ANDREW SMITH J:
[1] The Defendant in these proceedings, M. de “S y R”, applies for an
order that the court has no jurisdiction over the claim made by the
Claimants (to whom I shall refer as the "Reinsurers") and that the
proceedings should therefore be set aside; and alternatively for an order
under art 28 of Council Regulation no 44/2001 (the "Regulation") that the
proceedings be dismissed or stayed. The application also indicated that
M. would seek a stay on the grounds that England is not the appropriate
forum to determine the claim, but this argument is not pursued before
me (although M. reserve their position should the matter go further).
The basis of M.'s applications are (i) that the relevant reinsurance
contract made between them and the Reinsurers contained a jurisdiction
agreement to the effect that claims relating to it would be heard in Spain,
and (ii) that, these proceedings and proceedings brought against M. in
Spain being "related actions" under art 28, this court may and should
dismiss or stay this action.
[2] This action was brought on 16 April 2003. The Reinsurers seek
declarations that they are not liable to M. as reinsurers of cover written
for the Spanish football club, S., in respect of personal accident and
sickness of its players for a period from 5 December 2000 to 4 December
2001. A claim has been brought against M. by S. in respect of one of
their players, P.. Mr P., having played no competitive matches since
September 2000 and having been taken off injured when he played in
a friendly match in April 2001, retired from playing professional football
in September 2001. In these proceedings, the Reinsurers claim (i) a
declaration that they are entitled to avoid the reinsurance contract
and have validly done so (the "avoidance claim"), and (ii) further and
alternatively, a declaration that they are not liable under the reinsurance
contract in relation to the claim concerning P. (the "pre-existing condition
claim").
[3] The contractual background to the dispute is as follows: in December
1999, M. wrote insurance (the "1999/2000 insurance") for S. in respect
of their players suffering personal accidents or sickness for a period of 12
months from 5 December 1999. They were reinsured as to 98% of the
risk under a reinsurance contract (the "1999/2000 reinsurance") placed in
the London market, the leading underwriter being C. Re. The evidence is
that M. would not have contemplated underwriting the risk without such
reinsurance. M. wrote a second such policy (the "2000/01 insurance")
for S. for a period of 12 months from 5 December 2000, and took out
reinsurance (the "2000/01 reinsurance") as to 98% of the risk with the
Reinsurers.
[4] The 1999/2000 reinsurance was a slip agreement, and no wording
was produced. The terms of the slip included the following:
"Type: Personal Accident Reinsurance
Form: Slip Reinsurance NMA 1779a plus wording as agreed by Leading
Underwriter on 10 December 1999
Conditions:
(1) Full reinsurance clause:
Being a reinsurance of and warranted subject to the same terms and
conditions (excluding limits and rates) as and to follow the settlements of
the Reassured.
The above full reinsurance clause is amended to include the following
claims Control clause:
(2) It is understood and agreed that the Reinsurers shall have the sole
control of the adjustment, negotiations and settlement of all claims.
It is further agreed that:
(a) the Reinsured upon being advised of any claim(s) or of any possible
claim(s), or upon their being advised of any situation likely to result in
any claim(s), shall give immediate notice thereof to the Reinsurers,
(b) the Reinsured shall furnish the Reinsurers with all information and
papers in connection with such claim(s) and co-operate in the settlement,
negotiation and adjustment thereof.
(3) 24 hour cover including Flight risk and Hijacking, as original.
...
(5) Pre existing conditions exclusion clause, as Original."
[5] The 2000/01 reinsurance was also a slip agreement. Its terms
included the following:
"Form: Slip Reinsurance NMA 1779a
...
Conditions:
(1) Full Reinsurance Clause:-
Being a reinsurance of and warranted subject to the same terms and
conditions (excluding limits and rates) as and to follow the settlements of
the Reassured.
The above full reinsurance clause is amended to include the following
Claim Control Clause:
It is understood and agreed that the Reinsured shall have the sole control
of the adjustment, negotiations and settlement of all claims.
It is further agreed that:
(a) the Reinsured upon being advised of any claim(s) or of any possible
claim(s), or upon their being advised of any situation likely to result in
any claim(s), shall give immediate notice thereof to the Reinsurers;
(b) The Reinsured shall furnish the Reinsurers with all information and
papers in connection with such claim(s) and co-operate in the settlement,
negotiation and adjustment thereof.
(2) 24 hour cover including flight risk, as original.
...
(4) Pre existing conditions exclusion Clause, as Original.
..."
[6] The wording referred to in the 1999/2000 reinsurance slip and agreed
by the leading underwriter on 10 December 1999 (and it will be observed
that there was no comparable reference in the 2000/01 reinsurance slip)
was a translation from the Spanish prepared by the brokers, W. and D.
Ltd, of conditions of the underlying insurance. It was initialled by the
leading underwriter, and included the following:
(i) A term headed "24 hour risk", referred to in the reinsurance slip, that
M. should cover any accident in either professional or private life.
(ii) A term headed "Pre-existing Conditions", excluding cover "in the event
of death or permanent total disablement arising from, traceable to or
accelerated by a pre-existing condition", subject to an exception if a duly
completed proposal form and a medical report had been presented.
(iii) Under the heading Special Conditions at article 17, a jurisdiction
clause in these terms: "If any or both of the contracting parties decide to
bring action before the courts, this should be made before the court with
jurisdiction over the Policy Holder's address in Spain, this being the only
competent court to hear actions arising from this insurance contract, as
long as it reside in the Spanish territory. In any other situation, the court
with jurisdiction over the Insurer's address shall be the only competent
[sic]."
[7] According to a witness statement of Mr L., M.'s manager of the
Northern Zone of Spain, the 1999/2000 insurance also included, at art
15 of the "policy wording", a simultaneous payments clause whereby
it was agreed that M. would be obliged to meet its obligations when it
had received payment from its reinsurers for the reinsured proportion
of the risk. This is not art 15 of the conditions initialled by the leading
underwriter: it is apparent that the 1999/2000 insurance included other
conditions which are not in evidence.
[8] Further, perhaps more surprisingly, the 2000/01 insurance contract is
not in evidence. However, it included the following terms:
(i) A jurisdiction clause which (according to Prof Dr Juan Sanchez-Calero
Guilarte, a Professor of Commercial Law at the Complutense University at
Madrid and a practising Spanish lawyer, who gave expert evidence for M.)
reads as follows in translation: "Competent Jurisdiction. The competent
judge to hear any claims under the Policy will be the judge of the domicile
of the Insured in Spain, notwithstanding any agreement to the contrary.
Should the Insured have its domicile in another country, it will be required
to nominate a domicile in Spain for the purposes of this article."
(ii) A simultaneous payments clause and a pre-existing conditions clause
similar to those of the 1999/2000 insurance.
I was invited by Mr SJ Phillips, who represented M., to assume that
otherwise the 2000/01 insurance was in similar terms to the 1999/2000
insurance. I do not find that an easy assumption in view of the differences
which are apparent: the jurisdiction clause not only had different
wording but was found at art 13 of the General Conditions in the later
policy whereas it was art 17 of the Special Conditions in the 1999/2000
insurance. In any event, it is not necessary to my decision to draw any
inference about the other terms of the 2000/01 insurance.
[9] By a claim dated 27 March 2003, which was filed on 1 April 2003, S.
brought proceedings in the Court of San Sebastian against M., making a
claim for E3,606,072.63 (including interest) under the 2000/01 insurance
on the basis that P. was permanently incapable of playing football.
Cover in respect of Mr P. had been added to the 1999/2000 insurance in
about August 2000, and was included in the 2000/01 insurance. In their
claim S., referring to the pre-existing condition exception, cited medical
evidence that the injury causing the player's disability was not related
to an earlier injury that he had suffered, and stated that he suffered an
injury "separate from the one he had at the start of the agreement". They
also claimed that his condition was disclosed to M..
[10] In their response made on 20 May 2003, M. disputed both these
points. M. also raised a procedural issue of "litisconsorcio pasivo
necesario", a complaint that the proceedings were not properly
constituted because the necessary parties, including the Reinsurers, had
not been joined. Further, M. requested that there should be the "provoked
intervention" (compulsory intervention) of the Reinsurers (and others), or
alternatively that the proceedings be notified to Reinsurers (and others)
so that (as I infer) they could apply to be joined if they wished to do so.
[11] At a preliminary hearing on 15 July 2003, the judge rejected M.'s
complaint of "litisconsorcio pasivo necessario" and the application for
"provoked intervention". She did, however, agreed to notify the Reinsurers
(and also Mr P. and the brokers) of the proceedings. She also said that
the rejection of M.'s application did not mean that M. could not bring
separate proceedings against the Reinsurers. On 4 November 2003, the
court set out the reasons that it rejected the "litisconsorcio" argument. M.
was given permission to file a "revision appeal". The trial of the Spanish
proceedings is scheduled for 4 February 2004.
[12] Is there a relevant agreement between M. and the Reinsurers that
disputes should be determined by the Spanish court? The Reinsurers say
that there is not. M. say that, in view of the full reinsurance clause and
the commercial background, the parties are to be understood to have
agreed to Spanish jurisdiction, and so, under art 23 of the Regulation, the
Spanish court have exclusive jurisdiction over this dispute and this court
has no jurisdiction. Article 23 provides that:
"If the parties... have agreed that the court or the courts of a member
state are to have jurisdiction to settle any disputes which have arisen or
which may arise in connection with a particular legal relationship, that
court or those courts shall have jurisdiction. Such jurisdiction shall be
exclusive unless the parties have agreed otherwise. Such an agreement
conferring jurisdiction shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords to practices which the parties have
established between themselves."
[13] It is convenient first to set out what is not in dispute:
(i) M.'s domicile is in Spain, and so prima facie under the Regulation
proceedings against them are to be brought in Spain.
(ii) The claim of the Reinsurers is a matter "relating to a contract" within
the meaning of art 5 of the Regulation, and as far as the avoidance claim
is concerned, the place of performance of M.'s obligation to make a fair
presentation of the risk was England: Agnew v Lansforsakringsbolagens,
[2001] AC 223, [2000] 1 All ER 737, [2000] Lloyd's Rep IR 317.
Accordingly, in the absence of a relevant jurisdiction agreement, these
proceedings are properly brought in the English court.
(iii) The question whether there is a relevant jurisdiction agreement is, so
far as is relevant, determined not by the proper law of the contract, but
by community law.
[14] I was referred to a number of cases in which the courts have
considered whether the parties had made an effective jurisdiction
agreement. The starting point is, of course, the decision of the European
Court in Salotti v RUWA Polstereimaschinen GmbH [1976] ECR 1831 in
which it was said that "Article 17 [of the Brussels Convention] imposes on
the court before which the matter is brought the duty of examining, first,
whether the cause conferring jurisdiction upon it was in fact the subject
of a consensus between the parties, which must be clearly and precisely
demonstrated" (at p1841, para 7).
[15] M. submits that that the parties to the 2000/01 reinsurance slip
did reach a consensus that they should confer jurisdiction upon the
Spanish court because, through the full reinsurance clause, they reached
a consensus upon the terms of the 2000/01 insurance, including the
jurisdiction clause agreed between M. and S.. In Siboti v BP France,
[2003] EWHC 1278, [2003] 2 Lloyd's Rep 364 at para 40, Gross J set
out the following principles (among others) about the incorporation of
jurisdiction clauses through reference to a body of terms. I gratefully
adopt his formulation of them:
(i) Community law recognises the validity of incorporation by reference,
provided that the body of terms to be incorporated is clearly identified and
whether or not it was available to the parties at the time of entry into the
contract.
(ii) For the purposes of art 23, Community law, like English law, regards
jurisdiction clauses as ancillary to the substantive provisions of the
contract. In many cases, general words of incorporation would only
suffice to incorporate terms germane to the subject matter of the contract
and not terms ancillary thereto; the reason is that in the absence of
specific language, the court may not be able to conclude that the parties
have demonstrated clearly and precisely the existence of a consensus
to incorporate clauses which are ancillary to the subject-matter of the
contract.
(iii) While in Community law, the language of the contract is emphasised
rather than extrinsic factors, this does not entail ignoring the commercial
background; to the contrary, in each case the court must construe the
language of the contract in context and inquire whether a consensus on
the subject matter of the jurisdiction clause has been clearly and precisely
demonstrated. It was, however, to be kept in mind that the commercial
background could not always be relied upon to make good deficiencies on
the language which the parties had chosen to use.
[16] The full reinsurance clause does not expressly refer to the
jurisdiction clause in the 2000/01 insurance, and the clause is not
germane to the subject matter of the contract but ancillary thereto.
Mr Phillips nevertheless invites me to conclude in view of the terms
of the 2000/01 reinsurance slip and the commercial background
(and in particular the fact that M. were, as Mr Phillips submits, "a
front", with the Reinsurers bearing the real financial risk) that M. has
sufficiently demonstrated a consensus between the parties to the 2000/01
reinsurance slip that their agreement should be subject to the jurisdiction
clause in the 2000/01 insurance.
[17] First, Mr Phillips relies upon the fact that the full reinsurance clause
not only provides that the contract is subject to the terms and conditions
of the 2000/01 insurance, but also contains a warranty that it is subject
to those terms and conditions; and argues that it is therefore clear
that the Reinsurers were promising that reinsurance was subject to
the terms of the insurance. I doubt whether, properly interpreted, the
full reinsurance clause does contain such a warranty on the part of the
Reinsurers, being inclined to think that the proper interpretation of the
clause is that stated by Mr Longmore QC arguendo in Vesta v Butcher,
[1989] AC 852, [1989] 1 All ER 402, 887C/D thus: "The true meaning
of this provision is that in consideration of the reinsured agreeing that
the terms of the original contract of insurance should be incorporated in
the contract of reinsurance... reinsurers agree to accept and follow the
settlements made by his reinsured." More importantly, the fact that there
was a warranty in the reinsurance contract that terms would be the same
as those of the insurance does not assist an argument that the parties
intended to incorporate not only terms germane to the subject matter of
the insurance but also ancillary provisions.
[18] Secondly, Mr Phillips relies upon the express exception from the full
reinsurance clause of "limits and rates" to argue, on the basis of expressio
unius est exclusio alterius, that the jurisdiction clause was incorporated.
There are three answers to this point:
(i) Mr Phillips' argument was undermined when he (necessarily) accepted
that not all terms of the 2000/01 insurance other than those relating to
limits and rates were incorporated into the reinsurance.
(ii) Secondly, the 2000/01 reinsurance slip expressly incorporated from
the 2000/01 insurance the 24 hours cover and the pre-existing provisions
clauses. The Reinsurers could therefore point out that similarly it could
be argued that the express reference to those terms indicated that not
all other terms of the insurance contract were incorporated into the
reinsurance slip through the full reinsurance clause.
(iii) Thirdly, the express exclusion of limits and rates is an exclusion
of matters germane to the subject matter of the contract. Even if the
exclusion could be used to advance an argument of expressio unius est
exclusio alterius as to other terms so germane, it cannot apply to ancillary
matters such as the jurisdiction agreement.
[19] Next, Mr Phillips argues that, because the leading underwriter writing
the 1999/2000 reinsurance initialled the insurance wording, it is to be
inferred that the intention was to incorporate the jurisdiction clause into
the 1999/2000 reinsurance, and that, since such changes as were made
upon renewal of the reinsurance are apparent from the 2000/01 slip (for
example, the changes relating to claims control), the inference is that the
parties to the 2000/01 reinsurance contract did not intend to change the
agreement that the Spanish courts should have jurisdiction over disputes.
I cannot accept this argument:
(i) First, I do not infer from the fact the C. Re initialled the wording that
the 1999/2000 reinsurers intended to adopt ancillary provisions from the
insurance contract, specifically the jurisdiction clause.
(ii) Secondly, the jurisdiction agreement in the 2000/01 insurance
was different from that in the 1999/2000 insurance. This undermines
the argument that it is to be inferred that the parties to the 2000/01
reinsurance intended that the jurisdiction agreement should remain
unchanged.
(iii) Thirdly, C. Re did not lead, or even subscribe to, the 2000/2001
reinsurance, and their agreement to terms in the previous year does give
a "clear and precise" indication as to the intention of the parties to the
2000/01 reinsurance contract.
[20] Finally it is argued that, because the subject matter of the
reinsurance was a Spanish risk, the commercial context of the 2000/2001
reinsurance suggests, in the absence of an express jurisdiction
agreement, that the parties intended the Spanish courts to have
jurisdiction over any disputes. I do not agree. Indeed, it seems to
me, if anything, more natural to suppose that parties to reinsurance
underwritten in the London market would more probably expect litigation
to be in the English courts. In any event, I do not consider that the
commercial background can properly be deployed in this way.
[21] In order to defeat M.'s application, the Reinsurers must make out
a good arguable case that the English court has jurisdiction under art
5(1) of the Regulation and that there is no jurisdiction agreement that
the courts of Spain should have jurisdiction; and in a case such as this, in
order to satisfy the flexible test of "good arguable case", the Reinsurers
must, in my judgment, show that their argument would be highly likely to
succeed if the question were tried: IP Metal Ltd v Ruote OZ SpA, [1993] 2
Lloyd's Rep 60 at p 63; Evialis v SIAT, [2003] EWHC 863, [2003] 2 Lloyd's
Rep 377, [2004] Lloyd's Rep IR 187 at para 70. I conclude that they have
done so. Indeed, despite Mr Phillips' ingenuity, I consider M.'s contentions
on this point to be barely arguable.
[22] I add that I see force in criticisms which have been made of adopting
the criterion of a "good arguable case" on the question whether the
parties have made an effective jurisdiction agreement: see Briggs and
Rees in Civil Jurisdiction and Judgments 3rd ed (2002) at p 215. However,
I need not consider these criticisms further. I would have emphatically
rejected M.'s application had I decided the question on the balance of
probabilities.
[23] M.'s alternative application is that these proceedings should be
dismissed or stayed under art 28 of the Regulation, which reads as
follows:
"1. Where related proceedings are pending in the courts of different
member states, any court other than the court first seised may stay its
proceedings.
2. Where these actions are pending at first instance, any court other than
the court first seised may also, on the application of one of the parties,
decline jurisdiction if the court first seised has jurisdiction over the actions
in question and its law permits consolidation thereof.
3. For the purposes of this Article, actions are deemed to be related where
they are so closely connected that it is expedient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings.
[24] It is not disputed that the Spanish proceedings were brought before
this action and that the Spanish court was first seised. Nor have the
Reinsurers argued that the Spanish court does not have the relevant
jurisdiction or that the law of Spain does not permit "consolidation" of
the actions within the meaning of art 28. The issues between the parties
are whether the proceedings are "related actions" and whether this
court should exercise its discretion to dismiss or stay these proceedings.
I consider these questions bearing in mind that "there should be a
broad commonsense approach to the question whether the actions in
question are related, bearing in mind the objective of the article, applying
the simple wide test set out in Article 28 and refraining from an over-
sophisticated analysis of the matter": Sarrio SA v Kuwait Investment
Authority, [1999] 1 AC 32, [1997] 4 All ER 929 at p 41F per Lord Saville.
[25] When the application was opened before me, Mr Phillips accepted
that the avoidance claim was "no part of the existing Spanish
proceedings" and his argument was that:
"The material factors rendering these actions related therefore arise
from the [Reinsurers'] secondary case, by which it places reliance on the
incorporation of the Pre-Existing Conditions clause from the underlying
wording."
In response, Mr Masefield sought to argue that his clients' pre-existing
condition claim did not give rise to a risk of irreconcilable decisions
because the essential question in the Spanish proceedings is whether
the medical report disclosed to M. gave them sufficient notice of the
player's condition. This was no answer to M.'s argument. Although one
question in the Spanish proceedings is whether proper disclosure was
made, the question whether the player's disability results from a pre-
existing condition is also in issue.
[26] During the course of the hearing, therefore, I expressed the
view that since the 2000/01 reinsurers were relying upon the pre-
existing condition clause in the reinsurance slip, there was a real risk
of inconsistent decisions in the Spanish proceedings and in this action,
and that injustice might be done to M. if the Spanish court were to find
that the player's disability did not result from a pre-existing condition
and this court reached the contrary conclusion. I therefore indicated
a provisional view that there was a "risk of irreconcilable judgments
resulting from separate proceedings", that these proceedings and the
Spanish proceedings were "related actions" within the meaning of art
28, and that it would be wrong for this action to proceed. Mr Masefield
took instructions and told me that the Reinsurers offered the court an
undertaking not to pursue the pre-existing condition claim and to confine
themselves to the avoidance claim; and to seek permission to amend
their pleading accordingly.
[27] This answered the case as originally presented by M.. However, Mr
Phillips then put forward a new argument that the avoidance claim gives
rise to the risk of irreconcilable judgments from this court and the Spanish
court. This is said to arise from the Reinsurers' complaint that, when
presenting the risk, M. did not disclose what they knew of Mr P.' condition
from the medical proposal that they received from S. when cover relating
to the player was added to the risk in about August 1990. Therefore,
it is argued, Mr P.' medical condition will have to be investigated in
both these proceedings and the Spanish proceedings, and there is a
consequent risk that the two courts will reach different conclusions about
it. I must therefore consider whether there is such a connection between
the avoidance claim and the Spanish proceedings, and such a risk of
irreconcilable judgments if the avoidance claim is litigated in this court,
that these proceedings should be dismissed or stayed.
[28] I am not convinced by Mr Phillips' argument. As Mr Masefield made
clear, the focus of the Reinsurers' argument in the avoidance claim is
that M. should have disclosed the report that they had received about
Mr P.'s condition, rather than his condition itself. This is not surprising in
view of the decision of the Court of Appeal in Brotherton v Aseguradora
Colseguros SA [2003] EWCA Civ 705, [2003] 2 All ER (Comm) 298,
[2003] Lloyd's Rep IR 746. In my judgment, it is not likely that any
question about Mr P.'s actual condition will need to be determined in these
proceedings, and if any such question arises at all, it will be relatively
peripheral.
[29] In these circumstances, even had it appeared probable that the
Reinsurers would be joined as parties in the Spanish action if I dismissed
these proceedings or ordered a stay of them, I would not have been
persuaded that, because of a risk of irreconcilable judgments, it is
expedient for the avoidance claim to be heard with the S.’ claim in
Spain, and I would not have made an order under art 28. In fact, unless
the decision of the Spanish court is reversed, the dispute between the
Reinsurers and M. over the avoidance claim will not be tried with S.’claim,
and there is nothing in the evidence before me to suggest that the risk of
irreconcilable judgments will be less if there are two separate proceedings
in Spain than if this action proceeds. Accordingly, I decline to dismiss
or stay these proceedings under art 28. I add, although this is not my
reason for reaching this conclusion, it is convenient and desirable that the
avoidance claim, which is likely to be determined by English law and in
light of practices in the London market, should be heard by this court.
[30] Upon the Reinsurers giving the undertaking to which I have referred,
I dismiss M.'s application.