Society of Lloyd's v White and others
Queen's Bench Division (Commercial Court)
The Times 14 April 2000, 144 SJ LB 190,
(Transcript)
HEARING-DATES: 3 MARCH 2000
3 MARCH 2000
COUNSEL:
M Brindle QC and D Houseman for the Claimant
PANEL: CRESSWELL J
JUDGMENT BY-1: CRESSWELL J
JUDGMENT-1:
CRESSWELL J: By application notice dated 11 February 2000 the
claimant, the Society of Lloyds (Lloyds), seeks an interim
anti-suit injunction against the defendants. The injunction sought is in these
terms: Each of the defendants, whether acting by himself/herself or by his/her
legal or personal representatives or successors, be restrained until judgment
is given by the Commercial Court in The Society of Lloyds v Sir William
Jaffray, Consolidated Action 1996 folio number 2032, or until further order of
the Court, from pursuing in the courts of any country other than England any
claim against Lloyds arising out of, or relating to, his/her former
membership of Lloyds and/or former underwriting of insurance business at
Lloyds.
In applying for this relief Lloyds offer an
undertaking not to take any limitation point in respect of the second to eighth
defendants (which might otherwise be available) as a result of the grant of the
injunction.
Lloyds relies upon the following evidence in support
of the application: the first witness statement of Mr Nicholas Demery, dated 10
February 2000; the second witness statement of Mr Demery, dated 11 February
2000, together with exhibits NPD1-4; the first witness statement of Mr Alan
Mitchell, dated 11 February 2000, together with exhibit AJM1; the second
witness statement of Mr Mitchell, dated 29 February 2000, together with exhibit
AJM2.
Background
The background to the present application is described
in Mr Demerys first witness statement at paras 6 to 16. All eight defendants
are counter claimants in the Jaffray proceedings.
The management of the Lloyds Litigation has been the
responsibility of the Commercial Court. Prior to the market settlement in 1996,
the Commercial Court identified and decided a number of preliminary issues
which (subject to appeals) assisted in resolving certain common issues of
principle. In addition, the Court selected and decided a number of lead or
pilot cases for trial as to liability and general principles relating to
quantum.
In September 1996 a market settlement was arrived at.
About 95 per cent of Names accepted the market settlement. About 1752 Names did
not accept. About 180 Names have since reached individual settlements with
Lloyds. Of the remaining Names as at 1 November 1999, about 148 were
claimants in the Jaffray proceedings and about 1420 were not. A number of the
remaining Names have joined the Jaffray proceedings since 1 November 1999. In
the Jaffray proceedings, the Names allege that they were fraudulently induced
to become and remain underwriting members of the Lloyds market by reason of
Lloyds failure to disclose the nature and extent of the markets liabilities
for asbestos-related claims. The trial in the Commercial Court of this issue,
the Threshold Fraud Issue. in relation to three sample Names, started on Monday
of this week, 28 February. All of the defendants in 2000 Folio No 176, except
for Mr Stuart Beale, joined the Jaffray proceedings in or about July 1998,
having been included in an affidavit sworn by Mr Freeman a solicitor, on 17
July 1998 (made pursuant to para 3 of the Order of Mr Justice Colman of 30 June
1998). Mr Stuart Beale joined the Jaffray proceedings by giving notice on 29
November 1999, pursuant to para 8 of the Order dated 9 November 1999. All eight
defendants are listed in the schedules to the Order dated 14 January 2000.
The Jaffray trial, which started last Monday, is the
cumulation of many months preparation, involving thousands of hours of work
and considerable expense in legal costs. Mr Demery states in paras 105 to 107
of his second witness statement:
Location of Documents:
A very substantial discovery exercise has been carried
out in England in relation to the Jaffray proceedings by lawyers acting for
Lloyds. I am informed by Freshfields that, since July 1998, Freshfields has
conducted a broad review in respect of over 35,000 crates of documents for
which there is no central index held by Lloyds. Out of those 35,000 crates of
documents, over 1,000 crates of documents were the subject of a more detailed
review, from which over 250 crates of documents were subject of a
document-by-document review. Lloyds has served 22 discovery lists, containing
over 60, 000 documents. This very significant volume of Lloyds documents is
located in England. In comparison, Lloyds has negligible documents in
Australia and very few (if any) that would be relevant to the issues raised in
the White proceedings. Mr White and the other defendants may have some
discoverable documents in Australia but, in comparison to the volume of Lloyds
documents, the volume of these documents is likely to be minimal.
Location of Witnesses:
Lloyds has also carried out a substantial exercise
in interviewing and preparing witness statements for the Jaffray proceedings .
. . 47 witness statements and one reliance statement were initially served by
Lloyds by 17 January 2000 and . . . witness statements in reply . . . will
include statements from additional witnesses. Of the Lloyds witnesses a very
small proportion only are normally resident outside the UK and none are
resident in Australia. It is likely that Mr White and other defendants would
want to call some, possibly many, of those giving evidence for the Names in the
Jaffray proceedings. The Jaffray Names have served 22 witness statements and
three reliance statements. Of the Names witnesses, only one is believed to be
normally resident outside the UK and none are resident in Australia.
Age and Health of Witnesses:
Difficulties have been encountered in preparation of
Lloyds witness statements. Many of the potential witnesses in the Jaffray
proceedings (indeed many of those accused of fraud) are now of advanced years,
some are not in the best of health, and some have died. During the course of
preparing witness statements in the Jaffray proceedings one individual from
whom a witness statement was taken has died, and I believe that two individuals
have presented doctors certificates certifying that they are too ill to
attend trial (though there may be further doctors certificates). The events
that are concerned in the Jaffray proceedings (and the principal events
concerned in the White proceedings) took place in the period 1978 to 1988. It
is not clear to me how many of the witnesses that will give evidence at the
Jaffray proceedings would be prepared to attend the trial in Australia of the
same, or substantially similar, issues due to the pressures of such a trial and
the age/poor health of some of those witnesses. The prospect of securing their
attendance at trial in Australia seems to me to be remote with, of course, no
means of compelling their attendance.
Notwithstanding their involvement in the Jaffray
proceedings in England, each of the eight defendants has commenced legal
proceedings against Lloyds in Australia. Lloyds say that such conduct is in
clear breach of the exclusive jurisdiction clause contained in clause 2.2 of
the General Undertaking signed by each of the defendants in 1986 or 1987. I set
out below the terms of clause 2 of the General Undertaking:
2.1 The rights and obligations of the parties arising
out of or relating to the Members membership of, and/or underwriting of
insurance business at Lloyds and any other matter referred to in this Undertaking
shall be governed by and construed in accordance with the laws of England.
2.2 Each party hereto irrevocably agrees that the
courts of England shall have exclusive jurisdiction to settle any dispute
and/or controversy of whatsoever nature arising out of or relating to the
Members membership of, and/or underwriting of insurance business at, Lloyds
and that accordingly any suit, action or proceeding (together in this Clause 2
referred to as Proceedings) arising out of or relating to such matters shall
be brought in such courts and, to this end, each party hereto irrevocably
agrees to submit to the jurisdiction of the courts of England and irrevocably
waives any objection which it may have now or hereafter to (a) any Proceedings
being brought in any such court as is referred to in this Clause 2 and (b) any
claim that any such Proceedings have been brought in an inconvenient forum and
further irrevocably agrees that a judgment in any Proceedings brought in the
English court shall be conclusive and binding upon each party and may be
enforced in the courts of any other jurisdiction.
2.3 The choice of law and jurisdiction referred to in
this Clause 2 shall continue in full force and effect in respect of any dispute
and/or controversy of whatever nature arising out of or relating to any of the
matters referred to in this Undertaking notwithstanding that the Member ceases,
for any reason, to be a Member of, or to underwrite insurance business at,
Lloyds.
As to the eight defendants, Mr White served third party
proceedings against Lloyds in the Supreme Court of Victoria in late
1998/early 1999, Mr Luxton issued a writ in the Supreme Court of Victoria on 2
September 1999 (this writ has not yet been served on Lloyds) and the other
six defendants each issued a writ in the Supreme Court of New South Wales on 3
September 1999 (none of these writs has yet been served on Lloyds).
As to Mr White, Lloyds is the third party in
proceedings before the Supreme Court of Victoria. That action was brought by
the Commonwealth Bank of Australia against Mr White, who in turn brought a
third party action against Lloyds (case 1997, number 5660). As an
underwriting member of Lloyds, Mr White was required to provide security to
Lloyds to be held on trust for the payment of policyholders claims and any
other underwriting liabilities, and for this purpose obtained accommodation
from the Bank in the form of Irrevocable Letters of Credit in favour of Lloyds.
By 1992, the total value of the Letters of Credit was £168,000. In 1995-1996,
in order to satisfy unpaid claims on policies written by Mr White, Lloyds
drew down on Mr Whites Letters of Credit to their full extent. The Bank then
commenced proceedings in the Supreme Court of Victoria on 11 December 1997,
seeking recovery from Mr White of AU$ 427,994.87, together with interest.
Service or purported service of Mr Whites third party proceedings upon Lloyds
took place in London/Australia in December 1998/February 1999.
On 11 February 2000, the High Court of Australia
refused special leave to appeal against the decision of Byrne J on 29.7.99 in
the Supreme Court of Victoria. Byrne J had dismissed applications by Lloyds
that the third party proceedings be stayed or dismissed for the reasons set out
in his judgment (to which I refer for the full terms thereof). The Court of
Appeal in Australia and the High Court of Australia refused to disturb the
decision of Byrne J as first instance judge, on the ground that the decision
essentially concerned practice and procedure and should not be entertained in
the Appellate Courts.
Lloyds submit that:
(a) any application for an anti-suit injunction in
England before exhausting the Australian appellate procedures would have been
premature and presumptuous, and
(b) the fact that the Australian Court has assumed
jurisdiction in relation to Mr Whites claim against Lloyds does not
preclude the English court from granting an anti-suit injunction - see The
Angelic Grace [1995] 1 Lloyds Rep 87, per Millett LJ at pps 94
to 96.
As to the other seven defendants, the writs were
issued in September 1999. None has been served upon Lloyds.
Lloyds Submissions
Mr Brindle QC for Lloyds, submitted as follows.
As to the Courts jurisdiction, the Court has
jurisdiction in personam over the defendants to grant an anti-suit injunction.
The duly endorsed claim form was served out of the jurisdiction without
permission under RSC Ord. 11, r 1(2) pursuant to the Civil Jurisdiction and
Judgments Act 1982 (under article 17 in the Brussels Convention).
Lloyds seeks to restrain the defendants from further
pursuit of any legal action in Australia on the following grounds:
(1) The commencement and pursuit of such legal action
is in clear breach of the exclusive jurisdiction clause contained in clause 2.2
of the General Undertaking signed by each of the defendants in 1986 or 1987.
(2) The existence of such legal action is vexatious
and oppressive since Lloyds is having to defend the Jaffray proceedings in
England at the same time.
(3) The balance of justice clearly favours the grant
of an interim anti-suit injunction in this case, to hold the position pending
the outcome of the Jaffray trial in the Commercial Court.
As to (1) breach of the exclusive jurisdiction clause,
under the current law, a party who pursues legal action in a foreign court in
breach of an exclusive English jurisdiction clause will be restrained from so
doing, unless he/she shows good reason to justify such a breach
of contract and resist the grant of an injunction. The defendants have not
shown good reason for a refusal of an interim anti-suit
injunction in the present case. Although Mr White has pleaded that his consent
to the exclusive jurisdiction clause (clause 2.2 of the General Undertaking) in
1986 was vitiated by conduct on the part of Lloyds, which appears to be an
allegation equivalent to an allegation of fraud, Mr White has adduced no
credible evidence with which to impeach this clause, see Donohue v Armco Inc
and others [1999] 2 Lloyds Rep 649 at 657-9; cf Credit Suisse First Boston
(Europe) Ltd v Seagate Trading Co Ltd [1999] 1 Lloyds Rep 784, [1999] 1 All
ER (Comm) 261, at 797. Further, Mr White is a party to the English test cases
which have found that rescission of the membership contract is barred under
English law, see: Society of Lloyds v Leighs [1997] CLC 1012, (1997) Times,
11 August.
As to (2) vexatious and oppressive conduct, the
defendants commencement and pursuit of legal action in Australia in breach of
the exclusive English jurisdiction clause is, submits Mr Brindle, the paradigm
case of vexatious and oppressive conduct. Further, England is the natural and
most convenient forum for the resolution of the disputes involved in these
proceedings, and the further pursuit of the Australian proceedings in parallel
with the Jaffray trial will be manifestly vexatious and oppressive to Lloyds.
As to England being the natural forum, the overlap between the issues and
factual inquiries involved in the Jaffray proceedings and the White proceedings
is set out at paras 42 to 82 of Mr Demerys second witness statement. England
is clearly the most natural forum for the resolution of the present disputes -
see the considerations set out in paras 102 to 108 of Mr Demerys second
witness statement. Compare Australian Commercial Research & Development Ltd
v ANZ McCaughan Merchant Bank Ltd [1989] 3 All ER 65 at 70-72. Lloyds denies
that it has conducted any trading activities in Australia, still less made any
offer or invitation to the public in Australia, as claimed by Mr White. To the
extent that Mr Justice Byrne made findings against Lloyds in this regard, the
observations of the High Court of Australia on 11 February 2000 appear to
indicate that this is not conclusive of the issue in those proceedings. As to
vexation and oppression, the Court must assess both the character of the
defendants conduct and the consequences for Lloyds of having to defend
these concurrent and similar proceedings in different jurisdictions. Vexation
and oppression are constituted in many different ways, including substantial
inconvenience occasioned by the multiplicity of proceedings in disparate
jurisdictions It would be unjust and unfair to permit the defendants to pursue
parallel sets of proceedings against Lloyds in different parts of the world,
with the risk of inconsistent findings and multiplied cost and inconvenience
for Lloyds. The Jaffray proceedings have now reached trial and the defendants
should not be allowed to create additional burdens for Lloyds, whilst taking
the benefit of being parties to the Jaffray proceedings.
As to (3), the balance of justice, Lloyds will
suffer injustice and prejudice if the interim injunction is not granted, and
any injustice or prejudice that may be suffered by the defendants if the
interim injunction is granted will be insignificant and could be compensated by
the cross-undertaking in damages from Lloyds. As to injustice to Lloyds,
Lloyds should be free to defend the Jaffray trial without unnecessary
diversion or distraction. The allegations against Lloyds in the White
proceedings are similar, but involve different and wider factual issues also.
The inconvenience and prejudice which will be afflicted upon Lloyds by the
parallel pursuit of related proceedings in Australia is not capable of
quantification. To refrain from granting such an injunction at this stage is
likely to reduce the likelihood of Lloyds obtaining a stay of the White
proceedings at the hearing in Australia on 10 March 2000. The interim
injunction will be a personal order against the defendants and the Australian
Courts will not be offended by such an order. As to injustice to the
defendants, the similarities between the factual issues involved in the Jaffray
proceedings and the White proceedings cannot be overlooked. There would be no
significant hardship to the defendants if an interim anti-suit injunction was
now granted, pending the outcome of the Jaffray proceedings, in which all of
the defendants are involved. Any difficulties the second to eighth defendants
face can be met by the undertaking offered by Lloyds, referred to above. The
position of Mr White is different, given that he is a defendant to proceedings
brought by Commonwealth Bank. In any event, the balance of justice favours the
grant of the interim anti-suit injunction sought by Lloyds. It is for the
Australian Court at the directions hearing on 10 March 2000 to determine
whether the Banks claim against Mr White and/or Mr Whites claim against
Lloyds ought to be stayed. Given that Mr White alleges in his defence to the
Banks claim, that the Bank had notice of the alleged fraud by Lloyds, the
two sets of proceedings are interrelated. The concept of juridical
advantage is not relevant to the present application for an interim
injunction. The defendants will lose nothing by being restrained pending the
outcome of the Jaffray trial.
By way of conclusion, Mr Brindle submitted that Lloyds
must be allowed to concentrate on defending the Jaffray proceedings. The
defendants are all party to the Jaffray proceedings. They should await the
outcome of that trial and will be bound by the decision. If the defendants wish
to pursue their legal action against Lloyds after that time, then the matter
will need to be revisited in the light of the findings of fact and law made in
the judgment. In the meantime the defendants will lose nothing by staying their
Australian proceedings and awaiting the Jaffray judgment. Lloyds, on the
other hand, will be faced with the unfair burden of preparing and defending
parallel proceedings in different jurisdictions, whilst at the same time
defending the Jaffray proceedings in court for several months.
The Submissions on behalf of the Defendants
The defendants have not instructed solicitors/counsel
to appear before the court today on their behalf. I have, however, received
written submissions from Foster Hart, Australian lawyers on behalf of the
defendants. It should be recorded for completeness that Mr Church, a partner in
the firm of More Fisher Brown, lead solicitors in the Jaffray proceedings,
appeared at an earlier hearing on behalf of, or purportedly on behalf of, the
defendants.
I have given careful consideration to the defendants
written submissions, to which I will refer. I should point out at the outset
that I am concerned that in certain places the written submissions appear to
mis-state the effect of decisions of this Court in Lloyds v Daly (27 January
1998, unreported) Tuckey J and the Court of Appeal in Society of Lloyds v
Fraser and others [1999] Lloyds Rep IR 156.
The written submissions on behalf of the defendants
include the following. The application by Lloyds for an anti-suit injunction
by Mr White should be refused on the ground that Mr Whites claims, based on
the Trade Practices Act 1974 (Cth), the Companies Act 1961 (Vic) and the
Companies (Victoria) Code being not justiciable in an English court, the
Supreme Court of Victoria is the only forum which is of competent jurisdiction
to determine the merits of these claims. This constitutes good reason not to
grant an anti-suit injunction, notwithstanding the existence of an exclusive
jurisdiction clause in favour of the English courts. The application for
anti-suit injunctions against the second to eighth defendants should be refused
because the applications are premature; these defendants would suffer serious
prejudice if not permitted to serve their writs during their period of
validity.
The submissions on behalf of Mr White include the
following. The principal causes of action relied on by Mr White in the
Victorian proceedings are breaches of s 52 of the Trade 12 Practices Act 1974
(Cth) and s 11 of the Fair Trading Act 1985 (Vic) and breaches of ss 81 to 83
of the Companies Act 1961 (Vic) and ss 169-171 of the Companies (Victoria)
Code. Mr Whites claims based on breaches of the Companies Act, the Companies
(Victoria) Code and the Trade Practices Act cannot be determined in an English
court. [At this point in the written submissions the effect of the decisions of
Tuckey J in The Society of Lloyds v Daly supra and the Court of Appeal in The
Society of Lloyds v Fraser supra are mis-stated]. This is a case in which
there is a single forum only that is of competent jurisdiction to determine the
merits of the claims under the Companies Act, Companies (Victoria) Code and
Trade Practices Act. Where a foreign court is the only forum that is of
competent jurisdiction to determine the merits of a claim, a good reason is
shown not to grant an anti-suit injunction. (see British Airways Board v Laker
Airways Limited and others [1985] 1 AC 58, [1984] 3 All ER 39, Scarman LJ at
95, Diplock LJ at 79 to 80). This is a case where Lloyds recruited new Names
in Australia (at a time when no exclusive jurisdiction clause was present in
the General Undertaking) and is sought to be brought to account for its acts in
Victoria under Victorian and Australian legislation. The relevant transaction
is not overwhelmingly English in character. Lloyds has by its earlier and
subsequent conduct indicated an acceptance of the applicability of Australian
law to its Australian operations. Lloyds should be taken to have accepted
that it was subject to Victorian and Australian legislation with respect to its
acts in Victoria in connection with the recruitment of Australian names. It is
inapposite to speak of a natural forum in a single forum case.
Alternatively, where there is a single forum only that is of competent
jurisdiction to determine the merits of a claim, that forum is the natural
forum in respect of the claim. The Victorian proceedings are not vexatious
or oppressive because the claims which Mr White raises in those proceedings
cannot be raised in any other forum. The principle 13 applicable to the grant
of an anti-suit injunction in a case where there is an exclusive jurisdiction
clause in favour of the English courts is not expressed as an absolute rule.
The court retains a discretion not to grant an anti-suit injunction if good
reason is shown. In circumstances where the Supreme Court of Victoria is the
only forum of competent jurisdiction to determine the merits of Mr Whites
claims based on the Companies Act, the Companies (Victoria) Code, and the Trade
Practices Act, good reason is shown not to grant an anti-suit injunction. In
circumstances where the question of whether Mr Whites claims should be
permitted to proceed has already been fully agitated in Victoria, applying the
same principles of conflict of laws as would be applied by an English court, an
anti-suit injunction should not be granted for reasons of comity. It is true
that the question now before the English Court is a different one from that
which was before the Victorian Court. Nevertheless, in substance, the question
is the same: whether the Victorian third party proceedings issued by Mr White
should be allowed to proceed. The Victorian Court having already ruled that the
proceedings should be permitted to go forward, it would be a breach of comity
for the English court to substitute its own decision on this issue. An interim
injunction would interfere with the management of the Victorian proceedings in
the Commercial List of the Supreme Court and, on the other hand, offer little
tangible benefit to Lloyds. Lloyds has already applied unsuccessfully for a
temporary stay of the Victorian proceedings pending the hearing and
determination of the Jaffray proceedings. There is no prospect of the Victorian
proceedings between Mr White and Lloyds being heard and determined before the
hearing and determination of the Threshold Fraud Issue in the Jaffray
proceedings. Mr White will be bound by any findings of fact made in the Jaffray
proceedings without the need for an interim anti-suit injunction. The
interlocutory steps likely to take place between now and the determination of
the Threshold Fraud Issue in the Jaffray proceedings are:
(a) the filing of an appearance by Lloyds;
(b) the filing of a defence by Lloyds;
(c) discovery.
Discovery has already been performed by Lloyds for
the purposes of the Jaffray proceedings. This should reduce considerably the
work involved in making discovery in Victoria. On the other hand, interim
restraint of the Victorian third party proceedings may cause Mr White
substantial injustice because it would assist the Bank in its application to
have the proceedings between it and Mr White tried before the third party
proceedings.
The submissions on behalf of the Second to Eighth
Defendants are as follows. The proceedings against Lloyds instituted by the
second to eighth defendants are not far advanced. Writs have been filed but not
yet served. The second to eighth defendants may be seriously prejudiced if
restrained from serving the writs. The writs are valid for only one year from
filing (unless extended by the Court). Lloyds application for an anti-suit
injunction against the second to eighth defendants is premature. The writs have
not yet been served. There is no prospect of a hearing in respect of these
proceedings clashing with the Jaffray proceedings. The second to eighth
defendants also rely on the submissions by Mr White except where inapplicable
to them.
Analysis and Conclusions
The General Undertakings signed by the defendants in
1986 or early 1987 all contain an exclusive jurisdiction clause in favour of
the English courts (clause 2.2) and a choice of English law clause (clause
2.1). The management of the Lloyds litigation has been the responsibility of
the Commercial Court. The litigation has been unprecedented in its nature and
extent. I refer to the numerous decisions before and after the market
settlement in September 1996.
Foreign Securities Legislation
It is necessary to refer to previous decisions of this
Court and the Court of Appeal in relation to foreign securities legislation in
the context of the Lloyds Litigation. In response to the problems caused
by/reflected in the Lloyds Litigation, Lloyds developed the Reconstruction
and Renewal Scheme (R&R) using its by-law making powers. R&R was a
compulsory insurance and run off scheme whereby Names were required to run off
their outstanding liabilities and reinsure them with EQUITAS. Part of the
reinsurance scheme required individual Names to pay a reinsurance premium to
EQUITAS which corresponded to an assessment of each Names outstanding future
and accrued liabilities to the end of 1992. The scheme was put to members of
Lloyds in July 1996 and each name had to decide whether or not to accept by
September 1996. I have already said that about 95 per cent of Names accepted
the market settlement. About 1752 names did not accept. The scheme was
implemented in October 1996 and EQUITAS thereafter assigned to the Society its
right to receive premiums. Certain Names, being dissenting Names, refused to
pay the reinsurance premiums due to EQUITAS. Lloyds in the latter part of
1996 commenced a series of actions against such Names. In Society of Lloyds v
Daly supra Tuckey J commenced his judgment with these words:
This is a further chapter in the story of Lloyds
attempts to obtain judgment for the premium due under the EQUITAS Reinsurance
contract from names who did not accept the R&R settlement. From the outset
of the litigation, Names resident in Canada made it clear they wanted to argue
that the EQUITAS Reinsurance contract is unenforceable against them by reason
of Lloyds contravention of Canadian Securities legislation . . . I ordered
that any Canadian Name not represented by Warner Cranston and any other Name
who wished to raise a similar defence based on other foreign securities
legislation should identify themselves and if they thought such legislation
provided them with a stronger defence than that of Mr Daly, they should explain
why 2 Canadian Names, 229 US Names and 11 Australian Names represented by
Epstein, Grower and Michael Freeman wish to rely on the defence. They have
filed some evidence of Canadian, United States and Australian securities
legislation, but it is not submitted that this legislation gave these Names a
stronger defence than Mr Dalys, although in the case of US Names, two
additional points were taken which I will deal with later in this judgment . .
.
According to the written submissions from Foster Hart,
Mr White was among the 11 Australian Names represented by Epstein, Grower.
I refer to the decision of the Court of Appeal in Society
of Lloyds v Fraser supra. Among other arguments the Court of Appeal
considered arguments based on the Canadian securities legislation. The Court of
Appeal held that the arguments based on the Canadian securities legislation did
not provide any basis for giving leave to defend and did not provide any basis
for giving leave to appeal. The proper law of contracts with Canadian Names was
English law, and the relevant obligations were to be performed in London. Under
Ontario securities legislation, the membership contracts had been entered into
in an illegal manner and were unenforceable against the Names. However, on
established principles of English private international law, any question of
material or essential validity was governed by the proper law, and no question
of formal validity under a foreign law could arise where the contract was both
made in England and governed by English law Any invalidity or lack of
enforceability under a foreign law was irrelevant. There was no question of
enforcing an act which would involve infringement of the law of Ontario, and
the contract did not offend against a principle of universally recognised
positive law as the provision was regulatory in character and was not
universal, so that no question of infringement of comity arose.
In the course of his judgment, Hobhouse LJ said at
p172:
It was agreed by all concerned that the case of a
Canadian non-accepting Name, Mr Donnel Russell Daly, should be taken as the
test case . . .The relevant question was one of conflict of laws. The relevant
contracts contain an express English law and jurisdiction clause. The Rome
Convention does not apply . . . (p 173:) The proper law of all the relevant
contracts was English law. The contracts were made in London at the time his
application was accepted. The relevant obligations which he undertook to the
Society to perform were all obligations to be performed in London. It was not a
contract which called for any performance in Canada . . . The question raised
therefore is whether the fact that an act illegal under the law of Ontario
preceded and led to Mr Dalys subsequently entering into a contract in England
governed by English law, and that fact that the contract would be unenforceable
in Canada against Mr Daly, has the consequence in English law that the contract
is unenforceable against Mr Daly in the English courts.
On established principles of English private
international law any question of the material or essential validity of a
contract is governed by its proper law (Dicey, Rule 184) - here English law.
Similarly no question of formal validity under a foreign law can arise where
the contract is both made in this country and governed by English law (Dicey,
Rule 183). Any invalidity or lack of enforceability under a foreign law is
irrelevant. Mr Leczner in his argument sought to escape from this conclusion by
relying upon two acknowledged exceptions to the general rule to which we have
referred. The first is that English law will not enforce a contract insofar as
it requires the performance in a foreign country of an act contrary to the law
of that foreign county: Ralli Bros v Co Nav Sota y Aznar [1920] 2 KB 287.
Similarly an English court will not enforce a contract which has as its purpose
the breaking of the laws of another Country, Foster v Driscoll [1929] 1 KB 520,
even if it would be capable of performance without committing such breach:
Regazzoni v Sethia [1958] AC 301, [1957] 3 All ER 286. This line of argument
did not assist the Applicants because the contract between Mr Daly and the
Society did not require or involve the performance of any act in Ontario
contrary to the law of Ontario, nor did it have as its purpose the commission
of any breach of the law of Canada or any Province.
The second way the Applicants case was put was to
rely upon the exceptions recognised in Re Missoun Steamship, 42 Ch D 321 at p
336, per Lord Halsbury:
Where the contract is void on the ground of
immorality, or is contrary to such positive law as would prohibit the making of
such a contract at all, then the contract would be void all over the world and
no civilised country would be called on to enforce it.
In Vita Food v Unus Shipping [1939] AC 277 at 297,
Lord Wright said:
In this passage Lord Halsbury would seem to be
referring to matters of foreign law of such character that it would be against
the comity of nations for an English court to give effect to the transaction
just as an English court may refuse in proper cases to enforce performance of
an English contract in a foreign country where the performance has been
expressly prohibited by the public law of that country. The exact scope of Lord
Halsburys proviso has not been defined.
The Applicants submit that the enforcement of the
present contract against Mr Daly does offend against a principle of universally
recognised positive law and that it would be contrary to the comity of nations
that English courts should enforce it.
This submission cannot be accepted. No question of
enforcing any act which would involve infringement of the law of Ontario was
involved. The provision is regulatory in character (Pezim v Attorney-General
British Columbia 114 DLR 385). It exists in Ontario and other parts of Canada
but is not a universal one and, for example, there does not exist in English
law any equivalent provision which prevents the enforcement of this contract
against Mr Daly or any other underwriting Name. No question of infringement of
comity arises. In this connection it is to be observed that the question of
comity was considered by the Court of Appeal in their judgment of 1997. They
said:
This court is bound to proceed in accordance with
settled principle and is not to be fettered by speculative regard as to how its
judgment may be received abroad.(p28)
Further, the two cases relied upon in this context,
the Missouri and Vita Food cases, both involved the enforceability of contracts
which contravened the law of the place where they were made so that they would
be treated as illegal and invalid or unenforceable by the law of that place but
were upheld as fully enforceable because they did not contravene the chosen
proper law.
Established authority which cannot be seriously
questioned demonstrates that the argument advanced based upon the Canadian
securities legislation provides no defence. These contracts must be enforced in
accordance with English law. No question of public policy or comity is
involved. Indeed, as is pointed out in the skeleton argument on behalf of the
Society, the acceptance of this argument would mean that the insurance
contracts entered into by Mr Daly would likewise be void and unenforceable, a
consequence which for obvious reasons Mr Daly disclaimed, because their
validity under English law depended upon the validity of Mr Dalys
underwriting membership of Lloyds. If he was not an underwriting member of
Lloyds he could not lawfully enter into any insurance contract, as an
insurer, in England. No principle of comity or public policy would suffice to
justify that result and, as we have said, it was one which Mr Daly has
implicitly recognised to be unacceptable.
Accordingly, for reasons which are substantially the
same as those given by Tuckey J, the arguments based upon the Canadian
securities legislation did not provide any basis for giving leave to defend and
do not provide any basis for giving leave to appeal. The Canadian Names
general application for a stay of execution must also fail for the reasons
given by the Court of Appeal in 1997.
The principles relevant to applications for an
ant-suit injunction in cases where there is an exclusive jurisdiction clause
I set out below the principles relevant to
applications for an anti-suit injunction where there is an exclusive
jurisdiction clause.
1. Where a contract provides that all disputes between
the parties are to be referred to the jurisdiction of the English courts, the
court normally has jurisdiction to hear and determine proceedings in respect
thereof. An English court may restrain a party over whom it has personal
jurisdiction from the institution or continuance of proceedings in a foreign
court in breach of a contract to refer disputes to an English (or semble,
another foreign) court (Dicey and Morris, The Conflict of Laws, (13th edn) vol
1, rule 32(1) and (4)).
2. Where an injunction is sought to restrain a party
from proceeding in a foreign court, in breach of an exclusive jurisdiction
clause or an arbitration agreement governed by English law, the English court
will, where appropriate, grant an injunction, provided that it is sought
promptly and before the foreign proceedings are too far advanced. There is no
difference in principle between an injunction to restrain proceedings in breach
of an arbitration clause and one to restrain proceedings in breach of an
exclusive jurisdiction clause. The justification for the grant of the
injunction in both cases is that without it the claimant will be deprived of
its contractual rights in a situation in which damages are manifestly an
inadequate remedy. The jurisdiction is discretionary and is not exercised as a
matter of course, but good reason needs be shown why it should not be
exercised. (The Angelic Grace [1995] 1 Lloyds Rep 87 at 96,
Millett LJ.)
3. The burden of establishing a good reason for not
granting an injunction in the case of an exclusive jurisdiction clause is upon
the party in breach of the clause (Donohue v Armco Inc and Others, Aikens J
[1999] 2 Lloyds Rep 649).
4. To a considerable extent, the principles to be
applied in the context of an exclusive jurisdiction clause are the same whether
a court is considering an application for a stay or an application for an
anti-suit injunction. The principles differ only where the different nature of
the relief sought renders a particular principle inapplicable to the form of
relief.
5. Where proceedings are brought in breach of an
exclusive jurisdiction clause, the test for the grant of an anti-suit
injunction is the same test as that which applies where a stay of English
proceedings is sought (Ultisol Transport Contractors Limited v Bouygues
Offshore SA [1996] 2 Lloyds Rep 140 at 149). The Court must, when considering
all such applications, take into account all the circumstances of the case.
6. If the party applying for an injunction has already
litigated the issue of jurisdiction in another state and failed, this will be a
significant factor counting against him, if that court has applied principles
relating to jurisdiction similar to those applied by this Court (The Angelic
Grace supra). Where the foreign court is not bound to apply such
principles, or has not applied such principles, the fact that the issue of
jurisdiction has been litigated in another state will not generally be
significant (Airbus Industrie GIE v Patel and others, [1997] 2 Lloyds Rep 8).
7. In considering whether to grant an injunction, the
Court will also take account of:
(a) whether the claimant seeking an injunction applied
promptly and before foreign proceedings were too far advanced (The Angelic
Grace supra). The longer the delay that occurs before the application is
made, the more likely a court is to refuse it;
(b) any voluntary submission to the jurisdiction of
the foreign court, particularly where proceedings have progressed for any
period of time (A/S D/S Svendborg v Wansa [1996] 2 Lloyds Rep 559 at 570);
(c) the undesirability of a second set of proceedings
where the matter is already being litigated elsewhere, except where there are
powerful reasons for so doing (The Abidin Daver [1984] 1 AC 398,
[1984] 1 All ER 470 at 411 and 423).
5, 6, and 7 above are drawn from the judgment of
Thomas J in Akai Ltd v Peoples InsuranceCo Ltd [1998] 1 Lloyds Rep 90 at
105.
The application of the above principles
Should an anti-suit injunction be granted in the
present case? It is to be noted that Lloyds only seek an injunction until
after judgement in the Jaffray proceedings. The defendants in company with
other Names allege in the Jaffray proceedings that they were fraudulently
induced to become and remain underwriting members of the Lloyds market by
reason of Lloyds failure to disclose the nature and extent of the markets
liabilities for asbestos-related claims. The trial has already started.
I have, with a full sense of comity, paid careful
regard to the decisions of the Courts of Australia. I should, however, record
that it does not appear to me that any of the following potentially relevant
decisions of the English Courts were drawn to the attention of Byrne J. If they
were, they are not referred to in his judgment. The decision of Gatehouse J in
Ashmore & Others v Corporation of Lloyds (No 2) [1992] 2 Lloyds Rep
620; the decision of Saville J in Lloyds v Canadian Imperial Bank of Commerce
& Others [1993] 2 Lloyds Rep 579; the judgment of Saville J in the same
case on 20.7.03; the decision of the House of Lords in the Merrett, Feltrim and
Gooda Walker cases [1995] 2 AC 145, [1994] 3 All ER 506, the decision of the
Court of Appeal in Lloyds v Clementson; Lloyds v Mason [1995] LRLR 307,
(1994) Independent, 11 November as to alleged implied terms; the judgment of
the Court of Appeal in Lloyds v Leighs supra; the judgment of Tuckey J in
Lloyds v Daly supra; the judgment of the Court of Appeal in Lloyds v Fraser
supra. (I have already recorded that in my opinion the defendants, in their
lawyers submissions, mis-state the effect of the decision of Tuckey J in
Lloyds v Daly supra and the Court of Appeal in Lloyds v Fraser supra).
(In addition, it seems to me that the various
confidentiality orders made by the Court in the Jaffray proceedings should have
been drawn to the attention of Byrne J.)
The defendants have not, in my opinion, established a
good reason for not granting an injunction in the terms sought, to restrain a
breach of the exclusive jurisdiction clause. In my view it is vexatious and
oppressive to pursue the Australian proceedings while the Jaffray trial is
proceeding. The defendants allege in the Jaffray proceedings that they were
fraudulently induced to become and remain underwriting members of the Lloyds
market by reason of Lloyds failure to disclose the nature and extent of the
markets liabilities for asbestos-related claims. These allegations are of the
utmost seriousness. As the trial judge, I am familiar with the nature, extent
and complexities of the trial. I refer to the passages quoted above from paras
105-107 of Mr Demerys second witness statement which provide a fair
indication of certain aspects of the trial, in particular location of
documents, location of witnesses, and age and health of witnesses. It seems to
me that there is good reason to grant the relief sought by Lloyds while the
Jaffray trial is proceeding.
(For completeness, I refer to the fact that the Court
has, by directions, sought to address in the Jaffray proceedings problems of
confidentiality in relation to certain materials before the Court. The approach
adopted in this connection follows the approach adopted by the Court in earlier
cases forming part of the Lloyds Litigation. It is common ground in the
Jaffray proceedings that there are good commercial reasons to justify the
confidentiality orders).
In all the circumstances, applying the principles set
out above, in the exercise of my discretion I grant the injunction sought.
Because of this courts concern to exercise caution,
having regard to the decisions of the Australian courts, I emphasise there will
be liberty to apply to vary or set aside this injunction generally, and in
particular following any further consideration of this matter by the Australian
courts.
DISPOSITION:
Judgment for the claimant.
SOLICITORS:
Freshfields