Order of the Supreme Court dated the 30th day of July 2007, referring
a question to the Court of Justice of the European Communities for
Preliminary Ruling pursuant to Article 234 of the Treaty establishing the
European Communities.
1. The Supreme Court makes this order for reference in the context
of two actions in the High Court. The Court seeks a preliminary ruling
on the correct interpretation of article 22.2 of Council Regulation (EC)
No. 4412001 on jurisdiction and the recognition and enforcement of
judgments in civil and commercial matters (the "Brussels Regulation").
2. The actions in the High Court related to claims made for damages for
serious personal injuries allegedly caused by the professional negligence
of two medical practitioners, in fact consultant obstetricians. The plaintiffs'
claims have been settled for agreed amounts. The aspect of these actions
which gives rise to the necessity to make this reference is that there
is a dispute as to whether the medical practitioners are entitled to be
indemnified by the Medical Defence Union or MDU Services Limited in
respect of the damages awarded (by agreement) to the plaintiffs in the
two actions.
3. Each action was brought on behalf of an infant plaintiff arising from
injuries suffered at birth due to professional negligence in a hospital
under the care and responsibility of, respectively, the South Eastern
Health Board and the North Western Health Board. Each of the medical
practitioners was a consultant obstetrician, practising in Ireland, and
attending the mother of one of the infant plaintiffs in respect of the
birth. Each Health Board applied to the High Court for liberty to join the
responsible consultant obstetrician as a third party in the proceedings.
The High Court made the order sought joining the consultant obstetrician
as a third party in each case. The third party notice served pursuant
to that order claimed indemnity or contribution from the consultant
obstetrician in respect of the claim of the infant plaintiff, based on an
allegation of professional negligence.
4. Each action was compromised and settled between the Health Board
and the representatives of the infant plaintiff: in the first case for
€3,750,000; in the second for €4,145,000.
5. The issue of indemnity or contribution claimed by each health board
from the consultant obstetrician (hereinafter called "the Respondent")
remained and still remains to be determined.
6. On 220d June 2005, the High Court made an order, on the application
of each Respondent giving liberty to join the Medical Defence Union
and MDU ~ Services Limited as additional third parties in each of the
proceedings. For ease of reference these additional third parties will
hereafter be described as "the MDU."
7. The Third Party Notice served on the MDU in each case is identical.
In both cases, the Chief State Solicitor, acting on behalf of the relevant
Respondent, seeks an indemnity and/or a contribution in respect of any
sum which may be awarded against him on foot of an indemnity claimed
against him by the relevant Health Boards.
8. Both the Respondents were members of the MDU, practising their
profession in Ireland, at the time of birth of each of the infant plaintiffs.
They are now former members.
9. Both the MDU and MDU Services are companies incorporated in the
United Kingdom under the laws of England and Wales. Each has its
registered office and head office at 230 Blackfriars Road, London, SEI
8PJ, England. It is agreed that the seat of the MOU and MDU Services is
England and Wales for the purposes of the "Brussels Regulation"
10. The MDU is a doctors' mutual defence organisation. It"was formed
in 1885 by a group of individuals in London concerned by the medico-
legal problems faced by medical doctors. The MDU was set up as a limited
liability company, under English law, with a Memorandum and Articles of
Association as its governing documents. The MDU contends that it has
always provided assistance and indemnity to its members (and former
members) (if applicable) on a discretionary basis in accordance with its
Memorandum and Articles of Association. The MDU has, for many years,
provided medical defence and indemnity to members practising medicine
in Ireland.
11. The Memorandum and Articles of Association represent the statutory
contract between the member (and former member) and the MDU
under the provisions of Section 14 of the Companies Act, 1985 (a United
Kingdom statute). Members and former members of the MDU can request
assistance from the MDU in respect of medical negligence claims arising
from events that occurred during the period of membership of the
member concerned under Articles 47 and 48 of the Articles of Association.
12. The MDU provided assistance to both Respondents in the conduct of
their defence of the claims made against them in the proceedings in the
High Court. The Board of Management of the MDU (being an organ of
the company) ultimately decided in exercise of their absolute discretion
under Articles 47 and 48 of the Articles of Association not to provide an
indemnity in respect of an award of damages against the Respondent
medical consultants. The Respondents challenged those decisions in the
Third Party Notices in which they set out their claim against the MDU.
13. Both Article 47 of the MDU Articles of Association (dealing with the
giving of advice or legal assistance) and Article 48 (dealing with financial
assistance or indemnity) includes among a number of conditions the
following: "Any such advice or legal assistance or defence may be granted
or terminated by resolution of the Board of Management it shall rest
only in the absolute discretion of the Board of Management ...... to limit
or restrict the giving of such advice or legal assistance or defence or
altogether to decline to give the same or to terminate any advice or legal
assistance or defence so given without assigning any reason. "(Article 47)
and
"Any such indemnity may be granted or terminated by resolution of the
Board of Management ...... and the grant of indemnity in every case
shall be made only upon such terms and conditions as the Board of
Management ...... shall think proper and it shall rest only in the absolute
discretion of the Board of Management ..... , in every case to limit or
restrict the grant of such indemnity or altogether to decline to grant the
same or to terminate any indemnity so granted without assigning any
reason. " (Article 48) (Emphasis added).
14. The Third Party Notices served on behalf of the Respondents assert
that the Irish Courts have jurisdiction to hear and determine the claims
brought by the Respondents against the MDU under Articles 5.1,5.3 arid
6.2 of the Brussels Regulation. The Third Party Notices contend that the
Respondents are entitled to an indemnity and/or contribution from the
MDU on a number of grounds.
They may be summarised as follows:
a. The MDU is estopped from not providing an indemnity to the
Respondents;
b. The Respondents have a legitimate expectation that an indemnity
would be provided;
c. The decision to "withdraw cover" or rather not to provide a full
indemnity is unlawful and contrary to the entitlement of the Respondents
under the terms of their contract with the MOU;
d. The decision in each case is "not valid' on the grounds that it is alleged
that the MDU failed to give any adequate individual consideration to
the particular circumstances of the case of each Respondent, but rather
applied a "blanket policy decision" to withdraw indemnity from certain of
the MDU's Irish members;
e. The MDU has not used or applied any discretion in deciding to grant or
to withdraw an indemnity to Dr. Howard and Dr. Davidson but allegedly
adopted a "rigid rule;"
f. The MDU is in breach of its contracts with the Respondents;
g. The MDU has discriminated against the Respondents on grounds of
nationality contrary to E.C. Law and to constitutional and natural justice;
h. The MDU did not properly exercise any discretion which it had in the
case of either Respondent;
1. The MDU made representations on foot of which it collected annual
membership fees from the Respondents and, as a consequence, the MDU
is estopped from [not] providing an indemnity to them.
J. The decision to deny indemnity to the Respondents is unfair and
unreasonable.
15. The MDU contends that the decision of its Board of Management in
each case
s a decision of an organ of the MOU, that the claims of the Respondents
have as their object a challenge to the validity of that decision, and that
consequently, the Irish Courts do not have such jurisdiction, having
regard to the provisions of Article 22.2 of the Brussels Regulation. The
MDU contends that the Courts of England and Wales, where the MDU has
its seat, have exclusive jurisdiction in relation to the Respondents' claim
against the MDU.
On that basis, a Conditional Appearance was entered in the High Court on
behalf of the MDU in each case on 5 July 2005.
16. Applications were made to the High Court on behalf of the MDU in
both cases on 29 July 2005, seeking orders pursuant to the Rules of the
Superior Courts setting aside service of the Third Party Notices dated
30 June 2005 on the MDU on the grounds that the Irish Courts do not
have jurisdiction to hear and determine the claims made against the MDU
having regard to the provisions of Article 22.2 of the Brussels Regulation.
17. The applications were grounded on affidavits sworn by Michael
Thomas Saunders, Chief Executive of the MDU and of MDU Services.
Dr. Saunders described the MDU and explained its involvement in the
proceedings in each case. Dr. Saunders also explained the context in
which the MDU had decided to continue to assist in the defence by the
Respondents of claims made against them by the relevant Health Boards
but not to assist them in the payment of an indemnity or contribution in
respect of damages or costs claimed against thedoctors by those Health
Boards. Dr. Saunders explained the issues which arose in the context
of a dispute between the MDU and the Minister for Health and Children
(the "Minister"). He then explained the MDU decision-making process in
general before describing how that process was applied with regard to
each of the two doctors. In each case, the Board of Management of the
MDU resolved in the exercise of its discretion to continue to assist the
Respondents' defence for the time being but not to assist in providing
an indemnity to the doctors in respect of any damages or costs awarded
against them by their employers, the relevant Health Boards.
18. In their replying affidavits, the Respondents contended that it had
not been indicated to them at any time, nor were they led to believe that
the support of the MDU was discretionary. They believed and were never
disabused of the notion that they would be assisted or indemnified by
the MDU. They were not informed that assistance or indemnity might be
unavailable or withdrawn.
They had paid fees to the MDU in respect of their membership. They
contended that the decision by the MDU to withdraw indemnity was
actuated not by any proper exercise of any discretion which the MDU
might have in relation to their membership but rather related to purported
concerns about the level of payments being made in respect of obstetric
claims in Ireland generally and the impact which this might have on MDU
finances. They claimed that this was not a proper exercise by the MDU
of any discretion which the MDU might have but constituted "urifair and
unjustified discrimination" against them and against other Irish members
and former members. They also contended that there was no basis for
the MDU to refuse an indemnity and that such refusal was "grossly urifair
and unreasonable". They alleged that their cases were not considered by
the MDU on their merits but rather as a consequence of a "predetermined
course of action by the MDU to reject all claims of this nature in the Irish
market". They contended that by reason of representations allegedly
made by the MDU to medical practitioners in Ireland, the MDU is estopped
from challenging jurisdiction or from withdrawing assistance or indemnity
from them.
19. The President ofthe High Court rejected the applications ofMDU. He
held that the claims made against the MDU in the Third Party Notices did
not have as their object the validity of a decision of any organ of the MDU
in company law terms and that, as a consequence, the Courts of England
and Wales did not have exclusive jurisdiction in relation to those claims
pursuant to Article 22.2 of the Brussels Regulation.
20. The MDU has appealed the High Court judgment and Order to the
Supreme Court by a Notice of Appeal in each case dated 22 May 2006.
21. The MDU contend that, properly construed, the claims made by the
Respondents against the MDU in the Third Party Notices, seek directly or
indirectly to impugn the validity of decisions of the Board of Management
of the MDU and are, therefore, caught by the exclusive jurisdiction
provision contained in Article 22.2 of the Brussels Regulation as a
consequence of which the Courts of England and Wales have exclusive
jurisdiction in relation to the claims.
22. MDU say that the claims are not made on foot of simple contracts
of indemnity existing between two separate parties. The rights asserted
arise as members of the MDU under the constitution of the MDU and the
obligations of the Board are not just to an individual member, but to the
membership as a whole. The arrangements between the MDU and its
members, therefore, fall to be dealt with under English Company Law.
A member of the MDU has no right to assistance or indemnity under the
provisions of Articles 47 and 48 of the Articles of Association of the MDU.
The right of a member (as a member (including former members)) is to
have his or her request for assistance or an indemnity properly considered
by the MDU. The member's request must be considered by the Board
which must determine in its absolute discretion whether to grant, decline
to grant or terminate any indemnity. Matters concerning the status and
ambit of such discretion are central to the constitution of the MDU.
23. The MDU says that any case brought by a member which seeks to
challenge the MDU's decision in relation to the granting or otherwise
of an indemnity can only be a challenge to the ambit and exercise of
the express absolute discretion and thus to the validity of a decision
of the MDU taken under its Articles of Association. The decisions being
challenged can only be made by the Board. Requests for assistance or
indemnity made by members (or former members) are required under
the Articles of Association of the MDU to be dealt with by the Board of
Management of the MDU which must exercise the discretion conferred in
that context and which is bound by the Articles of Association to make a
decision on those requests. The Third Party Notices directly challenge the
validity of the Decisions of the Board and contend inter alia that there was
not a proper exercise of the discretion of the Board in each case.
24. The MDU submits that the "principal subject matter" of the
Respondents' claims against the MDU is a challenge to the validity of
decisions of the Board of Management of the MDU and is, therefore, a
challenge to the validity of a decision of an organ of the MDU within the
meaning of those terms in Article 22.2 of the Brussels Regulation.
25. On the other hand the Respondents, in their submissions to this
Court, contend that their claim is essentially contractual: the MDU has
acted in breach of contract in failing to give proper consideration to
the request for an indemnity; the MDU, having acted on behalf of the
consultants in the defence of their claims in the High Court, is estopped
from refusing an indemnity at this late stage of those proceedings.
They claim that the Courts in both the United Kingdom and in Ireland
have treated claims by MDU members to an indemnity from the MDU as
being contractual in nature. (See Medical Defence Union v Department
of Trade [1981] Ch 82 (High Court of England and Wales) and Barry v
Medical Defence Union [2005] IESC 41 (Supreme Court ofIreland)). They
assert that the Irish Courts have jurisdiction to hear and determine their
claims against the MDU and should assume jurisdiction pursuant to the
provisions of Article 5.1,5.3 and 6.2 of the Brussels Regulation.
26. The Respondents contend that the claim does not involve an attack
on any decision of any organ of the MDU by reference to any provision or
principle of company law.
27. The Respondents further contend that Article 22.2 insofar as it
provides for exclusive jurisdiction where the proceedings have as their
object (inter alia) the validity of decisions of organs of companies or other
legal persons does not extend to claims (such as those made in these
proceedings) where no allegation is made that in arriving at its decision,
the MDU did not have regard to its internal management rules or to its
Memorandum and Articles of Association or where no allegation is made
that the decision is invalid on some company law grounds.
28. The Respondents submit that Article 22.2 of the Brussels Regulation
should not be given a wider interpretation than is required by its objective
since the Article has the result of depriving the parties of the choice of
forum which would otherwise be theirs under the Brussels Regulation.
29. The appeals came on for hearing before the Supreme Court on 5
March 2007. It was accepted by the parties that there was no decision
of the Court of Justice directly on point. The Court decided that it would
be necessary to request the Court of Justice to give a ruling on the
interpretation of Article 22.2 of the Brussels Regulation pursuant to
Article 234 EC in order to enable the Court to decide the appeals. 30.
That necessity arises as follows. This Court is of opinion that, assuming
the courts of England and Wales do not have exclusive jurisdiction, it will
have to decide whether the relationship between the Respondents and
the MDU is a contractual one of the nature asserted by the Respondents
or one which involves the exercise of an absolute discretion by the Board
of Management of MDU whether or not assistance should be granted
to a medical practitioner. Even if the courts of England and Wales have
exclusive jurisdiction, those courts may be called upon to decide that
question. The question of interpretation arises, because MDU contends
that the exercise by its Board of Management of the discretion comes
within the terms of Article 22.2 of the Brussels Regulation. That provision
is as follows: "The following courts shall have exclusive jurisdiction,
regardless of domicile:
1. ...
2. In proceedings which have as their object the validity of the
constitution, the nullity or the dissolution of companies or other legal
persons or associations of natural or legal persons, or the validity of the
decisions of their organs, the courts of the Member State in which the
company, legal person or association has its seat. In order to determine
that seat, the court shall apply its rules of private international law"
QUESTION OF INTERPRETATION
For the reasons given above, the Court asks the Court of Justice for an
interpretation of the following question: Where medical practitioners
form a mutual defence organisation taking the form of a company,
incorporated under the laws of one Member State, for the purpose of
providing assistance and indemnity to its members practising in that and
another Member State in respect of their professional practice, and the
provision of such assistance or indemnity is dependant on the making of a
decision by the Board of Management of that company, in accordance with
its articles of association, in its absolute discretion, are proceedings in
which a decision refusing assistance or indemnity to a medical practitioner
practising in the other Member State pursuant to that provision is
challenged by that medical practitioner as involving a breach by the
company of contractual or other legal rights of the medical practitioner
concerned to be considered to be proceedings which have as their object
the validity of a decision of an organ of that company for the purposes
of Article 22, paragraph 2 of Council Regulation (EC) No. 44/2001 on
jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters so that the courts of the Member State in which that
company has its seat have exclusive jurisdiction.