[2006] Vol. 2
LLOYD'S LAW REPORTS
QUEEN'S BENCH DIVISION
(COMMERCIAL COURT)
23 March; 16 May 2006
____________________
KONKOLA COPPER MINES PLC
v
COROMIN LTD (NO 2)
[2006] EWHC 1093 (Comm)
Before Mr Justice COLMAN
Insurance - Jurisdiction - Claimant insured by Zambian insurers
under policy subject to exclusive Zambian jurisdiction and by
English insurers under policy subject to exclusive English
jurisdiction - Whether Zambian insurers should be co-defendants
to proceedings against English insurers - Whether exclusive
jurisdiction clause overrode need to avoid fragmentation of
proceedings.
KCM, a mining company incorporated in Zambia, was insured by
local Zambian insurers (the NR defendants, the second, fourth, fifth
and sixth defendants; and PICZ, the third defendant) under a policy
covering property damage and business interruption losses. KCM's
ultimate parent company took out a Global Master All Risks Policy
with Coromin, its captive insurance company located in Bermuda.
Coromin was reinsured by London market reinsurers. Following an
avalanche in April 2001, KCM made a claim against the local insurers
and also against Coromin. Proceedings were commenced in England
by KCM against Coromin and the local insurers, and permission was
given for service of the proceedings on the local insurers outside the
jurisdiction. Coromin pleaded that it was not the direct insurer of
KCM but rather was the reinsurer of the local insurers. Coromin made
a Part 20 claim against its reinsurers, seeking indemnity in the event
that Coromin was held to be liable either as direct insurer of KCM or
as reinsurer of the local insurers.
At an earlier hearing, [2006] Lloyd's Rep IR 71, the issue was
whether the Part 20 proceedings by Coromin against the reinsurers
should be stayed pending the determination of issues which arose
between KCM, Coromin and the local insurers. The local insurers
were originally included as co-defendants, although it was agreed in
the course of the hearing: that KCM would commence proceedings
against the local insurers in the Zambian courts; that the local insurers
accepted that they were 100 per cent primary insurers of KCM, 80 per
cent underwritten by the NR defendants and 20 per cent by PICZ; that
in the English proceedings there should be a consent order staying the
claims against the local insurers; and that stay was to remain in place
until final determination of the Zambian proceedings. Two consent
orders were made on 9 March 2004, both providing that in the event
that the local insurers were in breach of such undertakings or
agreements, KCM could apply to the court to lift the stay in the
English proceedings.
446
Notwithstanding the terms of the undertakings, the NR defendants
served a defence in the Zambian proceedings putting in issue the
agreed proportions of the risk and reverting to their original assertion
that the local insurers were collectively on risk only in respect of 10
per cent whereas Coromin was on risk for 90 per cent. PICZ similarly
denied that it had accepted 20 per cent of the risk. The NR defendants
and PICZ were in breach of the terms of the consent order and were in
contempt of court. The NR defendants consented to the lifting of the
stay of the English action and PICZ offered to purge the contempt by
amending the Zambian defence.
Following the lifting of the stay, the question became whether the
NR defendants and PICZ were entitled to have the service of the
English proceedings against them set aside. The NR defendants argued
that there was an exclusive Zambian Law and Jurisdiction clause in
the Zambian contract, in that the cover note provided for "Local Law
and Jurisdiction Clause", and that there were no strong reasons for
departing from the clause.
-Held, by QBD (Comm Ct) (COLMAN J) that the order permitting
service on the NR defendants and PICZ would be set aside.
(1) PICZ was entitled to be heard as it was not in breach of any
undertaking. The court had a discretion to hear the NR defendants
given that they were in contempt, but would exercise its discretion to
do so. Where a person in contempt sought to challenge the jurisdiction
of the court which made the order which he had broken it was
generally right that he should be heard (see paras 11 and 14);
-X Ltd v Morgan Grampian (Publishers) Ltd [1991] 1 AC 1; Motorola
Credit Corporation v Uzan (No 2) [2004] 1 WLR 113, applied.
(2) The expression "Local Law and Jurisdiction Clause" in the cover
note referable to the Zambian contract was sufficiently certain to mean
that the policy was to be governed by Zambian law and that all
disputes arising under it were to be determined by the Zambian courts.
A contractual non-exclusive Zambian jurisdiction clause would have
added nothing to the position, and in the improbable event that it had
been intended by either party to insert a non-exclusive jurisdiction
clause the cover note would have said so in express terms (see paras
22, 23 and 24).
(3) The exclusive jurisdiction clause should be given effect.
(a) It was not open to a party seeking to justify service outside the
jurisdiction in contravention of a foreign jurisdiction to rely as
grounds for strong cause or reasons the risk of inconsistent decisions
of different courts when he ought to have appreciated the existence
of that risk at the time when he entered into the exclusive jurisdiction
clause (see para 32);
-British Aerospace plc v Dee Howard Co [1993] 1 Lloyd's Rep. 368,
Mercury Communications Ltd v Communication Telesystems
International [1999] 2 All ER (Comm) 33, applied.
(b) Although it was clear from the authorities that the risk of
conflicting decisions was a consideration of considerable weight in
the discretionary analysis, each case had to be tested by reference to
its own
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Konkola Copper Mines plc v Coromin Ltd
facts. In the present case, the just, cost-effective and consistent
determination of all the issues could only be achieved if they were all
determined by the same tribunal. However, for the court to permit
KCM to pursue the proceedings against the Zambian insurers in the
interests of avoiding fragmentation of the proceedings would in
substance be permitting KCM to avoid the foreseeable consequences
of the contractual structure which they themselves created. In those
circumstances justice did not require that KCM should be permitted
to break their contract in order to cure the consequences of the very
fragmentation which they had created. To enable joinder of the
Zambian defendants in such a case would be a serious misuse of the
necessary or proper party jurisdiction (see paras 41 and 42);
-The Eleftheria [1969] 1 Lloyd's Rep. 237, Citi-March Ltd v Neptune
Orient Lines Ltd [1997] 1 Lloyd's Rep. 72, Mahavir Minerals Ltd v
Cho Yang Shipping Co Ltd (The M C Pearl) [1997] 1 Lloyd's Rep.
566, Donohue v Armco Inc [2002] 1 Lloyd's Rep. 425, Bas Capital
Funding Corporation v Medfinco Ltd [2004] 1 Lloyd's Rep. 652,
Antec International v Biosafety [2006] EWHC 47 (Comm), applied.
____________________
The following cases were referred to in the judgment:
Antec International v Biosafety [2006] EWHC 47 (Comm);
Aratra Potato Co Ltd v Egyptian Navigation Co (The El Amria)
(CA) [1981] 2 Lloyd's Rep. 119;
Bas Capital Funding Corporation v Medfinco Ltd [2004] 1
Lloyd's Rep. 652;
British Aerospace plc v Dee Howard Co [1993] 1 Lloyd's Rep.
368;
Citi-March Ltd v Neptune Orient Lines Ltd [1997] 1 Lloyd's Rep.
72;
Donohue v Armco Inc (HL) [2002] 1 Lloyd's Rep. 425;
Eleftheria, The [1969] 1 Lloyd's Rep. 237;
Mahavir Minerals Ltd v Cho Yang Shipping Co Ltd (The M C
Pearl) [1997] 1 Lloyd's Rep. 566;
Mercury Communications Ltd v Communication Telesystems
International [1999] 2 All ER (Comm) 33;
Motorola Credit Corporation v Uzan (No 2) (CA) [2004] 1 WLR
113;
X Ltd v Morgan Grampian (Publishers) Ltd (HL) [1991] 1 AC 1.
____________________
This was an application by the second to sixth defendants to
set aside service on them of English proceedings outside the
jurisdiction.
TAG Beazley QC and Philip Edey, instructed by Pinsent
Masons and Freshfields, for the claimants;
447
Colman J
David Edwards, instructed by Norton Rose for the second,
fourth, fifth and sixth defendants; Tim Penny, instructed by
Cartier & Co, for the third defendant.
The further facts are stated in the judgment of Colman J.
Tuesday, 16 May 2006
____________________
JUDGMENT
Mr Justice COLMAN:
Introduction
1. There are before the court two applications. Both of them
are directed to setting aside orders giving permission to serve
these proceedings on the second to sixth defendants in Zambia
which is where all those defendant companies are incorporated
and carry on business as insurers. The facts giving rise to the
claim against them by the claimants are set out in paras 5 to 11
of my judgment dated 10 May 2005 ([2006] Lloyd's Rep IR
71). I refer to the second, fourth fifth and sixth defendants as
"the NR defendants" and to the third defendant as "PICZ". All
those defendants are collectively referred to in my earlier
judgment as "the local insurers". The main issue in that
previous application was whether the Part 20 proceedings by
Coromin against the reinsurers should be stayed pending the
determination of issues which arose between KCM, Coromin
and the local insurers. KCM asserts that it was insured for 100
per cent of the risk by Coromin under the CCIP/Coromin policy
on an all risks basis under which it is entitled to recover in
respect of the Nchanga mine disaster or alternatively that it is
entitled to recover under the DIC clause, set out in para 12 of
the earlier judgment. It also asserts that it was insured in
parallel by the local insurers on terms which differed in
important respects from the CCIP/Coromin policy. In particular,
as appears from para 11 of the earlier judgment, it was insured
on a specified perils basis, one of the perils being "collapse
including shaft collapse". Thus, whereas the Zambian contract
would not respond to losses not caused by any of the specified
perils, including collapse, the CCIP/Coromin policy had a wider
scope and responded on all risks basis. The Zambian contract
also contained a Zambian Law and Jurisdiction clause but the
CCIP/Coromin contract contained an English Law and
Jurisdiction clause.
2. The local insurers were originally included as co-defendants
in these proceedings and, as appears from para 20 of the earlier
judgment, on 29 June
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Konkola Copper Mines plc v Coromin Ltd
2004 KCM obtained leave to serve them outside the jurisdiction
on the basis that they were 100 per cent direct insurers of KCM
and necessary or proper parties to these proceedings against
Coromin. On 27 and 29 October 2004 the local insurers applied
to set aside service, accepting that they were 100 per cent
primary insurers of KCM under the Zambian contract.
3. As appears from para 21 of the earlier judgment, on 9
March 2005 the local insurers and KCM/ARH settled that
application to set aside service. The terms are summarised in
para 21. They included that KCM/ARH would commence
proceedings against the local insurers in the Zambian courts,
that the local insurers accepted that they were 100 per cent
primary insurers of KCM/ARH on terms including the
provision as to specified perils, that in the English proceedings
there should be a consent order staying the claims against the
local insurers and that stay was to remain in place until final
determination of the Zambian proceedings. Each side agreed to
pay its own costs of the application and all further costs orders
were to be treated as discharged. The consent order staying the
NR defendants' application was made on 11 March 2005 and
that staying PICZ's application on 18 March 2005.
4. These consent orders are not in exactly the same form. Thus
NR defendants' order incorporated an undertaking that in the
Zambian proceedings they would admit and not dispute or deny
or otherwise put in issue that they for their respective
proportions had provided 100 per cent cover. PICZ's consent
order was not in the form of an undertaking to this effect but
merely recited that PICZ agreed to that effect, namely that its
proportion was 20 per cent which it would admit in any
subsequent proceedings. Importantly, both consent orders
provided that in the event that the local insurers were in breach
of such undertakings or agreements, KCM/ARH could apply to
the court to lift the stay in these proceedings.
5. In due course KCM/ARH commenced proceedings in
Zambia against the local insurers claiming in respect of the
same losses as in the English proceedings on the basis that the
local insurers were 100 per cent primary insurers of KCM, 80
per cent underwritten by the NR defendants and 20 per cent by
PICZ.
6. Notwithstanding the terms of the undertakings given to this
court, the NR defendants served a defence in the Zambian
proceedings by which they put in issue those proportions of the
risk. It seems that they proceeded on the basis that they wished
to keep alive their original assertion that the local insurers were
collectively on risk only in respect of 10 per cent whereas
Coromin was on risk for 90 per
448
Colman J
cent. In this court Mr David Edwards on behalf of the NR
defendants has frankly accepted that they were thereby in
breach of their undertaking and, for that reason, in contempt of
this court.
7. As for PICZ, there can, in my judgment, be no doubt that in
as much as paras 5 and 14 of the defence in the Zambian
proceedings made no admissions as to KCM's case as to the
percentage of the risk accepted by PICZ, its service amounted
to a breach of the terms of the settlement effected by the
consent order. It is said in the second witness statement of Mr
Silutongwe, served on behalf of PICZ, that as far as he is aware
any breach of the consent orders was unintentional, albeit that
no explanation is put forward as to how the error occurred.
Moreover, although PICZ now seek to cure their breach of the
consent order and settlement by amending their defence, no
steps were taken to do so until after KCM/ARH had applied for
the stay of these proceedings to be lifted. This was a long time
after both the service of the NR defendants' defence in the
Zambian proceedings and of KCM's reply in those proceedings
in which it was pleaded that PICZ was estopped from resiling
from its confirmation in the consent order that it carried 20 per
cent of the risk. Had PICZ pleaded its defence in error or by
reason of some misunderstanding, one would have expected an
immediate response withdrawing that part of the pleading. None
was forthcoming and it is therefore, in my judgment, impossible
to infer that the pleading was the result of any mistake or
misunderstanding.
8. In these circumstances, I have no doubt that both as regards
the NR defendants and PICZ, the entitlement of KCM/ARH for
the stay to be lifted under the terms of the consent order was
engaged. Indeed, the NR defendants had by my order of 27
February 2006 consented to the lifting of the stay.
9. If the stays were to be lifted, however, the procedural
consequence would not be that the NR defendants and PICZ
inextricably became parties to these proceedings. The effect of
the lifting of the step would go no further than placing the
parties in the same position as they were in before the consent
orders were made. That is to say, there would in particular
remain to be determined the outstanding applications to set
aside service on the local insurers outside the jurisdiction.
10. As regards the NR defendants, a question arises as to
whether, given that they are in contempt which, unlike PICZ,
they do not offer to purge by amending their Zambian defence,
those defendants should be heard by this court on any matter
other than mitigation of their contempt.
11. This is a matter for the discretion of the court as held by
the Court of Appeal in Motorola Credit Corporation v Uzan
(No 2) [2004] 1 WLR 113. In
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Konkola Copper Mines plc v Coromin Ltd
this connection, there is a well-developed approach to the
exercise of that discretion which, although not an inflexible
practice, is normally adhered to. In particular, the court will
normally hear a contemnor where the purpose of the application
is to appeal against the order disobedience to which has put him
in contempt: see Motorola Credit Corporation v Uzan, supra, at
page 128. Moreover, where the contemnor seeks to challenge
the jurisdiction of the court which made the order which he has
broken it is generally right that the contemnor should be heard:
X Ltd v Morgan Grampian (Publishers) Ltd [1991] 1 AC 1 per
Lord Oliver at pages 50-51.
12. In the present case the order broken was the vehicle for
giving effect to the settlement of an issue as to this court's
jurisdiction to hear the substantive claim against the NR
defendants. That issue was left at large on condition of
performance of the terms of the undertaking, failing which the
stay might be lifted so reinstating the NR defendants'
application challenging the exercise of jurisdiction. If that
challenge were successfully made, this court would be shown to
have had no exercisable jurisdiction over those defendants
except for the limited purpose of determination of the issue of
substantive jurisdiction. For this court to shut out these
defendants from arguing that they should never have been
brought before this court in the first place presents itself to me
as a disproportionate response to non-performance of the terms
of their undertaking. If it is indeed the position that this court
should exercise no substantive jurisdiction the ex parte order
should never have been made and the defendants should never
have had to enter into the settlement agreement or to give the
undertaking.
13. For these reasons I have heard submissions from Mr
Edwards on behalf of the NR defendants.
14. PICZ is not in contempt for it was in breach of no
undertaking and does not need any discretion any exercise to
permit it to make submissions as to jurisdiction.
The submissions
15. The NR defendants rely on one ground for setting aside
service: that there was an exclusive Zambian Law and
Jurisdiction clause in the Zambian contract. They point to the
cover note which provides for "Local Law and Jurisdiction
Clause". This, they contend, goes beyond an agreement to agree
on the terms of such a clause and means "Zambian Law and
Jurisdiction Clause". Moreover, it is to be construed as an
exclusive Zambian jurisdiction clause. Reliance is placed on my
analysis of the law and jurisdiction clause in the reinsurance
contract between Coromin and the reinsurers
449
Colman J
in my earlier judgment at paras 69-73. Mr Edwards then relies
on the judgment of Brandon J. in The Eleftheria [1969] 1
Lloyd's Rep. 237 and the decision of the House of Lords in
Donohue v Armco [2002] 1 Lloyd's Rep. 425, as well as the
more recent decision of Gloster J in Antec International v
Biosafety [2006] EWHC 47 (Comm) where there is set out a
useful summary of the applicable approach where a party has
commenced proceedings in a jurisdiction other than that in the
jurisdiction clause.
16. Mr Edwards submits that in the present case strong cause
or strong reasons for permitting KCM/ARH to depart from the
terms of the Zambian Law and Jurisdiction clause do not exist.
In particular, all or most of the parties to the Zambian policy are
in Zambia. The policy was broked in Zambia. It is subject to
Zambian law. Many of the main issues have their "centre of
gravity" in Zambia, in particular whether the events giving rise
to the loss fell within any of the specified perils, specifically a
"collapse", and whether the events of the broking exercise were
such as to involve the local insurers in 100 per cent direct cover
or only 10 per cent with Coromin as direct co-insurer for 90 per
cent. Most of the many witnesses of fact were in Zambia.
17. It is further submitted that KCM/ARH, having entered into
parallel contracts of insurance in respect of the same risk on
different terms and, in particular, different terms as to law and
jurisdiction must or ought to have foreseen that a situation
might well arise where a dispute arose under one policy which
had to be determined under English law in the English courts
and where a dispute covering the same or overlapping ground
arose under the other policy but had to be determined under
Zambian law in the Zambian courts. Inconsistent decisions
might thus result, an eventuality which therefore must have
been foreseeable from the outset. That being so, the risk of
inconsistent decisions having been brought about by KCM's
own contractual structure, it should not be open to it to maintain
that in the interests of justice it should be permitted not to
comply with the Zambian Law and Jurisdiction clause in the
Zambian contract. Although the issue as to whether Coromin
was a direct insurer under the Zambian contract or was but a
reinsurer of the local insurers was not foreseeable, that did not
alter the position because the inconsistency in terms was
engendered by or on behalf of KCM and would exist whatever
the participation of Coromin.
18. Further, whatever course was taken in the English
proceedings, it was probable that the Zambian proceedings
would proceed in any event, an application to join Aon Zambia,
the placing brokers, having already been issued by the NR
defendants. It was unlikely that in these circumstances
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Konkola Copper Mines plc v Coromin Ltd
the Zambian judge would stay the Zambian proceedings.
19. Mr Penny, on behalf of PICZ, adopted the submissions on
jurisdiction advanced by Mr Edwards.
20. On behalf of KCM/AH, Mr Tom Beazley QC relied
heavily on the approach of the Court of Appeal exemplified in
The El Amria [1981] 2 Lloyd's Rep. 119 and of the House of
Lords in Donahue v Armco [2002] 1 Lloyd's Rep. 425 as well
as on certain remarks made in the course of my earlier judgment
in this case, at paras 84, 85, 102 to 112 and in the judgments in
the Court of Appeal, notably the specific recognition by Rix LJ
at para 27 that the risk of inconsistent decisions due to
fragmentation of proceedings is where possible avoided even if
that involves that an exclusive jurisdiction clause is not
enforced. Mr Beazley submits that only if the Zambian Insurers
are joined in these proceedings will all parties be bound by
decisions on the issues arising between all of them. Given that it
was KCM's case that there had been double primary insurance it
was essential that the same court should decide liability under
both the CCIP/Coromin policy and the Zambian contract and
should decide how the double insurance clause in the
CCIP/Coromin policy should be applied. Further, inconsistent
decisions of different courts on the coverage issue as to whether
KCM was insured as to 100 per cent or 10 per cent by the
Zambian insurers could leave KCM with a gap in primary cover
of 90 per cent. The operation of the DIC cover provided by
Coromin potentially depends on the extent, if any, to which
cover under the Zambian contract was less than under the
CCIP/Coromin policy. It is submitted that even if this risk of
inconsistent decisions was foreseeable, the interests of justice
require that all parties should be subject to a trial by one court
in spite of the Zambian jurisdiction clause. KCM draw attention
in particular to para 28 of the earlier judgment where I
observed:
It will therefore be seen that the just, cost-effective and
consistent determination of all the issues could only
effectively be achieved if they were all determined by the
same tribunal.
21. KCM further submits that arguments advanced in favour
of setting aside service out are of comparatively little weight.
There is little or no material different between Zambian law and
English law and issues of Zambian law will have to be
determined in the English proceedings in any event in relation
to the claim against Coromin. Even if the claim against the
Zambian insurers takes place in Zambia many of the witnesses
of fact will still have to travel to England to give evidence here
because of the need to determine the same factual issues.
450
Colman J
Even if the experts have to visit the mine it is more convenient
and cost-effective if they only have to give evidence at one trial.
The number of Zambian witnesses who would have to give
evidence in England on the structure of the insurance would be
likely to be few. The costs of a Zambian trial might well be less
than those of an English trial, but if there were two trials KCM
would have to bear two lots of costs. Further, even if Aon
Zambia were joined in the Zambian proceedings, the Aon
Group too, would have to bear two lots of costs. Moreover, the
Zambian insurers could join Aon Zambia in these proceedings
if they remained parties.
Discussion
22. I accept the submission of the Zambian insurers that the
expression "Local Law and Jurisdiction Clause" in the cover
note referable to the Zambian contract is sufficiently certain to
mean that the policy is to be governed by Zambian law and that
all disputes arising under it are to be determined by the
Zambian courts. Neither party could in the circumstances of this
risk have had the slightest doubt that "Local" referred to
Zambia. An underwriter or a placing broker confronted with
these words, I have no doubt, would have understood them as a
mutual transitive reference of such disputes to the Zambian
courts and not as a mutual promise not to object to the
jurisdiction of the Zambian courts if that were invoked. Both
the placing brokers (Aon, Zambia) and the five insurers would
have had in mind the provisions of section 79 of the Zambian
Insurance Act which provides:
(1) The holder of a policy shall, notwithstanding any contrary
provision in the policy, be entitled to enforce his rights under
the policy against the insurer named in the policy in any
competent court in Zambia.
(2) Any question of law arising in any action under a policy
which is instituted by the policy holder against the insurer
named in the policy shall, subject to the provisions of this Act,
be determined in accordance with the law of Zambia.
23. A contractual non-exclusive Zambian jurisdiction clause
would thus have added absolutely nothing to that which to the
presumed knowledge of all concerned was incorporated as a
matter of Zambian law.
24. In the improbable event that it had been intended by either
party to insert a non-exclusive jurisdiction clause the cover note
would have said so in express terms.
25. It follows that KCM's attempt to join the Zambian insurers
as parties to these proceedings was in breach of that exclusive
jurisdiction clause.
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26. That being so, are the circumstances such that this court
should not give effect to that clause because there is strong
cause, to use the well-established phrase used by Brandon J in
The Eleftheria, supra, and approved by the Court of Appeal in
The El Amria, supra and by the House of Lords in Donahue v
Armco [2002] 1 Lloyd's Rep. 425 where "strong reason" was
used to substantially the same effect?
27. It is to be observed that in The El Amria, both Brandon LJ
and Stephenson LJ considered that the case was close to the
borderline. In that case a stay of English admiralty proceedings
was refused notwithstanding an Egyptian exclusive jurisdiction
clause on the grounds that strong reasons had been shown, in
particular the location of the preponderance of evidence in
England, which was where the damaged cargo was discharged,
and the risk of inconsistent decisions arising from the
commencement of proceedings in England against the English
port authority advancing an alternative claim for cargo damage
due to delay in discharge.
28. The undesirability in the interests of justice of the risk of
inconsistent decisions in proceedings in the exclusive
jurisdiction court and those in the English courts and the weight
to be attached to that consideration upon an application to stay
English proceedings was emphasised in my own decision in
Citi-March Ltd v Neptune Orient Lines Ltd [1997] 1 Lloyd's
Rep. 72 at 77 to 78 and by Rix J in Mahavir Minerals Ltd v Cho
Yang Shipping Co Ltd [1997] 1 Lloyd's Rep. 566. The latter
was another case where a stay of English admiralty proceedings
was refused, there being an exclusive Korean jurisdiction clause
in bills of lading. The main grounds for refusal was the
desirability of concentrating in one jurisdiction (England) all
the many claims (125 plaintiffs suing under 62 bills of lading)
in order to avoid inconsistent decisions and to minimise costs.
29. Similarly, in Donohue v Armco [2002] 1 Lloyd's Rep. 425,
a claim for an anti-suit injunction to restrain New York
proceedings on the grounds of an English exclusive jurisdiction
clause, it was held that in the interests of justice an anti-suit
injunction should be refused on terms as to abandonment of
RICO claims in the New York proceedings. The basis of this
decision was the desirability of the same tribunal determining
all issues between all parties, including those not bound by the
English jurisdiction clause, particularly having regard to the fact
that a conspiracy was alleged by the defendant against the
claimant and others, many of those concerned having no
connection with England and not being independently amenable
to the jurisdiction of the English courts. It was held that the
relevant overseas-based defendants should not be served outside
the jurisdiction. The substance of the
451
Colman J
matter was that those defendants who had commenced the
proceedings in New York against parties not bound by the
English jurisdiction clause had done so perfectly properly and
to separate off the claimant's proceedings by means of an
anti-suit injunction would give rise to parallel proceedings and
the risk of conflicting decisions.
30. At this point it is necessary to go back in time to an earlier
decision of this court - that of Waller J in British Aerospace plc
v Dee Howard Co [1993] 1 Lloyd's Rep. 368. In that case an
application was made to set aside service on the defendants and
that the action be stayed on the grounds that proceedings had
been commenced by them against the claimant in Texas and
that the Texas court was the more appropriate forum. Those
applications were dismissed. Waller J first determined that there
was an exclusive English jurisdiction clause in the relevant
contract. He then considered the position if there were a
non-exclusive English jurisdiction clause with particular regard
to forum non conveniens considerations and in so doing
introduced a consideration which is particularly relevant to the
present application. This appears in a passage from his
judgment at pages 376-377:
It seems to me on the language of the clause that I am
considering here, it simply should not be open to DHC (the
defendant) to start arguing about the relative merits of fighting
an action in Texas as compared with fighting an action in
London, where the factors relied on would have been
eminently foreseeable at the time that they entered into the
contract. Furthermore, to rely before the English court on the
factor that they have commenced proceedings in Texas and
therefore that there will be two sets of proceedings unless the
English court stops the English action, should as I see it
simply be impermissible, at least where jurisdiction in those
proceedings has been immediately challenged. If the clause
means what I suggest it means that they are not entitled to
resist the English jurisdiction if an action is commenced in
England, it is DHC who have brought upon themselves the
risk of two sets of proceedings if, as is likely to happen, BAe
commence proceedings in England. Surely they must point to
some factor which they could not have foreseen on which they
can rely for displacing the bargain which they made ie that
they would not object to the jurisdiction of the English court.
Adopting that approach it seems to me that the inconvenience
for witnesses, the location of documents, the timing of a trial,
and all such like matters, are aspects which they are simply
precluded from raising. Furthermore, commencing an action in
Texas, albeit that may not be a breach of the clause, cannot
give them a factor on which they can rely, unless of course
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that action has continued without protest from BAe. One can
well imagine that if BAe had taken part in the proceedings in
Texas without protest and if the proceedings had reached the
stage at which enormous expenditure had been incurred by
both sides and the matter was accordingly nearly ready for
trial in Texas, that such factors would obviously lead the
English Court to exercise its discretion in favour of setting
aside service of proceedings. That is very far from being the
situation in relation to the Texas proceedings so far
commenced. In relation to the only other factor which it seems
to me could be said to be one not foreseeable when the
contract was entered into, the Cambridgeshire factor, I am not
persuaded that the expertise undoubtedly achieved by the
lawyers for DHC in other actions should be a factor which
overrides the contractual bargain of DHC that they would not
object to the jurisdiction of the English Court. It is thus clear
to me that the proper approach to a case of the sort that I am
considering is to consider it as equivalent to proceedings
commenced as of right, to apply the passage in Lord Goff's
judgment in The Spiliada dealing with such actions, but to add
the consideration which he did not have in mind as pointed out
by Mr Justice Hobhouse in Berisford, that there is a clause
under which DHC had agreed not to object to the jurisdiction.
That being the proper approach, and additionally, it being (as
in my judgment it is) right only to consider the matters which
would not have been foreseeable when that bargain was
struck, I would dismiss both summonses of the defendants.
31. The concept that it is not normally open to an overseas
defendant seeking to set aside service in the face of a
non-exclusive English jurisdiction clause which had been freely
negotiated to rely in support of a forum non conveniens
argument on factors of inconvenience which he ought
reasonably to have appreciated might arise when he entered into
the jurisdiction agreement presents itself to me as entirely
correct in principle. Were it otherwise, it would be open to a
defendant to invite the court to exercise a discretion to enable
him to escape from his contract for reasons of which he ran the
risk of occurrence from the outset. In such circumstances
procedural inconvenience clearly has to yield to the public
policy of holding him to his contract.
32. I have no doubt that if, as I am sure, that approach should
be applicable in the case of the forum non conveniens analysis
required in the case of a non-exclusive jurisdiction clause, it
must in principle also be applicable to the "strong cause/strong
reasons" analysis required in the case of an exclusive
jurisdiction clause. Thus, for example, it should not be open to a
party seeking to justify
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service outside the jurisdiction in contravention of a foreign
jurisdiction to rely as grounds for strong cause or reasons the
risk of inconsistent decisions of different courts when he ought
to have appreciated the existence of that risk at the time when
he entered into the exclusive jurisdiction clause.
33. In Mercury Communications Ltd v Communication
Telesystems International [1999] 2 All ER (Comm) 33
Moore-Bick J said of judgment of Waller LJ at page 41:
In principle I would respectfully agree with that approach.
Although I think that the court is entitled to have regard to all
the circumstances of the case, particular weight should in my
view attach to the fact that the defendant has freely agreed as
part of his bargain to submit to the jurisdiction. In principle he
should be held to that bargain unless there are overwhelming
reasons to the contrary. I would not go so far as to say that the
court will never grant a stay unless circumstances have arisen
which could not have been foreseen at the time the contract
was made, but the cases in which it will do so are likely to be
rare.
34. In Bas Capital Funding Corporation v Medfinco Ltd
[2004] 1 Lloyd's Rep. 652 at page 678 Lawrence Collins J,
having considered the earlier authorities, observed:
192. I am satisfied that it would require very strong grounds
to override a choice of English jurisdiction, and that the
normal forum conveniens factors have little or no role to play,
especially where it could be inferred from the lack of other
connections with England that the parties had chosen the
English forum as a neutral forum. In some cases the fact that
the clause was non-exclusive might make it easier to displace
the strong presumption in favour of upholding the choice,
particularly where more than one jurisdiction was chosen, but
that would depend on the circumstances.
193. It would not be useful to speculate on what exceptional
circumstances would justify the court in not accepting
jurisdiction where the parties had conferred non-exclusive
jurisdiction on the English court, but I accept that one feature
which may be highly relevant is whether there are already
proceedings in a foreign country which involve overlapping
issues, especially if they have been commenced by the party
which subsequently seeks to sue in England.
35. In the present case it is important not to lose sight of the
fact that the only basis upon which application to serve these
defendants out of the jurisdiction was made and the application
granted was that they were necessary or proper parties under
CPR 6.20(3). Accordingly, none of them
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could have been the subject of an order for service out on the
basis of any other connecting factor under CPR 6.20. Their
status as potential parties to these proceedings is therefore
founded only on the kind of case management considerations
which would justify joinder of defendants within the
jurisdiction: see CPR 19.2(2). In other words KCM/ARH's
claim has no connection whatever with this jurisdiction. All the
parties to the claim on the Zambian contract are incorporated in
Zambia, except ARH, which incorporated in Luxembourg but is
the indirect subsidiary of an English company. The Zambian
contract was made in Zambia and is governed by Zambian law.
The events giving rise to the loss occurred in Zambia. All the
primary facts are located in Zambia. The alleged breach of
contract by non-payment of the claim occurred in Zambia. But
for the fact that KCM had commenced these proceedings
against Coromin claiming in respect of the same casualty and
had advanced an alternative claim against Coromin under the
DIC clause in the CCIP/Coromin policy, KCM could not have
commenced proceedings against the Zambian insurers in the
English courts. The position is therefore that KCM now seeks to
implead those defendants who have no connection with this
country in order to consolidate the determination of issues in
one jurisdiction in circumstances where KCM finds itself
exposed to the risk of considerable financial loss if there are
parallel proceedings in diverse jurisdictions. That loss is
exemplified by the risk of conflicting decisions relevant to the
operation of the DIC clause. If, for example, it is decided in this
court that KCM has 100 per cent cover from the Zambian
contract, whereas the Zambian courts decide that the Zambian
contract provides only 10 per cent cover, the DIC clause is not
engaged in respect of the 90 per cent gap. Further, for the
purposes of the operation of the other insurance clause (see
earlier judgment para 15) conflicting decisions as to what loss
was recoverable under the Zambian contract could leave KCM
without a significant recovery.
36. In early June 2000 KCM and Coromin agreed to an
extension of cover for 24 months under the pre-existing
Coromin policy. That policy period was unexpired on 8 April
2001 when the casualty occurred.
37. Between 30 June and 6 July 2000 the Zambian insurers
agreed to extend cover under a pre-existing policy from 1 July
2000 to 30 June 2001. The period of that policy was also
therefore unexpired at the time of the casualty. As I have said,
KCM maintains that this policy provided cover in respect of
100 per cent of the risk.
38. At the time when that cover was placed with the Zambian
insurers KCM therefore knew that it
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Colman J
would thereby be creating a double insurance structure. It also
knew or ought to have known that, in order for it to be certain in
the event of disputes that it achieved effective protection against
losses under the DIC clause and/or by the operation of the other
insurance clause in the Coromin policy, it needed entirely
consistent decisions as to whether and if so to what extent it
was covered under both the CCIP/Coromin policy and under the
Zambian contract. Yet it entered into contracts of insurance
with diverse law and jurisdiction clauses.
39. Against this background KCM/ARH invites this court to
permit it to implead the Zambian defendants notwithstanding
the exclusive Zambian Law and Jurisdiction clause and
notwithstanding the fact that the claim against them has no
connection whatever with this jurisdiction. For this purpose, it
relies upon the procedural dislocation created by the diverse
terms of the CCIP/Coromin and Zambian policies and the
consequent risk of conflicting decisions as strong cause or
strong reason for departure from the Zambian defendants' prima
facie entitlement to enforcement of the Zambian jurisdiction
clause by refusal of leave to serve out.
40. I am unable to accept this submission.
41. Although it is clear from the authorities to which I have
referred that the risk of conflicting decisions is a consideration
of considerable weight in the discretionary analysis, each case
has to be tested by reference to its own facts. There are many
cases, such as The El Amria, supra, where that which occasions
the risk of conflicting decisions is the advent of a loss which
engages the courts of a jurisdiction other than that provided for
in an exclusive jurisdiction clause. Thus, in that case the
shipowners' allegation that the cargo damage was the fault of
the port authority led to the commencement by cargo owners in
this country of proceedings against that party. Even though
there was a palpable risk of conflicting decisions as to the cause
of the damage if the shipowners had to be sued in Egypt, the
Court of Appeal regarded it as a case "near the borderline": see
Brandon LJ at page 128R and Stephenson LJ at page 129R.
Similarly, in Citi-March v Neptune Orient, supra, although the
bills of lading contained a Singapore exclusive jurisdiction
clause, the situation arose where several parties handled the
goods after discharge in Felixstowe and before delivery and
none of those defendants were bound by the Singapore
jurisdiction clause. In deciding that service against the
shipowners should not be set aside this court held that there was
strong cause for all those concerned with carriage and handling
of the goods to be joined
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in one set of proceedings. There again the eventuality giving
rise to conflicting decisions was adventitious and could not be
regarded as foreseeable.
42. In the present case, as I observed in my earlier judgment,
at para 28, the just, cost-effective and consistent determination
of all the issues could only be achieved if they were all
determined by the same tribunal. However, for this court to
permit KCM to pursue these proceedings against the Zambian
insurers in the interests of avoiding fragmentation of the
proceedings would in substance be permitting KCM to avoid
the foreseeable conse-
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quences of the contractual structure which they themselves
created. In my judgment, in these circumstances justice does not
require that KCM should now be permitted to break their
contract in order to cure the consequences of the very
fragmentation which they have created. To enable joinder of
these defendants in such a case would be a serious misuse of the
necessary or proper party jurisdiction.
43. For these reasons the orders giving permission to join both
the NR defendants and PICZ must be set aside.