JUDGMENT-1:
CHRISTOPHER CLARKE J:
1. I have before me an application on the part of the claimants, whom I
will call E. and ERL, that I should enter judgment in their favour against
the defendants, whom I shall describe as "W.", "R." and "L.", in default
of an acknowledgment of service from any of them. The claim arises in
this way. On 6th January 1991 the "D. B." sank in the Gulf of Oman. She
was owned by W.. Under the same management and with, I infer, either
the same or similar beneficial ownership were the vessels "Le.", owned by
R., and "Le. L", owned by L.. D. B. was insured against war risks with the
H. W. R. M. Association (B.) Limited ("H."). In March 1991 W. claimed on
the insurance, contending that the vessel had sunk after striking a mine.
An investigation took place by Ho. Fe. & Wi. ("Ho. Fe.") in conjunction
with various experts appointed by H.. Their conclusion was that there was
insufficient evidence that D. B. had struck a mine and that her sinking
was probably attributable to some other cause. H. declined to pay under
the insurance. Proceedings were then launched against H. before the
Piraeus High Court in what was to be the beginning of a long sequence of
acrimonious claims by one or more of the claimants against H. or those
associated with H.. In those proceedings W. claimed US $ 4 million in
damages for breach of contract and further unliquidated damages for
moral degradation and further losses allegedly caused by W.'s restricted
access to credit.
2. A short summary (which I accept) of those claims is contained in the
Witness Statement of D. McK., a partner in Elborne Mitchell, solicitors of
the claimants. On 8th October 1999 W. commenced proceedings against
Ho. Fe., T. M. W. R. S. Limited ("T. M."), who were H.'s managers, and one
of H.'s directors claiming US $4 million, damages for loss of reputation,
and US $1,000,000 for defamation. On 9th December 1999 R. and L.
ceased to be members of H.. The defendants allege that they were
expelled due to their status as affiliates of W.. In early 2002 W. asked for
security of US $20 million from H. and, following a disagreement about
the amount of security, wrote to a number of H.'s members threatening
to arrest their ships in lieu of the security demanded. On 22nd March
2002 W. commenced three sets of proceedings against 24 directors and
members of H. claiming the same remedies as had been claimed against
H. and US $1 million for defamation on the basis that the individual
members were liable for W.'s loss on the footing that H. was a Greek "civil
cooperative". In May 2002 W. filed arrest proceedings against a vessel
owned and operated by an H. Board member. On 20th August 2002 W.
sought to wind H. up. That petition was withdrawn in November 2002;
but it was substituted by an identical petition lodged by R.. That was
rejected in December and judgment was given in H.'s favour in July 2003.
In March 2003 L. lodged a further winding up petition which was rejected
in August 2003. Also in March 2003 the proceedings against the directors
and members of H. were discontinued, but they were then replaced with
a claim by all three defendants against the same parties together with a
further 4 directors and members of H. claiming $ 15,000,000, excluding
interest and costs, comprising W.'s original claims and $10,000,00 for
alleged defamation of R. and L.. W. also served a memorandum on the
Greek Minister of Merchant Marine alleging that H. was in breach of
EU law insofar as it had established an office in Greece following W.'s
obligations. These complaints were later rejected.
3. H. was, in respect of years up to and including the date of the loss
of D. B., reinsured by London market underwriters, including a number
of Lloyd's Syndicates, one of which was the Janson Green Syndicate
79, which led the reinsurance in respect of the 1991 year. The non-life
liabilities underwritten by members of Lloyds' syndicates under contracts
of insurance and reinsurance allocated to their 1992 and prior years
of account, including the liabilities of Lloyd's reinsurers arising under
the contracts of reinsurance of H., ("1992 and prior business") have
been reinsured by ERL (either directly or indirectly) and retroceded
by ERL to E.. ERL is the run-off agent authorised to manage the run-
off of the 1992 and prior business of these syndicates and ERL has
delegated that responsibility to E.. ERL and E. represent in this action
the Lloyds' syndicates which reinsured H. at the material time as well
as themselves. Numerous interlocutory applications have been made
by all three defendants in the Greek proceedings seeking disclosure of
documents including H.'s contracts of reinsurance led by Janson Green
Syndicate 79.
4. On 1st April 2004 the defendants' Greek lawyer, Mr George Latsoudis,
wrote a letter to H.'s managers, T. M., which included the following
passage:
"In addition, we have now been instructed by the clients to sue the
Janson Green Syndicate 79 and E. Limited for damages over the profit
commission arrangements, which the clients consider wrongfully interfere
with the primary insurance."
As was almost inevitable that letter came to the attention of E..
5. The sentence that I have quoted plainly intimated that a further claim
was to be made against, at least, the Janson Green Syndicate and E. upon
the basis that a profit commission provision in the relevant reinsurance
operated so as to cause H. to act in breach of their obligations under
the insurance. Although that claim has not been fully articulated by
Mr Latsoudis it is apparent from a number of references in the papers
in the Greek litigation to which I have referred in paragraph 2 above
that the claim is that profit commission arrangements in the 1991
reinsurance (which contains a term "Profit Commission to be agreed
Leading Underwriter") were tortious in that they induced H. to refuse to
pay valid claims and, in particular, the claim in respect of the D. B..
6. On 16th June 2004 Elborne Mitchell, solicitors for E. and ERL wrote
on their behalf, and on behalf of those whom E. and ERL represent, to
Mr Latsoudis. They expressed their understanding that Mr Latsoudis
was instructed on behalf of the defendants and that the defendants had
instructed Mr Latsoudis to sue E. and Janson Green Syndicate 79 in the
manner indicated in the letter of 1st April 2004. They asked to be advised
if their understanding was incorrect. They referred to the fact that these
proceedings had been issued, but indicated that they would take no
further action if an unequivocal undertaking was given by 16th June 2004
in the form attached not to make claims against E., ERL or those whom
they represent.
7. On 2nd July 2004 Elborne Mitchell indicated a preparedness to extend
the deadline to 6th July and, if an undertaking was not to be forthcoming,
invited Mr Latsoudis' clients to instruct someone in England & Wales
to accept service of the proceedings. On 5th July 2004 Mr Latsoudis
replied by fax. He asserted that the action was "totally unwarranted
and apparently pointless", but markedly failed to withdraw the threat to
sue contained in the letter of 1st April 2004. On 9th July 2004 Elborne
Mitchell wrote to Mr Latsoudis again, enclosing a copy of the Claim
Form. They asked him whether he had been instructed by his clients to
sue Janson Green Syndicate 79 and E. in the manner indicated in the
letter of 1st April and to state whether his clients were W., R. and L.,
indicating that they would take a failure to answer these two questions
as an affirmative response. They extended time for the receipt of the
undertaking they had previously requested and repeated their invitation
to the defendants to instruct someone to accept service. On 13th July
2004 Mr Latsoudis sent a fax to Elborne Mitchell in which he suggested
that the sole purpose of these proceedings was to generate costs to
pursue against the defendants and prejudice the issues in the Greek
litigation and referred to an "illusionary threat". But he did not withdraw,
or even advert to, the threat contained in his letter of 1st April. On 22nd
July 2004 Elbornes wrote again pointing out that it would be a simple
matter for Mr Latsoudis to confirm whether a threat had been made. They
also indicated that they would now serve the proceedings and would seek
to recover the costs of doing so from his clients. There was no reply.
8. In these proceedings E. and ERL invite the Court to declare (putting
it shortly) (i) that neither of them nor those the represent is liable to W.
in respect of the loss of the D. B. by reason of any claim by W. that, on
account of the terms of the reinsurance contracts with H., the relevant
underwriters or the claimants wrongly interfered with the contracts of
insurance between H. and W., and (ii) that neither of them nor those they
represent is liable to R. or L. in respect of any loss in connection with any
termination of the insurance between H. and those corporations in 1999
arising out of any claim that, on account of the terms of the reinsurance
contracts with H., the relevant underwriters or the claimants wrongly
interfered with the contracts of insurance between H. and R. or L..
Procedural requirements
9. I am satisfied from the evidence before me that the claimants have
fulfilled all the procedural requirements that need to be fulfilled in order
for them to be able to invite the Court to give judgment against the
defendants in default, both under the Civil Procedure Rules applicable to
this Court and the requirements of Article 19 of Council Regulation (E.C.)
No 1348/2000 ("the Service Regulation"). In particular the evidence
satisfies me (a) that in August 2004 these proceedings were duly served
on the Defendants both at their principal place of business in Piraeus by
the bailiff of the Piraeus Court, where their receipt was acknowledged by
an employee, and at their registered offices in Cyprus, in the case of W.,
and Liberia in the case of R. and L.; (b) that none of the Defendants have
filed acknowledgments of service or filed admissions either within the time
prescribed by the rules or at all.
Jurisdiction
10 I am also satisfied on the evidence that the claim herein is one which
this Court has power to hear since (i) the defendants are, on their own
assertion, domiciled in Greece, (ii) the case also falls within Article 5 (3)
of Council Regulation EC 44/2001 ("the Jurisdiction Regulation"), (iii) no
other court has exclusive jurisdiction under the Jurisdiction Regulation,
and (iv) the claim has been properly served in accordance with Article 26
of the Jurisdiction Regulation.
11 Article 5(3) provides that:
"a person domiciled in a contracting state may, in another contracting
state, be sued... in matters relating to tort, delict or quasi delict, in the
courts of the place where the harmful event occurred or may occur."
Any claim such as that threatened is based on the inclusion of a provision
for profit commission in the reinsurance contract(s). If that occurred it
happened in London, where the reinsurance was written, even if any
resulting harm occurred in Greece (or Cyprus or Liberia). According to
the jurisprudence of the European Court of Justice a party instituting
proceedings in reliance upon Article 5(3) may bring his claim either in
the place where the allegedly tortious act was committed or where the
victim suffered harm: Handeslwerkerij GJ Bier N.V. v. S.A. Mines de
Potasse d'Alsace [1978] Q.B. 708. The defendants could, therefore, sue
in England. I am satisfied that the claimants can also sue in England for
a declaration that they are under no such liability. The purpose of Articles
5 (3) and 5(1) is to prescribe the courts in which matters relating to torts
and contracts may be determined. Such matters include whether or not a
contract has been made or a tort committed as well as the consequences,
if it has. It would seem to me inconsistent with that underlying purpose if
it were otherwise - with the result that X who claims that he is the victim
of a breach of a contract or a tort committed by Y may sue in the court
prescribed, but Y, who claims that there was no contract to be breached
and no tort committed, may not avail himself of the same facility.
12 In Boss Group Limited v. Boss France S.A. [1997] 1 WLR 351 the Court
of Appeal was concerned with jurisdiction under Article 5(1) which applies
to matters "relating to contract". In that case a negative declaration
was sought in respect of contractual liability, the claimants arguing that
the contract under which they were alleged to be liable did not in fact
exist. Saville L.J. (as he then was), who gave the leading judgment,
held that there were two obligations under the contract (assuming it
existed) one of which was to be performed in England, while the other
was performable anywhere including England and France. It was held that
in these circumstances it was open to the claimants to 'select' England
for the purposes of Article 5(1) notwithstanding the fact that they denied
that a contract had in fact been concluded. The fact that the claimants
were denying the existence of the contract did not, as the defendants
contended, mean that they could not show a good arguable case under
Article 5(1). As to that, Saville L.J. held (at 357) as follows:
"Unless the defendants withdraw their contentions (which they have not
done) it seems to me that they cannot challenge the jurisdiction on the
basis that they should not be sued here because there is (contrary to
those contentions) no contract."
Saville L.J.'s approach was approved by Lord Hope in Agnew v
Lonsforsokringsbolagens [2001] 1 A.C. 223 at 258 and adopted by Aikens
J. in USF Ltd v Aqua Technology [2001] All E.R. (Comm) 856.
13 In my judgment the same must apply in relation to tort. I agree
with the observation at page 395 of Briggs & Rees, Civil Jurisdiction and
Judgments:
"The principle in Boss Group must be assumed to be general in relation
to the jurisdictional rules of the Convention and the Regulation. It is
submitted that it is soundly based."
14 I am also in respectful agreement with the observation of Saville L.J.
that seeking a negative declaration was not "a substantive ground for
declining jurisdiction" nor could a charge of forum shopping be made out,
because, as Saville L.J. said (at 357):
"the charge of forum shopping can only be made good by assuming that a
party which takes advantage of the Convention exceptions to the general
rule of domicile is doing something illegitimate; but that assumption
cannot be maintained if in truth one of the exceptions is applicable."
He also pointed out that jurisdiction under the Convention was a matter
of right; so that many of the discretionary principles applicable to the
common law exercise of the Court's exorbitant jurisdiction are irrelevant
in the Convention or Regulation context. This is consistent with the
European jurisprudence: see the opinion of Advocate General Tesauro in
"The Tatry" [1994] E.C.R. I-5439:
"... the bringing of proceedings to obtain a negative finding... is entirely
legitimate in every respect, is an appropriate way of dealing with genuine
needs on the part of the person who brings them. For example, he may
have an interest, where the other party is temporising, in securing a
prompt judicial determination if doubts exist... deriving from a given
contractual relationship..."
15 Mr David Bailey, who appeared on behalf of the claimants, has very
properly directed my attention to the case of Mesier Dowty v Sabena
[2000] 1 Lloyd's Rep. 428, in which the Court of Appeal was not invited
to consider whether jurisdiction in a similar situation could be founded
under Article 5(3) of the Regulation. Instead the matter was considered
only in the context of Article 6(1) and the claimant failed to establish
jurisdiction. In those circumstances it does not seem to me that the ratio
of the decision affects the question that I have to decide.
16 So far as Article 26 is concerned, service has been duly effected in
accordance with Article 19 of the Service Regulation. That was done in
sufficient time to enable the defendants, if they chose, to defend. In
addition on 3rd March 2005 Elborne Mitchell wrote to the defendants
warning them of their intention to enter judgement in default.
17 I am also satisfied that this is a case in which it would be appropriate
for the Court to make a declaration, even in the absence of the
defendants. They have had ample opportunity either to withdraw the
threat or to make it good. They have been warned of these proceedings,
invited to nominate someone with authority to accept service, and
informed that the claimants proposed to proceed to judgement. They
have chosen to do nothing. If the threatened claim is ill founded the
claimants are, in my view, entitled to have the Court declare that to
be so. To deny them declaratory relief would be to deprive them of the
"fullest justice ... to which [they] are entitled" per Millett J in Patten v
Burke Publishing [1991] 1 WLR 541,544.
The validity of the threatened claim
18. I am satisfied that any claim that the inclusion of an arrangement
for a profit commission in any reinsurance of H. gives rise to a tort of
any kind is without foundation. The relevant tort is that of inducing
or procuring a breach of contract. The principles are summarized in
Halsbury's Laws of England (4th ed. Reissue), Volume 45(2) at paragraph
687 ("Specific Torts") as follows:
"Where one person by either direct or indirect means intentionally induces
a second person to commit a breach of contract against a third person
or prevents or hinders the performance of that contract, so that that
third person suffers damage, the first commits a wrong actionable at the
suit of the third, unless the inducement is justifiable. Mere interference
not involving breach of contract or illegal means does not appear to be
tortious. Direct means may be either inducing a party to a contract to act
in breach of it or physical restraint on a party or intervention preventing
performance or dealings with a party inconsistent with performance.
Indirect means involve constraining by illegal means employees or
associates of a party to a contract so that they may induce that party
to act in breach of it. Any employee acting bona fide within the scope
of authority or company directors acting as a board cannot be liable for
inducing the employer or company to act in breach of contract with a third
party."
19 English law is the applicable law because England is the country in
which the events constituting the tort or delict occurred: section 11(1) of
the Private International Law (Miscellaneous Provisions) Act 1995.
20 Profit commissions, whereby reinsurers agree to give their reinsured
a share of any profit that they may earn in respect of the relevant
underwriting year are extremely common. Self-evidently the reinsurance
(and the underlying insurance) will be more profitable (or less
unprofitable) if a claim is rejected than it would be if it was accepted.
But that does not mean that the clause induces the insurer to break his
contract with the assured. There is no evidence that E. or ERL, who were
not parties to the relevant reinsurance contracts, or the reinsurers whom
they represent, who were parties, ever intended to bring about a breach
of the contract of insurance much less that they "knowingly" induced
a breach. That requires an intention to interfere with knowledge of the
contract and not merely that breach was the natural consequence of the
alleged tortfeasor's act: Stott v. Gamble [1916] 2 K.B. 504 at 508-509
and Clerk & Lindsell, Torts at paragraph 24-16. In those circumstances
there can have been no tort of inducement of breach of contract or any
other tort even if there was a profit commission in the 1991 reinsurance.
In fact, as it appears, there was no profit commission arrangement
made for the 1991 year because the reinsurance premium paid by H.
was regarded as a competitive one. Further neither E. nor ERL were
parties to the relevant reinsurance contracts or any profit commission
arrangements. That is enough to determine the matter adversely to
the defendant. But in addition the level of claims for 1991 was such
that no profit commission would have been payable had there been a
profit commission arrangement in force. In addition, if there was a profit
commission arrangement in place in 1991 it would be necessary for the
defendants to show not only that H. were in breach in not paying up
under the insurance but that they did so because of the provision about
profit commission. There is no such evidence. Further any claim by W. is
now probably time barred, since any cause of action must have arisen in
the early 1990s, well outside the six year period.
21 So far as any claim by R. or L. in relation to their expulsion is
concerned it appears that they did not become members of H. until 1994
and 1998 respectively. Neither E. nor ERL, nor those whom they represent
in this action, have any responsibility for any reinsurance arrangement
after 1992.
22 I have considered whether to decline to grant a declaration upon the
footing that the suggested claims were sufficiently ridiculous that no one
would seriously think of pursuing them. But in the light of the history to
which I have referred in paragraph 2 above, any such assumption would
be misplaced. I consider that the claimants are entitled to be relieved of
the burden of dealing with a claim of this nature.
23 I propose, therefore, to make declarations in the claimants' favour in
the form set out in the schedule attached to this judgment.
24 There are three matters that I should record. First, I have reached
my judgment on the basis of the evidence before me and have reached
findings of fact on the basis of that evidence. Secondly, even though the
defendants have chosen not to take any part in these proceedings, in
accordance with the practice of the English Bar, it has been the duty of
Mr. Bailey to draw to my attention any authority that might be adverse to
his clients' interests. Thirdly I have considered whether on the material
before me there is any point which the defendants could have raised
which would make it inappropriate to grant the declarations that I propose
to make.
25 I also order that the defendants shall pay the costs of this action and
the application for judgment in default which I summarily assess in the
sum of £ 42,765. That sum includes (1) the costs of arranging service
in Greece, Cyprus and Liberia, all of which the defendants could have
avoided if they had accepted the claimants' sensible suggestion that they
should nominate someone to accept service within this jurisdiction; and
(2) the irrecoverable VAT (being 19.69% of the full VAT) on solicitors' and
Counsel's fees. I have, however, reduced the figure for solicitors' fees to
£ 25,000 (from £ 26,190.43 in the statement of costs presented to me)
and the figure for Counsel's fees to £ 15,000 (from £ 17,370), in order to
render the final figure proportionate to the issues involved.
SCHEDULE
The Court declares as follows:
(a) neither the First nor the Second Claimant, nor any of those
underwriting members of Lloyds whom they represent in this action ('the
Underwriters'), is liable to the First Defendant, W. C. S. Company Limited
('W.'), in respect of any loss, expenditure, liability or damage incurred or
sustained by W. in consequence of or in connection with the loss of the
vessel D. B. on 6th January 1991, which was entered with The H. M. W.
R. Association (B.) Limited ("H."), arising out of any claim by W. that by,
on account of, or in consequence of the terms of the reinsurance contracts
or arrangements between H. and the Underwriters for the calendar
year 1991 (and, in particular, any provision therein in relation to profit
commission) the First and/or Second Claimants and/or the Underwriters
unlawfully induced a breach of, or unlawfully interfered with, any contract
of insurance between H. and W., conspired to injure W. or otherwise
committed any tortious act of which W. was the victim;
(b) neither the First nor the Second Claimant nor any of the Underwriters
is liable to the Second Defendant, R. S. Limited ('R.'), in respect of
any loss, expenditure, liability or damage incurred or sustained by R.
in consequence of or in connection with the alleged termination of the
contract of insurance between H. and R. in respect of the vessel Le. in
December 1999 arising out of any claim by R. that by, on account of, or in
consequence of the terms of the reinsurance contracts or arrangements
between H. and the Underwriters for the calendar year 1991 (and, in
particular, any provision therein in relation to profit commission) the First
and/or Second Claimants and/or the Underwriters unlawfully induced a
breach of, or unlawfully interfered with, any contract of insurance between
H. and R., conspired to injure R. or otherwise committed any tortious act
of which R. was the victim;
(c) neither the First nor the Second Claimant nor any of the Underwriters
is liable to the Third Defendant, L. S. SA ('L.'), in respect of any
loss, expenditure, liability or damage incurred or sustained by L. in
consequence of or in connection with the alleged termination of the
contract of insurance between H. and L. in respect of the vessel LE. L in
December 1999 arising out of any claim by L. that by, or on account of, or
in consequence of the terms of the reinsurance contracts or arrangements
between H. and the Underwriters for the calendar year 1991 (and, in
particular, any provision therein in relation to profit commission) the First
and/or Second Claimants and/or the Underwriters unlawfully induced a
breach of, unlawfully interfered with, any contract of insurance between
H. and L., conspired to injure L. or otherwise committed any tortious act
of which L. was the victim.