y served on t he day he arrived because the evidence was that the copy writ came to his knowledge when he was within the jurisdic on.

43. Lord Brightman said (at 510–511)

“… I accept the appellant's proposi on t hat t he def endant mu s t be wi thi n t he jurisdic on at the me whe n t he wri t i s served, and I do not find i t poss i bl e to agree the Court of Appeal's approach. This approach would mean that a writ could validly be served under Order 10 on a defendant who had once an address in England but had permanently le thi s count ry and se led elsewhe r e … T hi s appear s to me t o ou l ank Order 11 (rela ng to ser vi ce of pr ocess out si de the jur i sdi c on) in every case whe r e the defendant was formerly resident in this country and is capable of being contacted abroad within seven days. I feel no doubt that the words ‘within the jurisdic on’ appl y to the defendant, and not to the writ for service.”

44. The claimants say that the decision in Barclays Bank of Swaziland Ltd v. Hahn , being a decision under the Rules of the Supreme Court , has no applica on for the pur poses of the Civil Procedure Rules 1998 which are “a new procedural code” (CPR 1.1). They rely on the approach that new provisions in the CPR are not to be limited by prac ces and a tudes t hat a ach t o the former r ules of court, and that even provisions plainly based on provisions formerly found in the RSC would not necessarily be interpreted and applied in accordance with the case law built up around those provisions.

45. They say that there is no fundamental rule of procedure that a defendant outside the jurisdic on cannot be served within the jurisdic on, and rel y on Rolph v. Zolan [1993] 1 WLR 1305 , a case on the County Court Rules, which provided that a document could be served on a defendant “by first class post to his last known residence.” In that case the county court summons was sent by post to the defendant at his address in England at a me wh en he (a forme r sol ici tor ) had emi grat ed to Spain and started a new career as a guitarist and flame nco dancer . A f ri end of the def endant collected his mail and posted it on to Spain with the result that he received the summons. It was held by the Court of Appeal, first, that the Count y Cour t Rul es we r e not l imi ted, as a ma er of construc on, to ser vi ce onl y on a def endant wh o wa s wi thi n the jur i sdi c on. Secondl y, the Cour t of Appeal rejected a submission to the effect that Count y Cour ts Ac t, sec on 76, limit ed t he appl i ca on of the County Court rule to defendants within the jurisdic on at the me of servi ce. Sec on 76

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provided that “… the general principles of prac ce in the Hi gh Cour t ma y be adopt ed and appl ied to proceedings in a county court.” The submission was rejected for two reasons: first, sec on 76 was primarily directed to extending the powers of the county court where the County Court Rules made no express provision, and not to curtailing its powers. Secondly, the interpreta on of RSC Or der 10, r 1 in Barclays Bank of Swaziland Ltd v. Hahn was a specific limi ta on and not a gener al pri nci ple of prac ce wi thi n the me ani ng of sec on 76: pos t al servi ce was a ma er of s peci fic rul es, and not a ma er of gener al pr inc i pl es of pr ac ce.

46. Ralph v. Zolan is a decision on the former County Court Rules . The new regime under the CPR does not require me to follow decisions on the previous rules. In my judgment the decision does not bind me to hold that CPR 6.5 applies to defendants who are outside the jurisdic on at the me of service, or that it has effected a ma j or change i n the pr inc i pl es appl icabl e to j ur i sdi c on over persons outside England.

47. In my judgment there are two separate reasons why Sham has not been validly served. First, the claimants have not adduced any evidence which casts doubt on Sham's evidence that the address in St John's Wood is used only occasionally by him on the rare occasions when he visits London. In these circumstances there is no evidence that it ever was a “residence” and it therefore cannot be his “last known residence.” Secondly it has always been, and remains, a fundamental rule of English procedure and jurisdic on that a def endant ma y be ser ved wi th or i gi na ng process wi t hin t he jurisdic on onl y if he is pr esent in the jur i sdi c on at the me o f s ervi ce, or deemed servi ce. Barc l ays Bank of Swaziland Ltd v. Hahn is simply an illustra on of thi s pr inc i pl e (as is anot her case, not ci ted in argument, Cadogan Proper es Ltd v. Mo unt Eden Land Ltd [2000] I.L. Pr 722, in wh i ch the Cour t of Appeal held that if the defendant is outside England, an order for subs tut ed ser vi ce i n Engl and could not be obtained unless permission to serve proceedings out of the jurisdic on had been obtained). CPR Part 6 contains general rules about service of documents and does not only apply to service of a claim form (see Godwin v. Swindon Borough Council [2001] 4 All ER 641, 646 (CA) ), but I do not consider that CPR 6.5 has swept away the general principle so far as it relates to service of the claim form.

V The facts: the 1943 and 1946 Trusts

The 1943 Trust

48. The 1943 Trust was established by Kishinchand in April 1943 for the benefit of the wi ves and male children of Shewakram and Lokumal. The funds were to be divided equally into two separate trust funds: (1) the Lachmibai trust fund, for the wife and male children of Shewakram; and (2) the Kamlabai trust fund, for the wife and male children of Lokumal.

49. The net income of the respec ve trus t funds wa s to be pr ovi ded to the wi fe for the suppor t, maintenance, educa on and advanceme nt and ot herwi se for the benefit of her and her chi l dren born before the date of the crea on of the trus t (i.e. in the case of the Lachmi bai trus t fund, Mo han and Harish). Lachmibai had, during her life me , absol ut e di scre on as to t he use of the r evenue derived from the trust assets of the Lachmibai trust fund. Upon the death of the survivor of Lachmibai and Shewakram, the trust fund would be held by the trusts such that that the male descendants of Shewakram would obtain on distribu on an equal s hare of t he t rus t asset s depending on their respec ve fat her ' s share.

50. The original trustees of the 1943 Trust were Tahilram, Shewakram and Lokumal. A er Tahi lram and Shewakram died, Mr. Advani and Murli were appointed trustees. A er Mr . Advani di ed, Lal and Sham also became trustees, by deed of appointment dated January 5, 1993. The present trustees are Lokumal, Murli, Lal and Sham.

51. The present benefici ar ies of t he 1943 Trus t asset s are: as t o t he L achmi bai t rus t f und (represen ng 50% of the wh ol e) : Mo han (25% of the wh ol e) , and the cl ai ma nt s (12. 5% each of the

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whole); as to the Kamlabai trust fund: Kamlabai (50% of the whole) during her life me , ther ea er Lokumal during his life me , and ther ea er Sham a nd Lal (25% e ach of the who l e).

52. The trust monies were invested in real estate in Bombay, which is now called Central Building No. 2, which was acquired in May 1943. The property is fully tenanted. There is also a Bombay bank account which is used for the administra ve cos ts associ at ed wi th the admi ni stra on of Cent r al Building No. 2 and its tenancies.

The 1946 Trust

53. The 1946 Trust was established by Kishinchand Chellaram in July 1946. The Trust was established for the benefit of Lachmi bai and the ma l e chi ldr en of Shewa kram. The net income of the trus t fund was to be provided to Lachmibai during her life me or to Shewa kram in the event that he sur vi ved her. Upon the death of the survivor of Lachmibai and Shewakram, the trust fund was to be held by the trustees to divide amongst the male children/and all the male issue of the male line descending from Shewakram per s rpes in equal shares . Any ma l e descendent had to a ain t he age of maj ori ty before receiving his share. Un l that me, the t rust ees wer e r equi r ed t o provi de t he net income f or the maintenance, upbringing, educa on and gener al we l fare of t he s ons of L achmi bai and Shewakram.

54. The original trustees were Shewakram, Lokumal and Murli, and Lokumal and Murli are the surviving trustees. The present benefici ar ies of the 1946 Trus t are: Mo han (50%) and the cl ai ma nt s (25% each).

55. The trust monies were invested in property, a 30% share of a building in Bombay called Carmichael House. There is also a Bombay bank account which is used for the administra ve cos ts associated with the administra on of Carmi chael House and i ts tenanc i es . Ther e wa s al so a trus t part interest in another building on the site, Chellaram House, but that interest was, it would seem, disposed of some me ago.

Complaints concerning 1943 and 1946 Trusts

56. The figur es put bef or e the cour t i ndi cat e that the rent al i ncome from the two pr oper es i s rela vel y mo dest: i n the case of Cent ral Bui ldi ng No . 2, i t barel y br eaks even, and in the case of Carmichael House the expenditure exceeds income by more than £1000 per annum. The defendants say that because the tenancies for the proper es in the 1943 and 1946 Trus ts come under the Indi an Rent Control Act (whereby tenants' occupa on i s pr ot ected and rent al i ncreases are l imi ted to nominal annual amounts) it is difficul t to val ue t he proper es or t he c l ai mant s' i nter est i n them.

57. In 1998 the trustees of the 1943 Trust requested the benefici ar ies to pay a cont ribu on t o t he expenses of Central Building No. 2 to make up a shor al l. A er Indi an l awye rs for the t rust ees sought approval from the benefici ar ies to di stribut e the trus t asset s, the cl ai ma nt s' London sol ici tor s in early 2001 sought ( inter alia ) full accounts for the 1943 and 1946 Trusts for the period “pre-1980” to the date of their le er . I n cor respondence ther ea er they took the pos i on t hat informa on suppl ied wa s not sufficient, and t hat t heir cl i ents had no i nten on of releas ing the trustees from their obliga ons . The cl ai ma nt s then comme nced these pr oceedi ngs, ma ki ng the allega ons wh i ch are set out in paragraph 124 bel ow.

Governing law of the 1943 and 1946 Trusts

58. There can be no doubt that the 1943 and 1946 Trusts, and their administra on, are gover ned by Indian law, and the claimants accept that the governing law is that of India, and that the Indian courts can exercise jurisdic on over them. They we r e creat ed i n I ndi a by an I ndi an se lor over Indian property with trustees who were then resident in India, and were dra ed by Indi an lawy er s, and are registered in Bombay. They refer specifical ly to the Indi an Income Tax Ac t for aut hor i sed payments and the Indian Trusts Act 1882 for authorised investments. The only assets are property in Bombay and the bank accounts used for their administra on. The admi ni stra on of the Trust s i s dealt with in India under Powers of A or ney gr ant ed by the trus tees to di rector s of the I ndi an

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companies of the Lokumal or Tahilram Groups.

59. There is no case for any other governing law. The only foreign connec on is the res i dence of three of the trustees in the case of the 1943 Trust (Lokumal and Sham in Hong Kong and Lal in Spain) and of Lokumal in the case of the 1946 Trust. Neither Trust, nor its administra on, has any connec on wi th Engl and.

VI The 1975 Trusts

60. On February 14, 1975, two trusts were created by Harish (the father of the claimants) and Mohan (the claimants' uncle) (“the 1975 Trusts” and separately “the Harish Trust” and “the Mohan Trust”). The 1975 Trusts were dra ed in Bomb ay by Mr Advani .

Background: Kaycee (Bermuda) Ltd and Chellsons (Bermuda) Ltd

61. When Shewakram died in 1949, his interest in the Chellaram family trading enterprises outside India was inherited by Lachmibai, his widow. Prior to the death of Shewakram, the Chellaram family businesses were already being conducted mainly by Lokumal and Murli. In about 1960, the Chellaram businesses outside India became subsidiaries of a Bermudan holding company, Kaycee (Bermuda) Ltd (“Kaycee”), with shareholdings of 36% for the Lokumal Group, 34% for the Tahilram Group and 30% for the Shewakram Group (which at that me wa s effec vely represented by Lachmibai, Shewakram's widow).

62. In about 1973, the Lokumal Group and Tahilram Group decided to effect a separa on of thei r trading interests outside India from one another with Lachmibai op ng to ret ai n her 30% int er est in both groups. To implement this separa on the Lokuma l Gr oup wa s to cont rol Kaycee as the hol di ng company for the Lokumal Group businesses and the Tahilram Group was to control another Bermudan company, Chellsons (Bermuda) Ltd. (“Chellsons”) as the holding company for the Tahilram Group businesses. Lachmibai was to have a 15/51 interest in Kaycee and a 15/49 interest in Chellsons, i.e. 30% of the whole. The Lokumal Group (Lokumal, Lal and Sham) was to have 36/51 of Kaycee, and the Tahilram Group (Murli, Pishu and Ram) was to have 34/49 of Chellsons. The businesses to be allo ed to each group we r e se led by an arbi t ra on award made by Mr H oba r t Moore in 1974.

The Trusts

63. According to the defendants, in about 1973 or 1974, Mr Advani advised Lachmibai, for Indian fiscal and exchange cont rol reasons , to gi ve one hal f of her 30% int er est in Kaycee and Chel lsons to each of her sons Mohan and Harish, and require them to se le thei r shares in di scre onar y t rust s with Lachmibai remaining as a named benefici ar y in bot h those se lemen t s . It seems that because Mohan and Harish were non-resident Indians (NRIs) the shares would not be subject to Indian tax or exchange control. Vishal's evidence is that the gi wa s an absol ut e one and qui te separat e from the crea on of di scre onar y t rust s, but not hing t urns on t hi s .

64. The assets of the 1975 Trusts established by Harish and Mohan were the shareholdings in Kaycee and Chellsons. Mohan and Harish were the respec ve se lors . The ori ginal trust ees wer e Ram, and Mr K Rupchand and Mr G R Bharwani (who managed the Chellsons London company).

65. The benefici ar ies we r e in the case of the Ha r i sh Trus t: Lachmi bai , Mo han, Radhi ka, the cl ai ma nt s, the wife and any children of Mohan, children and remoter issue of the father and mother of the se lor ( Shewa kram and Lachmi bai ), and the spouses of the af or esai d and t he spouses of any adopted child of the se lor . I n the case of the Mo han Trus t the beneficiari es wer e: Lachmi b ai , Harish, Radhika, the claimants, children and remoter issue of the father and mother of the se lor (Shewakram and Lachmibai), spouses of the benefici ar ies l isted above and the spouses of any adopted children of the se lor .

66. The trust deeds provided that during the life me of the respec ve se l ors, and i n the event t hat

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the whole or part of the trust fund consisted of shares in Kaycee or Chellsons, the trustees would not without the wri en consent of the se lor dispose or deal wit h t he shar es. The ves ng day was the period of 20 years or earlier when the claimants a ai ned the age of ma j or i ty or any day, wh i ch the trustees declared to be that day. What the benefici ar ies obt ai ned on the ves ng day was at the absolute discre on of the trus tees (cl ause 4( c) ).

67. Clause 15(a) of each of the trust deeds provided:

“Notwithstanding anything herein contained if it shall appear to the Trustees benefici al to the Trust Fund and in the interest of the Benefici ar ies so to do the Trus tees ma y at any me or mes and f rom me t o me by Deed declar e t hat t his Se lement s hal l from the date of such declara on or wh er e any dat e ther ef or is speci fied t her ein f rom such date take effect in accor dance wi th the Law of some ot her pl ace in any par t of the World and that the forum for the administra on her eof shal l thencef or th be the Cour ts of that place and as and from the date aforesaid the Laws of the Country named in such declara on shal l be the Laws appl icabl e to thi s Se lemen t and t he Cour t s of that Country shall be the forum for the administra on t her eof but subj ect t o powe r conferred by this Clause.”

VII Eskay (Bermuda) Ltd: reconstruc on of trus ts

Eskay 1 formed to hold Kaycee and Chellsons shares

68. In October 1976, probably on the advice of Mr Advani, Eskay (Bermuda) Ltd (“Eskay 1”), a Bermudan company, was formed to hold those shares in Kaycee and Chellsons which were subject to the 1975 Trusts. The shares in Eskay 1 were expressly held by Mohan, Harish and Conyers Dill & Pearman (the well known Bermuda law firm) for the trus tees of the 1975 Trus ts.

Change in trustees and separa on of Lokuma l Gr oup and Tahi lram Gr oup int erests

69. In 1981 the following events occurred. First, Mr Rupchand and Mr Bharwani re red as trus tees of the 1975 Trusts, the con nua on as trust ee of Ram was confirmed and Sham, L al, Murl i and Mr Advani were appointed as new trustees of each of the 1975 Trusts.

70. Secondly, there was a re-structuring of the interests of the 1975 Trusts in the Chellaram businesses. Prior to the reconstruc on the trus tees of each of the 1975 Trus ts cont ai ned me mb er s of the Lokumal Group (Lal and Sham) and the Tahilram Group (Ram and Murli), and the interest of the trusts in Kaycee (the Lokumal Group vehicle) and Chellsons (the Tahilram Group vehicle) was held through Eskay 1. According to the defendants, the Lokumal Group and Tahilram Group wished to complete the separa on of thei r bus i ness i nt er ests by al so separa ng t hei r respons i bil ity as trustees of the shares in Kaycee and Chellsons.

71. In addi on, accor di ng to the def endant s (and not cont radi cted by the cl ai ma nt s), at that me i t was the prac ce to rei nvest the pr ofits of Kaycee and Chel l sons i n t he bus i nes ses and accordingl y neither Kaycee nor Chellsons declared dividends for distribu on to me mb er s. Lachmi bai wi shed to receive a dividend for the Shewakram family and, in order to ensure income for the trusts, which held their interests through Eskay 1, it was decided that a class of preferen al shares in Kaycee and Chellsons would be created to enable dividends to be paid so as to benefit onl y the trus ts. As wi ll appear, the claimants take a radically differ ent vi ew of the change.

Reconstruc on of shar e capi tal of Kaycee and Chel lsons

72. The following steps were taken. First, the shares held by Eskay 1 in Kaycee and Chellsons were converted into “B” shares, and all the remaining shares (i.e. those held by the Lokumal Group and the Tahilram Group) in Kaycee and Chellsons were designated “A” shares. The “B” shares were given a minimum guaranteed and preferen al di vi dend of 6% but had r estri cted vo ng r i ght s . The

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minimum guarantee in respect of dividend did not affect the ri ght of the “B” sharehol der s to recei ve dividends pari passu with the right to dividends payable in respect of the “A” shares.

73. The defendants say that the restric on on vo ng r ight s was a r ecogni on of t he f act that t he holders were not interested, and had voluntarily not par ci pat ed, i n t he ma nageme nt of t he relevant companies. The vo ng restri c ons did not appl y to cert ain i mpo r t ant deci sions of Kaycee or Chellsons, including any considera on of me r ger of the comp any wi th or int o any ot her cor por a on; any sale of the company or any sale of a substan al por on of the compa ny' s assets ; and t he dissolu on or wi ndi ng up of the comp any.

74. The claimants assert in the par cul ar s of cl ai m (as thei r parent s di d in Chel lar am v. Chel lar am (No.1) ) that this reconstruc on di mi ni shed the val ue of the asset s of the 1975 Trus ts thr ough the crea on of “ B” s hares , wh i ch we r e of l ess v al ue t han t he unconver ted s hares wh i ch t hey represented. But they do not say why the “B” shares were less valuable than the “A” shares, and Vishal does not answer the evidence of Sham that the “A” and “B” shares were treated equally in the only transac on in wh i ch thei r val ue wa s rel evant , to wh i ch I wi ll tur n in the next sec on.

Kayshewak and Eskay 2 hold shares in Kaycee and Chellsons: trustees re-arranged

75. Second, Eskay 1 was replaced as the shareholder in Kaycee and Chellsons by two new Bermudan companies, one of which was ul ma t el y cal led Kayshewa k Ltd (“Kayshewa k”) , wh i ch hel d the trus t interests in Kaycee and the other called Eskay (Bermuda) Ltd. (“Eskay 2”) (a er Eskay 1 had been placed into liquida on) , wh i ch hel d the trus t int er ests in Chel lsons . Al l of the shares in Kayshewa k and Eskay 2 were held (in the case of the Eskay 2 shares through a nominee company) for the trustees of the 1975 Trusts.

76. Third, the trust assets were divided into two funds, an “A” fund comprising the Kayshewak shares; and a “B” fund comprising the Eskay 2 shares. The trustees were re-arranged so that members of the Lokumal Group (Lokumal, Lal and Sham) became trustees of the “A” fund, i.e Kayshewak shares, Kayshewak being the company which held the shares in Kaycee, the Lokumal Group company. Members of the Tahilram Group (Ram, Murli and Pishu) became trustees of the “B” fund Eskay 2 shares, Eskay 2 being the company which held the shares in Chellsons, the Tahilram Group company. Mr Advani was a trustee of both funds.

VIII The proceedings in Singapore and in England in 1983/1985

77. According to the claimants, in May or August (both dates are found in the documents) 1983 the trustees of the 1975 Trusts ceased making payments to Harish and Radhika who had un l then been receiving $250,000 per annum from the family interests. In August 1983 they were removed as directors of K Chellaram & Sons (Far East) Pte Ltd, a Chellaram Singapore company, and allega ons of fraud were made against them in Singapore proceedings by Murli (who then had overall responsibility for managing the business affai rs of the Tahi lram Gr oup) .

78. In December 1983, Harish and Radhika and their sons, the claimants in these proceedings (as minors), brought proceedings in the High Court in London against the then trustees of the 1975 Trusts (Lokumal, Murli, Lal, Sham, Pishu, Ram, and Mr Advani) in Chellaram v. Chellaram (No.1) . They sought ( inter alia ) accounts in respect of both trusts from the dates of their crea on, and an order removing the defendants as trustees and appointment of new trustees in their place.

79. The complaints by the plain ffs i n Chel l aram v . Chel l aram ( No. 1) wer e t hat the t rust ees had failed to prepare and provide proper accounts of the trusts; the effect of the conver si on of the shares into class “B” shares had diminished their value, and the defendants had procured the conversion in breach of trust for their own benefit; no reasonabl e trus tee coul d pr oper l y have declined to exercise his discre on to pr ovi de Radhi ka and Ha r i sh wi th an income equi val ent to that which had been cut off, and to pr oduce such income ; and the al lega ons of fraud i n t he Singapor e proceedings had caused such a breakdown of trust that it had become impossible for the defendants

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to exercise their powers and discre ons vis-a-vis the plain ffs i n good f ait h.

80. Each of the defendants entered appearances or instructed their solicitors Norton, Rose, Bo er i ll & Roche (“Norton Rose”) to accept service on their behalf. The defendants then sought a stay of the proceedings on the ground that England was not the forum conveniens .

81. Sco J ref used a stay: Chellaram v. Chellaram [1985] Ch 409 . He did not decide on the governing law of the trusts. He said that he was originally strongly inclined to regard the law of India as the proper law of the se leme nt s, but he had become less cer tai n. The beneficiari es wer e an I ndi an family, and the trustees were all Indian in origin, and the se leme nt s we r e dr awn up in Bomb ay, by an Indian prac oner , and t he se l ors were Indian i n or igin and domi c i led i n India at t he date of t he se leme nt . Those factor s poi nt ed strongl y to the law of Indi a bei ng the pr oper law. But the trus t property was Bermudan, and the underlying assets, in the form of the opera ng comp ani es , we r e al l situated outside India, and the purpose of the se leme nt s wa s in par t to escape Indi an taxa on and Indian exchange control. But, most important, the iden ty of thr ee or i gi nal trus tees , two of wh om were permanently resident in England, and the third being the member of the family who in 1975 appeared to have the closest connec on wi th Engl and. The i nf er ence wa s i nescapabl e that the par es to the se lemen t cont empl ated t hat admi n is tra on woul d take pl ace i n London.

82. Although India was a more convenient locality as far as the personal circumstances of the par es and any witnesses were concerned, a stay was refused principally on these grounds. There was some doubt whether the Bombay court would have jurisdic on over the non- Indi an def endant s, even if they submi ed to i ts jur i sdi c on. It mig ht take f rom 7 t o 10 year s to get a hear i ng, and a minimum delay of 7 years might expose the plain ffs to cons i der abl e har dshi p. It was commo n ground that the payments had ceased and that the financi al pos i on of Har i sh and his fami l y had correspondingly worsened. A delay might represent a serious injus ce. The comme nceme nt of the ac on in Engl and wa s not an exer ci se in for um shoppi ng, si nce ther e wa s al wa ys a strong connec on between England and the se leme nt s, a nd b etwe en E ngl and a nd t he C hel lar am f ami ly. Administra on of the se lemen t s was i ntended at the dat e of the s e l ement s to take pl ace i n England. Such administra on as had taken pl ace si nce the dat e of the se lemen t had t aken place i n England, four of the defendants held Bri sh passpor ts, and al l the def endant s as we l l as the pl ai n ffs regularly spent me in Engl and. Each of the def endant s wa s ei ther ser ved per sonal ly or vol unt ar i ly submi ed to the jur i sdi c on by giving i nst ruc ons t o Nort on Rose to accept s ervi ce.

IX Se leme nt of the pr oceedi ngs and the sal e of the Shewa kram trus t int er es ts i n Kaycee and Chellsons to the Lokumal and Tahilram Groups

Background

83. In 1985 an agreement was reached whereby the Singapore and London proceedings were discon nued, and wh i ch wa s int ended to tur n int o cash the int er ests of the beneficiari es of the 1975 Trusts in Kaycee and Chellsons. According to the defendants in these proceedings, rela ons wi thi n the family had reached the point where each side wanted a clean break. The Lokumal Group and the Tahilram Group wished to have absolute control and ownership of their businesses and the Shewakram Group no longer wished to be ed int o those bus i nesses but to be pai d out thei r share.

84. The method by which this aim was achieved must be understood, according to the defendants, in the light of the tax advice the family had received. They say that it was understood by the trustees, following wri en advi ce from the account ant s Mo or e, Stephens & Co. (“Mo or e, Stephens ”) to Norton Rose, that the decision in Chellaram v. Chellaram (No.1) that the administra on of the trust assets was conducted in the UK and that some of the trustees had English connec ons (Sco J having held that the trustees had English addresses and appeared to visit England regularly), led to a risk that the Inland Revenue would argue that all revenue flowi ng from Kayshewa k and Eskay 2 to the 1975 Trusts would be liable to UK tax. In any event, the cost of defending a lengthy enquiry by the Inland Revenue would be extremely expensive. The advice of the accountants in November 1984

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was therefore that none of the trustees should be UK resident, that the current trustees should resign and an independent, professional off-shor e trus tee be appoi nt ed in the Channel Isl ands or Bermuda.

85. The claimants allege (par cul ar s of cl ai m, para 39) that the appoi nt me nt of Bermu da Trus t wa s for the purpose of enabling breaches of trust to be effected by seeki ng to avoi d the necessi ty for court approval in England under RSC Order 80, r. 10 , but Vishal says nothing about the evidence that it was solely for tax reasons. RSC Order 80, r. 10 provided that no compromise of a monetary claim by an infant would, so far as it related to that claim, be valid without the approval of the court.

Heads of Agreement and Supplemental Agreement: change of trustees and agreement to sell shares

86. The following steps were then taken. First, on March 29, 1985 Heads of Agreement (nego at ed mainly in Bombay and executed in Bombay, Hong Kong and Singapore) were agreed between (a) Harish and Radhika on behalf of themselves and the claimants (as minors), (b) Lokumal, Lal, and Sham, and (c) Murli, Pishu and Ram. It was agreed that all the trustees of the 1975 Trusts would resign in favour of the Bank of Bermuda, who would act as trustee in respect of both of the 1975 Trusts; the assets of the trusts would vest to the extent of 1/3rd each in (a) Radhika and Harish and the claimants; (b) Lachmibai; and (c) Mohan. Radhika and Harish would then sell their shareholdings in Kayshewak to the Lokumal Group (Lokumal, Lal and Sham) and in Eskay 2 to the Tahilram Group (Murli, Pishu and Ram).

87. The price of the shares to be sold was to be fixed by arbi trat or s, wi th Radhi ka and Ha r i sh appoin ng Mr M B Chanr ai (a successful int er na onal bus i nes sman and t he brother - in-l aw o f Har i sh and Mohan) as their arbitrator, and the purchasers appoin ng Mr Advani as thei r arbi trat or . They were to conduct two separate, final and bi ndi ng arbi tra ons i n r espect of the Eskay 2 shar es on t he one hand and the Kayshewak shares on the other. It was also provided that because the arbitra ons would be family arbitra ons and the arbi trat or s had been known to al l par es for a l ong me, t he par es we r e to be bar red from mo vi ng the cour t for thei r remo val for mi sconduct; and that the par es mi ght be heard, but we r e not en tled t o l egal or account ancy assi stance at the hear i ngs .

88. The agreement was condi onal on wi thdr awa l of pr oceedi ngs in Engl and and Si ngapor e, but the par es had the ri ght to seek redr ess from the cour ts if the arbi tra on f ail ed. Cer t ain paymen t s wer e to be made upon withdrawal of the li ga on on account for the shar e sal es. Par t of the proceeds were to be used by Harish and Radhika to reduce their indebtedness to the Singapore company which had been the subject of the Singapore proceedings.

89. Clause 18 provided:

“The par es expr essl y agree that onl y the cour ts of Bermu da shal l have j ur i sdi c on over this Agreement and agree to exclude the UK courts from any jurisdic on whatsoever over this Agreement directly or indirectly.”

90. Second, on May 31, 1985 a Deed supplemental to the Heads of Agreement (“the Supplemental Agreement”) was entered into between Lachmibai, Harish, Radhika (on their own behalf and that of their children, the claimants), Mohan, Lokumal, Lal, Sham, Murli, Pishu, Ram and Mr Advani.

91. They agreed to appoint the Bank of Bermuda as trustee in place of the family trustees, and Mohan, Harish and Radhika (both themselves and on behalf of their children) (“the benefici ar ies”) agreed not to challenge or impugn the appointment. All rights against the family trustees that the benefici ar ies mi ght have had we r e gi ven up as we l l as any ri ght s to the Kayshewa k and Eskay 2 shares once transferred to the relevant purchasers. In addi on it wa s agreed that a le er of wis hes would be presented to the new trustee which was scheduled to the Deed. The effect of the le er of wishes was to indicate that the inten on wa s to ma ke an ear l y appoi nt me nt to Ha r i sh and Radhi ka and their sons of 2/3rds of the Mohan Trust fund, with a later appointment of 1/3 rd of each of the Trust funds to Lachmibai and 1/3 rd of the Harish Trust fund to Mohan. The Supplemental Agreement

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was signed by the par es in Jer sey, Si ngapor e and Bomb ay in Ma y 1985. Si nce the Suppl eme nt al Agreement was supplemental to the Heads of Agreement it was no doubt impliedly governed by the same choice of law and choice of jurisdic on pr ovi si ons .

92. Third, on the same day Bermuda Trust was appointed under the powers in the 1975 Trusts as a new trustee in place of the Chellaram family trustees. Mr Advani remained as trustee.

Choice of law and jurisdic on for 1975 Tr us ts

93. Fourth, on May 31, 1985, purportedly pursuant to clause 15 of the 1975 trust deeds, the Chellaram family trustees declared in rela on to each of the 1975 Trus ts:

“I. This se leme nt shal l con nue t o t ake effect i n accordance wi th the Hi ndu Fami l y Law being the proper law of the Se leme nt . 2. Wi thout pr ej udi ce to the pr ovi si ons of paragraph (I) above the forum for the administra on of t he S e lemen t shal l henceforth be Bermuda.”

94. The claimants suggest that the declara ons we r e ineffec ve because they seem t o bear a date of June 10, 1985, which is a er the trus tees res i gned, but ther e is ot her evi dence that execu on t ook place on May 31, 1985. In any event, it is likely that this choice was not authorised by clause 15(a). Even if the reference to Hindu Family Law is to be taken as a choice of Indian law, clause 15(a) does not authorise the choice of differ ent laws to gover n the trus t and its admi ni stra on.

95. Later that year, in October/November 1985, Bermuda Trust and Mr Advani executed deeds in respect of each of the 1975 Trusts declaring that :

“The Se leme nt shal l hencef or th take effect in accordance wit h t he l aws of the s ai d Islands of Bermuda [and] the Courts of the said Islands of Bermuda shall henceforth be the forum for the administra on of the Se lemen t . ”

96. Only the deed rela ng to the Ha r i sh Trus t has been locat ed, but I am sa sfied f or t he purposes of this applica on by the cont emp or ar y cor respondence that ther e we r e deeds for bot h Trus ts.

Appointment of shares

97. Fi h, Bermu da Trus t and Mr . Advani as trus tees of the Mo han and Ha r i sh Trus ts ma de the following appointments: (a) under the Mohan Trust, on July 29, 1985, 50,000 Kayshewak shares were appointed to Harish (25%), Radhika (25%) and the claimants (25% each); and on November 18, 1985, 25,000 Kayshewak shares were appointed to Lachmibai; and (b) under the Harish Trust, on November 18, 1985, 50,000 Kayshewak shares were appointed to Mohan, and 25,000 Kayshewak shares were appointed to Lachmibai.

98. The second November 18, 1985 deed appointed the same number of Eskay 2 shares in the same propor ons , and I inf er that thi s wa s so in the case of the ot her appoi nt me nt s al so.

Arbitra on

99. The “B” shares of Kaycee were the principal assets of Kayshewak. In November 1984 Moore, Stephens had arrived at a valua on range of betwe en $17 and $21 as an appr oxi ma t e fai r val ue (based on the accounts to June 30, 1983) for both the “A” and “B” shares of Kaycee, on the assump on that no di s nc on was t o be dr awn b etween t he t wo c l asses of s hares.

100. Following a formal hearing in Jersey at the offices of Moo r e, Stephens , the arbi t rators on J uly 29, 1985 valued the Kayshewak shares at $45 per share, which represented a valua on of the Kaycee shares at $25. The amount due to Radhika and Harish and their sons was therefore $2,250,000. The award recited that the arbitrators had determined the value and that the par es had agreed to the valua on and had requested the ar bi trat or s to ma ke the awa rd by consent . The Kayshewak award states: “This Award shall be enforced either in the Courts of Jersey where it has

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been made or in Bermuda and in no other jurisdic on”. It wa s si gned by al l par es, incl udi ng Har i sh and Radhika on behalf of the claimants.

101. The Eskay 2 arbitra on resul ted in a val ua on of £180, 000. The consent awar d s tated:

“The law of Bermuda shall apply to this award.”

102. The defendants have put in detailed evidence to support their conten on that the val ua on of the Kayshewak and Eskay 2 shares was done on a proper basis. According to the defendants, the valua ons by Mo or e, Stephens and the arbi trat or s we r e al l ma de wi thout any di s nc on bei ng made between “A” shares and “B” shares of Kaycee and Chellsons. They say that at no me si nce the delivery of the awards in 1985 un l these pr oceedi ngs had Ha r i sh, Radhi ka or the cl ai ma nt s complained about the values arrived at by the arbitrators; during the course of the valua on the arbitrators reviewed all relevant company files docume nt s and recor ds , and we r e al so afforded t he assistance of Moore, Stephens; the arbitrators also heard formal and informal representa ons from all par es , over a per iod of about 2 mo nt hs . They rel ied on the comp ut a ons and s tatemen t s prepared by Moore, Stephens and also sought independent verifica on of the val ues of real proper es and vessel s and var ious ot her imp or tant key asset s.

103. The defendants say that the price of £180,000 at which the Eskay 2 shares were valued was fair and generous because their value was directly dependent on the value of its shareholding in Chellsons, which in turn was dependent on the financi al pos i on of the Chel l sons Group as a who l e, which was very grave because the Central Bank of Nigeria had defaulted on bills payable to Chellsons which were security for debts owed by Chellsons to banks and other lenders. The defendants say that contemporary documents show that at the me wh en the val ua on of the Eskay shares took place, the Chellsons Group was figh ng f or i ts survi val . The claiman t s have not contradicted this evidence.

104. The claimants say that the arbitrators based their valua on on the financi al advi ce provi ded by accountants employed by the companies controlled by the defendants who bought the shares. The par cul ar s of cl ai m do not put for wa rd any pos i ve case. It i s simpl y sai d t hat the claiman t s do not accept the valua ons (paras 44 and 45) .

X Comple on of sal e and treatme nt of pr oceeds of sal e

Agreement by claimants' parents: Kayshewak Award Supplemental Agreement

105. By an agreement dated August 7, 1985 and signed in Jersey, called the Kayshewak Award Supplemental Agreement, Harish and Radhika agreed with the purchasers of the Kayshewak shares (Lokumal, Lal, Sham and Chellwood) that during the minority of their sons, the claimants, or unless the Bermuda court should otherwise order, they would invest the proceeds of sale of the claimants' share of the sale of the Kayshewak shares (50%) in investments authorised under the laws of Bermuda.

106. They represented to the purchasers that they had agreed to sell the shares of their sons on the same terms as all other selling shareholders in the belief that the sale was on the best terms reasonably obtainable and “in the best interests and advantage” of their sons (as minors). They covenanted to procure that as and when their sons came of age each of them would ra fy and confirm the sal e, and un l such r a fica on they woul d keep the pur chasers i ndemni fied agai nst any claims by or on behalf of the claimants.

Comple on of sal e and recei pt of pr oceeds

107. Harish and Radhika instructed the new trustees of the 1975 Trusts (Mr Advani and Bermuda Trust) to transfer the 50,000 shares in Kayshewak which Harish and Radhika held for themselves and the claimants to Chellwood as nominated purchaser. Harish and Radhika were subsequently paid the

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money for those shares by Chellwood as set out below.

108. The awards related only to the shares in which Harish and Radhika and their sons had an interest. The remaining 100,000 Kayshewak shares in the hands of the 1975 trustees were transferred to Mohan and Lachmibai by a deed of appointment executed in respect of both 1975 trusts on November 18, 1985, and were sold to Chellwood for the same price as fixed in the consent award. I infer that the Eskay 2 shares were treated in a similar manner when they (or perhaps shares in a nominee company) were transferred to Murli, Pishu and Ram (or their company).

109. Following execu on of the deeds of appoi nt me nt the Bank of Bermu da Ltd. wr ot e to the Gibraltar lawyers who had dealt with the appointment of Bank of Bermuda earlier, Triay & Triay, on December 2, 1985 to say: “These Deeds have effec vel y termin at ed t he Se l ement s , subj ect to comple on of the trans fer s of own er shi p of the Kashewa k and Eskay shares . ”

110. Harish and Radhika were paid the sums due to them and their sons for the Kayshewak shares. Vishal accepted in an affidavi t in t he I ndi an proceedi ngs that Har i sh and Radhi ka had been pai d i n full. $1,125,000 represented the sum due to the claimants. In respect of that sum, their parents received two amounts of $375,000 on August 7, 1985 and on October 14, 1985. A third instalment of $375,000 was included in a payment on October 20, 1988 of $630,066.53 to the trustees of the Geneva Trust, which is referred to below. The $535,000 capital component of the final ins tal me nt paid by Chellwood was used to make the payments of $267,500 to each of the claimants in 1992 and 1995, when they signed the releases referred to below. There is no dispute about these payments.

111. The Eskay 2 shares had been valued in the 1985 arbitra on at £180, 000. Not al l of the pr i ce has been paid. £50,000 of the Eskay award was paid to the claimants' parents in 1986. It is said by on behalf of Murli and Pishu that other payments in sa sfac on of the awar d wer e mad e by Ram. Ther e is evidence from Murli's son, Suresh Murli Chellaram, that both claimants, a er they had reached the age of majority, pressed Murli for payment of the balance of the sale price, which Murli had not paid because of the financi al pos i on of the Tahi l ram G roup. Vis hal does not deny that he asked f or payment, although he says he did not “press” for payment.

Geneva Trust and execu on of rel eases

112. There were proceedings in Bermuda by Lal and Sham against Harish and Radhika in connec on with the final payme nt s due to them for the benefit of the c laiman t s i n connec on wi th the s ale of the Kayshewak shares. There was no evidence before me on the nature of the ac on, but i t wa s discon nued on condi on t hat Radhi ka est abl i shed a t rust in Geneva over the t hen unpai d proceeds of sale due to the claimants from Chellwood for the Kayshewak shares. The trust fund was $630,000. The trustees were United Overseas Bank and Trust Co. (Bahamas) Ltd and Mr Jus ce P. N. Bhagwa . Jus ce Bhagwa was a f ormer Chi ef Jus ce of I ndia (and i s now ch ai r man of t he Uni t ed Na ons Human Rights Commi ee) , and he wa s invol ved in se l ing t he t erms of the t rust . Har i sh was not a party to the Trust Deed, but on the date of its execu on, June 30, 1988, he appr oved its terms in the form of a separate confirma on.

113. The trustees were to hold the trust fund as to half each for the claimants on their a ai ni ng 21. It was to be invested, prior to distribu on, as permi ed by the l aws of Ber mud a. The i ncome of the trust prior to their a ai ni ng ma j or i ty c oul d be appl ied f or t hei r benefit, mai ntenance and advancement, such sums being payable to their parents or guardians upon receipt of an undertaking to use the funds as directed.

114. The deed provided that the trustees should not pay and distribute the trust fund to either of the claimants un l each of them had execut ed a deed of rel ease. If they di d not execut e a deed of release within 90 days of their a ai ni ng t hei r ma j or i ty, t hen t he t rus t i n t hei r f avour wo ul d determine and the fund would be held for Radhika and Harish to be applied solely to meet any liability under the indemnity in favour of Lokumal, Lal and Sham in the Kayshewak Award Supplemental Agreement. The release was to be in favour of Lokumal, Lal, Sham and Chellwood in respect of any ma er ar i si ng out of Chel lar am v. Chel lar am (No . 1) , the Kayshewa k consent awa rd or

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the sale of shares pursuant thereto or otherwise howsoever arising during the minority of the releasor in any way touching or concerning any interest of the releasor in Kayshewak or the opera on ther eof or of any subs i di ar y or associ at e or the trus ts affec ng t he s ame.

115. Each of the claimants signed releases and were paid out part of their share of the Geneva Trust fund ($267,500 each) when they reached the age of 21 on June 18, 1992, in the case of Vishal, and April 25, 1995, in the case of Ashwin. The releases recited the Chellaram v. Chellaram (No.1) proceedings, and also that the li ga on had been se l ed by t he submi s s ion t o ar bi tr a on and t he Kayshewak Consent Award; that their interests in the proceeds of sale of the shares in Kayshewak was $562,500 each; that Lal and Sham had purchased the shares for Chellwood, and had paid $375,000 of that sum to Radhika and Harish as trustees for the claimants, and the balance had been paid to the trustees of the Geneva trust.

116. Vishal says that if he had not signed within 90 days he would have received nothing, and he needed the money to go to University in England: but in the event he bought a property for his family and he needed the money for the Indian li ga on deal t wit h i n t he next sec on.

XI Indian proceedings

117. In 1991 the claimants in these proceedings commenced proceedings in the High Court at Bombay against eighteen members of the Chellaram family (including all of the individual defendants in these proceedings) and against seven Chellaram companies or partnerships.

118. The proceedings were, according to Vishal, ins tut ed on the cl ai ma nt s' behal f by thei r mo t her Radhika, a er her mo t her -in- law Lachmi bai had excl uded t he c l ai ma nt s f rom a f ami ly- own ed property which they regarded as an ancestral home. In those proceedings it is alleged that the business of Kishinchand, and Lokumal, Tahilram, and Shewakram, was run as a joint Hindu Undivided Family (“HUF”), and that the HUF had world-wide concerns and firms , si tuat ed al l over the wo r ld.

119. Consequently it is claimed that, through their father Harish, they are en tled to a one- ni nt h share in the en re pr oper ty and asset s of t he j oi nt Hi ndu f ami ly pr oper es of the HUF , or alterna vel y, if the Shewa kram group had separat ed, for a decl ar a on t hat they are j ointl y en t led to a one-third share in the Shewakram group of the Kishinchand HUF proper es . The pr ayer seeks a declara on that the pl ai n ffs are joint ly en t l ed to a 1/9 th share of the property/ies belonging to the HUF, disclosed and undisclosed, with par cul ar s of the di scl osed pr oper es i n an exhi bit , whi ch includes Carmichael House and Central Building No. 2.

120. An interim order for disclosure of all proper es and bus i ness asset s in Indi a wa s al so sought , in which it was submi ed by Vi shal that it wa s obvi ous that al l the bus i nesses and pr oper es, wit hin India, held by the Kishinchand Chellaram family were all the joint Hindu family businesses and proper es in wh i ch the cl ai ma nt s had an undi vi ded share, ri ght , tle and i nterest .

121. In one of his affidavi t s i n suppor t of the appl i ca on ( November 4, 1996) Vishal submi e d that the existence of an HUF in India and abroad was clearly established by ( inter alia ) the allega ons in the statement of claim in Chellaram v. Chellaram (No.1) , the 1985 Heads of Agreement, the Supplemental Agreement, the Kayshewak Consent Award, and the Eskay Consent Award. The affidavi t concl uded by submi ng that al though t hese agr eement s r el ated to the joi nt businesses and proper es out si de Indi a, it wa s obvi ous that al l the bus i nesses and pr oper es i n I ndi a wer e all subject to the joint Hindu family regime.

122. Interim relief was refused by Mr Jus ce Rebel lo on Augus t 19, 1999. He not ed that the heads of all the three families had chosen to deny the existence of an HUF. He said that the various trusts (without specifying which) created by which the plain ffs had become beneficiaries negat ed t he concept of an HUF, since if there was an HUF and if the plain ffs wer e membe r s of it, they coul d not be made benefici ar ies in respect of the HUF pr oper ty.

123. The claimants' posi on is that al though the subj ect ma er of the I ndi an proceedi ngs i ncl udes

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proper es in Bomb ay wh i ch are subj ect to the trus ts, the pr oceedi ngs do not rel at e to the trus ts or their assets; and that the references to the worldwide assets of the HUF were purely historical, and that the proceedings related only to Indian assets, and that was why no foreign companies were joined as defendants.

XII The present proceedings

124. The allega ons in the par cul ars of claim i n r ela on t o the 1943 Tr ust and t he 1946 Tr ust (now discon nued) are as fol lows :

(1) Lokumal, Murli, Lal and Sham have let the proper es in Bomb ay to per sons connected to themselves on terms which have resulted in the income being less (or allegedly less) than the running costs of the proper es , and have asked the cl ai ma nt s for a cont ribu on t o t he l osses being made.

(2) No proper accounts have been provided despite requests being made by the claimants in 1998 and by their solicitors in January 2001, and the claimants have received no part of their interest in the capital or income of the trusts and seek the removal of the present trustees accordingly.

125. The relief claimed is that those defendants deliver accounts of the capital and income of the 1943 Trust and 1946 Trust from February 14, 1997 to date, and be removed as trustees of the se leme nt s and be repl aced by fit and proper per sons .

126. With regard to the 1975 Trusts, the allega ons are as fol lows : (1) Lokumal, Murli, Lal, Sham and Pishu in breach of their du es as trus tees pr ocur ed the conversion of the shares owned by the trusts in Chellsons and Kaycee into “B” shares, whose value immediately a er thei r crea on and s ince was l ess than t hat of the unconvert ed shar es which they represented.

(2) During August 1983 the trustees ceased to make payments from trust income in favour of Harish or Radhika, and since that date had made no payment to either claimant and provided no trust accounts.

(3) The 1985 Heads of Agreement and Supplemental Agreement, purportedly se l ing al l the li ga on i n Singapor e and Engl and, wer e executed by the t rust ees and t he claiman t s ' par ent s , who had no authority to do so on behalf of the claimants who were then minors, and their execu on comp r i sed a br each of trus t by the def endant s because the int en on and effect was to benefit the trus tees and the cl ai ma nt s' parent s at the expense of the cl ai ma nt s.

(4) In par cul ar , the Heads of Agreeme nt we r e in br each of trus t because

(a) they procured for the trustees (for no benefit t o the beneficiari es) a r elease f rom t he breaches of trust men oned above in cons i der a on ( inter alia ) of the claimants' parents being released from the separate claims against them in the Singapore ac ons ;

(b) they enabled the trustees to purchase trust property and to do so not at its market value but according to the discre on of the arbi trat or s, one of wh om wa s hi ms el f a trus tee, Mr Advani , and the other was the husband of a sister of Mohan and Harish.

(5) Accordingly the Heads of Agreement comprised an agreement which was void or voidable, and the claimants (who, it is alleged, only became aware of its terms during the year 2000) seek to avoid it.

(6) The purported appointment of Bermuda Trust as a trustee to act jointly with Mr Advani as

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con nui ng trus tee of the 1975 Trus ts in Ma y 1985 wa s for the pur pose of enabl ing the br eaches of trust, and was consequently void or voidable at the instance of the claimants, and in either event is ineffec ve t o r elease t he exi s ng t rustees.

(7) The advance of the interests of Vishal and Ashwin to Harish and Radhika “as bare trustees” by the deeds of appointment of July 29, 1985 was a breach of trust, and it caused the property appointed to pass out of the control of the trustees.

(8) The claimants do not accept the valua on of the 50, 000 shares in Kayshewa k at $2, 250, 000 or the valua on of the shares in Eskay 2 at £180, 000, but no par t of the sal e pr oceeds of ei ther shareholding has been paid to either claimant, and that, save as men oned, nei ther of the claimants had ra fied or confirmed t he s ale or any part of any agreement compr i s ed or r eflected in the heads of agreement. But it is accepted that each of the claimants received $267,500 allegedly as part of the sale proceeds of the Kayshewak shares.

(9) The releases are not binding because neither claimant had any knowledge of the circumstances of the li ga on, the arbi t ra on or t he s ale of t he shares when t hey execut ed t he releases, or had any sight of the trust documents therein men oned.

(10) By a proposed amendment a claim that the releases were procured by the undue influence of Lokumal, Lal and Sham is abandoned. Instead, it is alleged that the releases are unenforceable because by the terms of the Geneva Trust it was provided that the moneys that remained due to the claimants as a result of the sale of the trust assets should only be released to them if they executed the release within 90 days of their coming of age; the trust deed was made to the knowledge of and at the ins ga on of Lokumal , Lal and Sham; no a empt was made t o ascertain the value of the claim against the ex-trustees which it was proposed that they should release; the moneys to be paid to them from the trust were moneys to which they were en tled in any event, whether as payment pursuant to the sale of trust assets if that transac on wa s binding on them, or as payment on account of their en tleme nt to comp ensa on f rom t he trustees in the event of the sale of the trust assets being set aside; in the circumstances it was unfair and inequitable for the execu on of t he r el eases t o have been obt ai ned by t he threatened withholding of money to which they were benefici al ly en tled.

127. The relief claimed with regard to the 1975 Trusts is that the first to fi h defendant s del i ver accounts of capital and income; that the releases signed in 1992 and 1995 be declared void or set aside; a declara on that the cl ai ma nt s are en tled t o t he en r e capi t al and i ncome o f t he t r ust fund of the Mohan Trust, and a declara on that they are each en tled t o 25% o f the assets of Har i sh Trust; an order removing such of the first to sevent h def endant s as are trus tees of the 1975 Trus ts and their replacement by some fit and pr oper per sons , and al l necessar y and consequen al ves ng orders; an inquiry as to the amount of loss suffer ed by the trus t estat es and the beneficial interest s of each claimant by reason of the reconstruc on and conver si on in 1981/1982, and the arbi tra on and share sales of 1985; a declara on that the Trus ts are en tled t o 75, 000 shar es i n Eskay 2 and Kayshewak or the assets represen ng those shares , or al ter na vel y an i nqui r y as to t he assets of the Trusts; a declara on that the first to fi h def endant s r emain l iable as tr ustees t o make good t he losses and replenish the trust estates accordingly; alterna vel y an i nqui ry as to the amo unt of income and the size of the trust estates to which the claimants should have become en tled si nce the company reconstruc on in 1981/1982, and an or der that the first to fi h def endant s do account for the amount found due on the inquiry.

XIII Jurisdic on

General

128. Since Sham and Lal were not validly served in England, the English court will only have

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jurisdic on in these pr oceedi ngs in one of the fol lowi ng ci rcums tances .

129. First, as regards the defendants who are domiciled outside the States or territories to which the 1968 Conven on appl ies (Lokuma l , Sham, Mu r l i, Pi shu, Bermu da Trus t and Mo han) the cour t ma y assume jurisdic on if ei ther (a) the case come s wi thi n the trus t pr ovi si on of CPR 6. 20( 11) ; or (b) the defendant is a necessary or proper party under CPR 6.20(3) to proceedings against another defendant who is amenable to the jurisdic on ei ther under CPR 6. 20( 11) or under the trus t pr ovi si on of Ar cl e 5( 6) of the 1968 Conven on.

130. Second, as regards the defendants who are domiciled in a State or territory to which the 1968 Conven on appl ies (Lal and Chel lwo od) , the cour t has jur i sdi c on onl y i f Ar cle 5( 6) i s appl i cabl e. Since there is no defendant who is domiciled in England, there is no basis for jurisdic on over addi onal par es under Ar cle 6( 1) .

131. It has been well established for more than 100 years that a claimant cannot pursue causes of ac on agai ns t a for ei gn def endant under CPR 6. 20 (and i ts pr edecessor Or der 11) wh i ch are not within the provisions for service out of the jurisdic on, even if the cl ai ma nt has ot her cl ai ms wh i ch are within it: see cases in Dicey and Morris, para 11–129. It is therefore not permissible to join with claims covered by CPR 6.20 claims which are not within any of the heads of jurisdic on. I n my judgment the same principle applies in the case of the 1968 Conven on.

132. In cases to which CPR 6.20 applies, in addi on the cl ai ma nt s mu s t show, because the bur den is on them, that England is clearly the appropriate forum ( Spiliada Mari me Cor p. v Cansul ex Li mi ted [1987] AC 460 ), and the court will not give permission unless sa sfied t hat Engl and i s the proper place in which to bring the claim: CPR 6.21(2A). Unless and un l ther e is a deci si on of the Eur opean Court or of the House of Lords to the contrary, where the English court has jurisdic on under the 1968 Conven on, the pr oceedi ngs ma y be stayed in favour of the cour ts of a non- Cont rac ng State ( Re Harrods (Buenos Aires) Ltd. [1992] Ch 72, applied to defendants domiciled in other Contrac ng States in Ace Insurance SA-NV v. Zurich Insurance Co [2001] EWCA Civ 173 ) if the defendant can show that there is another available forum, having competent jurisdic on, wh i ch is mo r e sui tabl e for the trial of the ac on, i.e. in wh i ch the case ma y be tri ed mo r e sui tabl y for the int er ests of al l the par es and the ends of jus ce, unl ess the claiman t can show t hat ther e are circums t ances by reason of which jus ce requi res that a stay shoul d never thel ess not be gr ant ed: e. g. Lubbe v. Cape plc [2000] 1 WLR 1545, 1553–5 (H.L.) .

133. In the sec on on domi ci le (paragraph 23) I ref er red to the rul e, appl icabl e to bot h Conven on and non-Conven on cases , that the cl ai ma nt mu s t establ ish a good ar guabl e case that the cour t has jurisdic on. In non- Conven on cases, the claiman t mus t also est abl i sh a seri ous i ssue t o be t ried on the merits.

134. But where the ques on of jur i sdi c on depends , not on s ome f ree- s tandi ng ques on such as domicile, but on elements which are linked to the elements of the claim, the claimant must equally establish that the requisite elements of jurisdic on exi st. The ques on of the r equi s ite s tandar d of proof was addressed fully in the context of jurisdic on i n cont ract cases under RSC Order 11, r. 1(1)(e) (now CPR 6.20(5) ) by Lord Goff of Chi evel ey i n Seaconsar Far East Ltd. v. Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 , 453–455. The effect of the deci si on is that wh er e jur i sdi c on depends on several elements, for example that there was a contract, that it was broken, and that it was broken within the jurisdic on, then a good ar guabl e case for each of those el eme nt s mu s t be established.

135. The good arguable case test was accepted as the appropriate test for domicile in the context of the 1968 Conven on in Canada Trust Co. v. Stolzenberg(No. 2) [2002] 1 AC 1 , 13, and there is no reason to doubt that it applies also to the more complex jurisdic onal pr ovi si ons of the 1968 Conven on (and has been so appl ied i n sever al deci si ons i n the Cour t of Appeal : see Di cey and Morris, para 11–225, n. 69).

136. Where jurisdic on depends on a ques on of law o r cons t ruc on, t he court wi ll deci de i t rather

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than apply the good arguable case test: see cases at Dicey and Morris, para 11–127, n. 34. That approach has consistently been applied to cases where jurisdic on has depended on the appl icabl e law of a contract for the purposes of what is now CPR 6.20(5)(c). In such cases the court does not consider whether the claimant has a good arguable case that the contract is governed by English law, but rather whether the contract is governed by English law. Some of the most important cases on the applicable law of a contract at common law were decided under predecessors of this rule ( e.g.Amin Rasheed Shipping Corp. v. Kuwait Insurance Co. [1984] AC 50 ) and I do not consider that anything in the Seaconsar case is intended to throw doubt on their approach. Accordingly in a case such as this, if jurisdic on depends on the iden fica on of the appli cable l aw, t h e cl aimant would have to sa sfy the cour t that the appl icabl e law wa s Engl ish law, and the good ar guabl e case test would only have a role to play if there were a relevant factual issue (for example, if an express choice of law were said to be ineffec ve on t he f act s of the case).

Law applicable to trusts and jurisdic on

137. Both CPR 6.20(11) and Ar cl e 5( 6) are in terms concer ned wi th expr ess trus ts. CPR 6. 20( 11) provides that a claim form may be served out of the jurisdic on if “a cl ai m is ma de for any reme dy which might be obtained in proceedings to execute the trusts of a wri en ins trume nt wh er e —( a) the trusts ought to be executed according to English law; and (b) the person on whom the claim form is to be served is a trustee of the trusts.” Ar cl e 5( 6) pr ovi des : “A per son domi ci led i n a Contrac ng Stat e ma y, in anot her Cont rac ng State, be sued ….— A s se l or, trustee or benefici ary of a trust created by the opera on of a stat ut e, or by a wr i en i nst rumen t , or creat ed oral l y and evidenced in wri ng, in the cour ts of the Cont rac ng State i n whi ch t he t rust i s domi c il ed. ”

138. Accordingly, neither CPR 6.20(11) nor Ar cl e 5( 6) appl ies to cons truc ve t rust s. CPR 6.20( 14) makes special provision for construc ve trus ts, and it is cl ear bot h from the text of Ar cle 5(6) and from the Schlosser Report on the 1978 Accession Conven on (by wh i ch the Un i ted Ki ngdom acceded to the 1968 Conven on, and wh i ch i nt roduced Ar cle 5(6)) , par a 117, that Ar cle 5( 6) does not apply to construc ve trus ts.

139. The effect of CPR 6. 20( 11) and Ar cle 5(6), as i mpl emen t ed i n t he Uni t ed Kingdom, is that the relevant connec ng factor for the pur poses of j ur i sdi c on i n t he case of CPR 6.20( 11) is the l aw “according to which the trusts ought to be executed,” which must be English law, and in the case of Ar cl e 5( 6) (as imp l eme nt ed by 1982 Ac t, s. 45(3) ) is “the system of law with which the trust has its closest and most real connec on, ” wh i ch mu s t be Engl ish law.

140. CPR 6.20(11) applies only to claims against a person who “is” a trustee of the trusts, and Ar cl e 5(6) applies only to an ac on agai ns t a def endant “as se lor, trust ee or beneficiary of a tr ust. ”

141. Both CPR 6.20(11) (which had its origin in the nineteenth century) and Ar cl e 5( 6) (wh i ch originated in 1978) pre-date the Recogni on of Trus ts Ac t 1987 (“the 1987 Act”), which implements the Hague Conven on of 1986 on the law appl icabl e to trus ts and on thei r recogni on ( “the Hag ue Conven on”) . Al though the formu l a ons differ, each i s refer ri ng t o the appl i cabl e law, a nd i n each the star ng poi nt wi ll be the Ha gue Conven on r ules. I cons i der i t l ikel y that the wor ding of CPR 6.20(11) is apt to encompass claims which may depend on English law either as the law applicable to the trust itself or as the law governing its administra on, wh i le Ar cle 5(6) is probabl y l imit ed t o claims in rela on to trus ts gover ned by Engl ish law.

142. The posi on pr ior to the 1987 Ac t, wh i ch is reflect ed i n t he j udgmen t of Sco J, i n Chel l aram v. Chellaram (No.1) , was that in the absence of an express or implied choice a trust was governed by the system of law with which it had its closest and most real connec on: [1985] Ch at 424–5 ; and cfDuke of Marlborough v. A or ney Gener al (No . 1) [1945] Ch 78 , 83 (“the law by reference to which the se leme nt wa s ma de and wh i ch wa s i nt ended by t he par es to govern t hei r ri ght s and liabili es”) ; Iveagh v. IRC [1954] Ch 364 , 370. In Chellaram v. Chellaram (No.1) Sco J expr essed the view that the rights and du es of the trus tees we r e gover ned by the pr oper law of the se lemen t (and not by the law of the place of administra on i f di fferent ) ; and t hat i f the cour t had per sonal

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jurisdic on over the trus tees the inher ent jur i sdi c on of the cour t to r emov e and appoi nt trust ees was a ma er of ma chi ner y for Engl ish law as the lex fori , and could be exercised regardless of the governing law of the trust or the law governing the administra on of the trus t: see p. 432.

143. Under the Hague Conven on (1987 Ac t, Sched) :

“A trust shall be governed by the law chosen by the se lor . The choi ce mu s t be expr ess or be implied in the terms of the instrument crea ng or the wr i ng evi denci ng t he trust, interpreted, if necessary, in the light of the circumstances of the case.” (Ar cl e 6(1))

144. By Ar cl e 7:

“Where no applicable law has been chosen, a trust shall be governed by the law with which it is most closely connected.

In ascertaining the law with which a trust is most closely connected reference shall be made in par cul ar to —

(a) the place of administra on of the trus t des i gnat ed by the se lor;

(b) the situs of the assets of the trust;

(c) the place of residence or business of the trustees;

(d) the objects of the trust and the places where they are to be fulfilled. ”

145. By Ar cl e 8 the l aw speci fied by Ar cle 6 or 7 i s to gover n the val i dity of t he t r ust, i ts construc on, i ts effect s and t he admi n is tra on of t he t r ust. In par cular that l aw is to govern t he appointment, resigna on and remo val of trus tees ; the rel a onshi ps bet wee n t he t rust ees and t he benefici ar ies i nc l udi ng the per sonal l iabi lity of the trus tees to the beneficiari es; the var i a on or termina on of the trus t; the di stribu on of the t rust assets ; and t he dut y of trust ees to account for their administra on. By Ar cle 9 a se verabl e as pect of the t r ust , pa r cular ly ma e r s of administra on, ma y be gover ned by a di fferent law.

146. By Ar cl e 10 the law appl icabl e to the val idi ty of the trus t is to det ermi ne wh et her that law or the law governing a severable aspect of the trust may be replaced by another law. Under English law the governing law may be changed with the concurrence of the benefici ar ies ( Duke of Marlborough v. A or ney Gener al (No . 1) [1945] Ch 78 at 85) and probably also by the exercise of a power reserved in the trust instrument: Dicey and Morris, 13 th ed. para. 29–020; Lewin, 17 th ed. para 11–42. But it is not changed merely by a change in circumstances such as a change in the trusteeship: Duke of Marlborough v. A or ney Gener al (No . 1) , at 85.

147. By Ar cl e 22 the Conven on appl i es to t rust s regardless of the dat e on whi ch t hey wer e created, but, by sec on 1( 5) of the 1987 Act, Ar cl e 22 is not to be cons trued as affec ng t he l aw t o be applied in rela on to anythi ng done or omi ed bef ore t he Act came i nto f orce ( on August 1, 1987: S.I. 1987 No.1177).

The me for tes ng t he appl i cabl e l aw f or juri sdi c onal purposes

148. One of the ques ons canvassed in thi s case is the cri cal dat e f or det ermin ing t he appl i cabl e law for the jurisdic onal pur poses of CPR 6. 20( 11) and Ar cle 5(6). The c laiman t s argue f or the dat e when the causes of ac on arose, wh i ch they say wa s bef or e the change to Bermu da law wa s ma de, with the consequence (they argue) that English law applies as the law with the closest and most real connec on wi th the 1975 Trus ts, and accor di ngl y gi ves the Engl ish cour t jur i sdi c on under bot h CPR 6.20(11) and Ar cl e 5( 6) .

149. The defendants say that the cri cal dat e for det ermi ni ng wh et her Engl ish law is the appl icabl e law and whether the defendant “is” a trustee (CPR 6.20(11)) or whether the defendant is sued as a

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trustee of a trust which “is” domiciled in England (Ar cl e 5( 6) ), is the dat e wh en the cour t is sei sed of the proceedings. At that date, the defendants say that either there was no subsis ng trus t, or if there was, it was governed by Bermuda law.

150. In Winter v. Winter [1894] 1 Ch 421 the then current version of what is now CPR 6.20(11) provided that service was permissible out of the jurisdic on wh er e the ac on was for the “execu on (as to property situate within the jurisdic on) of the trus ts of any wr i en i nst rumen t , of whi ch t he person to be served is a trustee, which ought to be executed according to the law of England.” The defendant was the sole trustee of a se leme nt execut ed in Engl and. The def endant had sol d the consols comprised in the se leme nt and had le Engl and, and t her e was not at that me, nor had there at any me si nce been, any pr oper ty subj ect to the trus ts of the se lemen t situat e wit hin t he jurisdic on. The ac on was for the admi n is tra on of t he t r usts . S rl ing J held t hat s ervi ce shoul d be set aside because the words “as to proper es si tuat e wi thi n the jur i sdi c on” l imit ed t he gener al i ty of the rule and imposed a condi on wh i ch had to be f ul filled i n order that servi ce out of the jurisdic on mi ght pr oper l y be al lowe d. It ref er red to pr oper ty wh i ch wa s actual ly si tuat e wi thi n the jurisdic on, and not simp l y pr oper ty wh i ch ought to be, or if the trus ts we r e dul y execut ed wo ul d be, so situate. Although the rule did not in terms define the per iods at wh i ch the pr oper ty wa s to be situate within the jurisdic on, si nce the rul e rel at ed to ser vi ce, the rel evant per iod wa s wh en leave to effect ser vi ce wa s gi ven. But in Official Sol i citor v. Stype I nvestmen t s (Jersey) Limit ed [ 1983] 1 WLR 214 Whi or d J sai d that but for Wi nt er v. Wi nt er he wo ul d have taken the rel evant dat e as the date on which the cause of ac on accrued rat her than the dat e of the appl ica on f or l eave t o s erve out of the jurisdic on.

151. In this case the ques on in rel a on t o CPR 6.20( 11) is whe t her the condi on t hat “the t r usts ought to be executed according to English law” must be fulfilled wh en permi ssi on to ser ve out is sought, or whether it is sufficient that Engl i sh l aw a ppl i ed t o t he t rust s at the me o f t he cause of ac on. I cons i der that the first cons t ruc on i s the correct one, and i s suppor t ed by t he ot her condi on that the def endant “i s” a trus tee of the trus ts. So al so i n the case of Ar cle 5(6) i ts applica on to a per son sued as a trus tee of a trus t wh i ch “i s” domi ci led i n a Cont rac ng State supports the construc on that the me of the proceedi ngs i s the cri cal me.

152. It is also supported not only by Winter v. Winter but also by part of the reasoning which led the House of Lordsto hold in Canada Trust Co. v. Stolzenberg (No. 2) [2002] 1 AC 1 that for the purposes of the Lugano Conven on ( and t her ef or e al so the 1968 Conven on) the dat e f or det ermin ing whether a defendant was domiciled in the United Kingdom or in another Contrac ng Stat e wa s the date when the proceedings were ins tut ed, and not wh en they we r e ser ved. One of the factor s which led Lord Steyn, in the leading speech, to that conclusion was the aim of the Conven on (ci ng Case C-125/92 Mulox IBC Ltd. v. Geels [1993] ECR I-4075 , 4103) to allow the plain ff eas i l y to foresee the court before which he may bring an ac on and the def endant reasonabl y to for esee the court before which he may be sued.

153. Finally it is supported by the strict approach to interpreta on of bot h CPR 6. 20 and the 1968 Conven on. In the cont ext of wh at is now CPR 6. 20 it has been sai d on ma ny occasi ons , appl yi ng The Hagen [1908] P. 189 , 201, that where there is doubt as to the construc on of any of its heads , the doubt should be resolved in favour of the foreigner (or, more strictly, against the exercise of extra-territorial jurisdic on) . In the case of the 1968 Conven on t he European Cour t has emph as i sed on several occasions that the excep ons to Ar cle 2, whi ch gi ves pri mac y to t he cour t of the domicile, are to be construed strictly (see cases cited at Dicey and Morris, para 11–051).

154. I will, however, in case I am wrong on this point, also consider the ques on of the appl icabl e law at the me wh en the cause of ac on i s sai d t o have ari sen.

1943 and 1946 Trusts

155. Neither CPR 6.20(11) nor Ar cl e 5( 6) can appl y to the 1943 or 1946 Trus ts. It is commo n ground that they are governed by Indian law, and there is no possible basis for English jurisdic on.

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1975 Trusts

156. It is central to the claimants' case on the merits in rela on at least to Lokuma l , Lal and Sham that they can avoid the effect of the rel eases wh i ch they si gned wh en they a ained maj ori ty i n 1992 and 1995 respec vel y. That is wh y the par cul ars of claim o ri ginal l y pleaded undue i nfluence (and why the claimants now seek to plead that they were obtained unfairly and inequitably), and also sought an order that the releases be declared void or be set aside. The defendants argued that the claimants' case on the releases was so weak that it did not raise a serious issue to be tried, but in my judgment there is a more fundamental objec on to the cl ai m for a decl ar a on r ela ng t o the releases.

157. There is no basis for an argument that the claims rela ng to the rel eases fal l wi thi n CPR 6.20(11) or Ar cl e 5( 6) , and the cour t has no jur i sdi c on t o deal wit h t hem a s i ndependent claims for the reason given in paragraph 131 above. But the claimants now say that they are really ma er s for reply to a defence of release, and that it is not necessary for the releases to be pleaded as a part of their posi ve case. I shal l pr oceed on the basi s that that submi ssi on is cor rect.

158. So far as the 1975 Trusts are concerned, on the construc on of CPR 6. 20( 11) wh i ch I have preferred, even if the trust subsists, the only person who “is” a trustee is Bermuda Trust, and the other non-Conven on def endant s coul d onl y be ser ved under CPR 6. 20( 3) (wh i ch wo ul d ma ke a differ ence because of t he even mo r e speci al care wh i ch mu s t be exer ci sed bef or e ser vi ce i s authorised under that head). But the assets of the trusts have been distributed, and Bermuda Trust, the sole trustee, acknowledged as long ago as 1985 that the trusts were at an end.

159. This is a hurdle which could be overcome in theory if the claimants had a good arguable case that the deeds of appointment were ineffec ve t o t ransf er the t rust proper t y. If ther e i s a t ransf er of trust property in breach of trust for which the trustees remain accountable, the trust rela onshi p remains and the fruits of the claim will be held on the same trusts. But it is noteworthy that the claimants do not plead that the deeds of appointment were invalid, perhaps because to do so might entail that the sums paid to Harish and Radhika and to the claimants will become repayable.

160. But, in any event, in the second choice of law in 1985 the trustees chose Bermuda law and jurisdic on for the trus ts, and ther ef or e ther e is pr ima faci e no basi s for a cont en on t hat the t rust s ought to be executed according to English law. The trustees had the power under clause 15(a) to select the applicable law, and that choice is prima facie effec ve as a combi ned r esul t of the common law and Ar cl es 6( 1) and 10 of the Ha gue Conven on .

161. There is no good arguable case for impugning the validity of the choice of applicable law. There is no reason to believe that there was any reason for the change other than to distance the trusts from UK tax law. There is clear and contemporary evidence produced by the defendants that the change to a Bermuda-based trustee and the choice of Bermuda law and jurisdic on in 1985 wa s tax-driven, to avoid an argument that UK tax law might apply to the income from the Kaycee and Chellsons shares. Although it is alleged in the par cul ar s of cl ai m that the appoi nt me nt of Bermu da Trust was effected for the pur pose of enabl ing the br eaches of trus t, Vi shal has not sought in any way to contest the evidence on the reason for the appointment (or the choice of Bermuda law). To do so he would have to show that the 1984 le er f rom Mo or e, Stephens t o Nor ton Rose recommending the change of trustee was bogus window dressing. It is not surprising that he has not sought to do so. But unless he has something to say about the defendants' evidence about the change, I do not see how the claimants can possibly establish a good arguable case that the choice of Bermuda law is ineffec ve, and t hat ther efore as at the dat e of the proceedi ngs the t rust s ought to have been executed according to English law.

162. In the case of the 1968 Conven on def endant s (Lal and Chel lwo od) , Ar cle 5(6) appl i es onl y to a defendant who is sued “as se lor , trus tee or beneficiary.” Chel l woo d i s a def endant because i t purchased the shares, but it is not a se lor , trus tee or beneficiary of the t rust s. At mos t i t mig ht be a construc ve trus tee, but (as I have me n oned) Ar cle 5( 6) does not appl y to const r uc ve trusts. Nor

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is Lal any longer a trustee, and, decisively (and for the same reasons as in rela on to CPR 6. 20( 11) ) the trusts are not domiciled in England, because they would not (if they s ll exi sted) have thei r closest and most real connec on wi th Engl ish l aw. I do not doubt that i n deci di ng wh et her i t i s English law with which the trusts have their closest connec on, it is permi ssi bl e to take int o account the express choice of Bermuda law to negate that connec on.

163. Since there is no basis for jurisdic on under CPR 6. 20( 11) or Ar cle 5(6), ther e i s no bas i s for service of addi onal necessar y or pr oper par es under CPR 6.20( 3).

164. If I am wrong in my conclusion that the governing law or domicile of the trusts is to be tested as at the date of the proceedings rather than the date when the cause of ac on arose, I wo ul d be faced with the same difficul t y as Sco J. in Chel l aram v. Chel l aram ( N o.1 ) . For t he r easons gi ven above i n paragraph 136 (although this was not the subject of argument), if this ques on arose in the pr esent proceedings it would be for the claimants to show that English law was the applicable law, and I doubt whether there would be any factual issues such that the ques on wo ul d fal l to be deci ded on the good arguable case basis. The court would have to come to its own view. Since in these circumstances the ques on of jur i sdi c on wou l d be l inked wit h t he act ual all eged breaches of trust it is likely that the effect of sec on 1( 5) of the Recogni on of Trust s Act 1987 would be that the common law rules would prevail if they led to a result differ ent f rom t hat under t he Ha gue Conven on .

165. Sco J' s i ni al vi ew was that the t rust s wer e governed by I ndi an l aw, but he was l e with doubts because the trust property was shares in Bermudan companies and the underlying assets were outside India; the purpose of the trusts was to escape Indian tax and exchange control and two of the three original trustees were in London. Accordingly he did not find it easy to see wh y, if the par es had i nt ended I ndi an l aw to gover n the trus ts, they wo ul d have ar ranged for an Engl ish administra on. But he di d not deci de the ques on of the governing l aw.

166. By Ar cl e 7 of the Ha gue Conven on , in t he absence of a choi ce of the appl i cabl e l aw, a t rust is governed by the law with which it is most closely connected. In ascertaining that law reference is to be made “in par cul ar ” to (a) the pl ace of admi ni stra on des i gnat ed by the se l or — no such pl ace was designated; (b) the situs of the assets of the trust — this was Bermuda if account only is taken of the shares in Kaycee and Chellsons which were se led, but ma ny ot her count ries (especi al ly in As i a and Africa) if the underlying assets are taken into account; (c) the place of residence or business of the trustees — Mr Rupchand and Mr Bharwani were resident in London at the date of the se leme nt s, and t he evi dence of Ram' s r es i dence wa s i nconc l us i ve, a l though he t hen had substan al London connec ons ; (d) the obj ect s of the t rust and t he places whe r e t hey wer e t o be fulfilled — ther e wa s no one pl ace to wh i ch these factor s coul d poi nt . In the light of the pauc i ty of authority at common law, I doubt if there is any significant di fference bet wee n t he Ar cle 7 and t he likely approach at the common law.

167. Because the approach to this ques on wa s not the subj ect of ar gume nt (and, in vi ew of my other holdings, further argument would serve li le poi nt ) I wi ll simp l y indi cat e that in my judgme nt it is likely that Indian law was the law with which the trusts were most closely connected. They were dra ed i n I ndi a by I ndi an l awy er s for a fami ly of I ndi an or i gi n wi th strong I ndi an es, but wi t h interna onal int er ests, and it is ver y doub ul that the f act that at l east two of the t rust ees wer e i n London, and that it was contemplated (but not required) that administra on wo ul d (at least ini all y) take place in London would have made English law the law with the closest connec on.

XIV Discre on and for um conveni ens

168. It is for the claimants to show that England is “the proper place in which to bring the claim” against the non-Conven on def endant s: CPR 6. 21( 2A) . Si nce t he exer ci se of j ur isdi c on wou l d involve bringing foreign par es to Engl and:

“The effect i s, not me r el y that the bur den of pr oof rests on the pl ai n ff to persuade

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the court that England is the appropriate forum for the trial of the ac on, but that he has to show that this is clearly so.” (Lord Goff of Chi evel ey in Spiliada Mari me Cor p. v. Cansulex Ltd [1987] AC 460 , 481)

169. I have to approach this ques on on t he hypot hes i s t hat not onl y wo ul d t he cour t have jurisdic on under CPR 6. 20 agai ns t the non- Conven on def endant s , but also t hat the cour t wou l d have jurisdic on over Lal , in each case on the hypot hes i s that the trus ts are gover ned by Engl ish law and, in the case of the non-Conven on def endant s, that ther e are ser ious issues to be tri ed on the merits of the case.

170. This is a case in which the claimants cannot show that England would clearly be an appropriate forum. On the above hypotheses, the only connec ons wi th Engl and wo ul d be (a) the trus ts wo ul d be governed by English law; (b) the se leme nt in 1985 rel at ed (in par t) to Engl ish pr oceedi ngs, and (c) the individual defendants have access to homes in England when they visit. But the governing law is not a weighty factor when there is no reason to suppose that the law applicable in the compe ng jurisdic on is any di fferent . The Heads of Agr eemen t in 1985 wer e express l y governed by Bermud a law, the Supplemental Agreement was, no doubt, impliedly governed by the same law, and the consent awards were governed by Bermuda law. The fact that the individual defendants can travel to England is a very minor factor, compared with the fact that, apart from Lal, they are all based in India (as is Radhika, who is bound to be a party on the indemni es wh i ch she gave in the Kayshewa k Award Supplemental Agreement if the proceedings con nue) and Hong Kong, and that the cl ai ma nt s are in Singapore.

171. Against that, there are proceedings in India against all of the individual defendants. It is clear that the applica on for int er im rel ief in those pr oceedi ngs wa s limi ted to pr oper ty in Indi a. Ther e is evidence from the defendants that the proceedings as a whole relate to property worldwide. The pleadings and Vishal's affidavi t in t hose proceedi ngs suppor t that view, and i t i s difficult t o see how the claim to a HUF could be limited to Indian property, although such a claim would be inconsistent with the claims made in these proceedings. But even if the Indian proceedings do not raise the same issues as these proceedings, or even deal with the same property as the 1975 Trusts, it is plain that the determina on of the Indi an pr oceedi ngs wi ll requi re an inves ga on of t he way i n whic h the Chellaram family dealt with their assets both in India and outside. The offer by the cl ai ma nt s to discon nue the Indi an pr oceedi ngs if the Engl ish cour t assume s jur i sdi c on over this ac on i s purel y tac cal in nat ur e.

172. India is an available forum. The evidence for the defendants from their Indian lawyer, Mr Malkani, is that the claim in the present Indian proceedings could be amended to include claims in rela on to the 1975 Trus ts. It ma y be true, as Vi shal asser ts, that that wo ul d not be an easy task, because the trust claims are incompa bl e wi th the cl ai m that an HUF exi sts, but it is the cl ai ma nt s' problem if they are making inconsistent claims. Even if it could not be amended, the court would have jurisdic on i n f resh pr oceedi ngs. Jur i sdi c on i n Bomba y i s governed by the Le ers Patent (Bombay), which grants jurisdic on if the cause of ac on arose wit hin t he l ocal limit s of the cour t , or if the defendant was resident or carried on business or worked for gain there. Mr Malkani's opinion is that all of the individual defendants have the requisite connec on wi th Bomb ay and coul d be sued there as having addresses or businesses there. He also confirms that Chel lwo od and Bermu da Trus t could effec vel y submi t to t he j uri sdi c on of t he Bombay court . Sco J in Chellaram v. Chellaram (No.1) [1985] Ch. 409 , 435 expressed some doubt as to whether a defendant could submit to the jurisdic on of the Bomb ay Hi gh Cour t, but in Konama neni v. Rol ls-Royce Indus tri al Powe r (Indi a) Ltd fuller evidence in rela on to pr oceedi ngs in Hy der abad per suaded me that submi ssi on wa s pos si bl e and Mr Malkani relies on the decisions of the Indian Supreme Court to which I referred when accep ng evi dence to that effect . Mr Mal kani also s ays that they coul d be added as def endant s wit h the permission of the court, but he does not give authority for that view. An undertaking has already been given by Lal and Sham on their own behalf and on behalf of Chellwood, and the court can take

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this into account in considering whether there is an alterna ve for um: Lubbe v Cape plc [2000] 1 WLR 1545 , 1552–6.

173. The following factors point to India as the forum conveniens . First, there are already proceedings pending there which raise the issue of the property rights in the Chellaram family, and an Indian court is far be er equi pped to under stand the int ri caci es of these fami ly rel a onshi ps. If there were proceedings in England, the same ma er s wo ul d be ven lated i n t wo j uri sdi c ons. Second, several of the most important witnesses are in India: Murli, Pishu and Mohan (although there may be doubts about the ability of Murli and Mohan to give effec ve evi dence) ; Radhi ka ( who , as I have said, would no doubt be joined as a party by Lokumal, Lal, Sham and Chellwood on the indemni es wh i ch she gave) ; Mr Chanr ai and hi s assi stant ( concer ni ng the consent awa rds , Mr Advani having died in 1991); and former Chief Jus ce Bhagwa (concerning t he Geneva Trust and the releases).

174. Lokumal and Sham are in Hong Kong, and the claimants are in Singapore. Lal has not, of course, suggested that it would be inconvenient for him to a end. The onl y imp or tant wi tnesses wh o wo ul d not be compellable in India are the lawyers involved in the 1985 se leme nt , Ma cfar l anes and Norton Rose. But it is not realis c to suppose that they wo ul d not a end i f asked t o by thei r cli ent s , and privilege, unless waived, would prevent them being compelled by any other party to give evidence. The partner in Moore, Stephens who dealt with the ma er has si nce di ed, and the representa ves of Bermu da Trus t and of Un i ted Ov er seas Bank wo ul d be onl y ma rgi nal ly rel evant witnesses.

175. I do not consider that any assistance in this exercise is to be derived from Chellaram v. Chellaram (No.1) . In that case the defendants had been served in England or had submi ed to the English jurisdic on, and the deci si on wa s based on stay pr inc i pl es , wh er e the bur den i s on the defendant to show that there is another more appropriate forum. The following factors were held to be relevant: (1) there was doubt whether the Bombay court would have jurisdic on over non- Indi an par es ; (2) del ay in Indi an pr oceedi ngs mi ght expose the pl ai n ffs to consi derable hardshi p; ( 3) I ndia would be more convenient so far as witnesses were concerned, but the geographic factor was not of great importance; (4) it was not a case of forum shopping because administra on wa s int ended to take place in London; (5) it was not a case of lis alibi pendens ; (6) all defendants had either been served in England or had instructed solicitors to accept service on their behalf.

176. I have already dealt with the point on the jurisdic on of the Indi an cour t. Thi s ma y not be a case of lis alibi pendens in the sense that the same issues are before the Indian courts, but it is a case in which there are proceedings in India to which all of the individual defendants are par es and which will cover much of the same ground.

177. On delay Sco J ( [1985] Ch. 409 , 435) said that, in view of the fact that Harish and Radhika had had no payments since 1983, a delay of seven to ten years might represent a serious injus ce to them. This is not a case of an applica on for a stay of pr oceedi ngs, and in Konama neni v. Rol ls-Royce Industrial Power (India) Ltd. , paras 59 and 176, I expressed the view that in cases of service out of the jurisdic on del ay in the for ei gn cour t wo ul d onl y be a factor if it we r e so great that the for ei gn court could not be regarded as an available forum. I also said that it was well known that problems of delay in Indian proceedings have lessened in recent years. The evidence in the present proceedings suggests that any delay would be a maximum of 4 to 5 years and that it may be possible to obtain an expedited hearing because of the age of some of the par es . Thi s is not a case wh er e the claimants are being kept out of their money. They and their parents have received all the money to which they were prima facie en tled, and these are pr oceedi ngs i n subs tance to set asi de a se leme nt 16 year s bef or e the pr oceedi ngs we r e ins tuted, and 9 year s a er Vi shal , and 6 years a er As hwi n, became en tled t o bri ng t hem. In t his case del ay i n t he I ndi an proceedi ngs i s not a factor which can make England the clearly appropriate forum.

178. On the hypothesis that the court would not exercise jurisdic on, not onl y because t he claimants had not shown that England was the clearly appropriate forum, but also because India was

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the appropriate forum, and that the proceedings would con nue agai ns t t he non- Conven on defendants in India, then there would be an overwhelming case for a stay of proceedings against Lal if (contrary to my view) the English court had jurisdic on over hi m under Ar cle 5(6).

179. I should add two points on the forum conveniens aspect. First, there is li le to be sai d for Bermuda as an alterna ve for um, and even Bermu da Trus t di d not pr ess for it. Second, Vi shal sai d in his witness statement that former Chief Jus ce Bhagwa had appar ent l y condoned breaches of trust and had filed evi dence i n suppor t of t he def endant s, and accor di ngl y Vi shal had “a r eal and jus fiabl e f ear that we wil l not be abl e t o achi eve j us ce i n India. ” Vi shal ' s advi s ers shoul d not have allowed this unworthy sugges on to be ma de, and it has now been abandoned.

XV Serious issue to be tried

180. On the view which I have taken on the jurisdic on and forum conveniens issues, the ques on of the strength of the claim in rela on to CPR 6. 20 does not ar i se, and I wi ll ther ef or e deal wi th i t shortly. There can be li le doubt that the cl ai ma nt s' case is, on the evi dence adduced so far , a ver y weak one.

181. There are two basic complaints. The first (wh i ch wa s al so the subj ect of Chel lar am v. Chel lar am (No.1) ) is that the 1981 reconstruc on wa s a br each of trus t because the conver si on of the trus t shares in Kaycee and Chellsons to “B” shares was procured for the benefit of Lokuma l , Lal , Sham, Murli and Pishu and diminished the value of the trust estate. But the claimants have not answered the evidence that the reason for the reconstruc on wa s to ensur e an income flow f or Lachmi b ai and that the “A” and “B” shares were treated equally in the 1985 valua ons .

182. The second complaint is that the 1985 se leme nt and its imp l eme nt a on was a breach of trust because it involved self-dealing by the trustees (through the indirect sale of the trust assets to them or their companies) and its inten on and effect was to benefit the t r ustees and Hari sh and Radhi ka at the expense of the claimants. But there is unanswered evidence that there was no prejudice to the claimants because the shares were properly valued, and (as regards the Kayshewak shares) the claimants executed deeds of release on a ai ni ng thei r ma j or i ty, and di rectly recei ved par t of the proceeds of sale, and (as regards the Eskay 2 shares) pressed for payment direct to themselves.

183. The purchase of trust property by a trustee by a trustee is not void. It is voidable within a reasonable me at the ins tance of a beneficiary: Holder v. Holder [1968] Ch 353, 398 (CA) . These proceedings were commenced some 9 years a er Vi shal a ained hi s maj ori ty and 6 year s a er Ashwin did so.

184. For the reasons I have given, the validity of the deeds of release could arise in English proceedings only in reply to the defendants' reliance on them, since there is no basis of jurisdic on for a posi ve cl ai m. The cl ai ma nt s asser ted in the par cul ars of cl aim ( par as 51 and 52) that the deeds of release were not binding for two reasons.

185. The first wa s that nei ther cl ai ma nt had any knowl edge of the ci rcums tances of the l i ga on, the arbitra on or the sal e of shares wh en they execut ed the rel eases , or had any si ght of the trus t documents men oned t her ei n. That cont en on had been pr eceded by a st atemen t that the claimants only became aware of the terms of the heads of agreement in the year 2000 (para. 38). These pleas are demonstrably untrue. The recitals to the deeds of release referred in terms to the previous li ga on, the s e l ement , the ar bi tr a on and t he sal e of shares , and i n his 1996 affidavit i n the Indian proceedings Vishal himself gave a full account of Chellaram v. Chellaram (No.1) and of the se leme nt in 1985 and exhi bi ted the stat eme nt of cl ai m (wh i ch set out the terms of the trus ts ful ly) , the Heads of Agreement, the Supplemental Agreement and the awards. When he was confronted with this material in the evidence for the defendants, all he could say was this:

“Although I had previously been aware of the existence of the 1975 trusts and 1985 agreement, it was only in 2000 that I gained sufficient informa on and under s t andi ng

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to make decisions about my own posi on i n rel a on t o t hese di sput es. It i s i n t hat context that the word ‘aware’ is used in paragraph 38 in the par cul ar s of cl ai m se led by counsel.”

186. The second conten on wa s that the rel eases we r e pr ocur ed by the undue influence of Lokumal , Lal and Sham. It was said that the claimants lacked any independent legal advice and were ignorant of the nature of the breaches of trust which they were purportedly releasing. This conten on has been abandoned. It was bound to fail. By the me the rel eases we r e execut ed li ga on was al ready being pursued on the claimants' behalf in India by legal advisers who had responsibili es to them. Even if it were arguable (which I do not consider it is) that there was then the requisite rela onshi p of trustee and benefici ar y, it coul d not be sai d that the Lokuma l def endant s had taken an advant age which was only explicable on the basis that there had been undue influence: Royal Bank of Scotland v. Etridge (No. 2) [2001] 3 WLR 1021 , 1034. The burden would therefore have been on the claimants to show actual undue influence. Jus ce Bhagwa , who was a tr ustee of t he Geneva Trust appoi nt ed by the claimants' mother, gave evidence that there was no undue influence, and i t has not been contradicted.

187. That conten on has been repl aced by anot her cont en on, that the r eleases wer e i neffec ve because it was “unfair and inequitable” for their execu on to have been obt ai ned by the thr eat ened withholding of money (under the terms of the Geneva Trust) to which they were en tled. Al though the court can consider all the circumstances with a view to seeing whether it is fair and equitable that a benefici ar y wh o has acqui esced in, or gi ven hi s concur rence to, a br each of trus t shoul d be able to turn round and sue the trustees ( Re Pauling's Se leme nt Trus ts [1962] 1 WL R 86, 108, affd in part[1964] Ch 303 ) that enquiry is concerned with the requisite degree of knowledge. There is no principle of the law of contract or trusts which makes a release ineffec ve s impl y because i t i s unfair. This is not a case where the releases could be said to have been wrung from the claimants by “distress or terror” (see Lewin, Trusts, para 39–74).

188. In my judgment the weakness of the claim is such that I would have held that for the purposes of service out of the jurisdic on under CPR 6. 20 ther e wo ul d not have been a ser ious issue to be tried on the merits for much of the claim, and if there had been jurisdic on under Ar cle 5(6) the case would have been ripe for an applica on to stri ke mu ch of it out . Some qual ifica on i s necessary because I have not heard full argument on the extent to which the claim in respect of the Eskay 2 shares, where there was no release, and where the evidence on acquiescence and concurrence is not so powerful, falls to be treated in the same way as the claim in rela on to the Kayshewa k shares .

XVI Non-disclosure

189. This issue, like the other subsidiary issues, would only have arisen if the court had jurisdic on, and if England had been shown by the claimants to be the forum conveniens . On the without no ce applica on for permi ssi on to ser ve out the dut y of the appl icant is to ma ke ful l and fai r di scl osur e of all the material facts, and I set out the relevant principles in Konamaneni v. Rolls-Royce Industrial Power (India) Ltd.

190. The witness statement in support of the applica on wa s def ec ve i n man y r espect s, but in at least two ways it plainly failed to make full and fair disclosure, and exhibited par cul ar s of cl ai m which in one important and material respect were untrue and misleading. The existence of overlapping proceedings between the same par es in ot her jur i sdi c ons i s alway s a highl y mat eri al factor on an applica on f or permi ssi on t o s er ve out . Ther e wa s no me n on of the I ndi an proceedings, in which all of the individual defendants in this ac on we r e al so def endant s. The English proceedings at the me of the appl ica on concerned not onl y the 1975 t rust s but also t he 1943 and 1946 trusts. There can be no doubt that the Indian proceedings commenced 10 years before, and s ll con nui ng, concerned t he tle to the pr oper t y compr i s ed i n the compl a i nt s of

Page31

breach of trust in the English proceedings even if it was not so clear that the 1975 trust assets were also comprised in the Indian claim. The failure to refer to the Indian proceedings was a material non-disclosure, because it was relevant to forum and also to the merits of the claim (since the claims in the Indian ac on we r e incons i stent wi th the cl ai ms in these pr oceedi ngs).

191. The second point is that the account in the witness statement of Chellaram v. Chellaram (No.1) is misleading. It says that the court had already accepted jurisdic on and hel d that Engl and wa s the proper place for the dispute regarding the 1975 trusts, without disclosing that (a) in that case all the defendants had been personally served in England or instructed solicitors to accept service on their behalf; (b) except as regards the reconstruc on i n 1981, ther e we r e no simi lar i ssues ; ( c) the principles applied by Sco J we r e not those appl icabl e in a case of permi ssi on to ser ve out of the jurisdic on.

192. Finally, the witness statement referred to and relied on, in support of the applica on, the par cul ar s of c l ai m. I have al ready s et out t he evi dence showi ng t hat t he s tat eme nt i n t he par cul ar s of cl ai m, para 38, that the cl ai ma nt s onl y became awa re of the terms of the Heads of Agreement in the year 2000 was demonstrably false and designed to give the impression that the proceedings for equitable relief had been brought promptly.

193. In my view these would have been sufficient l y seri ous fail ures to j us fy se ng asi de the orders .

XVII Conclusion

194. The orders of Master Bragge will be set aside, as will service on those defendants who have been served, or purportedly served, and I will make a declara on that the cour t has no jur i sdi c on to hear the claims.

XVIII Postscript: the posi on of He r ber t Smi th

195. Lal, Sham and Chellwood are represented by Herbert Smith, and the partner responsible is Ms Anna Pertoldi. Herbert Smith is a large firm of sol ici tor s in the Ci ty of London, wi th mo r e than 150 partners, of whom more than 50 specialise in li ga on. I was a par t ner i n t hat firm fr om 19 71 un l the end of September 2000 (when I was appointed to the High Court bench), and Ms Pertoldi worked in the same group as I did between 1988 and 1999 (both before and a er she became a partner), and worked with me on several cases. The claimants made an applica on that I shoul d disqualify myself, but withdrew the applica on on the mo r ni ng of the hear ing. It wo ul d have been another case (the others being Locabail (UK) Limited v. Bayfiel d Pr oper es Limit ed [ 2000] QB 45 and Bank of Credit and Commerce Interna onal SA v. Al i, Decemb er 3, 2001 ) in which par es rai sed the ques on wh et her I shoul d have heard, or shoul d hear , ma ers whi ch have been assi gned t o me, on the ground that I was, or had been, a partner in the firm of He r ber t Smi th.

196. In Taylor v. Lawrence [2002] EWCA Civ 90 the Court of Appeal concluded (at para 60) that the appropriate test for poten al bi as wa s the test in Re Medicaments (No.2) [2001] 1 WLR 700 (CA) as modified by Lor d Hope of Cr ai ghead in Porter v. Magill [2002] 2 WLR 37 , 84:

“The court must first ascer tai n al l the ci rcums tances wh i ch have a bear ing on the sugges on that the judge wa s bi ased. It mu s t then ask wh et her those ci rcums tances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.”

197. The judgment in Taylor v. Lawrence emphasises that in this country it is an everyday occurrence that barristers appear before judges who were former members of their chambers, and who will therefore be likely to have worked very closely with them. The judgment does not deal in this respect with the posi on of sol ici tor s, but ther e is no reason to bel ieve that di fferent cons i der a ons

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apply, and, indeed, every reason to the contrary. There is no reason to dis ngui sh the si tua on of solicitors on the ground that solicitors prac se as par tner shi ps wh i le bar ri ster s share pr emi ses , staff, prac ce devel opme nt (or ma rke ng) and t he expenses associ ated t her ewi t h, but not profit s. No fair-minded and informed observer could conclude that there would be a real possibility that a judge, whether a former barrister or solicitor, would have the slightest inclina on to act in br each of the judicial oath and favour a set of chambers or firm of wh i ch the judge wa s a forme r me mb er .

Chellaram Family tree: Lokumal, Tahilram and Shewakram branches male line

Crown copyright© 2012 Sweet & Maxwell

Page1

Status: Posi ve or Ne ut ral Judi ci al Tr eatme nt

*327 Entores LD. v Miles Far East Corpora on.

Court of Appeal

17 May 1955

[1955] 3 W.L.R. 48

[1955] 2 Q.B. 327

Denning, Birke and Par ker L. JJ.

1955 May 3, 17.

Contract—Offer and accept ance—Wh ere cont ract ma de—C ont ract by tel ephone—O ffer mad e by Telex communica on f rom L ondon—A c cept ance by Tel ex me ssage f rom Ho l land—A c cept ance received in London—Contract made in London—Service of writ out of the jurisdic on—S ubsequent varia on of cont ract—E ffect on whe r e mad e—R. S.C., Ord . 11, r. 1 ( e) (i).

House of Lords—Leave to appeal—Court of Appeal, by—Interlocutory ma er .

Prac ce—Wr it—S ervi ce out of jur isdi c on.

The plain ff compa ny i n London mad e an offer by Tel ex t o the agent s in Hol l and of t he defendant corpora on, wh ose headquar ter s we r e in New Yor k, for the pur chase of a quan ty of copper cathodes, and their offer wa s dul y accept ed by a commu ni ca on r ecei ved on t he plain ffs' Tel ex mac hi ne i n London.

The plain ff compa ny sought l eave t o s erve no ce of a wr it on t he defendant corpora on in New York claiming damages for breach of the contract so made:-

Held that, although where a contract is made by post acceptance is complete as soon as the le er of accept ance i s put i nt o the pos t box, wh er e a cont ract i s ma de by i ns tant aneous communica on, e. g. , by tel ephone, the cont ract i s comp l et e onl y wh en t he accept ance i s received by the offer or , si nce gener al ly an accept ance mu s t be no fied t o the offer or to make a binding contract; and that, since *328 communica ons by Tel ex we r e vi rtual ly ins tant aneous , the contract in this case was made in London. Accordingly it was a proper case for service out of the jurisdic on under R. S. C. , Or d. 11, r. 1 (e) . 1

Dicta of Hill J. in Newcomb v. De Roos (1859) 2 E. & E. 271 disapproved.

Decision of Donovan J. affirmed .

INTERLOCUTORY APPEAL from Donovan J.

The facts, which are stated in more detail in the judgment of Denning L.J., were as follows: The plain ffs, Ent ores Ld. , wer e an Engl i sh compa ny wi t h a r egi stered office in London, and t he defendants, Miles Far East Corpora on, we r e an Ame r i can cor por a on wit h headquar t ers i n New York, and with agents all over the world, including a Dutch company in Amsterdam. Both the plain ffs and t he def endant s ' agent s i n Ams t erdam h ad i n t hei r office an equipment known as Tel ex Service, by which messages could be dispatched by a teleprinter operated like a typewriter in one country, and almost instantaneously received and typed in another. The plain ffs des i red t o mak e a contract with the defendants' agents in Amsterdam for the purchase of copper cathodes from the defendant corpora on. In Sept emb er , 1954, a ser ies of commu ni ca ons by Tel ex pas sed bet wee n the plain ffs and t he Dut ch compa ny, the mat eri al one f or the pr esent pur poses bei ng a counter-offer ma de by the pl ai n ffs on September 8, 1954, and an acceptance of t hat offer by the Dutch agents on behalf of the defendants received by the plain ffs i n London by Tel ex on September 10, 1954.

The plain ffs l ater al l eged t hat ther e had been a breach by the def endant s of the cont r act . They accordingly applied for leave to serve no ce of a wr i t on the def endant s in New Yor k on the ground

Page2

that the contract was made in England and, therefore, fell within the terms of R.S.C., Ord. 11, r. 1 (e).

It was contended for the defendants that the contract was made in Holland.

The plain ffs' appl i ca on was granted by a mast er, and on appeal his deci s i on was affirmed by Donovan J.

The defendants appealed.

Gerald Gardiner Q.C. and S. B. R. Cooke for the defendants. The contract in the present case was not made in London and *329 was not therefore within the jurisdic on. The pr inc i pal ques on r ai sed by the appeal, on which English law is devoid of authority, is, when and at what place is a contract made when the nego a ng par es are pr ac cal ly in ins tantaneous communi c a on wit h e ach ot her by means of a telephone or, as in the present case, a Telex machine. So far as a contract made by correspondence is concerned, it has long been se led that the offer of a cont r act mad e by pos t is accepted when an acceptance is put in the post, and the contract is made at the place where that act was performed: see Adams v. Lindsell 2; Dunlop v. Higgins 3; In re Imperial Land Co. of Marseilles (Harris's case 4; Bri sh and Ame r ican Tel egraph Co. v. Col son 5; Household Fire Insurance Co. v. Grant. 6 In Henthorn v. Fraser7 Lord Herschell L.C. said: "Where the circumstances are such that it must have been within the contempla on of the par es that , according t o t he ordinar y usages of mankind, the post might be used as a means of communica ng the accept ance of an offer, the acceptance is complete as soon as it is posted."

So far as telegrams are concerned, the same rule has been applied: see Henkel v. Pape, 8 Cowan v. O'Connor 9 and Bruner v. Moore.10 With regard to a contract made verbally between the par es , in Newcomb v. De Roos 11 Hill J., in considering the ques on of the pl ace wh er e the cont ract wa s made, said: "Suppose the two par es stood on di fferent sides of the boundar y l ine of the dis trict: and that the order was then verbally given and accepted. The contract would be made in the district in which the order was accepted."

The ques on of jur i sdi c on i n r ela on t o the pl ace wher e a contr act i s made ar ises more fr equent l y in the United States than in this country and, so far as concerns contracts made by le er or telegram, there is no differ ence betwe en Engl ish and Ame r ican law: see Ame r i can Restat eme nt , § 64. In the case of a contract made by telephone, it has been held in America that the contract is made at the place where the acceptance is spoken, thus applying to such a contract the same principle as that applicable in the case of a le er or tel egram. In the pr esent , case accept ance by Telex was clearly within the contempla on of the par es, and i f *330 the offer ee in Hol land di d everything in accep ng the offer whi ch t he offeror i n London expect ed hi m to do, whic h was cl earl y the case, a contract was made in Holland and was made at the me wh en the accept ance wa s typed on the Telex machine. That being so, the contract was not made "within the jurisdic on" wi thi n the meaning of Ord. 11, r. 1, and service of the writ in New York should not have been ordered. If the law in rela on to a cont ract ma de by tel ephone or Tel ex is di fferent from t hat whi ch appl i es i n t he case of one made by le er or tel egram it i s des i rabl e that i t shoul d so be lai d down in cl ear and precise terms. [The Hagen12 was also referred to.]

Maurice Lyell Q.C. and Dennis Lloyd for the plain ffs. The cont r act i n t his case was mad e wit hin t he jurisdic on, and consequent ly ser vi ce out of the jur i sdi c on coul d proper l y be all owed under Ord . 11, r. 1. When a contract is nego at ed by t el ephone, Tel ex or ot her f orm of i ns tant aneous communica on, the cont ract is not comp l et e un l the accept ance i s act ual l y recei ved by the offeror , and further, the contract is made at the place where that acceptance is received and not at the place where it is spoken or, in the case of Telex, typed. If, therefore, the offer ee begi ns to tap out an acceptance to an offer ma de by Tel ex and the me ssage never get s thr ough, ther e is no cont ract . The authori es on cont racts ma de thr ough the pos t office by l e er or tel egr am, on whi ch rel i ance i s placed for the defendants, have no bearing on the present case.

When a new method of communica on, such as a tel ephone or a Tel ex, is emp l oyed in the ma ki ng of a contract, one must beware of trea ng the rul e in regard to pos tal commu ni ca ons as bei ng

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sacrosanct, since that rule was only arrived at a er long cons i der a on of wha t was mos t conveni ent in regard to postal services. In the American Restatement, Contracts, § 65, it is stated that "Acceptance by telephone is governed by the principles applicable to oral acceptance when the par es are in the pr esence of each ot her ," and it has been hel d in Ame r i ca that the cont ract is ma de at the place where the acceptor speaks his acceptance into the telephone. It is submi ed that that view should not be adopted in this country either in the case of a contract by telephone or Telex, and that the contract is only complete when the offer or has recei ved the accept ance. Fur ther , the contract is also made at the place where the acceptance is received, in the present case in London. That view has received *331 the support of Professor Winfiel d in thi s count ry: see (1939) 55 Law Quarterly Review, p. 514, "Some Aspects of Offer and Ac cept ance, " and of Pr of essor Wi lliston in America: see Contracts, § 82, p. 239.

Donovan J. was right in holding that the contract was made in London when the acceptance by Telex of their offer wa s recei ved by the pl ai n ffs, and consequent l y an or der f or t he s ervi ce of a wr it out of the jurisdic on coul d pr oper l y be ma de.

Gerald Gardiner Q.C. replied.

Cur. adv. vult.

May 17. The following judgments were read. DENNING L.J.

This is an applica on for leave to ser ve no ce of a wri t out of the j uri sdi c on. The gr ounds are that the ac on is br ought to recover dama ges for br each of a cont ract ma de wi thi n the jur i sdi c on or by implica on to be gover ned by Engl ish law.

The plain ffs are an Engl i sh compa ny. The def endant s are an Amer i can corpor a on wi th agent s al l over the world, including a Dutch company in Amsterdam. The plain ffs say that the cont r act was made by Telex between the Dutch company in Amsterdam and the English company in London. Communica ons by Tel ex are comp ara vel y new. Each compa ny has a t elepr i nter mac hi ne i n i ts office; and each has a Tel ex numbe r l ike a t elephone numbe r . Whe n one compa ny wis hes to s end a message to the other, it gets the Post Office t o connec t up t he mac hi nes . Then a clerk at one end taps the message on to his machine just as if it were a typewriter, and it is instantaneously passed to the machine at the other end, which automa cal ly types the me ssage ont o paper at that end.

The relevant Telex messages in this case were as follows: September 8, 1954: Dutch company: "Offer for account our associates Miles Far East Corpora on Tokyo up to 400 tons Japanese cat hodes sterling 240 longton c.i.f. shipment Mitsui Line September 28 or October 10 payment by le er of credit. Your reply Telex Amsterdam 12174 or phone 31490 before 4 p.m. invited." English company: "Accept 100 longtons cathodes Japanese shipment latest October 10 sterling £239 10s. longton c.i.f. London/Ro er dam payme nt le er of credi t stop please confirm la test tomor r ow." Dutc h compan y: "We received O.K. Thank you." September 9, 1954: English company: "Regarding our telephone conversa on a few mi nut es *332 ago we note that there is a query on the acceptance of our bid for 100 tons payment in sterling and you are ascertaining that your Tokyo office wil l confirm th e pr ice to be longton we therefore await to hear from you further." September 10, 1954: English company: "Is the price for the sterling cathodes understood to be for longton by Japan as you were going to find this out yesterday?" Dutch company: "Yes, price £239 10s. for longton."

At that step there was a completed contract by which the defendants agreed to supply 100 tons of cathodes at a price of £239 10s. a ton. The offer wa s sent by Tel ex from Engl and offeri ng t o pay £239 10s. a ton for 100 tons, and accepted by Telex from Holland. The ques on for our det ermi na on i s where was the contract made?

When a contract is made by post it is clear law throughout the common law countries that the acceptance is complete as soon as the le er is put int o the pos t box, and that is the pl ace wh er e the contract is made. But there is no clear rule about contracts made by telephone or by Telex. Communica ons by these me ans are vi rtual ly ins tant aneous and stand on a di fferent foo ng.

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The problem can only be solved by going in stages. Let me first cons i der a case wh er e two peopl e make a contract by word of mouth in the presence of one another. Suppose, for instance, that I shout an offer to a ma n acros s a ri ver or a cour tyard but I do not hear hi s repl y because it is dr own ed by an aircra flying overhead. Ther e i s no cont r act at that momen t . If he wis hes to mak e a cont r act , he must wait ll the ai rcra is gone and t hen shout back his accept ance so t hat I can hear wha t he says. Not un l I have hi s answe r am I bound. I do not agree wi th the obser va ons of Hi l l J. in Newcomb v. De Roos. 13

Now take a case where two people make a contract by telephone. Suppose, for instance, that I make an offer to a ma n by tel ephone and, in the mi ddl e of hi s repl y, the line goes "dead" so that I do not hear his words of acceptance. There is no contract at that moment. The other man may not know the precise moment when the line failed. But he will know that the telephone conversa on wa s abruptly broken off: because peopl e usual ly say some thi ng to si gni fy the end of the conver sa on. If he wishes to make a contract, he must therefore get through again so as to make sure that I heard. Suppose next, that the line does not go dead, but it is nevertheless so indis nct that I *333 do not catch what he says and I ask him to repeat it. He then repeats it and I hear his acceptance. The contract is made, not on the first me whe n I do not hear , but onl y the second me when I do hear . If he does not repeat it, there is no contract. The contract is only complete when I have his answer accep ng the offer.

Lastly, take the Telex. Suppose a clerk in a London office t aps out on t he t elepr i nter an offer whic h i s immediately recorded on a teleprinter in a Manchester office, and a clerk at that end t aps out an acceptance. If the line goes dead in the middle of the sentence of acceptance, the teleprinter motor will stop. There is then obviously no contract. The clerk at Manchester must get through again and send his complete sentence. But it may happen that the line does not go dead, yet the message does not get through to London. Thus the clerk at Manchester may tap out his message of acceptance and it will not be recorded in London because the ink at the London end fails, or something of that kind. In that case, the Manchester clerk will not know of the failure but the London clerk will know of it and will immediately send back a message "not receiving." Then, when the fault is rec fied, the Manchester clerk will repeat his message. Only then is there a contract. If he does not repeat it, there is no contract. It is not un l hi s me ssage is recei ved that the cont ract is comp l et e.

In all the instances I have taken so far, the man who sends the message of acceptance knows that it has not been received or he has reason to know it. So he must repeat it. But, suppose that he does not know that his message did not get home. He thinks it has. This may happen if the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated: or the ink on the teleprinter fails at the receiving end, but the clerk does not ask for the message to be repeated: so that the man who sends an acceptance reasonably believes that his message has been received. The offer or in such ci rcums tances is cl ear l y bound, because he will be estopped from saying that he did not receive the message of acceptance. It is his own fault that he did not get it. But if there should be a case where the offer or wi thout any faul t on hi s par t does not receive the message of acceptance - yet the sender of it reasonably believes it has got home when it has not - then I think there is no contract.

My conclusion is, that the rule about instantaneous communica ons betwe en the par es i s different from the rule about the *334 post. The contract is only complete when the acceptance is received by the offer or : and the cont ract is ma de at the pl ace wh er e the accept ance is recei ved.

In a ma er of thi s ki nd, howe ver , it is ver y imp or tant that the count ries of the wo r ld shoul d have the same rule. I find that mo s t of the Eur opean count ries have subs tan all y the same r ule as that I have stated. Indeed, they apply it to contracts by post as well as instantaneous communica ons . But in the United States of America it appears as if instantaneous communica ons are treat ed in the same way as postal communica ons . In vi ew of thi s di ver gence, I thi nk that we mu s t cons i der the ma er on principle: and so considered, I have come to the view I have stated, and I am glad to see that Professor Winfiel d in thi s count ry (55 Law Quar ter l y Revi ew, 514) , and Pr of essor Wi lliston i n the

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United States of America (Contracts, § 82, p. 239), take the same view.

Applying the principles which I have stated, I think that the contract in this case was made in London where the acceptance was received. It was, therefore, a proper case for service out of the jurisdic on.

Apart from the contract by Telex, the plain ffs put the case i n anot her way . They say t hat the contract by Telex was varied by le er pos ted in Hol land and accept ed by conduct in Engl and: and that this amounted to a new contract made in England. The Dutch company on September 11, 1954, wrote a le er to the Engl ish comp any sayi ng: "We confirm h avi ng sol d t o you f or account of our associates in Tokyo: 100 metric tons electroli c copper in cat hodes : £239 10s . for longt on c. i.f. U. K. / Con nent al ma i n por ts: pr omp t shi pme nt f rom a Japanese por t a er recei pt of expor t l i cence: payment by irrevocable and transferable le er of credi t to be opened in favour of Mi les Far East Corpora on wi th a first class Tokyo Bank. The r espec ve i mpor t l icences t o be s ent directl y wi th out delay to Miles Far East Corpora on. " The var i a ons cons i sted i n t he por t s of del i very, the provi sions of import licence and so forth. The English company say that they accepted the varia ons by dispatching from London the import licence, and giving instruc ons in London for the openi ng of the le er of credi t, and that thi s wa s an accept ance by conduct wh i ch wa s comp l et e as soon as the acts were done in London.

I am not sure that this argument about varia ons is cor rect. It ma y we l l be that the cont ract is ma de at the place where first comp l et ed; not at the pl ace wh er e the var i a ons are agreed. *335 But whether this be so or not, I think the varia ons we r e accept ed by conduct i n London and we r e therefore made in England. Both the original contract and ensuing varia ons we r e ma de in Engl and and leave can properly be given for service out of the jurisdic on.

I am inclined to think also that the contract is by implica on to be gover ned by Engl ish law, because England is the place with which it has the closest connexion.

I think that the decisions of the master and the judge were right, and I would dismiss the appeal.

BIRKETT L.J.

I can state very briefly my agreeme nt wi th the judgme nt jus t del iver ed by my Lor d. [Hi s Lor dshi p stated the facts and con nued: ] The pl ai n ffs contend t hat t he contr act was made i n Engl and and, therefore, comes within Ord. 11, r. 1 of the Rules of the Supreme Court, whereby the court or a judge may allow service of a writ outside the jurisdic on wh er e the ac on i s one brought agai nst a defendant for damages for breach of a contract made within the jurisdic on. The def endant s say that the contract was not made in England but was made in Holland.

I am of opinion that in the case of Telex communica ons (wh i ch do not di ffer in pri nci ple f rom t he cases where the par es nego a ng a contr act were actual l y in the pr esence of each ot her) there can be no binding contract un l the offeror recei ves no ce of t he acceptance f r om t h e offer ee.

Mr. Gardiner submi ed that the pr oper pr inc i pl e to be appl ied to a case like the pr esent coul d be thus stated: "If A makes an offer to B, ther e is a concl uded cont ract wh en B has done al l that he can do to communicate his acceptance by approved methods." He further submi ed t hat great difficul es woul d ar ise i f Telex commun i ca ons were t reated di ffer entl y f rom acce pt ances by pos t or telegram. In my opinion, the cases governing the making of contracts by le er s passi ng thr ough the post have no applica on to the ma ki ng of cont racts by Tel ex commu ni ca ons . The ordinar y rule of law, to which the special considera ons gover ni ng cont racts by pos t are excep ons , is that the acceptance of an offer mu s t be commu ni cat ed to the offeror, and t he place whe r e t he cont r act is made is the place where the offer or recei ves the no fica on of the acceptance by the offeree.

If a Telex instrument in Amsterdam is used to send to London the no fica on of t he acceptance of an offer the cont ract is comp l et e wh en the Tel ex ins trume nt in London recei ves the no fica on of the acceptance (usually at the same moment that *336 the message is being printed in Amsterdam), and the acceptance is then no fied t o t he offeror , and t he contr act i s made i n London.

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I agree with the judgment of Donovan J. and this appeal should be dismissed.

PARKER L.J.

I have come to the same conclusion, and would only add a few words on the basis that the contract sued on is that created by the Telex messages. As was said by Lindley L.J. in Carlill v. Carbolic Smoke Ball Co.14: "Unques onabl y, as a gener al pr opos i on, whe n an offer i s made , i t is necessary in or der to make a binding contract, not only that it should be accepted, but that the acceptance should be no fied. " I n t he same case Bowen L .J . sai d 15: "One cannot doubt that, as an ordinary rule of law, an acceptance of an offer ma de ought to be no fied t o the person who make s t he offer , i n order t hat the two minds may come together. Unless this is done the two minds may be apart, and there is not that consensus which is necessary according to English law - I say nothing about the laws of other countries - to make a contract." Accordingly, as a general rule, a binding contract is made at the place where the offer or recei ves no fica on of the acceptance, that i s where t he offeror i s.

Since, however, the requirement as to actual no fica on of t he acceptance i s for t he benefit of the offer or , he ma y wa i ve it and agree to the subs tu on f or t hat r equi r ement of s ome o t her conduct by the acceptor. He may do so expressly, as in the adver seme nt cases , by in ma ng t hat he i s content with the performance of a condi on. Agai n, he ma y do so i mp l iedl y by i ndi ca ng a contemplated method of acceptance, for example, by post or telegram. In such a case he does not expressly dispense with actual no fica on, but he i s held to have done so impli edly on gr ounds of expediency. Thus, in Adams v. Lindsell, 16 the court pointed out that unless this were so "no contract could ever be completed by the post. For if the defendants were not bound by their offer when accepted by the plain ffs l l the answer was r ecei ved, t hen t he pl ai n ffs ought not to be bound ll a er they had r ecei ved t he no fica on that the def endant s had received thei r answer an d assented to it. and so it might go on ad infini tum. "Agai n, i n Dunl op v . Hi ggi ns , 17 Lord *337 Co enham L. C. poi nt ed out that "Commo n sense tel ls us that transac ons cannot go on without such a rule"; and in In re Imperial Land Co. of Marseilles (Harris's case 18, Mellish L.J. referred to the mischievous consequences which would follow in commerce if no such rule was adopted. To the same effect i s the j udgme nt of Thes i ger L. J. i n Househol d Fi re I nsur ance Co. v. Grant, 19 in which he points out that where the par es are at a di stance the bal ance of conveni ence dictates that the contract shall be deemed complete when the acceptance is handed to the Post Office.

Where, however, the par es a re i n each ot her ' s pr esence or , t hough s eparat ed i n s pace, communica on betwe en them i s, i n effect , inst ant aneous , ther e i s no need f or any such r ule of convenience. To hold otherwise would leave no room for the opera on of the gener al rul e that no fica on of t he acceptance must be r ecei ved. An acceptor coul d say: "I spoke the word s of acceptance in your presence, albeit so ly, and i t ma ers not that you di d not hear me" ; or, "I telephoned to you and accepted and it ma er s not that the tel ephone we nt dead and you di d not get my message." Though in both these cases the acceptor was using the contemplated or, indeed, the expressly indicated mode of communica on, ther e i s no room for any i mp l ica on t hat the offer or wa i ved actual no fica on of t he acceptance. I t f ol l ows t h at I cannot agree wi t h the observa ons of Hi ll J. in Newc omb v. De Roos . 20

So far as Telex messages are concerned, though the dispatch and receipt of a message is not completely instantaneous, the par es are to al l int ent s and pur poses in each ot her ' s pr esence jus t as if they were in telephonic communica on, and I can see no reason for depar ng f rom t he gener al rule that there is no binding contract un l no ce of the accept ance i s recei ved by the offeror . That being so, and since the offer - a count er -offer - was mad e by the pl ain ffs in London, and no fica on of t he acceptance was r ecei ved by t hem i n London, t he contr act resul ng theref r om was made in London. I would accordingly dismiss the appeal.

Cooke

Page7

. Would your Lordships give me leave to take the ma er fur ther ? It is a ma er of some cons i der abl e importance. It appears that communica ons of thi s ki nd are on the increase, and your Lor dshi ps have at any rate disposed of a certain amount *338 of authority. I think your Lordships have also indicated that the courts here may depart from the rule which the American courts have observed with regard to the telephone.

DENNING L.J.

This is an interlocutory appeal. It means that the trial of the ac on wi ll be s l l furt her hel d up.

Cooke

. We do not wish to hold up the trial of the ac on fur ther than necessar y. On the ot her hand, it is an American corpora on tradi ng al l over the wo r ld. It is a ma er of cons i der abl e i mpo r t ance t o t hem and others in like posi on as to wh at thei r pos i on r eal l y i s.

DENNING L.J.

On the whole we do not think that we ourselves should give leave to appeal.

Representa on

Solicitors: Allen & Overy; Smiles & Co.Appeal dismissed. Leave to appeal to House of Lords refused. (P. B. D. )

________________________________________________________________________________________

. R.S.C., Ord. 11, r. 1, provides that service out of the jurisdic on of a wr i t of summo ns ma y be allowed (e) to enforce a contract (i) "made within the jurisdic on. "

(1818) 1 B. & Ald. 681.

(1848) 1 H.L.C. 381.

. (1872) L.R. 7 Ch. 587.

. (1871) L.R. 6 Exch. 108.

(1879) 4 Ex.D. 216.

[1892] 2 Ch. 27, 32; 8 T.L.B. 459.

. (1870) L.R. 6 Exch. 7.

(1888) 20 Q.B.D. 640.

[1904] 1 Ch. 305; 20 T.L.R. 125.

. (1859) 2 E. & E. 271, 275.

[1908] P. 189.

. (1859) 2 E. & E. 271.

[1893] 1 Q.B. 256, 262; 9 T.L.R. 124.

[1893] 1 Q.B. 256, 269.

(1818) 1 B. & Ald. 681, 683.

(1848) 1 H.L.C. 381, 400.

. (1872) L.R. 7 Ch. 587, 594.

(1879) 4 Ex.D. 21

Page1

*720 Apple Corps Ltd v Apple Computer Inc.

Chancery Division

7 April 2004

[2004] EWHC 768 (Ch)

[2004] 2 C.L.C. 720

Mann J.

Judgment delivered 7 April 2004

Service out of jurisdic on—C ont ract—A ppl icabl e l aw—A gr eeme nt s e l ing En gl i sh l i ga on regulated par es' us e of thei r respec ve t rade mar ks—Cl aiman t al l eged breach and t hreatened breach of agreement and obtained permission to serve out of the jurisdic on—Wh ether agr eeme nt made in England—Whether contract could be made in two jurisdic ons—Wh ether agr eeme nt governed by English law—Whether characteris c per for ma nce coul d be det ermi ned—Wh ether contract most closely connected with England—Whether England appropriate forum—Contracts (Applicable Law) Act 1990, Sch. 1 (Rome Conven on) , ar t. 4( 1) , (2) , (5) .

This was an applica on by the def endant US cor por a on ( ‘Compu t er’ ) dispu ng t he j urisdic on of the court in respect of proceedings where service out of the jurisdic on had been or der ed.

The defendant was the well-known producer of computers and so wa re. The cl ai ma nt (‘Cor ps ’ ) was the well-known record company formed by the Beatles. The basis of the claim made against Computer was that it had broken and intended to break an agreement (‘the trade mark agreement’) made between the par es in Oc tober 1991 to se le Engl i sh proceedi ngs and whi ch regulated the use of their respec ve trade ma rks i n respect of var ious areas of ac vit y or proposed ac vi ty. The al leged br each r el at ed t o t he l aunch by Comp ut er i n t he US of a web-based product which allowed members of the public to download songs over the internet and the threatened breach related to the possibility of making such a service available in the UK.

Corps obtained permission to serve Computer outside the jurisdic on under CPR, r. 6.20 on grounds that the relevant agreement was governed by English law and that it was made in England. Computer disputed the propriety of service out on those grounds, denying the relevant factual bases, and further maintained that England was not the appropriate forum for the dispute.

Held, dismissing the defendant's applica on:

The trade mark agreement was nego at ed betwe en exper ienced Engl ish and US lawy er s over many months. Each of the par es wi shed not to accept the ot her ' s jur i sdi c on or governing l aw and could reach no agreement on any *721 other jurisdic on or gover ni ng law. As a resul t it contained no governing law clause and no jurisdic on cl ause. In addi on, nei t her par t y wan t ed to give the other an advantage in terms of where the agreement was final ised. The evi dence di d not enable a clear view to be taken one way or the other as to who said what and in what order when the agreement was completed during a telephone conversa on betwe en London and California. But on that basis Corps had a good arguable case for saying that something amoun ng to an accept ance wa s u ered i n Cal i fornia and r ecei ved i n Engl and so t hat on usual principles of offer and accept ance in the case of i ns tant aneous commu ni ca ons the cont r act would have been made in England.

It was unnecessary to decide whether the contract could have been and was made in both jurisdic ons and ther ef or e wi thi n Engl and. Ther e we r e no concept ual bar rier s to the no on of a contract being treated as having been made in two places, and some not inconsiderable a rac ons . It was pos s i ble, as a ma er of principl e, f or a contr act to be made i n two p l aces at once so that if one of those two places was England the requirement of CPR, r. 6.20(5)(a) was

Page2

made out. On the facts, Corps had a good arguable case for saying that the contract was made in both England and California and that meant that it was made in England for the purposes of CPR, r. 6.20.

The central element of the contract in context was compliance with the par es ' nega ve obliga ons not to use thei r own trade ma rks i n the ot her ' s field of use. Ther efore t he t rue posi on wa s that thi s wa s not a case wh er e the ‘ character i s c per f orman ce’ of the cont r act could be determined and accordingly the presump on creat ed by ar t. 4( 2) di d not appl y, by virtue of the wording of art. 4(5), and the court had to ascertain the country with which the contract was most closely connected in accordance with art. 4(1).

As a ma er of pr inc i pl e and aut hor i ty the cour t wa s en tled t o t ake a broad appr oach t o t he ques on of connec on, unl i mit ed by any categor i sa on of t he r el evant f actors. Most of t he connec ng feat ur es we r e we ak or neut ral , and becaus e of the essen all y wor l dwi d e nat ure of the effect and oper a on of the t rade mar k agreemen t the ques on was a di fficult one, but the court concluded that the contract had a closer connec on wi th Engl and than wi th Cal ifor ni a. One of the weigh er factor s in favour of Engl and wa s that the agreeme nt wa s par t of an over al l se leme nt of Engl ish li ga on, albeit that t hat was l i ga on wit h worl dwi de i mpact. Theref or e English law was the governing law.

Corps also established that England was the proper place for the li ga on. The governing l aw was a key, though not determina ve, poi nt and t aki ng al l t he f actor s i nt o account , t he conclusion was that the construc on poi nt ar i si ng out of an Engl ish l aw cont ract wa s mo r e appropriately tried in England.

*722

The following cases were referred to in the judgment:

Agrafax Public Rela ons Li mi ted v Un i ted Sco sh Soci ety Inc [ 1995] I LPr 753 .

Bank of Scotland v Butcher (unreported, 28 July 1998, CA).

Benne v Cosgr iff (1878) 38 LT 177.

BP Explora on Co (Li bya) Ltd v Hunt [1976] 1 WL R 788 .

Brinkibon v Stahag Stahl und Stahlwarenhandels GmbH [1983] 2 AC 34.

Commission for the New Towns v Cooper (GB) Limited [1995] Ch 259.

Credit Lyonnais v New Hampshire Insurance Co [1997] CLC 909.

Defini tel y Ma ybe ( Tour ing) Ltd v Ma rek Li eber ber g Konzer tagent ur GmB H [ 2002] CLC 360; [2001] 1 WLR 1745.

Ennstone Building Products Ltd v Stanger Ltd [2003] 1 CLC 265; [2002] 1 WLR 3059

Entores Ltd v Miles Far East Corp [1955] 2 QB 327.

Evans v Nicholson (No. 2) (1875) 32 LT 778.

Page3

Gibson v Manchester City Council [1979] 1 WLR 294.

IR Commrs v Muller & Co's Margarine Ltd [1901] AC 217.

Iran Con nent al Shel f Oi l Co v IRI Int er na onal Cor p [ 2002] EWCA Civ 1034; [2004] 2 CLC 696 .

Print Concept GmbH v Gew (EC) Ltd [2002] CLC 352; [2001] EWCA Civ 352.

Samcrete Egypt Engineers and Contractors SAW v Land Rover Experts Ltd [2002] CLC 533

Seaconsar (Far East) Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438.

Representa on

Geoffrey Vos QC and Dani el Al exander QC (ins tructed by Ever sheds ) for the cl ai ma nt .

Anthony Grabiner QC and Daniel Toledano (instructed by Linklaters) for the defendant.

JUDGMENT

Mann J:

Introduc on

This is the applica on of t he def endant , Appl e Comp ut er I nc ( ‘Comp ut er ’ ), di spu ng t he jurisdic on of the cour t in respect of pr oceedi ngs wh er e ser vi ce out of the jur i sdi c on has been ordered. The defendant is the well-known producer of computers and so wa re. The cl ai ma nt (‘Corps’) is the well-known record company formed by the Beatles. The basis of the claim made against Computer is that that corpora on has br oken, and i nt ends to br eak, an agreeme nt made between the two companies in October 1991 which regulated the use of their respec ve marks in respect of various areas of ac vi ty or pr oposed ac vit y. On 7th August 2003 Mas t er Moncaster granted permission to serve Computer outside the jurisdic on under CPR 6.20 on two grounds — that the relevant agreement was governed by English law, and that the contract was made in England. At the hearing before me Corps sought to *723 rely on the addi onal ground that Computer threatens a breach of contract within the jurisdic on wh i ch wo ul d en tle Corps to an injunc on to restrai n i t. Comp ut er di sput es the pr opr iet y of ser vi ce out on those grounds, denying the relevant factual bases, and further maintaining that England is not the appropriate forum for the dispute. In the circumstances the applica ons bef or e me rai se the following ques ons : (a) Was the contract made in England?

(b) Was the contract governed by English law?

(c) Is there a threatened breach of contract within the jurisdic on?

(d) If any of those heads are made out, is England the proper place in which to bring the claim?

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Those issues arise out of the wording of CPR 6.20:

‘… a claim form may be served out of the jurisdic on wi th the permi ssi on of the cour t if—

(2) a claim is made for an injunc on or der ing the def endant to do or ref rai n from doi ng an act within the jurisdic on.

(5) a claim is made in respect of a contract where the contract—

(a) was made within the jurisdic on; …

(c) is governed by English law; …

(6) a claim is made in respect of a breach of contract commi ed wi thi n t he jurisdic on. ’

CPR 6.21(2A) provides that:

‘The court will not give permission unless sa sfied t hat Engl and and Wal es i s the proper place in which to bring the claim.’

The burden and level of proof in rela on to those i ssues i s commo n ground betwe en the par es . It is agreed that : (a) In rela on to (a) , the bur den is on Cor ps , and it has to establ ish a good ar guabl e case.

(b) In rela on to (b) and (c) the bur den is on Cor ps and it has to be actual ly deci ded. *724

(c) In rela on to (d) the bur den is on Cor ps to establ ish the fact .

In addi on, it is for Cor ps to establ ish that ther e is a ser ious ques on t o be t ried on t he mai n ques on i n the ac on, namel y whe t her ther e i s or wi l l be a breach of the agreemen t . The agreed approach on this at the hearing was that I could assume that there was, though the outline of Corps' case on the point given by Mr Vos was not always clear to me. At a late stage and having seen a wri en el abor a on of Cor ps argumen t on t he poi nt, Compu t er sought to resile from its posi on that ther e wa s a ser ious ques on t o be t ried, and t o s ay that i t had become apparent that there wasn't but a er (I conf ess) flir ng wi th idea t hat t hat shoul d be allowed, I decided that it was too late for Computer to change its stance on that.

The agreement in ques on, wh i ch is cal led the Tr ade Ma rk Agreeme nt in the jar gon of thi s case, was a keenly nego at ed agreeme nt , nego ated bet wee n exper i enced l awye rs (Engl i sh and US) over many months. The evidence before me showed that each of the par es wa s over tly adamant that it did not wish to accept the other's jurisdic on or gover ni ng law, and coul d reach no agreement on any other jurisdic on or gover ni ng law. As a resul t i t cont ai ns no gover ni ng law clause and no jurisdic on cl ause. In addi on, nei t her par t y wan t ed t o gi ve t he other an advantage in terms of where the agreement was final ised. If thei r int en on i n doi ng so was to create obscurity and difficul t y f or l awye rs to debat e i n f uture year s, they have succeeded handsomely.

The key terms of the agreement

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As will appear in more detail when I come to set out the detailed history of this ma er , the purpose of the Trade Mark Agreement was to regulate the ac vi es of the t wo par es f or t he future. Computer was described as ‘Apple Computer’; Corps was described as ‘Apple Corps’. It is dated 9th October 1991 and its key terms are as follows:

‘AGREEMENT

… Whereas, the context in which this Agreement arises in the par es ' des i re to reser ve for Apple Corps' fiel d of use for i ts Tr ade Ma rks, the recor d bus i ness, The Beat les , Apple Corps' catalog and ar sts and rel at ed ma t er ial al l as set for th i n sec on 1. 3 herein and to reserve for Apple Computers fiel d of use f or i ts Tr ade Ma rks, t he computer, data processing and telecommunica ons bus i ness as set for th in sec on 1.2 herein and to coordinate the use of their respec ve Tr ade Ma rks in such fields of use as set forth in sec on 4 her ei n.

Accordingly, the par es agree as fol lows :

*725 1. DEFINITIONS

2. “Apple Computer Field of Use” means (i) electronic goods including but not limited to computers, microprocessors and microprocessor controlled devices, telecommunica ons equi pme nt , dat a pr ocessi ng equi pme nt , anci llar y and per ipher al equipment, and computer so wa re of any ki nd on any me di um; (ii) dat a pr ocessi ng services, data transmission services, broadcas ng s er vi ces , t el ecommu ni ca ons services; (iii) ancillary services rela ng t o any of t he f or egoi ng, i nc l udi ng wi thout limita on, t rai ni ng, educa on, mai ntenance, repai r , financi ng and di st ri bu on; ( i v) printed ma er rel a ng t o any of the f oregoi ng goods or servi ces; and ( v) promo onal merchandising rela ng to the for egoi ng.

3. “Apple Corps Field of Use” means (i) the Apple Musical Ar sts; the Appl e Cat al og; personali es or character s wh i ch appear in or are der i ved from the Appl e Cat al og; the names likenesses, voices or musical sounds of the Apple Musical Ar sts; any mu s i cal works or performances of the Apple Musical Ar sts; (i i) any cur rent or fut ur e crea ve works whose principal content is music and/or musical performances; regardless of the means by which those works are recorded, or communicated, whether tangible or intangible; (iii) promo onal me r chandi se r el a ng t o any of the f o regoi ng; (i v) merchandising rela ng to the Appl e Mu s i cal Ar sts and t he Appl e Cat alog and t he related subject ma er set for th i n subsec on ( i ), incl udi ng, wi t hout l i mit a on, t he commercial exploita on of per sonal i es, char act ers , names , des i gns, imag es, wor ds, photographs, drawings, or other materials through ar cl es such as pos ter s, t oys, games (including computer games), novel es , figures, figuri nes and c l othi ng; and ( v) printed ma er rel a ng t o any of the f oregoi ng goods or servi ces.

4. “Apple Computer Marks” means (i) any design, reproduc on or ot her depi c on of an apple, in whole or in part, except for a whole green apple or a half apple (of any color(s)); and (ii) the word “Apple”.

5. “Apple Corps Marks” means (i) any design, reproduc on or ot her depi c on of an apple, in whole or in part, except a “rainbow” or mul col our striped appl e (in wh ol e or in part) or any apple (of any color(s)) with a “bite” removed; and (ii) the words “Apple”, and “Zapple”.

2. PAYMENT

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Apple Computer shall pay to Apple Corps the sum of One Hundred Thousand Dollars ($100,000) (exclusive of VAT), the receipt of which is hereby acknowledged by Apple Corps. Apple Computer shall be responsible for any VAT that may be levied as a consequence of such payment and will indemnify and hold harmless Apple Corps if any VAT is due but not paid and any a emp t is ma de by the rel evant aut hor i ty to levy such upon Apple Corps, Apple Corps shall be responsible for any income or similar tax payable by Apple Corps as a *726 consequence of the receipt of such payment and will indemnify and hold harmless Apple Computer if such tax is not paid and any a emp t is made by the relevant fiscal aut hor i ty to levy such upon Appl e Comp ut er . If ther e is any a emp t t o l evy any VAT or i ncome t ax on t he payme nt s et f or th her ei n, t he indemnified p ar ty s hal l c ooper at e f ul ly wi th t he i ndemn i fyi ng p ar ty a nd t he indemnifying party shall have the right to contest or control any proceeding arising in connec on ther et o.

4. RIGHTS TO USE TRADE MARKS

1. Apple Computer shall have the exclusive worldwide right, as between the par es , to use and authorise others to use the Apple Computer Marks on or in connec on wi th goods and services within the Apple Computer Field of Use.

2. Apple Corps shall have the exclusive worldwide right, as between the par es , to use and authorise others to use the Apple Corps Marks on or in connec on wi th goods and services within the Apple Corps Field of Use.

3. The par es acknowl edge that cer tai n goods and ser vi ces wi thi n the Appl e Comp ut er Field of Use are capable of delivering content within the Apple Corps Field of Use. In such case, even though Apple Corps shall have the exclusive right to use or authorise others to use the Apple Corps Marks on or in connec on wi th cont ent wi thi n subsec on 1. 3( i) or ( i i), Appl e Comp ut er shal l have t he excl us i ve r i ght t o use or authorise others to use the Apple Computer Marks on or in connec on wi th goods or services within subsec on 1. 2 (such as so war e, har dwar e or broadcas ng servi ces) used to reproduce, run, play or otherwise deliver such content provided it shall not use or authorise others to use the Apple Computer Marks on or in connec on wi th physi cal media delivering pre-recorded content within subsec on 1. 3( i) or ( i i) ( such as a compact disc of the Rolling Stones music).

9. Except as provided in subsec on 4. 4, nei ther par ty shal l use or aut hor i se ot her s to use their respec ve Ma rks on or in connec on wit the other par t y's excl usi ve field of use hereunder.

6. NO CHALLENGE;LIMITS ON USE/RESTRICTIONS IN EEC

1. Neither party shall challenge the other party's Trade Mark registra ons or applica ons for regi stra on i n any par t of the wor l d wit h r espect to t hat other par t y's Field of Use.

2. Apple Corps' rights of use and the restric ons on Appl e Comp ut er ' s ri ght s of use of their respec ve trade ma rks ( inc l udi ng the restri c ons on chal l engi ng Appl e Cor ps' trade mark registra ons and appl ica ons for regi stra on) hereunder shal l cease i n rela on to the Eur opean Economi c Commu ni ty i f wi thi n ni net y *727 (90) days of a reasonably grounded request from Apple Computer, Apple Corps fails to sa sfy the following test of use. Apple Corps shall sa sfy the test of use i f Appl e cor ps or i ts authorised licensees has used the Apple Corps Marks or any of them on or in rela on to goods or services within the Apple Corps Field of Use anywhere within the European

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Economic Community at any me dur ing the five ( 5) year per i od endi ng wit h t he dat e of the request.

7. NO LICENSE

This Agreement does not cons tut e a license.

9. SEVERABILITY

If any part or parts of this Agreement shall be determined to be void, invalid or unenforceable by any court or competent authority in any jurisdic on, s uch determina on shal l not affect the val i dit y or enf orceabi l ity of any other par t or par t s of this Agreement all of which shall remain in full force and effect. The par t or par ts of this Agreement rendered or declared void, invalid or unenforceable shall be void, invalid or unenforceable as the case may be in that jurisdic on onl y, and t hi s Agreement shall remain in full force and effect in al l ot her jur i sdi c ons .

13. NOTIFICATION

1. The par es shal l as soon as pos si bl e a er execu on her eof j oi nt ly no f y thi s Agreement to The Commission of the European Communi es for nega ve clear ance and/or exemp on under Counci l Regul a on 17 of 6th Febr uar y 1962, and shal l jointl y take all reasonably necessary steps and cooperate with each other with a view to obtaining such clearance and/or exemp on.

2. No provision of this Agreement (including any agreement or arrangement of which it forms part) being a restric on by vi rtue of wh i ch t hi s Agreeme nt i s s ubj ect t o registra on under Sec on 35 of the Restri c ve Trade Prac ces Act 1976 shall take effect un l the day a er par culars of this Agreement have been f ur nished t o the Director General of Fair Trading under that Act. Both par es shal l use al l reasonabl e endeavors to procure that the said par cul ar s are so fur ni shed as soon as pos si bl e a er execu on of this Agr eemen t and, in any event , wi t hin t hree ( 3) mon t hs therea er . ’

Clause 5 is headed Registra ons . It is a long cl ause wh i ch set s out , first, the s teps to be t aken by Corps if any Corps registra ons are ci ted by any Tr ade Ma rk aut hor i ty agai ns t any appl ica on by Computer, and then similar provisions applying the other way round. They provide for cascading steps involving cancella on, consent s, ame ndme nt s and assi gnme nt s. They appl y wo r ldwi de, though specific pr ovi si ons are *728 made for Spain, Sweden, Portugal and Brazil. It is unnecessary to set out its terms in full; that descrip on is sufficient.

Clause 6.3 is a counterpart to 6.2, switching the par es round.

The agreement is signed by Mr Aspinall on behalf of Corps, and Mr Graziano on behalf of Computer.

The alleged breaches

The alleged breaches come about in the following manner. Computer has launched a web-based product in the United States called iTunes Music Store. By using that service members of the public can download songs over the internet, and store them on a computer with a view to playing them back over the computer, or via portable players such as Computer's

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well-known iPod player. Computer's mark is clearly associated with that product — it appears on all the relevant pages, and one gets to it either via the Apple website or via a website known as Applemusic.com. The content (that is to say, the music tracks) is licensed by the owner of the rights in that content. Corps' case is that Computer's conduct in this respect is a breach of the Trade Mark Agreement; that is the breach which is relied on in this ac on as cur rent ly cons tut ed.

At the moment the content is available only in the USA. Marke ng takes pl ace in the US A, but because of the worldwide effect of the me di a, and par cul arl y of the i nternet , some of the marke ng is avai labl e el sewh er e. The evi dence of Comp ut er ' s wi tnesses is that the reason the content has not been available in Europe is that there is as yet no agreement with the owners of rights in the content which permits that. However, there have been sugges ons that Comp ut er is looking to make the site available in Europe this year (2004). Corps says that this demonstrates that a breach of the agreement is intended to be carried out in this jurisdic on — hence its alterna ve case for jur i sdi c on.

Where the contract was made

It may assist an understanding of the significance of the facts as they devel op if I first out l ine t he nature of the dispute that centres around the order of events at comple on, wh i ch is wh at thi s part of the case concerns. The process of dra ing ended up wi th dr a s of the agreemen t bei ng in place, signed by each party, and countersigned by one but not the other, in the offices of Frere Cholmeley, solicitors for Apple, and with Mr Lagod, counsel for Computer in California. On 9th October 1991 there was a conversa on to ar range comp l e on. Compu t er says that the telephone call ended with (in effect) Mr Lagod i n Cal ifor ni a pr opos i ng comp l e on and Mr Zeffma n (of Frer e Chol me l ey) agreei ng that . If cor rect, that wo ul d amo unt to an offer from Mr Lagod, accepted by Mr Zeffma n. Si nce Mr Zeffman ' s accept ance was recei ved i n Cal i fornia, on an applica on of the pr inc i pl e in Entores v Miles Far East Corpora on [1955] 2 QB 327 at 334, approved in Brinkibon v Stahag Stahl [1983] 2 AC 34 a 41–2 (in the case of instantaneous communica ons the cont ract is ma de wh er e the accept ance is recei ved the cont ract wa s ma de in California). Corps puts the final event s the ot her wa y round — Mr Zeffman offered, and Mr Lagod accepted, so the acceptance was received in London and the contract was made there on the same legal basis. The inquiry is therefore as to whether there is a good arguable case that, on the facts, Corps is right. In addi on to that Cor ps advances a lar gel y novel case. It invi tes me to find that in the cont ext of thi s case, and taki ng due account of the di fferent way s i n whi ch contracts might now be concluded which did not exist when the tradi onal rul es we r e l ai d down, it would be right to find in pr inc i pl e that a cont ract can be ma de in two pl aces at once, and that this was such a contract. I say this is ‘largely’ novel because a submission was made in Brinkibon to that effect by Mr Ant hony Thomp son QC , but i t wa s not r ul ed on, or even commented on, in the speeches in that case.¸

That is where the par es respec vel y wou l d l ike t o end up. I mus t now c ons i der and anal yse t he facts as they appear from the witness statements and the contemporaneous documents.

The Trade Mark Agreement had its roots in li ga on i n t he Hig h Cour t whi ch comme n ced i n February 1989, and in proceedings in the European Commission which had been suspended but which were re-ac vat ed 2 mo nt hs lat er . The par es wer e t hen l ocked i n a l arge and expens i ve dispute which turned on an agreement in 1981 which was expressly governed by English law. The High Court proceedings were heard by Ferris J, and had lasted 100 days by the me they were se led. Se lemen t nego a ons s t arted in the UK, a nd t hen t ook pl ace i n Cal if ornia and New York. The evidence before me shows that the par es we r e bot h adama nt that the ot her ' s jurisdic on shoul d not be used as the basi s of gover ni ng law or cour t jur i sdi c on. In addi on Mr Lagod, the US a or ney/nego ator for Compu t er sai d t hi s i n his wit nes s statemen t evi dence:

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‘Computer's representa ves and I we r e awa re that the det ermi na on of governing l aw and jurisdic on coul d be i nfluenced by the l oca on(s ) wher e the par es si gned t he agreements and where the agreements were formed. As a result, we took precau ons to ensure that neither party could claim priority for its preferred jurisdic on based on the place where the agreements were signed and formed.

Those precau ons i nc l uded a me chani sm for cl os i ng [and he goes on to describe a procedure set out in a le er of 7t h Oc tober , t o wh i ch I wi ll r ef er , i n wh i ch engrossments executed by each party in their respec ve jur i sdi c ons wou l d be hel d ‘ in escrow’ pending a telephone conversa on in wh i ch thei r rel ease wo ul d be or der ed; this procedure was not precisely followed].

This procedure ensured that an agreement was not concluded in England earlier than it was made in California, and vice versa. Because the Se leme nt Agreeme nt *730 and the Trade Mark Agreement would become simultaneously binding in England and California, those agreements would have no greater connec on, in terms of thei r pl ace of making, with either jurisdic on. ’

Mr Zeffma n, the Engl ish sol ici tor /nego ator for Cor ps at the end of the nego a on pr ocess , does not agree that the purpose of the mechanism was to achieve neutrality in terms of where the agreements would be deemed subsequently to be made, and does not recall that the inten on wa s that the agreeme nt s shoul d become bi ndi ng and effec ve at both pl aces at t he same instant.

I men on these poi nt s because it is apparent that at least one par ty wa s sens i ve t o t he place of the making of the agreement, and because the evidence might go to the proposi on that the contract was made in two places.

The trial of the 1990 ac on betwe en Cor ps and Comp ut er star ted on 29t h Oc tober 1990. The first me e ng at whi ch an a empt was made t o se l e the out st anding di sputes took pl ace on 19th March 1991. The offer to se le mad e by Compu t er was reject ed. Ther e wer e t hen no mee ngs un l June, whe n t her e was a flurry of ac vi ty. Mee n gs took pl ace on t he 5th, 7th and 10th June, again all in London. On 10th June 1991 Computer offer ed to pay $26. 5 m. It seems that was not accepted, but dra ing comme nced. The figure offered was actual l y accepted on 21st June 1991, again at a mee ng i n London. The dr a ing and s e l ement mee ngs t hen carried on. One of the structures adopted for the se leme nt wa s to have two agreeme nt s. The first wa s cal led a Se lemen t Agr eemen t , and by t hat agreemen t the par es i ntended t o se l e (and ul ma t el y di d se le) the hi s tori cal ma ers, that i s to say t he di sputes t hat had ex i s ted between the two. The second agreement was the Trade Mark Agreement; that was intended to regulate their ac vi es for the f uture.

Se leme nt me e ngs took place i n London on t he 26t h/27t h J une and t hen nego a ons t ook place in New York on 2nd/3rd August 1991 and 31st August 1991. On 12th September there was a mee ng in San Franci sco, and a fur ther me e ng i n New Y ork on 21st Sept embe r . As wel l as that, especially at the end of the process, certain nego a ons took pl ace over the phone i n transatlan c phone cal ls.

At the end of the process the par es began to addr ess thei r mi nds to se lemen t procedur e. The best evidence of what they were doing can be seen in the contemporaneous documenta on. On 26th September 1991 Mr Zeffma n wr ot e or faxed Mr Lagod in the fol lowi ng terms :

‘I have been thinking a bit more about the closing arrangements (on the assump on that we manage to final ise the dr a ing) . I suggest the f oll owi n g procedur e. Each of the two agreements will be in two parts. I will prepare engrossments of the Se leme nt Agreement and you will prepare engrossments of the Trade Mark Agreement. We will each get our clients to sign both parts of the Agreement that we have each prepared

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and I will send you both copies of the signed Se leme nt *731 Agreement at the same me as you send me bot h of the si gned copi es of the Tr ade Ma rk Agreeme nt . We wi ll both then get our clients to sign both copies of the other Agreement so that all four documents have been signed by both par es . We wi ll then send to each ot her one ful ly signed copy of the Agreement that we are holding, so that we both end up with full-executed Se leme nt and Trade Ma rk Agreeme nt s. We wi ll each hol d these i n escrow un l Ne i l recei ves the mo ney and I wi ll let you know as soon as he has recei ved it.’

It is apparent from this that, as was ul ma t el y t he case, t he par es expect ed bot h t he Se leme nt Agreeme nt and the Trade Ma rk Agreeme nt to be comp l et ed at the same me. It i s also apparent that Mr Zeffma n, on behal f of Cor ps , wa s al so concer ned that the mo ney shoul d have been received by or at comple on (or cl os i ng) ; the mo ney i n ques on i s the $26. 4 m payable under the Se leme nt Agreeme nt and the $100, 000 payabl e under the Tr ade Ma rk Agreement. The ‘Neil’ referred to is Mr Aspinall, Manager and sole execu ve officer of Corps .

A er that le er furt her amen dmen t s wer e mad e t o t he agreemen t in t he cour se of the dra i ng in process. The par es ret ur ned to the theme of comp l e on on t he 4th Oct ober whe n Mr Lagod faxed Mr Zeffma n:

‘Enclosed please find a revi sed Trade Ma rk Agreeme nt wh i ch reflect s the changes we discussed yesterday. I am pleased to state that, assuming all changes we discussed are made to the Se leme nt Agreeme nt , that thi s Tr ade Ma rk Agreeme nt i s ready f or execu on by the par es. Please give me a cal l to dis cuss how we go about closi ng t his case.’

The background to this was that the par es had agreed to spl it up the pr ocess of dr a ing. Mr Lagod had the conduct of dra ing t he Tr ade Ma r k Agreeme nt ; he had i t on hi s firm' s word-processor. For his part Mr Zeffma n had the conduct of the dr a ing of the Se l ement Agreement — he had it on his word-processor. The par es di d not exchange el ectroni c dr a s; it is easy to forget that those facili es di d not exi st as recent ly as 1991.

Later on on the same day Mr Zeffma n faxed Mr Lagod wi th wh at he hoped wa s a final dra of the Se leme nt Agreeme nt . Hi s le er wen t on t o s ay thi s :

‘As far as closing is concerned I suggest the following: 1. The Apple Computer signatory will sign the two Agreements (which, in the case of the Se leme nt Agreeme nt , wi ll be a f axed c opy) i n t he pr esence of an Appl e Cor p representa ve such as Wa yne Cooper . The Appl e Cor p repr esent a ve wil l then t ake away the signed agreements and hold them to your order.

2. At around the same me , Ne i l wi ll si gn the two agreeme nt s (wh i ch, in the case of the Trade Mark Agreement will be a faxed copy) in the presence of an Apple *732 Computer representa ve such as a Cl ifford Chance per son. The Appl e Compu t er repr esent a ve wi ll take away the two signed agreements held to my order.

3. The signed agreements will remain held in escrow un l Ne i l recei ves the banker ' s dr a . I will inform you as soon as it is received and the signed agreements will then be released from escrow.

4. I look forward to hearing from you later today.’

It will be noted that the arrangements involved each party signing a copy of the Agreements,

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with delivery being handed over to a representa ve of the ot her par ty, al bei t that they we r e held to the order of the signor. The trigger for the actual comple on wo ul d be Mr Zeffman informing Mr Lagod of the receipt of the bankers dra . Al though the wo r d ‘escrow’ wa s used, I do not consider that the par es thought that they wo ul d be irret rievabl y bound by si gni ng the documents, so that each party would, in theory, have been in a posi on to res i le up un l the me wh en Mr Zeffman confirmed r ecei pt of t he dr a . Recei pt of the dr a remained the key to the comple on.

Later s ll on the same day ther e wa s a fur ther fax from Mr Lagod, encl os i ng a fur ther revi si on of the Trade Mark Agreement which included a new provision that the agreement might not be varied except by wri en consent of the par es. The second par agraph of that l e er r eads :

‘I look forward to working out the closing arrangements on Monday. For your informa on, I pl an to me et wi th Gr azi ano at 6: 00am on Mo nday to get hi s si gnat ur e, as he will be going out of town later that morning. You can have Wayne Cooper (or whoever Apple Corps' representa ve wi ll be) cont act me Mo nday mo r ni ng to ar range to pick up the signed agreements. (I assume he will not be interested in mee ng us at 6.00pm to witness the signing). Please give me a call so we can confirm the logi s cs. ’

This le er seems to be respondi ng to the ear l ier le er from Mr Zeffman. I t was med a t 18:20 which is presumably California me .

There was obviously a conversa on on the phone the next day, because a l e er from Mr Zeffma n on the fol lowi ng Mo nday (7t h Oc tober 1991) star ts by sayi ng:

‘As discussed on Saturday, I a ach copi es of those pages of the Tr ade Ma rk Agreeme nt on which I have marked typos or other minor word changes’.

The le er goes on to ma ke sl ight ly di fferent proposal s for compl e on. I t reads :

‘As far as closing, the procedure is to be as follows: *733 1. Joe Graziano will sign the two Agreements (which in the case of the Se leme nt Agreement will be a faxed copy) at 6:00 am your me today. We agreed that ther e wa s no need for Wayne Cooper to a end as a wi tness and indeed I suggest that you cour ier the signed agreement to me together with the banker's dra and I wi ll hol d bot h the Agreement and the dra to your or der .

2. Some me today I wi ll ar range for Ne i l to si gn the two Agreeme nt s (wh i ch in the case of the Trade Mark Agreement will be a faxed copy). I will courier these to you and you will hold them to my order. (I do not know if you require Vanessa to be present as a witness. If that is what you prefer then Vanessa can take away the agreements and courier them to you). [I interpose that the reference to Vanessa was a reference to Vanessa Marsland, a partner at Cliffor d Chance, sol ici tor s to Appl e Comp ut er . ]

3. When you courier the Agreements and dra to me under 1 above, it wo ul d pr obabl y be preferable if you had already subs tut ed t he c or rected pages of t he Tr ade Ma rk Agreement. Similarly, when you receive the Agreement signed by Neil you can then subs tut e the cor rected pages .

4. When we each receive the two Agreements signed by the other party we will get our own clients also to sign those Agreements so that we each end up with full, executed copies.

5. When we both have fully executed copies in our possession we will have a telephone conversa on and agree that the Agreeme nt and the dr a may be r eleased f rom e scrow and we will date all the agreements.

Page12

Can you also please fax me today a copy of the banker's dra and gi ve me al l ot her relevant details, concerning the dra so that we can tee up Appl e Cor ps ' bank. As we discussed, when the agreement refers to “banker's dra ” we are tal ki ng about an instrument which will represent immediately available cleared funds when presented to Apple Corps' bank and I want to make sure there are no problems — otherwise all the agreements will not be released from escrow un l the dr a has clear ed’ .

It is apparent that the comple on ar rangeme nt s have changed sl ight ly. The si gned agreeme nt s would be in the hands of the other party via courier, and the dra wo ul d accomp any the agreements coming from California, the par es wo ul d t hen s i gn t he Agreeme nt s, a nd comple on wo ul d t ake pl ace wh en t he par es agreed t hat i t wou l d, over the t elephone. Comple on wa s no longer expr essl y to take pl ace wh en Mr Zeffman confirmed t hat t he dr a had been received, although obviously he would need to be sa sfied as to hi s recei pt and validity for he would, for his part, agree to complete. The newly agreed feature at this stage is that Mr Lagod himself would apparently also have to agree that comple on shoul d take pl ace. The fall back *734 arrangement for effec ve compl e on, based on t he dr a clearing, does not ma er for these pur poses .

Later that day (7th October) Mr Lagod faxed a photocopy of the dra (or ‘cashi er cheque’ as he called it). The fax said he was sending the actual dra by cour ier that day. That dul y happened — on that day Mr Lagod wrote enclosing the Trade Mark Agreement and Se leme nt Agreeme nt executed by Mr Graziano on behalf of Computer, as well as a le er f rom Mr Stead to Mr Aspinall enclosing the dra . The le er was sent by overnight cour i er. It closed wit h Mr Lagod saying: ‘I look forward to hearing from you when we are ready to wrap up the closing.’

For his part, Mr Zeffma n we nt to Cor ps ' offices at 3.45 pm t o get Mr A spi nall ' s si gnat ure to the two agreements; they were apparently signed in the presence of Mr Zeffma n and Vanessa Marsland; the la er took the si gned agreeme nt s awa y for cour ier ing to Mr Lagod in accor dance with the then agreed closing procedure.

A few days later, on 9th October 1991, the events took place which led to comple on, and which are at the centre of the present issue. I will have to set out the material which was placed before me, because it is on an interpreta on of that ma t er ial that the pr esent ques on t urns. It is necessary to do so verba m.

It is common ground that a telephone conversa on took pl ace betwe en Mr Zeffman and Mr Lagod on 9th October 1991, as a result of which comple on (or cl osur e) of the ma er took place. Mr Lagod does not have a contemporaneous record. Mr Zeffma n does . He ma de an a endance not e and it reads as fol lows :

‘Wednesday 9th October 1991.

At around 5.00 pm I received a couriered le er from Ma r Lagod encl osi ng t he Trade Mark and Se leme nt Agreeme nt s s i gned by Appl e Comp ut er t oget her wi th t he banker's dra . I gave the banker s dr a and s i gned agreemen t s to Sarah Moo r e ( a trainee solicitor employed by Frere Cholmeley) who took them over to Apple at around 5.45 pm for signature by Neil Aspinall.

I tried to speak to Marty Lagod at various me s dur ing the eveni ng and event ual ly spoke to him from home at around 11.30 pm. He had received from Vanessa Marsland the agreements which Neil had signed on Monday and although he had not yet obtained Apple Computer's counter signature of those agreements, we agreed that we were in a posi on to cl ose.

I told him that I had checked through the Trade Mark Agreement to see if he had

Page13

incorporated the various minor wording changes I had sent to him and that the one point he had not changed is that the Agreement had 7th October typed in as its date whereas we would not be comple ng un l that eveni ng i .e. 9th Oct ober . We had a debate about this and it became clear that US and UK prac ce di ffered *735 in that he was not used to wri ng in dat es and I wa s not used to havi ng typed in a dat e ear l ier than that on which the agreement became effec ve. Final l y, we agreed t o c lose t hen (at around 11.45 pm) on the basis that both agreements would have 9th October typed in as the relevant date and we would therefore each send each other subs tut e front pages on which 9th October had been typed in.

I then telephoned Neil Aspinall to inform him that we had closed.’

In his witness statement provided for the purposes of the applica on bef or e me , Mr Zeffman says that, as recorded in his a endance not e, he and Mr Lagod agreed on the tel ephone that :

‘Even though Mr Graziano had not signed Apple Computer's part of the agreement, which were by then in California, nevertheless we would close then on the basis that (a) Mr Aspinall had by then signed both the agreements (those copies had been previously signed by Mr Graziano), and that (b) Mr Aspinall had by then received the funds.’

He goes on to disagree with an interpreta on that Mr Lagod seeks to put on the a endance note (to which I will come) and says that they were not forced to deviate from the previously agreed procedure.

‘We agreed to deviate because we clearly had a deal — Mr Aspinall had signed on the same copies as Mr Graziano had previously signed and the money had been safely received by Mr Aspinall — and there was no need or point in wai ng for Mr Gr azi ano subsequently to sign Apple Computer's copies of the two agreements.’

In his witness statement Mr Lagod expressly accepts that the Trade Mark and Se leme nt Agreements were completed:

‘When Mr Zeffma n and I agreed on 9t h Oc tober 1991, by tel ephone, that we we r e in a posi on to cl ose. Mr Zeffman ' s telephone a endance note … co nfirms th i s f act. That a endance not e is cons i stent wi th my recol lec on of the event s of 9th Oct ober 1991 and states [and he then quotes the sentence beginning “final ly”] ’.

—He then goes on to make a comment about the word ‘although’ in the sentence beginning ‘he had received from the Vanessa Marsland’. He says that:

‘In my opinion, the word “although” confirms that the par es vi ewed t he cl osi ng procedure as binding, but that they were forced to deviate from that procedure. The devia on resul ted because the count er par ts hel d by me di d not i nc l ude Comp ut er ' s signatures. It was therefore necessary for me to waive the need for those signatures before the Agreements became binding. I made that plain that in the closing telephone call and Mr Zeffma n agreed that we coul d cl ose the deal .’

*736 He ends this sec on of hi s wi tness stat eme nt by sayi ng that the par es had not agreed t o any closing procedure that pped the scal es on gover ni ng l aw and j ur isdi c on i n f avour of either party.

Page14

‘As a result, as set forth in Mr Zeffma n' s 7t h Oc tober 1991 le er, we agreed t o and followed a procedure that ensured that the Agreements became binding and effec ve at the same instant in both England and California’.

Both par es star ted thei r anal ysi s of thi s transac on by anal ysi ng i t in t radi onal offer and acceptance terms and applying the well known rule (or at least the well known prima facia rule) that where instantaneous forms of communica on are concer ned a cont act is ma de wh er e the acceptance is received: Entores v Miles Far East Corpora on [1955] 2 QB 327 ; Brinkibon Limited v Stahag Stahl [1983] 2 AC 34. Accordingly, each side sought to analyse the facts so that in effect, the penul mat e wor ds wer e u ered wi th in their juris dic on in order t hat t he final words of acceptance should be u er ed out si de the jur i sdi c on and r ecei ved wit hin i t. Mr Vos also put forward an alterna ve anal ysi s, wh i ch wa s that , in the ci rcums tances , the cont ract wa s ma de in the two jurisdic ons simu l taneous l y.

For Computer, Lord Grabiner QC started his argument from the mechanism which was contemplated in the preceding correspondence between par es . He rel ies on the fact that the mechanism contemplated that the signed agreements would be in place, held in escrow, and that what was required was for Mr Zeffma n i n London to commu ni cat e wi th Mr Lagod i n California that the money payable under the Se leme nt Agreeme nt had been sa sfact ori l y received. This an ci pat ed me chani sm wa s comp l ied wi th, save that ther e wa s one addi onal tweak in so far as Mr Lagod had not actually procured Computer's signatures on the engrossment that he had received from London. What happened during the relevant telephone conversa on wa s t hat Mr Lagod wa i ved t he r equi reme nt f or t hose count er si gnat ur es and indicated that, despite the fact that he did not have them, he, Mr Lagod, was ready to complete. Mr Zeffma n in London confirmed t hat he t oo was cont ent that ther e shoul d be compl e on. I f this indica on wa s the l ast step i n the oper a on, it was a statemen t u ered i n London and received in California and amounts to a final accept ance in Cal ifor ni a. In thi s respect he rel ies on paragraph 38 of Mr Lagod's witness statement, which I have already set out in paragraph 30 above, and in par cul ar , the sent ence:

‘I made that waiver in the closing telephone call, and Mr Zeffma n agreed that we coul d close the deal.’

That is said to amount to an offer to comp l et e, accept ed by Mr Zeffman .

Mr Vos seeks to analyse the evidence differ ent ly. He traces the var ious pr oposal s for comp l e ng through the correspondence, and points out that by the me one get s to 9t h Oc tober thr ee uncertain es needed to be cl eared up — Mr Lagod di d not know wh et her Mr Zeffman had had the agreements countersigned; he did not know whether the banker's dra wa s sa sfact ory t o Mr Zeffma n; and Mr Zeffman di d not know *737 whether Mr Lagod had countersigned his agreements at his own end. What must have happened is that Mr Zeffma n, havi ng final l y got through to Mr Lagod, must have said that he had got signatures and the money. Mr Lagod must have said that he had not got signatures but that that was alright by him. Mr Zeffma n then mu s t have said that for his part he agreed the deal could be closed and that for his part Mr Lagod then confirme d that . That last stage wa s an u erance by Mr Lagod i n Cal i fornia amou n ng t o an acceptance, which was received by Mr Zeffma n i n London. Ac cor di ngl y, on the t radi onal analysis the contract was made in England.

I remind myself that, for the purposes of jurisdic on, wh at Mr Vos has to establ ish is a good arguable case: Seaconsar Limited v Bank Markazi [1994] 1 AC 438. He does not have to prove his case on a balance of probabili es . Can it be sai d that Mr Vos has establ ished hi s case to that extent? At one level it has to be acknowledged that the evidence does not enable a clear view to be taken one way or the other as to who said what and in what order. What is quite clear is

Page15

that immediately before the telephone conversa on not hi ng bi ndi ng wa s in pl ace. The par es had agreed that the Agreements were held ‘in escrow’, but it seems to me that both par es could have resiled from the Agreement in principle at any point of me up un l bot h men agreed, by appropriate words, that the Agreement had become binding. While Mr Zeffma n' s le er of 4t h Oc tober mi ght be sai d to have suggested a me chani sm under wh i ch onl y one act, namely Mr Zeffma n' s confirma on t hat t he mone y had been safel y recei ved, was suffici ent to bring about a binding agreement, in his le er of 7t h Oc tober he cl ear l y an cipat ed t hat bot h gentlemen would have to agree that comple on shoul d take pl ace — see paragraph 5 — although each party would obviously not agree that unless and un l he wa s sa sfied wi th the engrossed agreement in his possession. Accordingly, the ac vel y expr essed consent of bot h men was required. Neither Mr Lagod's evidence nor Mr Zeffma n' s evi dence ma kes i t cl ear in what order each man spoke, or indeed what he said. A full analysis of the situa on in offer and acceptance terms would require one to be able to analyse the situa on i n that wa y. The a endance not e does not actual ly ref er to the confirma on of t he r ecei pt of t he dr a . It refers to the fact that Mr Lagod had not got his client's signatures on the engrossment at his end, and despite that ‘we agreed we were in a posi on to cl os e’ . That coul d me an that they agreed to close at that point; or it could mean that they agreed subject to the ma er s deal t wi th subsequently in the a endance not e. If it me ans the forme r , one cannot tel l in wh at or der the gentlemen spoke. In offer and accept ance terms , each is equal ly l ikel y at pr esent . In my vi ew that means that Mr Vos has a good arguable case. In fact, they may not have agreed a closing at that point, because the a endance not e goes on to recor d a di scus si on as to da ng, and i t ends ‘final ly we agreed to cl ose then (at around 11. 40 pm) on the basi s that bot h agreeme nt s wo ul d have 9th October typed in as the relevant date’. If comple on wa s pos tponed un l that poi nt in the mee ng, then one wo ul d have to have an enqui ry as to the or der of the event s and the relevant parts of the conversa on in or der to det ermi ne wh o ma de final offers and who made final accept ances . I t seems to me that i n thi s respect too Cor ps as a good ar guabl e case for saying that something amoun ng to an accept ance wa s u ered i n Cal i fornia and r ecei ved by Mr Zeffma n in Engl and.

*738

I confess that, looking at the evidence in this case, the applica on of the ‘good ar guabl e test’ case has troubled me a li le. That is because the evi dence as such does not di rectly addr ess the ques on of the or der of event s in the conver sa on. It i s under standabl e t hat the a endance note should not do so; presumably the minds of the par es we r e not focused on that fact . However, neither of the principal witnesses has dealt with it in terms in his witness statement either. In my view the sentence relied on by Lord Grabiner in Mr Lagod's statement, in which he refers to waiver, is not in terms dealing with the order in which u er ances we r e ma de; the paragraph is in fact dealing with how the par es over came some t hi ng wh i ch hi ther to had been a precondi on to comp l e on. By the s ame t oken, Mr Zeffman does not deal with i t in terms either. It is maybe that neither witness would be wholly confident of the pr eci se or der of events, down to the very small refineme nt s that wo ul d be necessar y to anal yse thi s i ssue thoroughly, at this point in me (near l y 13 year s a er the event s i n ques on). Howeve r , i t does not seem to me that this means that I cannot determine that the Claimant has a good arguable case. The test does not require Mr Vos to establish his case to the full civil standard of proof, and I can find the test sa sfied even t hough i t may not be poss i bl e on t he pr esent evidence to predict the outcome of the case or to find that the Cl ai ma nt is mo r e likel y than not to wi n on the point were it to be tried — see Agrafax Public Rela ons Li mi ted v Un i ted Sco sh Soci ety Inc [1995] IL Pr 753 (CA) per Henry LJ.

The conclusion that Mr Vos has established a good arguable case makes it unnecessary for me to consider the alterna ve wa y in wh i ch Mr Vos sought to establ ish jur i sdi c on by showi n g t hat the contract was made within both jurisdic ons and t her ef or e wi thi n Engl and, but s i nce submissions were addressed to me upon it and because it may provide an appealing approach

Page16

to cases like the present, I will deal with the ma er . Mr Vos ma de the bol d and al mo s t unprecedented submission (so far as the researches in this case have established) that the contract could be shown to have been made in both England and California, which is sufficient for CPR 6.20(5)(a). I say ‘almost’ unprecedented because in the Brinkibon case Mr Anthony Thompson QC submi ed that as a ma er of pri nci ple a cont r act may be mad e i n t wo places at once — see the argument at page 37E. The point was not adverted to in any of the speeches in that case and the case was decided by applying the tradi onal pr inc i pl e wh i ch I have al ready iden fied. So f ar as the aut hor i es mate r ial put befor e me i s concer ned, nothi ng i n terms d eal s with the point and Lord Grabiner, while not accep ng that such an anal ysi s wa s pos si bl e, wa s unable to iden fy a ny pr inc i pl e wh i ch r ender ed t he c oncept her e cal , a nonsense or impermissible. No academic learning was put before me, and the only learning that my own researches have thrown up is in an ar cl e by Mr Char les Lewi s MA in [1990] LMC LQ at page 433, an ar cl e comme n ng on Brinkibon in the Court of Appeal. At the end of his ar cl e Mr Lewi s says:

‘Why should not an acceptance or a repudia on commu ni cat ed over a di stance have a spa al ly con nui ng exi stence, so t hat the cont r act is mad e f or juri sdi c onal purposes , albeit not for the purpose of fixi ng the mo me nt the cont ract assume d *739 binding force, at both points, the place for sending the message and the place of its receipt … Unfortunately, this is a type of lateral thinking with which the precise and literal analysis of the common law intellect has neither familiarity nor sympathy.’

Before considering whether authority compels a conclusion one way or another, it is worth considering the validity of the point as a ma er of pr inc i pl e. I conf ess that I can det ect no conceptual barriers to the no on of a cont ract bei ng treat ed as havi ng been ma de i n two places, and some not inconsiderable a rac ons . In a case whe r e t he t wo par es t o a contr act are not in the same loca on at the me of cont r ac ng, t he no on of where t he contract i s made is essen al ly a lawy er ' s cons truct. It sel dom ma ers of cour se, but whe r e i t does ma er (principally for the purposes of jurisdic on under Engl ish l aw) the l aw has to pr ovi de some answers where an applica on of the exper ience of ever yday life does not enabl e one to pr ovi de them. Hence the rule in Entores and Brinkibon to the effect that in the case of ins tant aneous communica ons (in those cases tel ex) the cont ract is ma de wh er e accept ance is recei ved. That form of approach assumes that one can analyse the forma on of a cont ract i n offer and acceptance terms, and in Brinkibon Lord Wilberforce indicated that, difficul t though t he exercise may be, the courts have to do their best with the evidence in order to work out, some me s i n si tua ons of some difficulty, how t he offer and accept ance anal ysi s pans out . However, in the post-Brinkibon world, where oral telephone communica ons are even mo r e common, and where such communica ons can invol ve thr ee or mo r e par cipant s i n t hree or more differ ent jur i sdi c ons , and whe r e par es mi gh t even concl ude a wr i en contrac t by each signing, and observing each other signing, over a video-link, the law may have to move on and to recognise that there is nothing inherently wrong or here cal i n al lowi ng the no on of a contract made in two (or more) jurisdic ons at the same me. Thi s i s not mer ely a way of avoiding an unfortunate, and perhaps difficul t , evi den al enqui r y. I t may well reflect t he reali t y of the situa on. Take the case of thr ee par es who each agree t o compl ete a wri en agreement by signing simultaneously over a three way video link — where is that contract made? The natural answer is that it is made in all three jurisdic ons . Such a conc l us i on does not necessar i ly create prac cal di fficul es. I f one of those j ur isdi c ons is Engl and, t hen one of t he founda ons for the English courts to assume jurisdic on is pr esent , but it does not necessar i ly fol low that jurisdic on wi ll be assume d, because a Cl ai ma nt wh o seeks to sue her e wo ul d s l l have t o establish that it is the most appropriate jurisdic on in wh i ch to sue. Jur i sdi c on wou l d t hen dealt with on the basis of a mature forum conveniens doctrine rather than what might

Page17

otherwise be a very forced and ar ficial anal ysi s of trying t o est abl i sh i n whi ch s ingl e j uri sdi c on the contract was made.

Such an analysis also has the merit of reflec ng t he f act that i t i s simpl y not alway s pos s i ble t o analyse a contract in offer and accept ance t erms . As Lor d Di pl ock obser ved i n Gibson v Manchester CC [1979] 1 WLR 294 at page 297: *740

‘… there may be certain types of contract, although I think they are excep onal , wh i ch do not fit easi ly int o the norma l anal ysi s of a cont ract as bei ng cons tuted by offer and acceptance …’

Where such a contract is brought into existence, a for or i i t wi ll not be pos si bl e to find out where the contract is made by applying the Brinkibon test. Of course, in most cases there will be no problem, but I do not see why, in the excep onal case, the answe r shoul d not be that a contract is made in two places (or conceivably in more than two places) if the facts admit of that result and drive one to that conclusion.

As I have indicated, there is no authority which bears directly on this point. Two authori es were relied on in Brinkibon: Evans v Nicholson (No. 2) (1875) 32 LT 778 and Benne v Cosgr iff (1878) 38 LT 177, but Mr Vos accepted that neither actually supported the proposi on because they deal with differ ent poi nt s name l y wh er e a l e er sta ng an account or orderi ng goods should be taken as speaking. Mr Vos did, however, rely on pointers in other cases. The first wa s Commission for New Towns v Cooper (GB) Limited [1995] Ch 259 at p. 285 where Stuart-Smith LJ, referring to exchange of contracts, said:

‘Exchange can also take place by telephone, in which case it will be simultaneous.’

That, however, merely deals with mi ng and me chani sm; it does not deal wi th pl ace and does not assist one way or the other. BP Explora on Li mi ted v Hunt [1976] 1 WL R 788 contains a debate as to where a contract was made, and it deals with a conten on that a cont ract wa s made partly in London and partly in Texas, because a London contract was amended in Texas. That conten on wa s rej ected in favour of a findi ng t hat the cont r act was mad e i n London and amended in Dallas rather being made partly in one jurisdic on and par tly in the ot her . So that does not assist me. The last case which Mr Vos relied on as containing pointers was IR Commrs v Muller [1901] AC 217. That was a stamp duty case where an agreement for the sale of a business, including goodwill, was executed by the vendor abroad and by the purchaser in England. One of the issues was whether the agreement was ‘made’ in England for the purposes of sec on 59 (1) of the St amp Ac t 1891 . At page 223 Lord MacNaghten said:

‘I think the agreement was made in England, and none the less so because it may also be described with equal propriety as being made abroad.’

However, the context of that quota on ma kes i t qui te cl ear that he i s cons i der ing the ver y limited ques on of wh er e the agreeme nt shoul d be treat ed as havi ng been ‘ma de’ for the limited purposes of the legisla on bef or e hi m. None of the ot her me mb er s of the commi ee expressed a view which assists one way or the other.

*741

There is therefore no authority which directly supports the proposi on. Is ther e any aut hor i ty which gainsays it? Unless it is implicit in Brinkibon then it does not seem to me that there is. Brinkibon was a case in which the House of Lords had to consider a contract reached by means of a telex machine. The effect of t he deci si on wa s to appl y the rul e as to i ns tant aneous communica ons wh i ch appeared in Entores. Despite the recorded submission of Mr Thompson that a contract can be made in two places at once, the debate in the judgments is really as to

Page18

the applicability of the instantaneous communica on rul e. True i t i s that Lor d Wi lber for ce at page 40 an ci pat es that an offer and accept ance anal ysi s wil l be appr opr i ate, but I do not read him as saying that it would be appropriate if it cannot be done or if it is u er l y ar ficial or inappropriate to do it. At page 42D he observed that many varia ons mi ght occur in rel a on t o the communica on and recei pt of a tel ex and that :

‘No universal rule can cover all such cases: they must be resolved by reference to the inten ons of the par es, by sound bus i nes s prac ce and i n some c ases by a judgment where the risk should lie.’

While that does not suggest that he was suppor ng the no on t hat in some cases i t mig ht be possible to find that a cont ract is ma de in two pl aces at once, he is cer tai nl y poi n ng agai nst any general rule applicable to all circumstances, and I think it is fair to say that it recognises the need to be appropriately flexi bl e in reflec ng t he needs and pr ac ces o f commer c e . Both Lor d Fraser and Lord Brandon (at pages 44 and 50 respec vel y) expr essed the vi ew that the gener al rule would have to give way to par cul ar ci rcums tances . I n the ci rcums tances , and wh i le Brinkibon clearly lays down a general rule which is very helpful and desirable in terms of crea ng cer tai nt y, I do not take i t as i nevi tabl y standi ng i n the wa y of the concept that a contract can be made in two places at once in the sense that it forces a court always to find a single jurisdic on in wh i ch the cont ract shoul d be taken to have been ma de.

So far as it is necessary for me to do so, therefore, I am prepared to consider this ma er on the foo ng that it is pos si bl e, as a ma er of pri nci ple, for a cont r act to be mad e i n t wo places at once so that if one of those two places is England the requirement of CPR 6.20(5)(a) is made out. It is therefore necessary to consider whether on the facts of this case there is a good arguable case for saying that that is the appropriate analysis. In my view Mr Vos has succeeded. It seems to me that this sort of case is very arguably one of the class contemplated by Lord Diplock in which an analysis in terms of offer an accept ance is not appr opr iat e. The par es had, by a long process of nego a on, arr i ved at agreed f orms of agreemen t whi ch wer e not to be made binding un l bot h par es i ndi cated t hat they wer e. If bot h par es had met i n or der t o sign and complete in the same place, it might well have been extremely difficul t to find anyt hi ng amoun ng to an offer and accept ance. Whe r e compl e on t akes pl ace at a di st ance over t he telephone, it might well be possible to construct an offer and accept ance anal ysi s (indeed, each party has sought to do so in this case) but it might equally be thought that that analysis is extremely forced and introduces a highly random element. The offer and accept ance ma y we l l depend on who speaks *742 first and wh o speaks second, wh i ch is likel y to be lar gel y a ma er of chance in closing an agreement of this sort. It is very arguably a much more sa sfactor y analysis to say that the contract was made in both places at the same me . On the facts of thi s par cul ar case, that wo ul d coi nc i de wi th the cl ear l y expr essed i nt en ons of the par es t hat neither wished to give the other an advantage in terms of governing law and jurisdic on, and although introducing the somewhat random element of offer and accept ance int o the concept might be said in one sense to coincide with their respec ve wi shes , and al though t hei r expressed wishes did not go so far as to encompass the place of contrac ng, it seems to me that there is a good arguable case for saying that a dual place of contrac ng coi nc i des rat her mo r e closely with the inten ons of the par es.

I therefore conclude that as a ma er of pr inc i pl e, and on the facts of thi s case, Cor ps has a good arguable case for saying that the contract was made in both England and California; since that means it was made in England that establishes one of the bases of jurisdic on i n CPR 6.20, although it does not conclude the ques on of wh et her i t i s appr opr iat e to l i gat e t he ma er here because I shall have to go on to consider whether this is the appropriate forum. I do so below.

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The Governing Law of the Contract

The next alterna ve ground of jur i sdi c on r el i ed on by Cor ps i s that the cont r act i s governed by English law. Neither the Se leme nt Agreeme nt nor the Tr ade Ma rk Agreeme nt cont ai ns an express choice of law clause (a deliberate decision of the par es , as appear s above) . So I have to determine the law which applies by the reference to the Rome Conven on, incor por at ed int o English law by the Contracts (Applicable Law) Act 1990. The relevant provisions are in Ar cl e 4 which, so far as relevant, reads as follows:

‘1. To the extent that the law applicable to the contract has not been chosen in accordance with Ar cl e 3, the cont ract shal l be gover ned by the l aw of the count ry with which it is most closely connected …

2. Subject to the provisions of paragraph 5 of this ar cl e, it shal l be pr esume d that the contract is most closely connected with the country where the party who is to effect the performance which is characteris c of the cont ract has, at the me of concl usi on of the contract, is habitual residence or, in the case of a body corporate or unincorporated, its central administra on. Howe ver , if the cont ract hi s ent er ed int o in the course of that par es ’ trade or pr of essi on, that count ry shal l be the count ry i n which the principal place of business is situated or, where under the terms of the contract the performance is to be effected thr ough a pl ace of bus i ness ot her than the principal place of business, the country in which that other place of business is situated.

*743 …

5. Paragraph 2 shall not apply if the characteris c per forma nce cannot be det ermi ned, and the presump ons in paragraphs 2, 3 and 4 shal l be di sregarded if it fear s from the circumstances as a whole that the contract is more closely connected with another country.’

I therefore have to carry out the following exercise: (a) I have to iden fy, i f pos si bl e, the character i s c per f orman ce due under the Trade Mar k Agreement.

(b) If I can do that, I then have to iden fy the par ty wh o effect s that per f orman ce.

(c) Once that party is iden fied ( i f pos s i ble) then I have t o i den f y the pl ace of t he centr al administra on of that par ty. That gi ves ri se to a pr esump on t hat that is the j uri sdi c on wi th which the contract is most closely connected, and that close connec on pr ovi des t he governing law.

(d) However, having iden fied t hat par t y and t hat per f orman ce ( i f I can) , I have t o cons i der whether or not the contract is in fact, and in the circumstances, more closely connected with another country (ar cl e 4( 5) ; if so, then that ot her count ry pr ovi des the gover ni ng law.

(e) If I cannot iden fy the character i s c per f orman ce due under the cont r act , then agai n I have to decide with which country the contract is most closely connected, and that country again provides the governing law (ar cl e 4( 5) and (ar cle 4(1)) .

My first task is ther ef or e to iden fy the char act eri s c perf ormanc e due under t his contr act.

There were two principal areas of dispute between the par es on thi s i ssue, name l y wh at factors I was en tled to take int o account in det ermi ni ng character i s c per f orman ce, and t hen what the answer was. Lord Grabiner propounded a wide ranging test, en tl ing one to go beyond the four corners of the contract and to see how it operated in the real world and where

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its real ‘bite’ was. Mr Vos propounded a narrower view, which confined itsel f lar gel y to the four corners of the contract and severely limi ng the factual cont ext int o wh i ch it wa s to be put for determining characteris c per forma nce and wh o wa s to pr ovi de it.

It is common ground that in determining the meaning and effect of the Rome Conven on I can derive assistance from the Giuliano-Lagarde Report (OJ C282/1980). Mr Vos said that the thrust of this report was to require one to work *744 principally from the contract to ascertain characteris c per forma nce. The pur pose of the Conven on i n t his respect was to s impl i fy the inquiry:

‘… the submission of the contract … to the law appropriate to the characteris c performance defines the connec ng f act or of the cont r act from t he i nsi de, and not from the outside by elements unrelated to the essence of the obliga on such as the na onal ity of the cont rac ng par es or t he pl ace wher e the contr act was concl uded’ ( p 20).

The test,

‘greatly simplifies the pr obl em of det ermi ni ng the l aw appl icabl e to the cont ract i n default of choice by the par es … Seeki ng the pl ace of per forma nce or the di fferent places of performance becomes superfluous . ’ (p 21)

I do not think that the inquiry required under this head should be confined i n the ma nner submi ed by Mr Vos . Al l cont racts oper at e in thei r own comme r ci al envi ronme nt , and in or der to understand them and how they operate they have to be placed in that environment. In many cases the posi on wi ll be obvi ous wi thout doi ng mu ch of that ; in some it wi ll be less obvi ous . Accordingly, as a ma er of pr inc i pl e it seems to me to be wr ong to seek to confine t he i nqui r y i n the way suggested by Mr Vos. Obviously the contract is a star ng poi nt , and in ma ny cases it may be obvious, without going further, what the characteris c per forma nce is; but that does not mean that one cannot or should not put the contract into its commercial context.

This approach is also supported by authority. In Print Concept GmbH v Gew (EC) Ltd [2001] EWCA Civ 352 Longmore LJ said:

‘The global picture must be assessed …’.

It is true, as Mr Vos observed, that that was a case in which the court had to define the cont ract and its nature first, because the cont ract wa s or al and the cour t had first to det ermin e wha t i ts terms were, but having determined the terms and the thrust of the contract the Court of Appeal did not confine itsel f to those terms — it looked at the ‘gl obal pi ctur e’ in or der to ascer tai n the ‘characteris c per forma nce’ . It al so described the pr ocess as tryi ng to find t he ‘ real mea t ’ of the arrangement (adop ng t hat descrip on f rom a n academi c ar cle) ; that concept does not suggest a narrow contract-bound inquiry. More compellingly, in Iran Con nent al Shel f v I RI Interna onal Cor por a on [ 2002] EWCA Civ 1034; [2004] 2 CLC 696 Clarke LJ, in connec on wi th this test, said:

‘24. It seems to me that in order to resolve this issue it is important to iden fy the terms of the contract. However, it is not in my judgment appropriate to look only at the purchase order and its acceptance. As in the case of any contract, it is important to view its terms against its surrounding circumstances or factual matrix. In this case the background to the contract is, I think, of par cul ar *745 importance because the contractual documents did not come out of the blue. On the contrary, they can be traced back to 1990.’

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Accordingly, I do not confine my i nqui ry to the terms of the cont ract i n thi s case, though obviously that is a vital star ng poi nt . The pr inc i pal pi ece of cont ext wh i ch Lor d Gr abi ner rel ies on is the fact (which he says the evidence establishes) that the ‘bite’ of the agreement was directed at Computer and what it did and sought to do. In 1991 it was the party that was seeking to expand its product range and was introducing various new products (hardware and so wa re) . That wa s at l east par t of the genes i s of the 1989 di sput e wh i ch ended up bef or e Ferris J. By contrast, Corps was not innova ng at the me. The pur pose of the Trademar k Agreement was to move the boundaries and to permit Computer to move into new areas that Corps was not interested in moving into anyway. In this respect Lord Grabiner relied on what a Mr Tenenbaum (one of Corp's principal nego at or s) had sai d on depos i on i n ot her US proceedings in 1995, which he said supported this analysis of what was really going on. He also maintained that Computer was en tled to rel y on event s subsequent to the cont ract to show its bite, and pointed to the rela vel y recent i nt roduc on of iTunes so ware in Januar y 2001. Accordingly, if one asks what the real subject of the agreement was, it was primarily directed at defini ng wh at Comp ut er coul d and coul d not do, and not at wh at Cor ps coul d and coul d not do.

I am afraid that I do not accept this analysis. I start by considering the concept of ‘performance’ under the contract. The concept of ‘performance’ is an easier concept to deal with where what is required is posi ve acts. Al though ther e wi ll al wa ys be cases of di fficulty, one can see how t h e concept applies where one can see what posi ve acts have to be done under the cont ract, iden fy one act or set of acts as lyi ng at the hear t of i t, and iden fy the par t y that has to do those acts. That is not the case for much of the Trademark Agreement. At the heart of the agreement are, in effect, nega ve provi sions . I have set out the r eci tal to t he agreemen t above. It recites its purpose as being to reserve certain fiel ds of use to the par es respec vely. There i s then a provision for payment, which, while clearly ‘performance’, is not ‘characteris c’ for these purposes, as both par es imp l ici tly recogni sed bef or e me . The hear t of the agreeme nt l ies in clause 4, which provides for the par es to use thei r ma rks in thei r respec ve defined fields of use. These are not posi ve obl iga ons under whi ch t he par es under t ake to do somet h i ng. They are permissive, un l one get s to cl ause 4. 9 wh i ch imp oses a nega ve obl i ga on on both par es — they are not to use thei r own ma rks in the ot her ' s field of use. They bot h per f orm b y not doing something. Clause 5 imposes posi ve obl iga ons , but i t i s qui t e clear that they are ancillary to the primary ma er s wh i ch are in cl ause 4 — they essen all y provi de f or how t he par es are to imp l eme nt the fields of use whi ch t hey are bot h t o have by speci fying wha t each is to do in various jurisdic ons to leave thei r respec ve fields of use open t o their owner s . The remaining provisions do not contain any material items of performance; nor do they shed any further light on characterisa on.

*746

The heart, or meat, of this agreement is therefore a nega ve one. The par es per f orm i t (so f ar as they perform it at all) by not doing something, rather than by doing something posi ve. However, I am prepared to assume that a nega ve obl iga on can amou nt to ‘ per f orman ce’ within the meaning of Conven on, and that wh er e a nega ve obl i ga on l i es at t he hear t of a contract then the fulfilme nt of that nega ve obl i ga on i s the ‘ characteris c performance ’ for the same purposes. Nonetheless, in rela on to the pr esent cont ract, i t seems to me that the mutuality of the obliga ons me ans that the cent ral per forma nce el eme nt s (I del iber at el y avoi d the expression ‘characteris c per forma nce’ at thi s poi nt of the ar gume nt ) are shared betwe en the par es . Each has to do (or ref rai n from doi ng) the same acts vi s-à- vi s the ot her . Ac cor di ngl y, so far as the concept of iden fyi ng ‘ character i s c per f orman ce’ provi ded by one par t y i s concerned, one cannot do it looking at the contract as such.

That one might arrive at this conclusion is not en rel y unf or eseen. Dicey & Morris on the Conflict of Laws at page 1240 gives barter as an example of a contract where one cannot

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determine characteris c per forma nce. That is doubt less because ther e are, in effect , mat chi ng obliga ons nei ther of wh i ch is mo r e character i s c than t he other . That has resonsances i n t he present case. More presciently, the problem of iden fyi ng character i s c per f orman ce i n cases of complex intellectual property rights agreements was referred to in Cheshire & North's Private Interna onal Law (1999) at page 570 where the authors refer to the difficul t y of appl ying t he concept to complex contracts for the commercial exploita on of int el lectual pr oper ty ri ght s.

Accordingly, I consider that star ng f rom the cont ract i tsel f, and l ooki ng at i ts nat ur e, one cannot iden fy character i s c per f orman ce provi ded by one par t y or the other . Howev er , I have already accepted that it is, or could be, appropriate to put the contract in its proper context in order to consider this point fully, and that is in effect wh at Lor d Gr abi ner does wh en he says that whatever the contract may say as between the par es , the ‘real me at ’ of the cont ract lies in the fact that the purpose of this contract was to free up his clients so they could pursue their innova ons int o new areas and appl ica ons . I do not agree. First, whi l e t hat may be how h is clients saw it, that does not describe how the central parts of this contract work. Whether or not the agreement provided a more helpful commercial and intellectual property environment than had existed hitherto, it is s ll the case that thi s cont ract regul at ed the ac vi es of both par es , i n real and subs tan al way s. The r est ric ons on Corps were in no way subsi di ar y to those imposed on Computer, and Corps' rights were in no real way less significant , or l ess central, than Computer's. The reality of this contract was s ll that i t di vi ded up a pot en all y disputed cake, and that remained the reality even if it was the case that Computer was ge ng a bigger slice of the cake than it might hitherto have had. I therefore do not consider that Lord Grabiner's factor somehow shi s the per forma nce in favour of hi s cl ient . In addi on, even i f he were right on the facts I do not see how the argument assists him in saying his client had become the party who provided characteris c per forma nce. Comp ut er under took no obl iga on to carry out any ac vi es i n i t s newl y est abl i shed t err i tory, so i t was i t sel f provi ding no addi onal per forma nce i tsel f. I f anyone wa s pr ovi di ng addi onal el emen t s of per f orman ce *747 which somehow lted the bal ance so as to creat e a character i s c per f orman ce, it was Corps, which had extended the area affected by its nega ve obl i ga on and t hus ( i f anyone di d) had provided the characteris c per forma nce. If that we r e cor rect then it wo ul d ma ke the law of Corps central administra on (ie Engl and) the gover ni ng law under Ar cle 4(2) whi ch i s not the result that Lord Grabiner seeks. In truth, however, that analysis is not the correct one. The true posi on is that thi s is not a case wh er e one can det ermi ne character i s c per f orman ce.

Accordingly the presump on creat ed by Ar cle 4(2) does not appl y, by vir tue of the wor ding of Ar cl e 4( 5) , and I have to ascer tai n ‘ the count ry wi th wh i ch [ the cont ract] i s mo s t cl osel y connected’ in accordance with Ar cl e 4( 1) .

At this point in the argument the stances of the par es rever sed. Lor d Gr abi ner sought to limi t the kind of factors that can be taken into account in this exercise, whereas Mr Vos sought to say they were wide. Lord Grabiner's submission was that the sort of ma er s that coul d be used to establish the connec on h ad t o b e ‘ geographi cal c onnec ons ’ an d co nnect ed wi t h performance. They must be connec ons betwe en the cont ract and a count ry, not connec ons between the contract and a legal system. This means that such things as considera ons wh i ch might go to the ques on of expr ess or i nf er red choi ce of l aw are i rrel evant — they come in under Ar cl e 3 or not at al l. The same appl ies to such factor s as cur rency i den fied i n the agreement.

Lord Grabiner said that his proposed limita on wa s suppor ted by the Gi ul iano — Lagarde repor t and by the judgment of Hobhouse LJ in Credit Lyonnais v New Hampshire Insurance Co [1997] CLC 909. That case concerned the ques on of the gover ni ng law of an insur ance cont ract wh i ch was to be determined under the provisions of similar but not iden cal l egi sl a on t o t he Conven on. In deci di ng the ques on bef ore him H obhouse LJ cons i der ed t he Conven on, and observed (at p. 914) that the Ar cl e 4( 2) test:

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‘applies a criterion which takes into account the performance of the contract and a geographical loca on … It is a cri ter ion wh i ch seeks to iden fy the count r y i n whi ch t he party providing the significant per forma nce is locat ed. It is al so to be obser ved that jus t as it is not a test directed to ascertaining inten on so it is not di rected to iden fying a legal system with respect to which the inten on to ent er i nt o cont ractual rel a ons must be taken to refer.’

He then considered the circumstances in which the presump on i n Ar cle 4( 2) mi g ht be rebu ed, in accor dance wi th Ar cle 4(5), and r eferr ed t o:

‘the guidance that [Ar cl e 4( 2) ] gi ves as to wh at is me ant by “the count ry wi th wh i ch it is most closely connected” …’

and pointed out that the presump on ‘ does not det ract f rom t he need t o l ook f or a geographical connec on’ . Ha vi ng t hen r et ur ned t o t he p r ovi si ons wi th wh i ch h e wa s *748 concerned, he embarked on a considera on of wh i ch count ry the cont ract wa s mo s t closely connected with. In that context he said (at p. 915–6):

‘Consistent with the policy of the direc ve … one mu s t l ook f or l inks wi th t he subject-ma er and per forma nce of the cont ract and thei r connec on wit h a par cular country …

There is no element of performance that is geographically connected with France … references to French francs and the provisions of the French penal code do not themselves relate to the loca on of t he per forma nce of t he cont ract nor t o t he loca on of ei ther of the per formi ng par es’ .

From this Lord Grabiner derived his submissions that the connec ng f actor s had t o be performance related and geographical, or to relate to the loca on of the par es. He sai d t hat this analysis was supported by Samcrete Egypt Engineers and Contractors SAE v Land Rover Exports Ltd [2002] CLC 533, which cited extensively from Credit Lyonnais and applied what it said.

Mr Vos disputed this narrow view of the factors that could be taken into account. In my view he is correct, and Lord Grabiner's approach is not correct either as a ma er of pr inc i pl e or as a ma er of aut hor i ty. (a) While Hobhouse LJ is clearly drawing a dis nc on, he i s i n my view d rawi n g a dis nc on between geographical links on the one hand and legal system links or ma er s rel a ng t o inten on on the ot her . He poi nt s out that it is the first that i s now d et ermin a ve under t he Conven on; the ol d law had been ot herwi se. Wh en he says that ‘one mu s t look for links wi th the subject-ma er and per forma nce of the cont ract and thei r connec on wi t h a par cular country’ he is not, in my view, intending to impose restraints as to the sort of features that one takes into account in that process by reference to performance and subject ma er — he is emphasising the geographical element (though obviously performance and subject ma er will be important factors in the assessment).

(b) The label ‘performance’ is not going to be an easy one to deploy in some contracts. The same is true if one adds ‘subject-ma er ’ as one of the tests. In some cases it mi ght invol ve an ar ficial and ul mate l y profitl ess debat e i n ascer tai ning wheth er a given f actor does or does not fall within one or other of those descrip ons . Such a debat e i s not requi red by the wording of the Conven on, wh i ch uses the br oader wo r ds ‘cont ract ’ and ‘connected’ .

(c) The limit suggested by Lord Grabiner is not reflected in the Gi ul iano- Lagarde repor t. That

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report refers to the ‘flexi bi lity’ of the gener al pr inc i pal emb odi ed in Ar cle 4(1) (though i t also uses the expression ‘vague concept’ as well). There is no sugges on in the repor t of some sub-classifica on of relevant fact ors . *749

(d) The authori es on Ar cle 4 do not suppor t Lord Gra bi ner ' s l ine.

(i) Samcrete Egypt Engineers and Contractors SAW v Land Rover Experts Ltd [2002] CLC 533 was a case of a guarantee provided by a parent company of the obliga ons of a subs i di ar y under a distribu on agreeme nt . That wa s a case wh er e the Ar cle 4(2) presump on was held to be rebu ed. Credit Lyonnais was cited, but the Court of Appeal did not draw from it the point now relied on by Lord Grabiner. The fact that the contract was wri en in Engl ish wa s said to be of ‘li le consequence’ , not of ‘no consequence’ wh i ch it ought to have been if Lor d Grabiner were right. The presence of the creditor in England as a factor was said to ‘lack substance’ because the purpose of the Ar cl e wa s to resol ve ques ons of governing l aw precisely where two par es we r e of di fferent domi c il e; but i t was not reject ed because i t was not performance — related. The place of payment under the guarantee was held to be significant (wh i ch is cons i stent wi th Lor d Gr abi ner ' s thes i s) . In addi on, Po er LJ reli ed on t he place where Land Rover had to deliver the vehicles under the guaranteed contract, which was England. In rela on to thi s del iver y, Po er LJ rel i ed on del i very as bei ng ‘ the cons i der a on stated in the guarantee’. Performance in the sense of delivery was due under the distributorship agreement, which was made with the subsidiary. Delivery was not really performance due under the guarantee (there was apparently no promise to deliver under the guarantee); yet Po er LJ rel ied on it. He wa s ther ef or e rel yi ng on per forma nce under another contract as a relevant connec ng factor . That is incons i stent wi th Lor d Gr abi ner ' s thes i s. Last, Po er LJ di d not rel y on the Engl ish choi ce of l aw cl ause i n the under l yi ng di stribut or shi p agreement, and declined to express a view as to whether it was relevant. He did, however, say that it was probably not, ci ng a passage in Credit Lyonnais in which Hobhouse LJ excluded inferred choice of law materials from that which the court could consider. While that is consistent with Lord Grabiner's line, it is significant that Po er LJ did not reject the submi s si on as not being a ‘performance related’ ma er . Ac cor di ngl y, l ooki ng at how Samcrete was decided, and despite the fact that it cited extensively from Credit Lyonnais, it did not ar cul at e the di s nc on r eli ed on by Lord Gr abiner, and i t s reasoni ng i s actual l y inconsi s tent with it in parts.

(ii) Bank of Scotland v Butcher is an unreported Court of Appeal case decided on 28th July 1998. In it the Court of Appeal was faced with a guarantee given to a Sco sh bank by an English resident and a Sco sh r esi dent . The Ar cle 4( 2) presump o n was h el d not t o apply, and in determining the place of closest connec on the Cour t of Appeal had regard to ‘al l the circumstances’, without iden fyi ng any l imi t to the cat egor ies of ci rcums tances wh i ch coul d be taken into account. One must be a li le cau ous i n t aki ng t his too f ar because Credit Lyonnais is not referred to in the judgment, and one does not know whether it was cited, and there are reasons for believing it may not have been because one of the factors taken into account by Aldous LJ was an inference as to the inten ons of the par es as to governing l aw, which Hobhouse LJ expressly excluded; but nevertheless it does not provide any support for limi ng the inqui ry as to connec on i n t he man ner suggest ed by Lord Gra bi ner . *750

(iii) Defini tel y Ma ybe Ltd v Li eber ber g GmB H [2002] CLC 360; [2001] 1 WL R 1745 was a case which concerned the rebu al of the pr esump on provi ded by Ar cle 4( 2) . In consi deri ng wi th which country (England or Germany) the contract was more closely connected, Morison J relied on the place of performance (which supports Lord Grabiner), and ‘for what it is worth’, the fact that the defendant company was German, payment had to be made in Deutschmarks

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and payment was subject to deduc on for Ge rma n tax. Those last factor s, al bei t qual ified by the judge, are not consistent with Lord Grabiner's line, and nothing in the judgment suggests Lord Grabiner's refineme nt of the test. Credit Lyonnais is referred to by the judge, and it was clearly cited to him.

(iv) Ennstone Ltd v Stanger Ltd [2003] 1 CLC 265; [2002] 1 WLR 3059 was another case involving the rebu al of the Ar cle 4(2) presump on. The f actors rel i ed on by t he Cour t of Appeal in its considera on of connec on wer e al l per f orman ce r elated apar t fr om t he reference to the domicile of the companies involved. To that extent it is consistent with Lord Grabiner's thesis. However, despite the fact that Credit Lyonnais was again referred to and relied on, Lord Grabiner's refineme nt wa s not ar cul ated.

(v) The decision in Iran Con nent al (see above) is consistent with Lord Grabiner's thesis but does not ar cul at e hi s di s nc on.

Accordingly, I consider that I am en tled t o t ake a br oad appr oach t o t he ques on of connec on, unl imi ted by any cat egor i sa on of the r elevant fact ors .

This has turned out to be a very difficul t ques on. The contr act i n ques on is a contract between two companies in differ ent jur i sdi c ons and whi ch governs thei r respec ve worl dwide ac vi es. In one sense i t has connec ons wi t h many j ur isdic ons but nei t her Corps nor Computer has put forward any close connec on ot her t han wi th Engl and and Cal ifor ni a respec vel y. I mu s t det ermi ne wh i ch is cor rect.

Computer relies on the following connec ons wi th Cal ifor ni a: (a) While both par es are per formi ng in thei r respec ve j uri sdi c ons, greater weig ht shoul d be given to Computer's performance in its jurisdic on because the Tr ade Ma rk Agreeme nt was directed at its performance because it was being given a new liberty. Substan al compliance would therefore take place in California. This is, in effect, the ar gume nt ref er red to above (under characteris c per forma nce) . I have al ready rej ected thi s anal ysi s i n that context, and I reject it here too. I do, however, accept that Computer would be performing, to a certain extent, by controlling ac vi es from C al i fornia, and t hat that gi ves a Cal i fornia connec on. Howe ver , thi s is neut ral ised by the same factor oper a ng f or Appl e i n Engl and.

(b) Computer relies on the fact that the contract was made in California. It may have been — see above. However, I cannot find that i t wa s, unl ess i t wa s al so ma de in *751 England — again, see above. Accordingly, this factor either does not operate at all, or it is neutral if the contract falls to be treated as having been made in two places at once. In any event, even if the contract were made in California alone, then that would be purely as a result of the accident as to who u er ed t he penul mat e and who u ered t he l as t wor d s i n the offer /accept ance anal ysi s. That chance happeni ng is too random to al low thi s factor (in the circumstances) to be of any weight.

(c) Nego a ons took place i n New Y ork and Cal i fornia, as wel l as i n Engl and. Neg o a ons i n New York do not help to establish a California connec on, but i n t rut h t he pl ace of nego a ons does not est abl i sh muc h of a connec on anyway. The pl ace of nego a on was essen al ly a ma er of bus i nes s conveni ence, not a cont r act ual connec on.

(d) The sums paid under the Se leme nt Agreeme nt and the Trade Ma rk Agreeme nt we r e expressed in US dollars. This is true, and might be some sort of connec ng factor , though Credit Lyonnais and Samcrete show that it is not strong. In the circumstances of the present

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cases it is not really of any material weight as a factor conno ng the necessar y geographi cal connec on bet we en the cont ract and Cal ifor ni a.

(e) Under clause 4.1 of the Trade Mark Agreement Computer has the right to use its mark ‘on or in connec on wi th’ i ts goods and ser vi ces . The same wo r di ng i s used i n cl ause 4. 2 i n rela on to Cor ps ' ri ght to use i ts ma rk. The 1981 agr eeme nt , and ear l y dr a s of the Trade Mark Agreement, used the words ‘in rela on to’ ins tead. Ms Ri ol a, a US trade ma rk a orney employed by Computer, says that the differ ent speci fic wor ding was used i n or der to correspond with wording in the US federal lanham act, which is the main source of trade mark law in the US. She says, in a witness statement, that the phrase would be well known to trade mark a or neys and ot her s seeki ng to regi ster ma rks in the US . Mr Val ner , wh o wa s heavi ly involved in the dra ing of the 1991 agreeme nt s for Cor ps , says that he di d not know, and there is no contemporaneous evidence, that the wording was changed for that purpose. Mr Zeffma n di d not know the reason for the change of wo r di ng ei ther , so I inf er that it wa s no part of the purpose of those ac ng for Cor ps at the me. In t he l ight of that , and i n t he l ight of the oblique nature of the cross-reference, I regard this factor as being of no real weight. A clearer reference to legisla on, even i f not appr eci at ed by one par ty, mi ght i mp or t a connec on, but thi s seems to me to be too obs cur e in the absence of a shared int en on as to the dra ing.

(f) Clause 7.3 of the Se leme nt Agreeme nt expr essl y excl udes the effect of Sec on 1542 of the California Civil Code (which limits the effect of a gener al rel ease) . Thi s ref er ence is sai d import to import a connec on to Cal ifor ni a (cont rar y to Lor d Gr abi ner ' s ma i n poi nt that thi s would actually show a connec on wi th a legal system, not a geographi cal connec on) . I agree that this is capable of demonstra ng a connec on. *752

(g) The worldwide nature of the proceedings se led by the Se lemen t Agr eemen t . I assume this means the worldwide nature of the disputes that were being li gat ed in 1991. I do not see how this can demonstrate a connec on wi th Cal ifor ni a any mo r e than any ot her count ry. If the proceedings had a worldwide nature, then this factor connects the agreement to every country in the world. While that includes California, it also includes England. It therefore might be said to be a connec ng factor wi th Cal ifor ni a, but i t does not par cul ar l y connect with California and is of no weight in demonstra ng connec on wit h t hat state.

(h) Computer's principal place of business was in California. That is true and might be said to be some sort of connec on, but not mu ch, as appear s from Samcrete. Since Corps' principal place of business was England, this factor is essen al ly neut ral .

That gives some, but it might be thought not much, connec on wi th Cal ifor ni a. Howe ver , I have to measure this against the alleged connec ons wi th Engl and. Those connec ons are sai d t o be as follows: (a) The history of the Trade Mark Agreement. The combined purpose of this agreement and the Se leme nt Agreeme nt wa s to se le exi s ng l i ga on in Engl and, as wel l a s disput es i n the Commission. This is true, and is a connec ng factor .

(b) The li ga on concerned a precedi ng agreemen t (the 1981 agreemen t ) whi ch was express l y governed by English law, and the 1991 agreement follows the form of the 1981 agreement. This is true but I do not think that this imports a real geographical connec on for the reasons referred to in Samcrete at p 545H.

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(c) Corps says that the 1991 agreement had, as a ma er of f act, been oper at ed and implemented in England, both par es havi ng used Engl ish trade ma rk agent s to co- or di nat e the world-wide ac vi es that resul t ed. Compu t er disput e t hat so f ar as they are concerned — it says that co-ordina on wa s achi eved by Comp ut er from Cal ifor ni a, us i ng Engl ish trade ma rk agents as and when appropriate but not to co-ordinate the world-wide ac vi es of Compu t er in rela on to the agreeme nt . Looki ng at the evi dence, it does appear that ver y ma ny aspects of implementa on of t he agreeme nt t ook pl ace i n L ondon, but t hey al so t ook pl ace elsewhere. This seems to me to be neutral on the facts. However, I do not think that this sort of conduct assists in determining closest connec on. Wh i le it is true that the Gi ul iano- Lagarde report an ci pat es that subsequent per forma nce can be taken int o account , I thi nk it can onl y do so by way of shedding light on the connec on betwe en cont ract and count ry at the me the contract was formed. Otherwise shi ing per forma nce gi vi ng rise to shi ing connec on could change the governing law, and that cannot be right. In the light of that, too, I do not think that this sort of eviden al factor for ges a connec on. The par es happened t o use London agents to deal with each other in order to implement the agreement, but that was not in any sense of the essence of the contract. They might have instructed agents anywhere. *753

(d) Clause 13.2, which I have set out above, refers to delivery of par cul ar s under t he Restric ve Trade Pr ac ces Act 1976 , and clause 14.2 made it clear that implementa on of the agreement was condi onal on ful filmen t of that condi on. Par culars were dul y del i vered, and the Office of Fai r Tradi ng deci ded t hat the 1976 Act di d not in f act appl y to i t. Thi s provision undoubtedly gives rise to some connec on wi th Engl and even though the del iver y was ul ma t el y not requi red by law. It seems to me , though, that thi s connec on poi nt is agai n weak. The agreement was intended to have worldwide opera on, and thi s wa s jus t a speci fic provision referring to its opera on in one speci fic j uri sdi c on.

(e) The agreement was made in England. This point is neutral for the reasons given in rela on to Computer's submissions.

This is an agreement in respect of which a close connec on wi th ei ther j ur i sdi c on i s very difficul t to find. Howeve r , the ques on for me i s sli ghtly differ ent because I have t o find the country ‘with which it is most closely connected’ (Art 4(1)). As appears above, I find that mo s t of the connec ng feat ur es are we ak or neut ral , and because of the essen all y wor l dwi d e nat ure of the effect and oper a on of the Trade Mar k Agr eemen t the ques on i s a very di fficult one, but in the end I think that the closer connec on i s wi th Engl and. I thi nk that one of the we i gh er factors in favour of England is that the Trade Mark Agreement is part of an overall se leme nt of English li ga on, al bei t that that is l i ga on wi t h wor l d wide impact . Taki ng that f actor , and assessing the other admissible factors so far as they are of any significance, I cons i der that thi s contract has a closer connec on wi th Engl and than wi th Cal ifor ni a. That me ans that Engl ish law is the governing law.

Accordingly, Corps establish that head of jurisdic on as we l l.

Is England the proper place for this claim?

It is common ground that the burden is on Corps to sa sfy me of thi s. The di sput e in thi s case is essen al ly one of cons truc on of the Trade Mar k Agr eemen t . Cor ps say that on i ts true t erms and effect that agreeme nt pr ohi bi ts Comp ut er from oper a ng t he i Tunes Mus i c Store. Subj ect

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to one differ ence of Cal ifor ni an law the ma t er ial for reasoni ng that di sput e wi ll be the cont ract (and argument on what it means) evidence of the surrounding circumstances, and evidence of what Computer is doing and intends to do (including evidence of how its product works, to a limited extent) in order to iden fy the exact br each (if any) .

The par es put var ious factor s bef or e me in thi s connec on, of whi ch t he mai n ones are as follows.

(a) Governing law. Computer submi ed that thi s wa s a key i ssue and that i f Cal ifor ni a l aw governs the Trade Mark Agreement. I agree that it is an important, though not *754 determina ve, poi nt , but si nce I have deci ded that Engl ish law is the gover ni ng law then this points towards England.

(b) The loca on of docume nt s, evi dence and wi tnesses . Comp ut er says that it wo ul d be the party which had the principal burden of disclosure of documents, and those documents are in California. The documents and other evidence will go to the use, marke ng, oper a on and circumstances surrounding the iTunes Music Store, and a number of witnesses would be called by Computer — a greater number than would be called by Corps, probably. I accept much of this, though some of the evidence and witnesses will depend on the scope of the admissible evidence. Apparently California courts will admit parol evidence of such ma er s as nego a on on t he ques on of const r uc on of the contrac t, and whi le it is not absol utely clear whether this is a case in which they would do so there seems to me to be a substan al possibility that they will in this case. If they did, then presumably more evidence and perhaps more witnesses would be adduced and produced by Computer, though Corps would itself presumably expand its evidence too.

(c) Corps submits that the disrup on to its bus i ness ar i si ng from a tri al in Cal ifor ni a wo ul d be greater than the disrup on to Comp ut er ' s bus i ness by a tri al in London. Thi s is because Cor ps ' Mr Aspinall would have to be heavily involved in the trial and in events leading up to trial. He is Corps' only execu ve officer ( albeit he has 9 junior empl o yees) and t here woul d be no-one to fulfil hi s rol e in hi s absence. Wh i le Comp ut er ' s officers woul d have to be i nvol ved i n a tr ial in England, Computer's size and managerial structures is such that the disrup on t o i ts business would be less.

(d) Computer points out that the ac vi es compl ained of (oper a ng t he i Tunes Musi c Store) take place in and from California, and that the music is only available in the US at present. I do not regard this as a significant poi nt .

(e) It is said by Corps that a trial in England will take less me and wi ll be avai labl e mo r e speedily. Corps says an English trial would take about 3 days, whereas a California trial would take 10 days (or 12 with a jury, though Computer has said it will not seek a jury trial). There is a dispute about these es ma t es — Comp ut er ' s wi tnesses put the me f or a t rial in Cal i fornia as being shorter (not significant ly di fferent from C or ps' es mate s as t o Engl i sh tr ial l engt hs), unless one adds in me for assessme nt of dama ges (wh i ch Cor ps ' es mat e does not ) . For my part I cannot see why like for like trials in each jurisdic on shoul d di ffer signi ficantl y in lengt h. A California trial will inevitably be longer if parol evidence of such ma er s as nego a ons i s given.

(f) Pre-trial prepara on wi ll be mo r e cos tly and di srup ve i n Cal i fornian proceedi ngs because witnesses will have to be deposed, either in California or in London, in addi on to thei r a endance at tri al . Thi s seems to me to be cor rect as a ma er of fact and of some wei ght . *755

(g) Corps submi ed that an ear l ier tri al dat e coul d be obt ai ned in London than in Cal ifor ni a. There was some equivoca on as to qui te wh en a tri al in Cal ifor ni a wo ul d be obt ai nabl e, but I

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am sa sfied t hat i t wou l d cert ainly be no ear l i er than a t rial in London, and qui t e pos s i bly later.

(h) There was debate about the loca on of the par es. Cor ps poi nted out that Compu t er had a trading subsidiary in England whereas Corps did not carry on business in California. Computer pointed out that this statement by Corps had to be qualified by the fact that it has a representa ve pr ovi di ng bus i ness ser vi ces ther e (Mr Tenenbaum) , its goods we r e sol d ther e and it had li gat ed ther e in the past. I do not thi nk that those factor s me an that Cor ps has the same sort of presence in California as Computer has in England, but at the end of the day I do not think that this factor has any real weight in determining the point with which I am concerned. Although Corps is a smaller scale opera on, i t i s s l l a sophi s cated busi ness opera on benefi ng f rom i n ter na onal connec ons and tr ade, and abl e t o conduct l i ga on in California if it has to. The same applies to Computer, and would s ll appl y even if it di d not have its English trading subsidiary.

Taking into account all these considera ons , and the ot her poi nt s advanced by the par es, I have concluded that England is the proper place for this li ga on. I accept that the governing law is a key (though, as I have said, not determina ve) poi nt , and that poi nt s to Engl and. I al so think that the prospect of parol evidence and deposi ons are likel y to lengt hen a tri al and ma ke the proceedings more costly. I also give some weight, but not a lot of, to the disrup on to Corps' business arising out of Mr Aspinall's engagement in California li ga on. Taki ng all these factors into account, I think that this construc on poi nt ar i si ng out of thi s Engl ish law cont ract is more appropriately tried in England.

Alterna ve bases of jur isdi c on

Corps advanced addi onal heads of j ur i sdi c on under CPR 6.20, namely an injunc on t o restrain breaches of contract to be commi ed wi thi n the j ur i sdi c on, and an i njunc on t o restrain the commission of acts within the jurisdic on. These cl ai ms we r e based on asser ons that Computer threatened to make the iTunes product available in this jurisdic on. In the light of my determina on on the ma i n poi nt I do not have to go on to cons i der thi s al ter na ve bas i s, and therefore I do not do so.

Concurrent proceedings

There is one further ma er of pr ocedur al hi stor y that I shoul d ref er to. In Oc tober 2003, sever al months a er the pr esent pr oceedi ngs we r e star ted, Comp ut er star ted i ts own pr oceedi ngs in California, seeking nega ve decl ar at or y rel ief in respect of Cor ps ' comp l ai nt s. Cor ps sought to have those proceedings dismissed on the basis of lack of personal jurisdic on. Judgme nt in that applica on wa s pendi ng *756 at the me of the hear ing bef or e me . Si nce then judgme nt has been given, and the applica on has been di smi ssed — I have seen a copy of the judgme nt of the judge (Judge Whyte). Nothing in that applica on or that j udgme nt rel at es to anythi ng that I have to decide, and neither party sought to say that it did.

Conclusion

In the circumstances I dismiss Computer's applica on.

(Applica on di smi ssed) *757

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*415 Union Interna onal Ins ur ance Co. Ltd. v Jubi lee Ins ur ance Co. Ltd.

Queen's Bench Division

3 December 1990

[1991] 1 W.L.R. 415

Phillips J.

1990 Nov. 30; Dec. 3

Prac ce—Wr it—S ervi ce out of jur i sdi c on—Co nt r act mad e by f oreign plain ff through agent wi thi n jurisdic on—Wh ether powe r to or der servi ce of wr i t out of jur i sdi c on— R.S.C., Ord. 11, r. 1(1)(d)(ii)

Ac ng thr ough the agency of London br oker s, the pl ai n ff, an i nsur ance compan y r egi s t ered i n Bermuda, entered into a quota share retrocession agreement with the defendant, an insurance company registered in Kenya. The plain ff obt ained l eave t o s erve a wri t out of the j uri sdi c on on the defendant claiming sums due under the agreement together with interest, and seeking declara ons that the def endant wa s bound by cer tai n covenant s in the agreeme nt .

On the defendant's applica on to set asi de the ser vi ce of the wr i t on the ground that ser vi ce out of the jurisdic on under R.S.C., Ord. 11, r. 1(1)(d)(ii)1 only applied to an ac on wh er e the contract was entered into through an agent ac ng on behal f of a for ei gn def endant : —

Held, gran ng the appl ica on, that to give a sens i ble cons t ruc on t o Ord. 11, r. 1(1) words were to be implied so that the sub-rule referred to a defendant and not to a plain ff; that , ther efore, “principal” in rule 1(1)(d)(ii) was to be construed as referring to a foreign defendant who had entered into a contract through an agent ac ng on hi s behal f wi thi n the jur i sdi c on; and t hat , since leave to serve the writ outside the jurisdic on coul d not be gr ant ed under the sub- rul e where it was the plain ff who was the f oreign pri nci pal , servi ce of the wri t wou l d be set asi de (post, p. 418E–H).

Na onal Mo r tgage and Agency Co. of New Zeal and Ltd. v. Gos sel in (1922) 38 T. L. R. 832 appl ied.

Dictum of Kerr L.J. in Citadel Insurance Co. v. Atlan c Un i on Insur ance Co. S. A. [1982] 2 Ll oyd' s Rep. 543, 546, C.A. not followed.

The following cases are referred to in the judgment:

Citadel Insurance Co. v. Atlan c Un i on Insur ance Co. S. A. [1982] 2 Ll oyd' s Rep. 543, C. A.

Na onal Mo r tgage and Agency Co. of New Zeal and Ltd. v. Gos sel in (1922) 38 T. L. R. 832, C. A.

Siskina (owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803, H.L.(E.)

The following addi onal case wa s ci ted in ar gume nt :

General Reinsurance Corpora on v. For sakr ingsak ebol aget Fenni a Pat r ia [ 1982] Q. B . 1022; [1982] 2 W.L.R. 518; [1983] Q.B. 856; [1983] 3 W.L.R. 318, C.A. *416

SUMMONS

On 13 August 1990 the plain ff, Uni on I nterna onal I nsur ance Co. Ltd. , a compan y r egi s t ered i n

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Bermuda, was granted leave by Morland J. to issue a writ and to serve it on the defendants, Jubilee Insurance Co. Ltd., a Kenyan company, out of the jurisdic on.

By a summons dated 15 October 1990 the defendant applied for the discharge of the order giving the plain ff leave t o i ssue t he wri t and s erve i t out of the j uri sdi c on and t he s e ng aside of the service of the writ on the ground that having regard to all the circumstances of the case it was not a proper case for service out of the jurisdic on wi thi n R.S.C., Ord. 11, r. 4 and the court in its discre on shoul d ref use to gr ant leave for such ser vi ce.

The applica on wa s heard in chamb er s and judgme nt wa s gi ven in open cour t.

The facts are stated in the judgment.

Representa on

Richard Wood for the defendant.

Robert Bright for the plain ff.

Cur. adv. vult.

PHILLIPS J.

3 December. read the following judgment. This summons raises a ques on as to the extent of the court's jurisdic on under R.S.C., Ord. 11 which does not appear to have been determined in any reported case. I give judgment in open court at the invita on of the par es.

The facts

The plain ffs ar e an i nsurance compa ny r egi stered i n Ber mud a. The def endant s ar e an insurance company registered in Kenya. The plain ffs used t he servi ces of London brokers , Lowndes Lambert Group Ltd., to conclude a quota share retrocession agreement with various retrocessionaires, including the defendants. The plain ffs claimed f rom t he def endant s var i ous sums alleged to be due under the agreement and the defendants failed to pay these. The plain ffs accordingl y i ssued a wri t in t he Comme r cial Cour t claimin g ( i) an i ndemni t y or damag es for failure to pay admi ed amo unt s and bal ances due under the agreeme nt ; (i i) a decl ar a on that the defendants are bound by the agreement.

Contractual provisions as to jurisdic on

The retrocession agreement provided:

“Arbitra on

“Disputes involving interpreta on of thi s agreeme nt or per forma nce of respec ve obliga ons by the par es her eto whi ch cannot be r esol ved i n t he normal cour se of business shall be submi ed for deci si on by a thr ee me mb er arbi tra on panel … T he seat of arbitra on shal l be Hami lton, Bermu da …

“Li ga on

“Disputes concerning the validity of this agreement and ac ons f or payme nt s of admi ed bal ances shal l be submi ed t o a cour t of compe t ent juri sdi c on. The par es hereto shall comply with all requirements necessary to perfect the jurisdic on of such court and all ma er s r el at ed t o di sput es of t hi s nat ur e s hal l be det ermi ned i n

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accordance with the law and the prac ce of such cour t.”

*417

When the writ was issued the plain ffs bel i eved t hat the def endant s wer e chal l engi ng t he validity of the retrocession agreement, but not the amount of the payments claimed under it, if valid. The defendants have now made it clear that they do not challenge the validity of the agreement, but dispute that the payments claimed under it are due. In those circumstances, the plain ffs accept that i f the j uri sdi c on of t his court i s establ i s hed t hey must submi t to a st ay so that their first head of cl ai m can be arbi trat ed in Bermu da. They nonet hel ess wi sh to obt ai n a declara on that the def endant s are bound by the agreeme nt — as to wh i ch ther e is no longer any issue.

The basis of jurisdic on asser ted by the pl ai n ffs

The plain ffs obt ained l eave ex par t e f rom Mor l and J . to s erve out of the j uri sdi c on on 13 August 1990 pursuant to Ord. 11, r. 1(1)(d)(ii). This provides:

“(1) … service of a writ out of the jurisdic on is permi ssi bl e wi th the leave of the cour t if in the ac on begun by the wr i t - …

(d) the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a cont ract, or to recover damages or obtain other relief in respect of the breach of a contract, being (in either case) a contract which - …

(ii) was made by or through an agent trading or residing within the jurisdic on on behal f of a principal trading or residing out of the jurisdic on …”

The plain ffs submi t that they f all fair ly and squar ely wit hin t he t erms of thi s rule i n t hat i t i s common ground that they trade and reside out of the jurisdic on and that they ma de the contract through an agent, Lowndes Lambert, trading and residing within the jurisdic on.

The defendants submit (i) on its true interpreta on the rul e appl ies onl y wh er e the pr inc i pal trading or residing out of the jurisdic on i s the def endant , not wh er e that pr inc i pal i s the plain ff; alt erna vely (i i ) the court shoul d, as a ma e r of di scr e on, onl y exerci se j uri sdi c on under the rule where the principal out of the jurisdic on is the def endant .

In Na onal Mo r tgage and Agency Co. of New Zeal and Ltd. v. Gos sel in (1922) 38 T. L. R. 832, 833, Atkin L.J. gave the following explana on of thi s head of jur i sdi c on:

“Formerly, proceedings for service of writs abroad would not be granted unless the breach complained of had occurred within the jurisdic on, but a new pr inc i pl e had now been adopted, as it was considered that if foreigners chose to carry on business here by means of agents it would only be right and proper to serve them although they were out of the jurisdic on. I n or der t o car ry out t hat pr inc i pl e i t wa s t hought necessary to include cases in which a foreigner who carried on his business abroad had an agent in this country whose duty it was to obtain orders, although he had no authority to accept them. It was to cover a case like that, that in his opinion the words ‘by or through’ had been inserted in the rule.”

As Mr. Wood for the defendants pointed out, this jus fica on f or t he exer ci se of j uris dic on only applies where the foreign principal is the defendant whom the plain ff seeks to s erve. It i s hard to see any jus fica on f or gi vi ng a forei gn pl ai n ff the right to invoke Engl ish juri sdi c on over a foreign defendant simply because the plain ff has mad e use of an Engl i sh agent whe n

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nego a ng his cont r act wit h t he *418 defendant — indeed such a basis of jurisdic on appear s not merely irra onal but indef ens i bl e in ci rcums tances wh er e no simi lar ri ght to invoke Engl ish jurisdic on i s afforded t o t he pl ain ff who t r ades or resi des wi thi n t he jur i sdi c on and who concludes a contract, whether directly or through an agent, with a foreign defendant.

Mr. Bright for the plain ffs has sear ched t he aut hor i es f or an i nstance wher e the Engl i sh court has exercised Order 11 jurisdic on in ci rcums tances such as those of the pr esent case. He has found none. He referred me to a passage in the judgment of Kerr L.J. in Citadel Insurance Co. v. Atlan c Un i on Insur ance Co. S. A. [1982] 2 Ll oyd' s Rep. 543, 546, wh er e Ker r L. J. appear s to have accepted that the rule under considera on wo ul d appl y to a cont ract conc l uded thr ough an agent ac ng for the pl ai n ff. This obser va on was , however obi ter and made i n cir cumstan ces where the point taken before me does not seem to have been argued.

Mr. Bright relied upon what he submi ed wa s the cl ear and unamb i guous wo r di ng of the rul e and urged me to decline the jurisdic on conf er red by i t si mp l y because the exi stence of such jurisdic on is hard to expl ai n — so to do, he submi ed, wou l d be t o dis regard t he s tricture of Lord Hailsham of St. Marylebone in Siskina (owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 262. Lord Hailsham was there disapproba ng any a emp t by the judi ci ar y to usur p the func ons of the Rul e Commi ee by asser ng a j ur isdi c on wider than that given by the rules. My task is first to int er pr et the rul e in ques on and, if I find that it confers jurisdic on, to deci de wh et her , as a ma er of di s cre on, t he court shoul d exercise that jurisdic on.

Interpreta on

Careful considera on of ot her pr ovi si ons of Ord. 11, r. 1(1) demonstrates, it seems to me, the need to imply addi onal wo r ds by wa y of restri c on i n order to give sens i ble effect to those provisions. In my judgment similar addi onal wo r ds mu s t be imp l ied to gi ve sens i bl e effect to Ord. 11, r. 1(1)(d). I can best demonstrate this conclusion by adding in brackets to the words as they stand the addi onal wo r ds that I cons i der mu s t be imp l ied:

“(1) … service of a writ out of the jurisdic on is permi ssi bl e wi th the leave of the cour t if in the ac on begun by the wr i t —

(a) relief is sought against a person domiciled within the jurisdic on [and the def endant to be served is that person] …

(c) the claim is brought against a person duly served within or out of the jurisdic on and a person out of the jurisdic on is a necessar y or pr oper par ty ther et o [and the def endant to be served is that person]

(d) the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a cont ract, or to recover damages or obtain other relief in respect of the breach of a contract, being (in either case) a contract which - …

(ii) was made by or through an agent trading or residing within the jurisdic on on behal f of a principal trading or residing out of the jurisdic on [and the def endant to be ser ved is that principal].”

In the case of each sub-rule it seems to me obvious that those who dra ed the sub- rul e onl y intended that leave should be permissible to serve the person expressly referred to in that sub-rule.

On the basis of this interpreta on I rul e that the f acts of thi s case do not f al l wi thi n the jurisdic on of the cour t under Or d. 11, r. 1( 1) (d) (ii). *419 Discre on

Had I not found in favour of the defendants on interpreta on I wo ul d have done so as a ma er

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of discre on. I accept that the pol icy under l yi ng the rul e i s that i den fied by Atki n L. J . in Na onal Mo r tgage and Agency Co. of New Zeal and Ltd. v. Gos sel in, 38 T. L. R. 832. Ha d the rul e, on its true interpreta on had the wi der effect for whi ch t he plain ffs contend, I would have concluded that the exercise of such wider jurisdic on di d not fal l wi thi n the spi ri t of the rul e and should not be entertained by the court. I would not have been discouraged from this conclusion by the argument that the defendants were, on the premise that jurisdic on e xi sted, disregarding their obliga ons under the “l i ga on c l ause” i n chal l engi ng t he j urisdic on. Nor would I have been persuaded to uphold the jurisdic on of t he cour t s imp l y because t he declaratory relief that the plain ffs seek relates to a ma er t hat i s no l onger i n is sue. This seems to me, at best, a neutral factor.

It follows, for the reasons that I have given, that the order of Morland J. giving leave to serve out must be discharged and the service of the writ pursuant to it must be set aside.

[Reported by John Spencer Esq., Barrister]Representa on

Solicitors: S. Merali & Co.; Humphreys & Co., Bristol.

Order accordingly.

________________________________________________________________________________________

R.S.C., Ord. 11, r. 1(1)(d)(ii): see post, p. 417C–D.

(c) Incorporated Council of Law Repor ng for Engl and & Wa l es© 2012 Swe et & Ma xwe l l