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England and Wales High Court (Commercial Court) Decisions
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Brotherton & Ors v Aseguradora Colseguros SA & Anor [2001] EWHC 498 (Comm) (18th December 2001)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2001/498.html
Cite as:
[2001] EWHC 498 (Comm)
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| | [2001] EWHC 498 (Comm) |
| | Case No: 2001/983 |
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
| | Royal Courts of Justice Strand, London, WC2A 2LL |
| | 18th December 2001 |
B e f o r e :
THE HONOURABLE MR JUSTICE DAVID STEEL
____________________
| (1) PETER MALCOLM BROTHERTON (on his own behalf and on behalf of the other members of Syndicate 490 at Lloyds and all other Reinsurers subscribing to Policy No. BD11176 OM )
(2) PETER MALCOLM BROTHERTON (on his own behalf and on behalf of the other members of Syndicate 490 at Lloyds and all the other Reinsurers subscribing to Policy No. BD11177 OM)
| Claimant
|
| - and -
|
|
| (1) ASEGURADORA COLSEGUROS S.A.
(2) LA PREVISORA S.A., COMPANIA DE SEGUROS
| Defendants
|
____________________
Michael Swainston and Roger Masefield (instructed by Reynolds Porter Chamberlain for the Claimants)
Richard Millett (instructed by Clyde & Co. for the Defendants)
____________________
HTML VERSION OF HANDED DOWN JUDGMENT
____________________
Crown Copyright ©
Mr Justice David Steel :
- The Court is concerned with two applications by the defendants. The first is to set aside service of proceedings on forum non conveniens grounds. The second is to set aside service, effected with leave of the court, on the defendant’s brokers in England.
- The claim form was issued by re-insurers seeking negative declaratory relief under two policies of facultatative re-insurance entered into by means of declarations to a line slip subscribed by the claimants as leaders. The re-insurance contracts are in the form of bankers fidelity slip policies which cover the defendants’ liability under an original insurance contract, the original assured being a Colombian bank called for short, CAJA.
- The claimants seek to avoid the re-insurance contract on grounds of mis-representation and non-disclosure. The focus of these allegations is an alleged failure to disclose reports in Colombian newspapers that the President of CAJA was involved in corrupt lending which had led to a police investigation and the arrest, charge and suspension of the President. The lending irregularities were said to form the basis of the losses claimed by the original assured.
Forum Conveniens
- There was a threshold issue to the argument on forum conveniens, namely whether, as contended by the defendants, the re-insurance contracts were subject to a Colombian law and jurisdiction clause.
- The background to this dispute is as follows. The line slip encompassed potential declarations in the form of both insurance and re-insurance. Such declarations, including the wording, were to be agreed by the claimants as lead underwriter (albeit some other subscribers to the line slip also insisted on agreeing each declaration – including, notably, Sorema later to become Trenwick). The line slip was silent on issues of jurisdiction. Its governing law was English law.
- On 17th November 1997, there was a presentation of the risk to a Mr Satterford, the head of the claimants’ underwriting division, by placing brokers Butcher Robinson Staples (“BRS”). The outcome was two quotation sheets signed by Mr Satterford for the primary and excess layers respectively. The primary quotation made reference, under the heading “conditions”, to a “Jurisdiction clause as attached”. This Mr Satterford crossed out before scratching it. The excess quote contained no reference to jurisdiction in that or any form.
- As regards the excess layer, the slip matched the quotation. The slip for the primary layer again contained the condition “Jurisdiction clause as attached”. Mr Satterford did not delete it, although, as the defendants emphasised, he did repeat an annotation to the claim control and settlement clause immediately above.
- It was common ground that no jurisdiction clause was attached. It was the defendant’s case, however, that a generic jurisdiction clause had earlier been discussed and agreed with Mr Satterford in the following form:
JURISDICTION CLAUSE
“It is hereby understood and agreed that the following Conditions and / or General Conditions:
Jurisdiction,
Interpretation,
Forum Selection,
Service of Process,
Conduct of Legal Action,
and/or any other Condition or General Condition which may be applicable are hereby modified to incorporate Local Jurisdiction on the following basis:-
a) This insurance / reinsurance shall be governed by the law of the country in which the Insured’s head office is located whose Courts shall have jurisdiction in any dispute arising hereunder, and…….”
- It is of course, common ground that the effect of this clause, if incorporated, would be to apply Colombian law and jurisdiction. But no copy of such a written clause has been found in the files of the claimants or, indeed, of the defendants’ brokers, let alone one scratched by Mr Satterford.
- It is Mr Satterford’s evidence that, whilst there had been some discussion with regard to a standard form of jurisdiction clause to be used in connection with the line slip, no agreement had been reached. This discussion had been prompted by the brokers who had pressed for the application for the same law to the re-insurance as the underlying cover. But Mr Satterford’s philosophy had remained that, whilst he was agreeable to follow the fortunes of the re-insured as regards the underlying cover, he was only willing, save in exceptional circumstances, for the re-insurance to be governed by English law. The only exception that he could recall was reinsurance cover in respect of the Central Bank of Colombia where he did expressly accept a non-English jurisdiction clause.
- Mr Satterford speculated that his failure to strike through the words “jurisdiction clause attached” was, probably, due to inadvertence or, possibly, in anticipation of agreement on a standard clause. His recollection is supported by Mr Barron from the claims department of the claimants. It is also worthy of note that Mr Head, former underwriter for Sorema, recalls no discussion of a generic jurisdiction clause, let alone any agreement to such. Indeed the first he saw of any form of clause as asserted by the defendants was in September 2001 when he scratched such a clause in respect of reinsurance cover of another Colombian bank which had incepted in May 2001.
- The defendants’ evidence on the topic, or more accurately the brokers’ evidence, suffered not only from a lack of supporting documentation, but also from a lack of consistency. Mr Cuthbert, a director of BRS responsible for the placement, when asked in May 2001 to comment on the disparity between the primary quotation and the slip responded that: “This would have been a negotiating point - the clause would have been put back following discussions between the underwriter and the broker.”
- His statement in November 2001 was to rather different effect. He then asserted that a jurisdiction clause had already been agreed between BRS and Satterford for use under the line slip. I quote from his statement:
“A jurisdiction clause had been agreed between my firm and Alan Satterford for use under the line slip. This had arisen from a previous risk that had been underwritten in the London market in relation to a reinsurance that we had placed in 1997, which had highlighted the possibility of it being argued that the jurisdiction applicable to the underlying policy could be the country of the reinsured while the jurisdiction for the reinsurance could be asserted as being England. This matter concerned an underlying Argentine assured called Firme Securidad. The ceding company in that case was amazed that it could be argued that English jurisdiction applied to the reinsurance and, as a direct result of this, my firm had discussion with the underwriters and companies with whom we placed this business to ensure that this problem did not recur. Because Alan Satterford was a recognised leader for this business, and because he led one of our lineslips, he was closely involved in these discussions. They resulted in a clause being drawn up and approved by him and other underwriters for use where specified generally in policies to which he or they subscribed which provided for law and jurisdiction to be that of the country in which the insured (or reinsured) had its head office. When Alan Satterford approved this clause I understand from my colleagues that a copy of it was initialled by him and the initialled copy was retained in our office. I have tried, so far unsuccessfully, to locate this initialled copy. However, it is possible that it may have been lost in a flood which our office suffered in October 1999 which resulted in the loss of, and damage to, a considerable quantity of our records. I have managed to find a copy of the clause that was initialled earlier this year by another insurer, Trenwick International Ltd, and a copy of this is to be found at p. 26 of my exhibit bundle.”
- The absence of any copy of the clause, let alone scratched by Mr Satterford in the broker’s files, is all the more striking having regard to certain other aspects of Mr Satterford’s evidence:-
i) If he had agreed any standard form of clause, he would have scratched it.
ii) If he had scratched it, he would have made arrangements for a copy to be scanned for inclusion in the reinsurers’ computer files;
iii) Yet there is not only no hard copy of the clause but also there is no image in the computer memory.
- It is striking that Mr Cuthbert fails to identify the “colleagues” who gave him the information about the agreement. Indeed it seems surprising that neither he nor Stuart Brown, the chairman of BRS, both of whom were intimately involved in the line slip, appear to be able to speak from their own knowledge.
- I have already referred to the evidence of Mr Head, relating to the jurisdiction clause scratched by him in September 2001. Despite the evidence from Mr Cuthbert cited above, this does not support the claimant’s case that there had been an agreement in 1997.
- Some reliance was placed by the defendants on a fax sent by BRS to the producing brokers in Colombia in November 1997 after the primary quotation had been made but before the primary line slip was scratched. This fax states that: “Following our telcon - please find attached a copy of a jurisdiction clause for your records.” The attached clause, whilst in like terms to the clause scratched by Mr Head, refers only to insurance.
- A somewhat tortured explanation for this is contained in Mr Cuthbert’s statement.
“In his statement Mr Satterford refers to the two versions of the jurisdiction clause - the one attached to my fax of 21st November 1997 which, in sub-paragraph (1), refers to “This insurance shall be governed.....” and the one appearing at the following page of the Exhibit bundle (p.142) which in the same sub-paragraph refers to “This insurance / reinsurance shall be governed.....” Although I am unsure how it had arisen that there were two versions of the clause with these differences my recollection is that Aseguros would have requested a copy of the jurisdiction clause but this did not have any bearing on them as this was a reinsurance condition (emphasis added). For the sake of good order we sent them a copy of the clause taking out the word ‘reinsurance’ as this had no bearing on them as they were the direct broker and not the ceding company. However, so far as the reinsurance between my principals and Alan Satterford was concerned, the relevant jurisdiction clause was that referring to “this insurance / reinsurance”.
- Regrettably, this is not only difficult to reconcile with the absence of any hard copy of the earlier version but the rationale for re-drafting is difficult to reconcile with an earlier paragraph in Mr Cuthbert’s same statement.
“I maintain that it was therefore agreed that the jurisdiction clause was incorporated consistent with the practice for the lineslip and open market that I have described above. It can further be seen that it was throughout my intention to insist on the jurisdiction clause from the fax of 21st November 1997 which I signed and which was sent to Aseguros Ltda. This shows that the question of the jurisdiction clause had been picked up by them, and that they had been told by us that was to be applied to the reinsurance (emphasis added). I am referring to the fax to Vicente Miranda Munoz of 21st November 1997, appearing at pages 140 and 141 of “ADS1” which states “Following our telcon today, please find attached a copy of jurisdiction clause for your records.” Although I did not recall myself having had the telcon referred to with Mr Munoz, in signing the fax I was clearly expressing my understanding that the jurisdiction clause was going to be a term of the final slip…”
- I am conscious of the need to exercise caution in respect of a conflict of witness evidence at an interlocutory stage, the more so where the issues to be determined will not by definition be re-visited at the trial. But I have come to the firm conclusion that the claimants have very much the better of the argument on the issue as to whether the jurisdiction clause had in fact been agreed. My confidence in this conclusion is fortified by the removal of the reference to a jurisdiction clause in the primary quotation by Mr Satterford and the absence of any reference to a jurisdiction clause in the excess quotation or slip.
- No doubt conscious of these difficulties, the defendants changed tack. In their skeleton argument, it was suggested that the absence of any clause, whether attached to the slip or not, was immaterial. It was suggested that the mere reference to a jurisdiction clause was enough to constitute a jurisdiction agreement for the courts of the country, not being England, with which the dispute had its real connection, i.e. Colombia. Reliance in support of this startling submission was based on the decision of Mr Justice Moore-Bick in Burrows v. Jamaica Power (28th October 2001).
- I am not sure that this proposition was pursued at the hearing. It is certainly misconceived. In Jamaica Power, there were two established jurisdiction clauses available on the market, an English jurisdiction clause and an overseas jurisdiction clause. The choice by the parties of the overseas jurisdiction clause obviously had implications by way of the rejection of English jurisdiction and the selection by implication of the only other jurisdiction the parties could conceivably have in mind.
- There is no analogy with a slip containing a reference to a jurisdiction clause in the primary slip which is not attached, which is not available on the market and which indicates no preference for a non English jurisdiction.
- Not to be discouraged, the defendants advanced a new argument in oral submission to the effect that, since it was common ground that a version of the jurisdiction clause was in circulation at the time when the slip was scratched, the reference to jurisdiction clause must be construed as a reference to that draft.
- The first difficulty of course with this argument is that, whilst there is evidence of discussions on the topic, several versions appear to have been in circulation, none of which are presently available. The whole structure of the argument is built on sand. The second problem is that it involves abandoning the entirety of the defendants’ evidence with regard to a successful conclusion to the negotiations. Once it is established, as I have sought to explain, that the defendants’ primary case is discredited, I cannot subscribe to the substitution in its place of an account to which none of the witnesses speak. Indeed it was implicit in the defendants’ evidence that no jurisdiction clause would be applicable unless agreement was achieved.
- It is for those reasons that I conclude that the claimants have established a strong case that there was no Colombian law and jurisdiction clause. Once that conclusion is reached, the claimants’ task in making good a case that England is the appropriate forum for the resolution of the issues becomes easy to discharge:-
a) The contract is governed by English Law. The English courts are obviously an appropriate forum to determine English Law issues. Indeed, English courts are the only appropriate forum, since the expert evidence demonstrates that the Colombian court would apply Colombian law.
b) The primary issues of fact revolve around misrepresentations and non disclosures by London brokers to London underwriters in London.
c) Most of the relevant witnesses, both factual and expert, are in England.
d) The proceedings on the underlying insurance and the evidence pertinent to those proceedings are of no direct concern. The claimant’s case in these proceedings is by way of complaint of nondisclosure of the contents of the Colombian press, not the truth of those reports.
- It follows that the application to set aside on forum conveniens grounds is dismissed.
Service
- I turn now to the issue of service. I granted leave on paper pursuant to CPR 6.16 to serve on the defendant’s brokers. This rule reads as follows:
“Service of claim form on agent of principal who is overseas
6.16 (1) Where -
(a) the defendant is overseas; and
(b) the conditions specified in paragraph (2) are satisfied, the court may, on an application only, permit a claim form relating to a contract to be served on a defendant’s agent.
(2) The court may not make an order under this rule unless it is satisfied that -
(a) the contract to which the claim relates was entered into within the jurisdiction with or through the defendant’s agent; and
(b) at the time of the application either the agent’s authority has not been terminated or he is still in business relations with his principal.
- It is common ground that the brokers’ retainer with respect to the reinsurance slips was indeed terminated. The only issue is whether the defendants are still “in business relations”. The evidence on this topic was all one way. BRS continued to act on behalf of the defendants in respect of a whole range of other reinsurance contracts both in terms of placement and claims handling. It seems to me to be a paradigm case to allow service on the agent who remains in regular contact with the defendants and where the only consequence of insisting on service in Colombia would be delay and expense. This application is also dismissed.