JUDGE DIAMOND QC: Introduction
There are before me summonses in three actions 1990 Folio 640, 1990
Folio 1675 and 1990 Folio 1676. All three actions arise out of a single
reinsurance programme arranged to reinsure the risks undertaken by
certain primary insurers under policies issued by an Italian cover holder,
V. International Spa ("V.") covering Italian jewellers and Italian dealers in
furs and antiques against loss and damage. The reinsurance programme
involved, as is not unusual, a multiplicity of parties domiciled in different
countries. The insurance companies who required reinsurance, the
"Reassured", were mostly domiciled in Italy but one was domiciled in
England. The programme of reinsurance and retrocession was arranged
by a broker domiciled in London, H. F. I. B. Ltd ("H."). The reinsurers were
domiciled in one case in France and in the other case in Belgium, though
both had branch offices in London. The reinsurance programme involved a
further retrocession and the retrocessionaires were domiciled in London.
The broad issue raised in the summonses before me in each action is
whether certain aspects of the disputes between the parties to this
reinsurance programme should be resolved by the Commercial Court in
London or by the Civil Tribunal of Milan. It is not disputed by the Italian
reassured that this Court has jurisdiction over certain aspects of the
matter including a claim made by the French reinsurers that they are
entitled to avoid the reinsurance for the first year of the programme
on the grounds of misrepresentation and non-disclosure. The Italian
reassured contend however that other aspects of the matter, including a
similar claim made by the French reinsurers in respect of the second year
of the programme and a claim made by the other reinsurers that they are
entitled similarly to avoid the reinsurance in respect of both years of the
programme can only be decided by the Civil Tribunal of Milan.
When disputes arise in connection with reinsurance arrangements such
as these it is most important that all the related disputes involving all
the interested parties should be determined in the same forum before
the same tribunal. Invariably there are common issues of fact and law
affecting all or many of the parties and only if the whole matter is decided
by the same tribunal will it be possible to avoid the risk of inconsistent
conclusions of fact and law resulting from separate proceedings.
The question which arises in the present case is whether that desirable
result can be achieved in cases where jurisdiction is governed by the
Convention on Jurisdiction and the Enforcement of Judgments in Civil and
Commercial Matters 1968 as amended ("the Convention"). Section 8 of
the Convention deals with "Lis Pendens-Related Actions". …
The Convention, together with the 1971 Protocol and the Accession
Convention, was given legal force in the United Kingdom by the Civil
Jurisdiction and Judgments Act, 1982. It also has legal force in Italy.
Since the points raised on art 21 and art 22 of the Convention are of
some general importance, I have taken a little time to consider the
matter, and at the request of the parties, I am giving this judgment in
open Court.
Background
I shall begin by describing the parties in a little more detail.
The 1988/89 year
A number of mostly Italian insurance companies gave binding authority
to an Italian cover holder, V., to write on their behalf primary insurance
policies covering Italian jewellers and Italian dealers in furs and antiques
against loss and damage. It seems likely that the London brokers, H., had
some part to play in setting up these arrangements.
The Italian insurance companies which gave binding authority to V.
included the following:
(i) R. M. C. Francese di Assicurazioni e Riassicurazioni ("R.")
(ii) C. Co. Italiana di Assicurazioni e Riassicurazioni Spa ("CCI")
(iii) L. Assicurazioni Spa ("L.").
In the course of the relevant insurance year, as a result of an approach
by H., the L. and G. Assurance Society Ltd (the "L. and G."), an English
company, agreed to participate and to give binding authority to V. to issue
primary insurance policies covering Italian dealers in furs.
The reinsurance programme for these risks was arranged by H.. The
programme had three constituent layers. It involved moreover that one of
the layers would enjoy the protection of stop loss retrocession which was
also arranged or to be arranged by H..
The binding authority given to V. had a limit of Lit 1,000 m each and
every loss. It was arranged that the primary insurer would retain 7.5 per
cent of this risk and cover the remaining 92.5 per cent by means of the
reinsurance placed by H.. The reinsurance programme would have three
layers as follows:
(a) First layer
This would cover Lit 2000 m each and every loss up to a limit of Lit 4,000
m in aggregate.
(b) Second layer
This would cover Lit 200 m each and every loss in excess of Lit 4,000 m in
aggregate.
(c) Third layer
This would cover Lit 800 m each and every loss in excess of the Lit 200
m each and every loss covered by the first and second layers and is not
relevant to the proceedings.
Both the first and second layers were reinsured by the following in the
proportions 50 per cent each.
(i) Assurances G. de France IART ("AGF") (AGF is incorporated in France
but had a branch office in London).
(ii) U. A. de Reassurances (U. Re). (This was a company incorporated in
Belgium which also had a branch office in London and which I will refer
to as "U. Re". On about Dec 27, 1989, in the course of the second year
of the reinsurance, it was dissolved and all its assets and liabilities were
transferred to its parent company U. SA, a company incorporated in
France.)
The reinsurers have been referred to in the pleadings as "fronting
companies". It appears that it was not intended that they should retain
any of the risk. As to the first layer, it is alleged that the fixed premium
would more than cover the exposure of the reinsurers. As to the second
layer it is said that it was always intended that the whole risk should be
covered by stop loss retrocession. What in fact occurred is that the whole
of the 50 per cent share reinsured by U. Re was further reinsured by AGF.
The liability of AGF (ie both the 50 per cent directly reinsured and the 50
per cent taken by U. Re and reinsured with AGF) was ceded by AGF as to
100 per cent to the following whom I will call "the retrocessionaires":
(i) Ch. F. and M. Co UK Ltd.
(ii) Mu. G. I. Co Ltd.
(iii) Cha. Insurance Co Ltd.
(iv) Sc. Reinsurance Co Ltd.
(v) Ll. S. Nos 80 and 843.
(vi) Ll.S. No 707.
All the above are domiciled in England.
The 1989/90 year
The reinsurance programme was renewed so as to cover a further period
from Aug 31, 1989 to Aug 31, 1990. The programme followed the same
pattern as for the previous year, with some differences as follows:
(a) The primary insurers were not identical. L. was not involved in the
second year of the programme. Two other Italian insurance companies
joined the scheme (i) No. Spa di Assicurazioni e Riassicurazioni ("No.") (ii)
Ni. Spa Lloyd Nazionale Italiano ("Ni.").
(Ni. was a member of the scheme for only a short period and it is said
that no policies were issued on its behalf.)
(b) H. or one of its associate companies acquired an interest in V. and a
new Italian company was formed to act as cover holdder, V. H. Fielding
Spa.
(c) The first layer covered Lit 200 m each and every loss up to a limit of
Lit 1000 m in aggregate (instead of Lit 4000 m as in the first year).
(d) The 50 per cent share in the second layer reinsured by U. Re was not
further reinsured by U. Re with AGF.
(e) The 50 per cent shares of the reinsurance accepted by AGF and U.
Re were not reinsured with the same retrocessionaires who had provided
stop loss retrocession for the first year but with different reinsurers being
certain Ll. S..
The disputes
By letters of Jan 9 and Feb 1, 1990 the retrocessionaires in respect of
the first year purported to avoid the contracts ab initio on the grounds
of non-disclosure, misrepresentation and breach of the duty of utmost
good faith. The reinsurers have contended that the retrocessionaires
were not entitled to take this course but they in turn have purported to
avoid the reinsurances as against the reassured. It is not necessary to
set out the grounds on which the retrocessionaires and the reinsurers
rely. They are complex and relate (i) to the structure of the reinsurance
programme which is said to have prejudiced unfairly the interests of
the retrocessionaires; (ii) to information as to underwriting restrictions
and other matters given to the reinsurers and retrocessionaires at the
time the business was written; (iii) to statistics relating to the prior loss
record of the account notified to the reinsurers and retrocessionaires
at the time the business was placed and (iv) to an alleged abuse of the
power of the reassured to grant extensions and renewals of original
insurances so as to bring within the terms of the reinsurance programme
risks which, it is said, according to normal market practice ought not to
have been covered by it. This is no more than a sample of the allegations
made by the retrocessionaires and the reinsurers and is not intended
to be comprehensive. The dispute in respect of the second year of the
reinsurance programme is similar. The reinsurers contend, inter alia,
that the alleged non-disclosure and misrepresentation which occurred
at the time the business was first placed had not been corrected at the
time the reinsurance programme was renewed and that there was an
implied representation that no material change had occurred. There is
however a difference between the two years in that the retrocessionaires
for 1988/1989 have purported to avoid the reinsurances whereas the
retrocessionaires for 1989/90 have not yet avoided the contracts though it
is said that there are grounds for fearing that they will do so.
The AGF action (1990 Folio No 640)
The writ in this action was issued on Mar 21, 1990. The defendants
named in the writ are R., CCI and L. (the Italian reassured), the L. and
G. (the English reassured), H. (the brokers) and the retrocessionaires.
The claims endorsed on the writ are confined to the 1988/89 year and fall
under three heads:
(a) A claim made by AGF against the retrocessionaires that the
retrocession is a valid and binding contract of insurance.
(b) A claim made by AGF against H. for damages (i) for failing to
obtain valid retrocession and (ii) for failing to exercise care in the
representations and undertakings made to AGF concerning the risks that
would be presented to AGF for reinsurance and the risks that V. would be
writing.
(c) A claim made by AGF against R., CCI, L. and L. and G. that AGF were
under no liability to pay claims submitted by those defendants or were
entitled to avoid the reinsurance on the grounds of misrepresentation
and non-disclosure and a claim for damages on the grounds that those
defendants failed to conduct the business with reasonable skill and care
and/or for failure to take reasonable care that claims presented for
payment fell within the terms of the reinsurance. The writ was served
on R., CCI and L. in Italy on about Mar 31, 1990. Points of claim were
served on May 4, 1990 and amended points of claim were served on
Jan 25, 1991. It is conceded by all the defendants to Folio 640 that the
proceedings were properly brought and that the Court has jurisdiction
over them under the Convention. R., CCI, and L. at one stage intimated
that they intended to apply to set aside service of the proceedings but by
a consent order of Oct 29, 1990 they withdrew that objection and on Nov
12, 1990 they served points of defence in the action. On Feb 13, 1991
AGF took out a summons which is presently before me by which they seek
the following relief:
1. Leave to reamend the writ to add Ni. and No. as defendants. Only the
application to add No. is currently pursued.
2. Leave to issue a concurrent writ and leave, so far as necessary, to
serve that writ out of the jurisdiction on No. under arts 5(1), 5(3) or 6(2)
of the Convention.
3. An order prescribing the time for acknowledgment of service.
4. Leave to amend the points of claim. The significant amendments are
those which seek to introduce causes of action relating to the 1989/90
year. These are set out in pars 82 to 97 of the draft supplied by Messrs
Clyde & Co, AGF's solicitors, on July 5, 1991. Paragraphs 82 to 92 and
par II(ii) of the prayer contain claims against H. in respect of the 1989/90
year. H. consented to these amendments before the hearing and were not
represented at it. Paragraphs 93 to 97 and par IV of the prayer set out
claims against R., CCI, L. and G., No. and Ni. (not pursued) in respect of
the 1989/90 year. L. and G. have consented to the amendment. R. and
CCI oppose the giving of leave. …
The proceedings brought in Milan
In July, 1990 the Italian reassured (L., R., CCI and No.) began
proceedings before the Tribunale Civile di Milano. The defendants named
in the proceedings were AGF, "U.-Union Atlantique de Reassurance SA",
V., V. H. Fielding Spa and H.. The subject matter of the proceedings was
"Reinsurance contracted by the Italian companies (cedents-reinsured)
through the brokers H. Fielding Insurance Broking Ltd and V. International
Spa and V. H. Fielding Spa with the French reinsurers AGF and U. and
regarding insurance contracts entered into by the plaintiffs mainly with
jewellers during the periods 1988-89 and 1989-90." The relief sought
by the Italian reassured in the writ includes an order requiring AGF and
U. Re to keep the reassured indemnified against losses falling within the
terms of the reinsurances and an order for payment of the amounts due
together with interest and inflation costs. The proceedings were served on
June 22, 1990 on AGF at the offices of Ph. Insurance Co (a company then
partly owned by AGF) in Rome. As to U. SA, the writ cited as one of the
defendants:
U.-Union Atlantique de Reassurance SA, with legal seat at Brussels and
general representation for Italy at Rome, Via VE Orlando 75 and head
office in Milan Via Valcava 6.
The writ, according to Av Boglione who acted for the Italian reassured,
was served at the offices of U. SA in Milan on June 28, 1990 (but see
the copy of the writ exhibited to the affidavit of Miss KM Appleyard
where the date of service of the writ by officials of the Milan Court is
given as June 26, 1990.) The case was entered in the Court list on July
2, 1990. AGF concede that, so far as they are concerned, the Court in
Milan became seised of the matter on July 2, 1990. U. SA say that the
writ was a nullity so far as they are concerned because it cited U. Re, a
non-existent defendant. U. SA entered a formal appearance to the writ
on Feb 20, 1991 in which they raised the plea that the action had been
brought against the wrong defendant. This in turn has given rise to a
number of issues as to whether and if so at what date the Italian Court
became seised of the dispute between the Italian Reassured and U. SA.
AGF has issued proceedings in the Supreme Court of Italy, the Corte
Suprema de Cassazione, to set aside or stay the Italian proceedings on
the grounds of "lis pendens" relying on arts 21 and 22 of the Convention.
U. SA has asked the Court in Milan to declare that the writ served on it is
a nullity and/or that U. SA's appearance to the writ has effect only from
Feb 20, 1991 and that the Court was not seised earlier and/or that the
Italian Court should declare its lack of jurisdiction in favour of the Court
in London on the ground that the Court in London was "first seised" by
virtue of the proceedings began by U. SA in Folios 1675 and 1676 (see
below).
A decision on U. SA's application to the Court in Milan has been stayed
pending a decision by the Court of Cassation on the proceedings begun by
AGF.
The actions begun by U. SA
(a) 1990 Folio No 1675
This action concerns the first year of the reinsurance programme
1988/89. The writ was issued on Aug 9, 1990. The defendants named
in the writ are the Italian reassured (R., CCI and L.), the English
reassured (the L. and G.), the French reinsurers (AGF) and the brokers
(H.). The writ was served on R., CCI and L. at their head offices in
Italy on or about Nov 27, 1990. The relief claimed in the writ includes
the following: (1) A declaration that U. SA are not liable in respect
of risks ceded or purportedly ceded to U. Re by the reassured. (2) A
declaration that U. SA is entitled to avoid the contract or contracts of
reinsurance for the 1988/89 year as against the reassured on the grounds
of misrepresentation, non-disclosure and breach of the duty of the
utmost good faith. (3) A declaration that AGF is liable on the contract of
retrocession placed by U. Re with AGF in respect of U. Re's 50 per cent
share of the reinsurance. (4) Damages against H. for breach of contract in
respect of H.'s part in arranging the reinsurance of the Italian and English
reassured with U. Re and the further reinsurance of U. Re with AGF.
The L. and G., AGF and H. accept that the proceedings have been properly
commenced against them and have served points of defence. On Dec
28, 1990 the Italian reassured (R., CCI and L.) took out a summons
under RSC, O 12, r 8 (relying also on s 49(3) of the Supreme Court Act,
1981 and on the inherent jurisdiction of the Court) by which they seek
orders: (1) that the writ and all subsequent proceedings against them
be set aside; (2) a declaration that the writ was not validly served upon
them; and (3) that all further proceedings against them be stayed on the
grounds of lis alibi pendens and/or by reason of art 21 and art 22 of the
Convention.
This summons is presently before me.
1990 Folio No 1676
This action concerns the second year of the reinsurance programme
1989/90. The writ was issued on Aug 9, 1990. The defendants named
in the writ are the Italian reassured (R., CCI, Societe Rappresentanza
Assicurative Sr1 No. and Ni.), the English reassured (the L. and G.) and
the brokers (H.). The writ was served on R., CCI and No. at their head
offices in Italy on or about Nov 27, 1990. The relief claimed in the writ
is similar to that claimed in Folio 1675 save that it concerns the risks
ceded or purported to be ceded in the 1989/90 year. The L. and G. and H.
concede that the action was properly brought against them. On Dec 28,
1990 R., CCI and No. took out a summons seeking similar relief to that
sought by R., CCI and L. in Folio No 1675. That summons is also before
me.
In this judgment I will refer to the proceedings in this Court as "Folio
640", "Folio 1675" and "Folio 1676" respectively. I will refer to the Italian
Courts as "the Court in Milan" and "the Court of Cassation" respectively.
The contentions of the parties
The applications made in Folios 640, 1675 and 1676 originally came
on together for hearing before me on May 2, 1991. I was immediately
confronted with the unfortU.e position that, in clear disregard of the
Rules of Court, no affidavit had been sworn or served in support of
the summonses taken out by the Italian reassured in Folios 1675 and
1676 until Apr 29, 1991, although the summonses themselves had been
issued on Dec 28, 1990. This regrettable lapse had the result that it was
not possible to deal at the first hearing with the issues relating to the
contention by U. SA that the Court in Milan was not seised of the dispute,
so far as it was concerned, on June 28, 1990, but if it became seised of
the dispute at all, this occurred only on Feb 20, 1991 when U. SA entered
a formal appearance to the writ and that accordingly the London Court
is the Court first seised since it became seised of the proceedings in
Folio 1675 and 1676 either on Aug 9 or Nov 27, 1990 and in either event
before Feb 20, 1991. There was time for U. SA to serve an affidavit from
an expert on Italian law before the hearing on May 2 but there was no
opportunity for the Italian reassured to file evidence in reply before the
hearing. …
Mr Jonathan Gaisman who appeared for R. and CCI in Folio 640, R.,
CCI and L. in Folio 1675 and R., CCI and No. in Folio 1676 made a
number of succinct and cogent submissions. He made it clear that,
notwithstanding the broad terms of the summonses in Folios 1675
and 1676, his application was confined to a submission that the Court
should decline jurisdiction under art 21 of the Convention. Thus he did
not dispute that the Court would otherwise have had jurisdiction over
the Italian reassured under arts 5(1), 5(3) or 6(1) of the Convention.
Further, he made it clear that he was not submitting that if he failed
to persuade the Court to decline jurisdiction under art 21, the Court
should nevertheless stay the relevant parts of the proceedings or decline
jurisdiction under art 22. …
Seisin
Both art 21 and art 22 refer to "the Court first seised". In the case of
art 21 this expression refers to the Court first seised in proceedings
involving the same cause of action and between the same parties. Article
22 requires one to ascertain the Court first seised in the first of two or
more related actions.
The proper approach to questions of seisin was laid down by the European
Court in Zelger v Salinitri, [1984] ECR 2397. The Court held that:
... Article 21 of the Convention must be interpreted as meaning that
the court "first seised" is the one before whom the requirements for
proceedings to become definitively pending are first fulfilled, such
requirements to be determined in accordance with the national law of
each of the courts concerned.
I need only cite two paragraphs from the judgment
14. It may properly be inferred from Article 21, read as a whole, that a
court's obligation to decline jurisdiction in favour of another court only
comes into existence if it is established that proceedings have been
definitively brought before a court in another State involving the same
cause of action and between the same parties. Beyond that, Article 21
gives no indication of the nature of the procedural formalities which must
be taken into account for the purposes of considering whether or not
to recognize the existence of such an effect. In particular, it gives no
indication as to the answer to the question whether a lis pendens comes
into being upon the receipt by a court of an application or upon service or
notification of that application on or to the party concerned.
15. Since the object of the Convention is not to unify those formalities,
which are closely linked to the organization of judicial procedure in the
various States, the question as to the moment at which the conditions for
definitive seisin for the purposes of Article 21 are met must be appraised
and resolved, in the case of each court, according to the rules of its own
national law. That method allows each court to establish with a sufficient
degree of certainty, by reference to its own national law, as regards itself,
and by reference to the national law of any other court which has been
seised, as regards that court, the order or priority in time of several
actions brought within the conditions laid down by the Convention.
Since the hearings before me the Court of Appeal has laid down that in
the ordinary straightforward case an English Court becomes "seised" of
proceedings for the purposes of art 21 and art 22 when the writ is served
on the defendant and not when it is issued, albeit that there may be
exceptions to this rule as where a Mareva injunction has been granted
earlier; Dresser UK Ltd v Falcongate Freight Management Ltd [1991] 2
Lloyd's Rep 557; judgments handed down on July 19, 1991.
So far as Italian proceedings are concerned, the experts on Italian law
were agreed that under Italian law the Court is seised at the time the writ
is served, provided that the writ is valid.
There is no difficulty about seisin in the existing proceedings involving
AGF. The Commercial Court in London became seised of Folio 640 when
the writ was served on the Italian reassured in Italy on about Mar 31,
1990. The Italian proceedings were served on AGF in Italy on June
22, 1990 and were entered in the Court list on July 2, 1990. So far as
concerns AGF's cause of action in respect of the reinsurance programme
for 1988/89, this Court is the Court "first seised". So far as concerns
the proposed reamendments (ie AGF's cause of action relating to the
reinsurance programme for 1989/90) the question of seisin depends
on whether or not Folio 640, the Italian proceedings and the proposed
reamendments are "related actions". If they are, then this Court is the
"first seised" by virtue of art 22. If they are not, then the Court in Milan
is the Court "first seised" by virtue of art 21. The problem here does not
so much concern seisin as whether the actions are related actions and
whether that question should be decided here in London or by the Court
of Cassation.
I turn to the proceedings involving U. SA. Here the question of seisin
was strongly contested. U. SA are not parties to Folio 640. The Italian
proceedings were served on U. SA in Milan on June 28, 1990 but there is
a contested issue as to whether the writ was valid. The first proceedings
begun by U. SA were Folios 1675 and 1676. The writs in these actions
were served on the Italian reassured in Italy on Nov 27, 1990. By that
time U. SA had not entered an appearance in the Italian proceedings. U.
SA entered an appearance to those proceedings on Feb 20, 1991. There
is a contested issue as to whether, if the writ was originally invalid, that
appearance retrospectively validated the writ as from the date of service
or only validated it as from Feb 20, 1991. There is therefore a contested
issue as to whether this Court, when it became seised of the two actions
on Nov 27, 1990 was the Court first seised or whether the Italian Court
had meanwhile become seised of the matter on June 28, 1990 in which
case it would be the Court first seised.
Mr Gaisman urged that I should not decide this issue on the grounds that
it related to the jurisdiction of the Court in Milan. I was not impressed
by this point. The European Court in Zelger v Salinitri, (sup) held that a
Court in one Contracting State should examine the date when a Court in a
different Contracting State became seised of proceedings --
... by reference to the national law of any other Court which has been
seised.
Applying that principle the Court of Appeal in the Dresser UK Ltd case
remitted the action to the Commercial Court to enable evidence of
Dutch procedural law to be given to resolve the question on what date
the Rotterdam District Court became seised of related proceedings. Mr
Gaisman relied on the recent decision of the European Court in Overseas
Union Insurance Company v New Hampshire Insurance Company (Case
C-351/89, judgment given on June 27, 1991 [1992] 1 Lloyd's Rep 204).
I shall have to refer to this case at a later stage in this judgment. It
is sufficient to say that there is nothing in this judgment to cast doubt
on the principles set out in Zelger v Salinitri which clearly state how
questions of seisin are to be resolved.
Mr Gaisman had however a stronger point that, as a matter of discretion,
since the Court in Milan is seised of the question at what date it became
seised of the Italian proceedings, I might stay the proceedings in London
and await the decision of the Court in Milan on this issue. It is not clear
to me that I have a discretion to do this but, in case I have, I have
considered with some care how I should exercise that discretion.
There are factors in favour of exercising my discretion in the manner
suggested by Mr Gaisman. These are that the question of seisin involves
disputed issues of Italian procedural law and that the Court in Milan is
far better equipped than an English Court to decide those questions.
Further if I were to decide the question of seisin, the matter might come
before the Court in Milan at a later stage and there is a danger that it
might reach a different result from the one that this Court had previously
reached.
These factors would weigh heavily with me if there were a prospect that
the Court in Milan is likely to decide the question of seisin in the near
future. The evidence however is otherwise. Av Rubino-Sammartano in
his affidavit of Apr 30, 1991 states, in a passage which has not been
challenged, that the Court of Cassation is unlikely, due to a backlog of
work, to decide the questions arising under art 21 and art 22, within
the next two years and that consequently it is anticipated that the
proceedings in Milan will continue to be stayed for that period of time. It
would not be until after a decision by the Court of Cassation (which might
itself involve a reference to the European Court) that the Court in Milan
would decide at what date it became seised of the relevant proceedings
and this decision in turn could well be the subject of an appeal.
It is, I think, a disquieting and unattractive scenario that any effective
decision on whether the disputed issues should proceed in England
should be postponed for this period of time. Whatever happens to the
summonses before me, large parts of the litigation will continue in
England in any event. Thus the litigation between the Italian and English
reassured and AGF and between AGF and the retrocessionaires and H. in
respect of 1988/89 will in any event continue in England. So in relation
to that year will the litigation between U. SA, the L. and G., AGF and
H.. So in relation to 1989/90 will the litigation between both AGF and
U. SA against the L. and G. and H.. It would be unrealistic to proceed
on the basis that until each and every disputed issue of jurisdiction is
resolved it is probable that there will be a freeze on all further progress
in the litigation. There must come a time when the litigation as a whole
proceeds in this Court even if it is not possible to include in that litigation
some related cause of action where the Court's jurisdiction is disputed.
In these circumstances I conclude that if I have a discretion in the matter
I would exercise it in favour of myself deciding the disputed question of
seisin. I reach this conclusion partly because of the time factors I have
mentioned and partly because I regard it as more important to adopt a
procedure which will enable the action, as a whole, to go forward than to
avoid any risk of inconsistent findings being made on seisin in London and
Milan.
I turn therefore to the evidence given by the experts on Italian law. I was
most impressed by the calibre of the evidence on both sides and clearly
the issues are not straightforward. I have to say however that I am in no
doubt that I must prefer the evidence given by Av Rubino-Sammartano
and Professor Berlingieri to that given by Professor La China. There are
two principal issues and I will deal with each in turn.
The first question is whether the writ was void as regards U. SA when
it was served on it on June 28, 1990. In his evidence Av Rubino-
Sammartano relies on ss 163(2) and 164(1) of the Civil Procedure Code
and the decision of the Court of Cassation in Spa Officine Galileo v
Oggioni reported in Giust Civ [1972] I 102.
Section 163 of the Civil Procedure Code provides "The writ of summons
must contain... (2)... the full name, residence, domicile or dwelling of the
defendant and of those who represent him or act for him.
Section 164(1) of the Code provides:
The writ is null and void if one of the requirements listed in section 163 at
nos 1, 2, 3 is omitted or is fully uncertain...
The defendant's appearance remedies any defect in the writ, but the
rights acquired before it, in the situations set out in the preceding
paragraph, are not affected by it.
I have been provided with an English translation of the decision of the
Court of Cassation in Spa Officine Galileo (sup). The facts in that case
are strikingly similar to those of the present case. Both Av Rubino-
Sammartano and Professor Berlingieri say, relying on that decision,
that when the writ was issued and its service effected it was void since
it named U. Re as a defendant and U. Re had ceased to exist. The
decision of the Court of Cassation seems amply to bear out that in such
circumstances the writ would be null and void at the time of service.
Professor La China in his first affidavit did not refer to Officine Galileo at
all. He has sought to argue, in reliance on s 156 of the Civil Procedure
Code, that "nullity cannot ever be established if the writ or other process
achieves the object for which it is intended" and that U. SA can have
been in no doubt that the Italian reassured intended to sue whichever U.
company was liable on the reinsurance. He has relied in this connection
on the fact that the writ describes the subject matter of the claim as
one concerning "the French reinsurers AGF and U." and also on the fact
that, in the vocatio in jus, the word "U." precedes "Union Atlantique de
Reassurance SA with legal seat at Brussels". While the argument is in
many ways an attractive one, as it prevents a defendant from taking
advantage of a technical point where he has not been misled by a defect
in the writ, the answer made to this point by Av Rubino-Sammartano and
Professor Berlingieri is partly that the argument runs counter to s 163(2)
and partly that precisely the same argument could have been raised in
Officine Galileo where a writ served on the merged company was held to
be invalid on the ground that it named as a defendant a company which
had ceased to exist but whose liabilities had been transferred by law to
the merged company. Having considered both sides of the argument I find
the evidence of Av Rubino-Sammartano and Professor Berlingieri much
more persuasive on this point. At one stage Professor La China expressed
the view that, as a result of the misnomer of the defendant, the case is
one of "partial nullity" within art 159 of the Civil Procedure Code. But
this opinion was inconsistent with Professor La China's own published
commentary on Breglia v Italia di Navigazione (Court of Naples, June 27,
1974 Giur It [1976] 1, II, 152) and in his second affidavit he seems to
have abandoned that point. On the basis of the evidence as a whole I find
that the writ was invalid when served on U. SA on June 28, 1990.
I turn to consider the second main point. This concerns the effect of the
original statement of defence filed by U. SA on Feb 20, 1991 by which
it stated that the proceedings correctly named U. Re as defendant since
the plaintiffs were reinsured with U. Re but that U. SA "had nothing
to do with U. Re". It seems probable on the evidence that by putting
in this defence U. SA waived the defect in the writ. The evidence of
Av Rubino-Sammartano and Professor Berlingieri is that, if this be the
case, the matter is governed by s 164(1) of the Civil Procedure Code
which provides that if one of the requirements for a valid writ listed
at (1), (2) or (3) of s 163 (including (2) which refers to the name of
the defendant) is "omitted or is fully uncertain", then "the defendant's
appearance remedies any defect in the writ but the rights acquired
before it, in the situations set out in the preceding paragraph, are not
affected by it". (My emphasis). Their evidence is that the appearance
remedied the defect ex nunc (ie from Feb 20) not ex tunc (ie from June
28). In answer to this Professor La China states that nullity cannot be
relied on as U. SA never raised nullity in its defence; that the validity of
service was never challenged; that the defect was an irregularity which
could be cured ex tunc by the appearance of U. SA; and that the rights
preserved by s 164(1) are only substantive and not procedural rights.
I am however satisfied that all these points were effectively countered
by Av Rubino-Sammartano and Professor Berlingieri. I would only add
that the judgment of the Court of Cassation in Framar v Cademartori on
which Professor La China relies in par 15 of his affidavit of July 9, 1991,
far from supporting his opinion, confirms the evidence of Av Rubino-
Sammartano that the entry of an appearance by U. SA would cure the
nullity but without prejudice to rights already acquired. Finally I was not
impressed by the point that U. SA had contributed to confusion as to
which U. company was the party liable to be sued.
There is, moreover, a further point not taken by any of the experts on
Italian law which seems to me to have a bearing on the question of seisin.
In Zelger v Salinitri the European Court held that the Court first seised
is the one before whom the requirements for proceedings to become
"definitively pending" are first fulfilled. It seems to me that if the writ
was null and void at all times down to the time that U. Re entered an
appearance on Feb 20, 1991, then even if the appearance of U. Re cured
the irregularity retrospectively to the date of service it would be difficult
to speak of the proceedings as having become "definitively pending"
within the meaning of the Convention until the appearance had been
entered. Before that time the proceedings were not, on the evidence,
merely voidable; they were null and void unless the defendant should, by
his appearance, remedy the defect in the writ. This is an additional point
which would seem to be available to U. SA on the second aspect of the
matter, in addition to the points made by Av Rubino-Sammartano.
I find therefore that in the case of U. SA, the requirements for
proceedings to become "definitively pending" before the Court in Milan
were fulfilled on Feb 20, 1991 and that accordingly that Court became
"seised" of the proceedings on that date. Meanwhile the Commercial Court
in London had become seised of Folios 1675 and 1676 on Nov 27, 1990.
It follows that this Court is the Court "first seised".
I therefore summarize my conclusions on seisin as follows: (a) It seems
to me that in some cases one cannot form a concluded view as to
which is the Court "first seised" under the Convention until one has first
decided whether actions are "related actions" within art 22. In the case
of the reamendments which AGF seeks to make in Folio 640 (which
concern AGF's causes of action in relation to 1989/90), there are two
possible views. If Folio 640, the Italian proceedings and the proposed
reamendments are all related actions, then this Court is the Court first
seised. If Folio 640 and the Italian proceedings are not related actions,
then the Court in Milan is the Court first seised. (b) As regards U. SA's
causes of action in relation to both years of the reinsurance programme,
this Court is the Court first seised.
Related actions -- which Court should decide?
The question arises in relation to AGF's proposed reamendments, whether
this Court should decide whether Folio 640, the Italian proceedings and
the proposed reamendments are all related actions or whether the matter
should remain in abeyance pending the decision of the Court of Cassation
as to whether the Court in Milan should assume or decline jurisdiction
over the Italian proceedings under art 21 or art 22. Mr Plender submitted
that for the purposes of deciding whether the reamendments should
be allowed this Court should decide whether the actions are "related
actions". In doing so the Court would not be judging the correctness
or otherwise of the assumption of jurisdiction by the Court in Milan but
would be deciding for the purposes of its own proceedings which Court
was first seised in relation to AGF's causes of action arising in relation to
1989/90. Mr Plender further submitted that while the Court of Cassation
has a discretion either to stay the proceedings or to assume jurisdiction
by virtue of art 22, this Court equally has a discretion under the same
article either to stay the proceedings or to assume jurisdiction in respect
of the reamendments and that in the circumstances it should exercise its
discretion in favour of allowing the reamendments.
Mr Gaisman, on the other hand, submitted that whatever the Court of
Cassation decides in relation to the Italian proceedings I must deal with
them on the basis that they are still pending. Since AGF's causes of action
in relation to 1989/90 are different causes of action from those in relation
to 1988/89, and since they are the same causes of action and between
the same parties as causes of action raised in the Italian proceedings, this
Court must of its own motion decline jurisdiction under art 21.
It could be argued that Mr Gaisman's submissions to some extent beg
the question which is the Court first seised, because until a decision
is reached on the question whether all the actions are related actions
within art 22, it is not possible to decide which is the Court first seised
under art 21. It might also be argued that this Court should examine
the point for the purposes of deciding whether to allow the amendments
and not for the purpose of deciding whether the Court in Milan should
assume or decline jurisdiction under art 22. I consider however that such
an approach would be inconsistent with the scheme and spirit of the
Convention.
In my judgment some assistance is to be derived from the recent decision
of the European Court in Overseas Union Insurance Ltd and Others v New
Hampshire Insurance Company (Case C-351/89, [1992] 1 Lloyd's Rep
204 judgment given on June 27, 1991). In that case New Hampshire, the
reassured under certain reinsurance contracts, began proceedings in the
Tribunal de Commerce, Paris claiming monies due under those policies.
Later Overseas Union and the other two reinsurers began proceedings
in the Commercial Court in London in which they sought a declaration
that they had lawfully avoided their obligations under the reinsurance
policies. Mr Justice Hirst granted a stay under the second paragraph of art
21 until such time as the French Court gave a decision on the question
of its jurisdiction in the proceedings before it (see [1992] 1 Lloyd's Rep
218). On a reference of a number of questions to the European Court by
the Court of Appeal, the European Court held that, without prejudice to
the case where the Court second seised has exclusive jurisdiction under
the Convention --
Article 21 of the Convention must be interpreted as meaning that, where
the jurisdiction of the court first seised is contested, the Court second
seised may if it does not decline jurisdiction only stay the proceedings and
may not itself examine the jurisdiction of the Court first seised.
The relevant paragraphs of the Court's decision are as follows:
Moreover it should be noted that in no case is the Court second seised
in a better position than the Court first seised to determine whether the
latter has jurisdiction. Either the jurisdiction of the Court first seised is
determined directly by the rules of the Convention which are common to
both Courts and may be interpreted and applied with the same authority
by each of them, or it is derived, by virtue of art 4 of the Convention,
from the law of the State of the Court first seised, in which case that
Court is undeniably better placed to rule on the question of its own
jurisdiction.
Moreover, the cases in which a Court in a Contracting State may
review the jurisdiction of a Court in another Contracting State are set
out exhaustively in art 28 and the second paragraph of art 34 of the
Convention... It follows that, apart from those limited exceptions, the
Convention does not authorise the jurisdiction of a Court to be reviewed
by a Court in another Contracting State.
It therefore appears both from the wording of art 21 and from the
scheme of the Convention that the only other possibility available, as an
alternative solution, to the court second seised, which should normally
decline jurisdiction, is to stay the proceedings if the jurisdiction of the
Court first seised is contested. However it cannot itself examine the
jurisdiction of the Court first seised.
The position in the present case is not quite so simple since for the
purpose of exercising its jurisdiction under the Convention this Court may
have to decide whether a number of proceedings are "related actions"
within art 22 and, if it decides that actions are related, then it may find
that it is the Court first seised in the first of the related actions, whereas
if the Court looks only at one of those proceedings it may find that it
is the Court second seised. Nevertheless the decision of the European
Court in Overseas Union v New Hampshire provides clear authority for
the principle that a Court in one Contracting State may not (subject to
very limited exceptions) review the jurisdiction of a Court in another
Contracting State. In this case the jurisdiction of the Italian Court to stay
the Italian proceedings or to decline jurisdiction in respect of them is
determined directly by the rules of the Convention, namely by arts 21
and 22. Even so it is not permitted for this Court to judge the correctness
or otherwise of an assumption of jurisdiction by the Italian Court. By
reaching a decision on the question whether Folio 640 and the Italian
proceedings are "related actions" it would, even if indirectly, be doing so.
In my judgment, moreover, that view is supported by the consideration
that it is only true in a very limited sense that a Court has a discretion
whether or not to apply art 22. Article 22 provides an exhaustive
definition of "related actions". The definition must have an independent
Convention meaning which is then applied in all Contracting States. Some
caution has to be used in relation to the question whether art 22 confers
a "discretion" on a Court other than the Court first seised. It is mainly
a question of judgment whether two or more actions are related within
the definition. That definition uses the word "expedient" which must of
course be applied bearing in mind the purpose of the article. I doubt if
it is correct to speak of a Court having a discretion not to do something
which by definition is "expedient". M Jenard in his report (OJ Vol 22 No
C/41) states that:
... where actions are related, the first duty (my emphasis) of the court is
to stay, the proceedings.
Professor Peter Schlosser in his report on the Accession Convention (OJ
1979 No C 59/97) states:
Even where in the rules relating to jurisdiction, tests of an exceptionally
flexible nature are laid down, no room is left for the exercise of any
discretionary latitude. It is true that Continental legal systems recognise
the power of a Court to transfer proceedings from one court to another.
Even then the Court has no discretion in determining whether or not this
power should be exercised.
It seems to me that in the light of these considerations it would be
impossible for this Court to determine whether Folio 640 and the Italian
proceedings are "related actions", even for the purpose of deciding
questions of seisin under art 21, without also determining how the Courts
of another Contracting State should exercise their jurisdiction under the
Convention.
Article 21
I turn then on the basis that the Italian proceedings are still pending
to consider whether this Court should either decline jurisdiction in
respect of the proposed reamendments to Folio 640 or alternatively defer
consideration of the amendments until the Court of Cassation has ruled
on the question whether the Italian Courts should decline jurisdiction. This
question requires me to consider whether the proposed reamendments to
Folio 640 and the causes of action in the Italian proceedings involving AGF
in respect of 1989/90 are --
... proceedings involving the same causes of action and between the same
parties.
Authoritative guidance as to the proper construction of art 21 is provided
by the decision of the European Court in Gubisch Maschinenfabrik
KG v Palumbo, [1987] ECR 4861. In that case Mr Palumbo, an Italian
citizen, placed an order with Gubisch for a machine tool. Gubisch
instituted proceedings before the Landgericht Flensburg to enforce the
contract and claim payment of the price. Subsequently Mr Palumbo
brought proceedings against Gubisch before the Tribunale di Roma for
a declaration that the order was inoperative since it had been revoked
before it reached Gubisch or on the ground that it should be set aside for
lack of consent, mistake or fraud or that it should be discharged on the
ground that Gubisch had not complied with the time limit for delivery. On
a reference by the Italian Supreme Court it was held by the European
Court that where in relation to the same contract:
... one party applies to a court in a Contracting State for a declaration
that the contract is inoperative... whilst the other institutes proceedings
before the Courts of another Contracting State for its enforcement (the
case falls) within the scope of the concept of lis pendens pursuant to
Article 21.
I set out the relevant paragraphs of the Court's decision:
13. It is therefore in the light of the aforesaid objectives and with a
view to ensuring consistency as between Articles 21 and 27(3) that the
question whether a procedural situation of the kind at issue in this case
is covered by Article 21 must be dealt with. The salient features of that
situation are that one of the parties has brought an action before a court
of first instance for the enforcement of an obligation stipulated in an
international contract of sale; an action is subsequently brought against
him by the other party in another Contracting State for the rescission or
discharge of the same contract.
14. It must be observed first of all that according to its wording Article
21 applies where two actions are between the same parties and involve
the same cause of action and the same subject-matter; it does not lay
down any further conditions. Even though the German version of Article
21 does not expressly distinguish between the terms "subject-matter" and
"cause of action", it must be construed in the same manner as the other
language versions, all of which make that distinction.
15. In the procedural situation which has given rise to the question
submitted for a preliminary ruling the same parties are engaged in two
legal proceedings in different Contracting States which are based on the
same "cause of action", that is to say the same contractual relationship.
The problem which arises, therefore, is whether those two actions have
the same "subject-matter" when the first seeks to enforce the contract
and the second seeks its rescission or discharge.
16. In particular, in cases such as this, involving the international sale
of tangible moveable property, it is apparent that the action to enforce
the contract is aimed at giving effect to it, and that the action for its
rescission or discharge is aimed precisely at depriving it of any effect.
The question whether the contract is binding therefore lies at the heart
of the two actions. If it is the action for rescission or discharge of the
contract that is brought subsequently, it may even be regarded as simply
a defence against the first action, brought in the form of independent
proceedings before a Court in another Contracting State.
17. In those procedural circumstances it must be held that the two
actions have the same subject-matter, for that concept cannot be
restricted so as to mean two claims which are entirely identical.
18. If, in circumstances such as those of this case, the questions at
issue concerning a single international sales contract were not decided
solely by the court before which the action to enforce the contract is
pending and which was seised first, there would be a danger for the
party seeking enforcement that under Article 27(3) a judgment given
in his favour might not be recognised, even though any defence put
forward by the defendant alleging that the contract was not binding had
not been accepted. There can be no doubt that a judgment given in a
Contracting State requiring performance of the contract would not be
recognized in the State in which recognition was sought if a court in that
State had given a judgment rescinding or discharging the contract. Such
a result, restricting the effects of each judgment to the territory of the
State concerned, would run counter to the objectives of the Convention
which is intended to strengthen legal protection throughout the territory
of the Community and to facilitate recognition in each Contracting State of
judgments given in any other Contracting State.
19. The answer to the question submitted by the national court must
therefore be that the concept of lis pendens pursuant to Article 21 of the
Convention of 27 September 1968 covers a case where a party brings
an action before a court in a Contracting State for the rescission or
discharge of an international sales contract whilst an action by the other
party to enforce the same contract is pending before a court in another
Contracting State.
The decision in Gubisch appears to me to have decided three things.
First art 21 is to be construed in the light of its purpose which is to
prevent a situation where a judgment given by a Court in one Contracting
State is not recognized in another Contracting State on the ground
referred to in art 27(3) namely that --
... it is irreconcilable with a judgment given in a dispute between the
same parties in the State in which recognition is sought.
Second, there are three conditions for the application of art 21 and no
more; the actions must be between the same parties and involve the
same cause of action and the same subject-matter.
Third, it is permissible to look for this purpose at the question which "lies
at the heart of the two actions" to see whether they concern the same
subject matter. The "concept cannot be restricted so as to mean two
claims which are entirely identical".
I should also point out that in Overseas Union v New Hampshire (sup) the
European Court held that art 21:
... must be interpreted broadly so as to cover, in principle, all situations of
lis pendens before courts in Contracting States irrespective of the parties
domicile.
Mr Plender, however, submitted despite these very clear statements of
principle that the conditions for the application of the first paragraph
of art 21 are "very strict". He relied in this connection on the opinion
of Mr Advocate General Mancini in Gubisch, [1987] ECR 4861, 4869
notwithstanding that this opinion was not adopted by the Court. Mr
Plender further submitted that for art 21 to apply there must be an
identity of causes of action, subject matter and parties in the two sets of
proceedings. He submitted that the question whether a lis can be severed
is both a Convention matter and also a matter of local law and that the
Convention cannot be taken to have required those Contracting States
whose procedural rules do not permit severance to sever those causes of
action which fall within art 21 while permitting other causes of action to
be litigated. Finally he submitted that it was not contrary to the policy of
the Convention to require identity of causes of action, subject matter and
parties in the two proceedings because even though, on his submissions,
such a case would not fall within art 21, it would still fall within art 22 and
he cited the opinion of Mr Advocate General Mancini in Gubisch for the
proposition that:
... the rules laid down in the case of related actions are also designed to
prevent the delivery of conflicting judgments and they do so by means
which, whilst they may not be automatic like those provided for in the
case of lis pendens, are not any the less effective.
I am unable to accept these submissions for two main reasons.
First it seems to me that on a proper analysis of Gubisch, a Court is
required to examine the two sets of proceedings for one purpose only
namely to see whether they involve actions between the same parties
and involve the same cause of action and subject matter. To require that
in addition there be complete overall identity of causes of action subject
matter and parties in the two pieces of litigation as a whole would unduly
restrict the concept of lis pendens and introduce a condition which so
far as I can see is not to be found in art 21. To require such an exact
correspondence would enable parties to frustrate the purpose of art
21 by introducing an additional party in the proceedings of the Court
which is "second seised" to enable that Court to retain jurisdiction. If art
21 is to fulfil the purpose of preventing a judgment being given which
is irreconcilable with a judgment given in a dispute between the same
parties in the State in which recognition is ought, then the Court must
be required to look at parts of an action to see whether those parts
involve the same cause of action and are between the same parties as
the whole or any part of another action brought in the Court of a different
Contracting State.
Second, while I accept that questions of severance can raise difficult legal
issues, there is no good reason to suppose that problems of severance
where they arise can be more easily resolved under art 22 than under
art 21. A possible construction of art 21 is that it requires national Courts
to sever causes of action where a cause of action falls within the article
and where the procedural rules of the particular national Court permit
severance. Since the procedural rules of this Court permit severance, I do
not think it is necessary to be unduly concerned at the possibility that art
21 may be differently applied by the Court of any Contracting State whose
procedural rules may happen not to permit severance.
In the result the position with regard to AGF's proposed reamendments to
raise its cause of action relating to the 1989/90 reinsurance programme
is that the proposed reamendments constitute a different cause of action
from those already raised in Folio 640 but constitute the same cause of
action between the same parties as one of the causes of action raised
in the pending Italian proceedings. Unless therefore the two sets of
proceedings are "related actions" within art 22, the situation seems to me
to be governed by Gubisch. While I might consider it to be fairly clear that
the Italian proceedings are a "related action" to Folio 640 within art 22
so that this Court is the Court first seised, the Court of Cassation has not
yet ruled on this question and it would be wrong in the meantime to make
any determination of this issue. In these circumstances I have reluctantly
come to the conclusion that it is not possible for me to allow the proposed
reamendments.
The question then arises whether I should apply the second sentence
of art 21 and, while allowing the reamendments, stay any further
proceedings on them pending the decision of the Court of Cassation.
So far as I can see there is nothing in the Convention to preclude this.
It would however be an illogical course to take since if I allowed the
reamendments they would date back to the issue of the writ and be
deemed to have been raised by the time the proceedings in Folio 640
became "definitively pending" on Mar 31, 1990. There would in that
event be no reason to impose a stay. Moreover if I were to allow the
reamendments this might prejudice the position of the Italian reassured
in the Italian proceedings since by allowing the reamendments the Court
would be enabling AGF to argue in the proceedings before the Court of
Cassation that in relation to its causes of action in respect of 1989/90 this
Court is the Court first seised.
Conclusion
In the case of the summons taken out by AGF in Folio 640 to amend
the writ and reamend the points of claim to add No. as a defendant and
to add the disputed causes of action against R. CCI and No. I do not
allow the application but I will give leave to AGF to renew the application
once the Court of Cassation has given its decision or if in the meantime
there should be a material change of circumstances. I allow the other
amendments which are not disputed.
In the case of the summonses taken out in Folios 1675 and 1676 under
O 12, r 8, I dismiss these summonses in the light of my findings that this
Court became seised of the actions on Nov 27, 1990 and that the Italian
proceedings did not become "definitively pending" before the Court in
Milan, so far as U. SA is concerned, until Feb 20, 1991.