STAUGHTON LJ: In May and June, 1990 a contract of insurance was
concluded between a Dutch company called W. O. BV and the members
of three syndicates at Lloyd's. The Dutch company, whom I shall call the
owners, had let some of their property on hire to a Yugoslav company for
purposes connected with the construction of a breakwater in Algeria. They
are referred to as the charterers. The owners were the insured under the
contract of insurance, and are the defendants in this action. The plaintiffs,
Mr Ch. and Mr B., sue on their own behalf and for the other members of
their syndicates.
The slip by which the contract was concluded contained the words: "FORM
Mar/SG." That, it seems, was a reference to two different printed forms
of contract used in the insurance market. One is the familiar SG form
used in the marine market. That contains no term as to who shall have
jurisdiction to decide disputes. The other form, MAR (which stands for
Marine), provides: "This insurance is subject to English jurisdiction."
That was the slip. Much later, a policy was issued on the SG form. For
the present, it is immaterial that the SG form was used in compiling the
policy; but that may become significant at a later stage.
The insurance was against the risk that, at the end of the construction
of the breakwater, the charterers would not be able to repatriate the
property which they had hired and return it to the owners. Against the
heading VESSELS/OBJECTS AND SUMS INSURED in the policy there is the
following list of that property:
A. Stone Placing Equipment:
A1. Loaders Cat 988 B 5 units in all
B. Concrete Block Placing Equipment:
B1. Cranebarge "MB 101"
B2. 1 flat top barge 60 X 20 mtr
B3. Tugboat "HOLLAND"
B4. Landbased Manitowoc
C. Equipment for dredging and excavation:
C1. Floating crane "MB 106"
D. Matrass Placing Equipment:
D1. Total equipment including following
Tug "GEODKOOP 14"
D2. Motorboat "KEMPHAAN"
Positioning equipment "FLAKKEE"
and "STREKKER"
including end beams
P & H crane in all
E. Other equipment:
E1. Divers/salvage equipment in all
E2. Rescueboat
F. Hire equipment:
F1. Eerland ponton
The terms of the insurance, so far as relevant, are as follows:
AND WHEREAS the Assured wish to insure their loss of earnings and/or
hire and/ or additional expenses which they incur by reason of the Vessel
not sailing from Algeria at expiry of the contract in respect of sub A, B, E
and F in December 1990 and in respect of sub C1 and D in August 1990.
NOW THEREFOR if in consequence of the Charterers or their Agents
failing for any reason whatsoever to obtain an Export Licence from the
appropriate Authority in Algeria for the Assured the vessel is unable to sail
from Algeria or its territorial waters at the end of the above referred to
contract periods, THIS INSURANCE is to pay up to the Sums Insured as
above to contract periods as follows:
A1.US$ 25,000
B1.US$ 35,500
B2.US$ 4,300
B3.US$ 9,500
B4.US$ 12,500
C1.US$ 26,750
D1.US$ 9,500
D2.US$ 22,770
E1.US$ 9,500
E2.US$ 1,750
F1.US$ 4,375
per week and pro rata, fixed and agreed amounts until the Vessels sail
from Algeria and its territorial waters.
The Judge thought it manifest that the words: "the vessel is unable to sail
from Algeria" must have some wider meaning, so as to encompass the
removal from Algeria of each of the listed items of property; and other
similar departures from the literal wording must have been intended. The
contrary has not been argued in this Court.
There is a further description of the property in an affidavit of the owners'
solicitor:
Items A are land vehicles;
Items B1, B2, C1 and D2 (apart from Kemphaan), F1 and Addendum 1
are dumb barges;
Items D1, D2 (Kemphaan) are small harbour work boats;
Items B4 and D2 (P & H crane) are land cranes;
Item B3 is a tug boat.
Yet further description is available if required. For the present it is enough
to say that some items were plainly land based, and that some were
seagoing vessels.
The owners say that a loss occurred under the policy, and that they ought
to be paid. The insurers maintain that they are entitled to avoid the policy,
or alternatively that they are under no liability in accordance with its
terms.
At first the owners commenced summary proceedings in the District
Court of Haarlem. But the Dutch Court ruled that, on the footing that the
MAR form was part of the contract, the Dutch Courts had no jurisdiction.
The insurers then commenced the present action as plaintiffs, seeking a
declaration that they were entitled to avoid and have avoided the contract
for material non-disclosure. Alternatively they seek what has been called
negative declaration, that they are not liable to the owners under the
contract. Shortly after the writ was issued, the owners started fresh
proceedings of a non-summary character in the Dutch Courts. Meanwhile
the owners have applied to set aside the English proceedings under RSC O
12, r 8, on the ground that only the Dutch Courts have jurisdiction.
That application raised two issues. First, does the contract of insurance
incorporate the MAR form or the SG form? Secondly, are the insurers
entitled to rely on the jurisdiction clause in the MAR form, despite the
terms of the European Convention scheduled to the Civil Jurisdiction
and Judgments Act, 1982? If the owners succeed on either issue, these
proceedings are not within the jurisdiction of the English Courts and must
be set aside. But it is said, and Mr Justice Hirst apparently accepted, that
expert evidence will be relevant to the determination of the first issue. So
he ordered that the second issue should be decided first. In the event he
decided it in favour of the owners (see [1992] 2 Lloyd's Rep 378); and if
that decision stands there will be no need to decide the first issue. But the
insurers appeal.
There was another point raised before Mr Justice Hirst and decided by
him, which also features in this appeal. The owners argued that an action
for negative declarations (as both the declarations claimed by the insurers
effectively are) was improper, and that the English proceedings should be
set aside on that ground also. The Judge would not have been minded to
accept that argument.
So I turn to the Brussels Convention, as amended, which has the force of
law in the United Kingdom by virtue of s 2(1) of the 1982 Act. Article 2
provides the basic rule of jurisdiction, that (subject to other provisions of
the convention) persons domiciled in a contracting state shall be sued in
the Courts of that state.
Articles 7 to 12A in s 3 deal with jurisdiction in matters relating to
insurance. For present purposes the first relevant provision is art 11,
which provides that:
... an insurer may bring proceedings only in the courts of the Contracting
State in which the defendant is domiciled, irrespective of whether he is
the policy holder, the insured or a beneficiary.
But there is an exception provided in arts 12 and 12A, which I must quote
in full:
Article 12
The provisions of this Section may be departed from only by an
agreement on jurisdiction:
(1) which is entered into after the dispute has arisen, or
(2) which allows the policy holder, the insured or a beneficiary to bring
proceedings in courts other than those indicated in this Section, or
(3) which is concluded between a policy holder and an insurer, both of
whom are at the time of conclusion of the contract domiciled or habitually
resident in the same Contracting State, and which has the effect of
conferring jurisdiction on the courts of that State even if the harmful
event were to occur abroad, provided that such an agreement is not
contrary to the law of that State, or
(4) which is concluded with a policy holder who is not domiciled in a
Contracting State, except in so far as the insurance is compulsory or
relates to immovable property in a Contracting State, or
(5) which relates to a contract of insurance in so far as it covers one or
more of the risks set out in Article 12A.
Article 12A
The following are the risks referred to in point (5) of Article 12:
(1) Any loss of or damage to (a) sea going ships, installations situated
offshore or on the high seas, or aircraft, arising from perils which relate
to their use for commercial purposes, (b) goods in transit other than
passengers' baggage where the transit consists of or includes carriage by
such ships or aircraft;
(2) Any liability, other than for bodily injury to passengers or loss of or
damage to their baggage, (a) arising out of the use or operation of ships,
installations or aircraft as referred to in point (1)(a) above in so far as the
law of the Contracting State in which such aircraft are registered does not
prohibit agreements on jurisdiction regarding insurance of such risks, (b)
for loss or damage caused by goods in transit as described in point (1)(b)
above;
(3) Any financial loss connected with the use or operation of ships,
installations or aircraft as referred to in point (1)(a) above, in particular
loss of freight or charter hire;
(4) Any risk or interest connected with any of those referred to in points
(1) to (3) above.
So an agreement as to jurisdiction may override art 11 and other
provisions in s 3 on certain conditions. Furthermore by art 17 an
agreement as to jurisdiction is to be taken as providing exclusive
jurisdiction.
We were urged by Mr Aikens for the insurers to adopt a purposive
approach to construction, and up to a point the owners accept that we
must do so. That was the ruling of Lord Justice Lloyd in New Hampshire
Insurance Co v Strabag Bau AG, [1992] 1 Lloyd's Rep 361 at p 365,
another insurance case, where he followed what Lord Diplock said in Henn
& Darby v Director of Public Prosecutions, [1981] AC 850 at p 905:
The European Court, in contrast to English Courts, applies teleological
rather than historical methods to the interpretation of the Treaties and
other Community legislation. It seeks to give effect to what it conceives to
be the spirit rather than the letter of the Treaties; sometimes, indeed, to
an English judge, it may seem to the exclusion of the letter.
We are getting quite used to purposive construction with European
legislation, and sometimes even apply it to our own domestic laws. The
difficulty that I find is in deciding how far one can go in disregarding the
language used in order to achieve the intended purpose. Perhaps it is a
matter of degree: the clearer the purpose, and the less the adaptation of
language required, the more ready the Court would be to achieve it.
Another rule, laid down by s 3(3) of the 1982 Act, is that:
(a) the reports by Mr P Jenard on the 1968 Convention and the 1971
Protocol; and (b) the report by Professor Peter Schlosser on the Accession
Convention... may be considered in ascertaining the meaning or effect
of any provision of the Conventions and shall be given such weight as is
appropriate in the circumstances.
There is important material in Professor Schlosser's report on the
insurance provisions with which we are concerned. But before coming to
that, I can express some views on the purpose of the Brussels Convention
as a whole. Its general object was to lay down general rules of jurisdiction
which would diminish the risk of multiplicity of proceedings in different
contracting states, and of conflicting decisions of the Courts of different
states. But it was also the aim of some of its provisions to afford, as a
matter of social policy, favourable treatment to those who might not
enjoy economic power. Hence, for example, the provision in art 8 that an
insurer may be sued either in the state where he is domiciled or in the
state where the policy holder is domiciled. A consumer, who agrees to
buy goods on instalment credit terms, or to repay a loan by instalments,
or any other form of credit, made to finance the sale of goods, has a
similar choice under art 14. By contrast the insurer, or other party to
the consumer credit contract, may in general only sue in the state of the
defendant's domicile.
Thirdly, there is the exception in art 12 as to an agreement on jurisdiction
in an insurance case. This was originally confined to cases (1) to (3) in
that article; and there was no art 12A. Thus far the exception does not
appear to have had any purpose that is of particular relevance to the
present dispute.
The introduction of arts 12(5) and 12A is explained by Professor Schlosser
as follows:
The United Kingdom's request for special rules for the insurance of large
risks was probably the most difficult problem for the Working Party.
The request was based on the realization that the concept of social
protection underlying a restriction on the admissibility of provisions
conferring jurisdiction in insurance matters is no longer justified where
the policy holders are powerful undertakings. The problem was one of
finding a suitable demarcation line. Discussions on the second Directive
on insurance had already revealed the impossibility of taking as criteria
abstract, general factors like company capital or turnover. The only
solution was to examine which types of insurance contracts were in
general concluded only by policy holders who did not require social
protection. On this basis, special treatment could not be conceded to
industrial insurance as a whole.
Accordingly, the Working Party directed its attention to the various classes
of insurance connected with the transport industry. In this area there
is an additional justification for special treatment for agreements on
jurisdiction: the risks insured are highly mobile and insurance policies
tend to change hands several times in quick succession. This leads to
uncertainty as to which courts will have jurisdiction and the difficulties
in calculating risks are thereby greatly increased. On the other hand,
there are here, too, certain areas requiring social protection. Particular
complications were caused by the fact that there is a well integrated
insurance market for the transport industry. The various types of risk
for different means of transport are usually covered under one single
policy. The British insurance industry in particular has developed standard
policies which only require for their completion a notification by the
insured that the means of transport (which can be of many different
types) have set off. The result of a consideration of all these matters
is the solution which figures in the new paragraph (5) of Article 12, as
supplemented by Article 12a: Agreements on jurisdiction are in principle
to be given special treatment in marine insurance and in some sectors
of aviation insurance. In the case of insurance of transport by land
alone no exceptional rules of any kind appeared justified. In order to
avoid difficulties and differences of interpretation, a list had to be drawn
up of the types of policy for which the admissibility of agreements on
jurisdiction was to be extended. The idea of referring for this purpose
to the list of classes of insurance appearing in the Annex to the First
Council Directive of 24th July 1973 (73/239/EE) proved inadequate.
The classification used there took account of the requirements of State
administration of insurance, and was not directed towards a fair balancing
of private insurance interests. There was thus no alternative but to draw
up a separate list for the purposes of the 1968 Convention.
Two questions have been argued before us on the meaning of the new
provisions. The first relates to the words "in so far as" in art 12(5); and
the second to art 12A(4). I prefer to take them in the reverse order.
Article 12A(4)
Article 12A permits an agreement as to jurisdiction in a contract of
insurance in so far as it covers:
(4) Any risk or interest connected with any of those referred to in points
(1) to (3) above.
It is conceded that the temporary loss of use of a seagoing ship by reason
of its being detained in Algeria is a risk within art 12(A)(1) to (3). Some
of the items of property in this case come within that description as they
can go to sea, even if they do not all have their own motive power. The
question arises whether other items of property, and in particular those
which will not even float such as a caterpillar tractor or a crawling crane,
come within art 12A(4) in the context of this case.
In my opinion the word "risk" in par (4) refers back to the risks of loss
or damage, liability and financial loss described in pars (1) to (3); and
the word "interest" refers to the seagoing ships, installations, aircraft
and goods referred to in those paragraphs. It is true that "interest" is
sometimes used in a technical sense by English marine insurance law,
to refer to the nature of the title to property held by the person insured.
Thus there can be an insurance of the owner's interest, or a charterer's
interest, or a mortgagee's interest. But I do not think that the word
"interest" was used in that technical sense in art 12A(4). In broad terms it
is used to describe property in connection with which a risk can give rise
to loss.
Paragraph (4) thus provides for risks which are not those mentioned in
pars (1) to (3), and for items of property not so mentioned -- provided in
each case that there is the requisite connection with the risks or items of
property that are mentioned.
The Convention does not tell us what the nature of the connection must
be. The owners argue that it must be a close connection, and that a risk
or interest is not within par (4) unless it is accessory or ancillary to a risk
or interest within pars (1) to (3). They derive support for that argument
from the French, Spanish and Portuguese texts ("accessoirement",
"accessorio", "accessoriamente").
There is also some modest support in Professor Schlosser's par 147:
Insurance against ancillary risks is a familiar practice, especially in
United Kingdom insurance contracts. An example would be "shipowner's
disbursements" consisting of exceptional operational costs, eg harbour
dues accruing while a ship remains disabled. Another example is
insurance against "increased value", providing protection against loss
arising from the fact that a destroyed or damaged cargo had increased in
value during transit.
The provision does not require an ancillary risk to be insured under the
same policy as the main risk to which it relates.
My understanding of the English practice is that insurance on
"disbursements" or "increased value" has always been used simply to
provide cover in an additional sum, above that already insured elsewhere
on the same ship or goods. It is thus not accessory or ancillary to
anything. It does not have to be found in art 12(4), as it would be within
pars (1) to (3). If I am right in that belief, perhaps the English practice
was not fully explained to Professor Schlosser.
A third argument in favour of a narrow construction of par (4) is based on
par (1)(b); that refers to transit of goods which:
... consists of or includes carriage by such ships or aircraft.
It is said that there was no need thus to include land transit if par (4)
has a wide meaning, since the land transit would be treated as a risk
within that paragraph. However, I can well understand that those who
drafted the Convention wished to make that absolutely clear and to avoid
disputes. So they covered land transit in par (1)(b).
For my part I do not accept that there must be a very close connection
between the risk or interest in par (4) and that within pars (1) to (3).
If that is what is meant by saying that the former must be accessory or
ancillary to the latter, I do not agree with that interpretation. It seems to
me inconsistent with the purpose of art 12(5) and art 12A.
As explained by Professor Schlosser, I take that purpose to be the
creation of an exception to the mandatory rules for jurisdiction in
insurance cases. The reason for the exception is that some people who
take out insurance do not need the special advantage which is accorded
to those with less economic power. It was not considered possible to
define the class of people who did not need such protection, except by
reference to the type of contracts which they entered into. Hence art
12A. If somebody has sufficient economic power to be in that class and
to make a contract of that type, but chooses to insure also for other risks
or property connected in some way with the subject matter of marine
insurance, it does not seem to me that he suddenly becomes a person in
need of consumer protection.
There are of course other reasons given by Professor Schlosser for the
special treatment of marine insurance. But in my opinion the reason
summarized above was its main purpose. It is best served by adopting
a liberal or generous interpretation of art 12A(4), and not the narrow
meaning which the owners contend for in this case. I would however
say that the extra risks or interests covered by par (4) must not be
disproportionately large compared with those covered by pars (1) to
(3). They must not be the main or almost the main subject matter of
the contract, but a lesser part of it. The tail must not be allowed to wag
the dog, or an insurance on land-based property to be converted into an
insurance within art 12A by the inclusion of some trivial marine risk.
By that test I would hold that the additional interests in this case are
covered by art 12A(4), because there is a sufficient connection with the
seagoing vessels that are covered by the insurance. All the property was
being used for a single adventure -- the construction of the breakwater;
all belonged to the same insured, and was covered in respect of their title
as owners rather than charterers or mortgagees; all was insured against
the same risk, of detention in Algeria. As to proportionality, we have some
figures for the value of the property. The floating items were said to be
worth 18,903,000 Dutch florins, and the land based items 5,000,000 fl.
So the latter are little more than 20 per cent of the whole in value. I am
not sure if the division is precisely that which is appropriate, since some
of the floating property is not sea going. But the comparison is sufficiently
accurate for present purposes.
Article 12(5)
The conclusion that I have thus reached makes it not strictly necessary to
consider the meaning of this paragraph. But it was argued at length and
in detail, and I shall express my views on it briefly.
Mr Justice Hirst held that the words:
... in so far as it covers one or more of the risks set out in art 12A...
meant "to the extent that" it covers those risks. But he went on to
conclude, without expressly saying so, that a jurisdiction clause was
invalid in a policy which also covered any risks not set out in art 12A. So
it may be said that he implied the words "and no other" at the end of art
12(5).
For my part I reach the same conclusion as the Judge but by a slightly
different route. In my judgment it is right to imply the words "and no
other". That is because art 12A(4) makes express provision as to what
additional risks or interests may be included in a contract of insurance if it
is to qualify under art 12A as a whole. It cannot have been the intention
that yet more risks or interests could be included, even if they were not
justified by art 12A(4), since that would have one of two consequences:
(i) The jurisdiction clause would be valid in respect of art 12A risks or
interests, but not for others in the same contract of insurance. This would
be a disaster. It would entail litigation of the same or nearly the same
issue in two different jurisdictions, which is contrary to the purpose of
the Convention as a whole. (ii) Alternatively the clause would be valid for
the whole contract, even though it covered some risks or interests not
within art 12A. Why then was par (4) if art 12A included? I realize that
par (4) is said to be free standing (see Professor Schlosser, par 147), so
that there may be a valid jurisdiction clause in a policy which only covers
par (4) risks or interests. But I cannot believe that this was the only or
main reason for including that paragraph.
Once one has reached the conclusion that the words "and no other" are
necessarily implied in art 12(5), the problem disappears. There is no need
to decide the point which was so elaborately argued before the Judge and
before us, as to the meaning of the words "in so far as". The owners say
that they mean, in ordinary English and in this convention, "to the extent
that"; the insurers say that they mean "if", or "provided that".
In correct usage it is no doubt right that the words "in so far as" mean
"to the extent that". But correct usage is not always followed. One can
compare the similar words "in as much as", which are sometimes used to
mean "because" or "whereas".
The other languages of the Convention would no doubt be considered
by the European Court of Justice to resolve such a problem, and I see
no reason why we should not consider them too, if we can safely do so
with the help of evidence or our own knowledge: See Effer Spa v Hans-
Joachim Kantner, (1982) case 38/81; [1982] ECR 825. The French and
Italian texts support "to the extent that", and so perhaps do some others.
The Danish, Spanish and Portuguese texts favour the opposite view -- but
Spain and Portugal acceded to the Convention after art 12(5) had already
been part of it for some time. The Greek version is, on the evidence,
equivocal.
All that is very interesting. But as I have said, it does not matter once
one has reached the conclusion that the words "and no other" are to be
implied in art 12A(5). Indeed the variance in the difference language
texts may be explained by the fact that the precise nuance of the words
translated in English as "in so far as" was immaterial.
So if I had concluded that the policy in this case included risks or interests
which were not justified by art 12A(4), I would have agreed with the
Judge that the jurisdiction clause was invalid.
Negative declaration
This is a separate ground upon which the owners seek to uphold the
Judge's decision to set aside the English proceedings. They rely on two
cases where an action for a negative declaration has been criticized,
Saipem Spa v Dredging VO2 BV, [1988] 2 Lloyd's Rep 361 at p 371,
and Sohio Supply Co v Gatoil (USA) Inc, [1989] 1 Lloyd's Rep 588 at
p 593. But what was said in those cases was in the context, or on the
assumption, that two different jurisdictions were available; negative
declarations were deprecated as a method of making a preemptive strike
so as to secure jurisdiction in the Court preferred by the plaintiff.
That is not this case. Here there is only one proper jurisdiction under the
Convention, but there has been doubt as to whether that is the English or
the Dutch Courts. Indeed there still is doubt, as it remains to be decided
whether the contract incorporated the MAR form or the SG form. If the
insurers prove to be right on that point also, only the English Courts
will have jurisdiction; and the owners will have to come here to enforce
their claim. It will save them the cost of a fresh writ if they can do so by
counterclaim. In those circumstances I consider, as Mr Justice Hirst did,
that the procedure adopted by the insurers is not open to objection on the
ground that negative declarations are sought.
However, Mr Swainston argues that the Dutch Courts should be allowed
to decide the jurisdiction issue. I do not see why that should necessarily
be so. In the first place, the Dutch Court initially held that it had no
jurisdiction, and then the English action was started. Secondly, it is at
least fairly arguable that either the English or the Dutch Courts have
jurisdiction, but not both. Thirdly, the Dutch Judges and we in this Court
will both be applying European Community law, subject to the control of
the European Court of Justice. In those circumstances I would not hold
that either country should be preferred to the other as the place where
the issue of jurisdiction should be decided.
I would allow this appeal, and rule that if the contract of insurance
incorporated the MAR form the jurisdiction clause is valid. The action must
be restored before a Judge of the Commercial Court for further directions.
JUDGMENTBY-2: MANN LJ
JUDGMENT-2:
MANN LJ: I agree.
DISPOSITION:
Judgment accordingly