Title: High Court Judgment Template
Author: smithd
Last saved by: viky.martzoukou
Company: RCJ

Neutral Citation Number: [2005] EWHC 923 (Comm)
Case No: 2004 Folio No. 443
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 13 May 2005 

Before :

MR JUSTICE CHRISTOPHER CLARKE
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Between :

Equitas Limited
(on its own behalf and for and on behalf of the underwriting Members of certain Syndicates at Lloyd’s subscribing to reinsurance contracts with the Hellenic War Risks Mutual Association (Bermuda) Limited)
Equitas Reinsurance Limited
(on its own behalf and for and on behalf of the underwriting Members of certain Syndicates at Lloyd’s subscribing to reinsurance contracts with the Hellenic War Risks Mutual Association (Bermuda) Limited)

1^st Claimant

2^nd Claimant

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| Wave City Shipping Company Limited Robin Services Limited Leoninus Shipping S.A. | 1^st Defendant 2^nd Defendant 3^rd Defendant

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David Bailey (instructed by Elborne Mitchell) for the Claimants

Hearing dates: 6^th May 2005
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Judgment
MR JUSTICE CHRISTOPHER CLARKE: 
1.	I have before me an application on the part of the claimants, whom I will call Equitas and ERL, that I should enter judgment in their favour against the defendants, whom I shall describe as “Wave”, “Robin” and “Leoninus”, in default of an acknowledgment of service from any of them. The claim arises in this way. On 6^th January 1991 the “Demetra Beauty” sank in the Gulf of Oman. She was owned by Wave. Under the same management and with, I infer, either the same or similar beneficial ownership were the vessels “Leo”, owned by Robin, and “Leader L”, owned by Leoninus. Demetra Beauty was insured against war risks with the Hellenic War Risks Mutual Association (Bermuda) Limited (“Hellenic”). In March 1991 Wave claimed on the insurance, contending that the vessel had sunk after striking a mine. An investigation took place by Holman Fenwick & Willan (“Holman Fenwick”) in conjunction with various experts appointed by  Hellenic. Their conclusion was that there was insufficient evidence that Demetra Beauty had struck a mine and that her sinking was probably attributable to some other cause. Hellenic declined to pay under the insurance. Proceedings were then launched against Hellenic 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 Hellenic or those associated with Hellenic.  In those proceedings Wave claimed US $ 4 million in damages for breach of contract and further unliquidated damages for moral degradation and further losses allegedly caused by Wave’s restricted access to credit.

2.  A short summary (which I accept) of those claims is contained in the Witness Statement of David McKie, a partner in Elborne Mitchell, solicitors of the claimants. On 8^th October 1999 Wave commenced proceedings against Holman Fenwick, Thomas Miller War Risks Services Limited (“Thomas Miller”), who were Hellenic’s managers, and one of Hellenic’s directors claiming US $4 million, damages for loss of reputation, and US $1,000,000 for defamation. On 9^th December 1999 Robin and Leoninus ceased to be members of Hellenic. The defendants allege that they were expelled due to their status as affiliates of Wave. In early 2002 Wave asked for security of US $20 million from Hellenic and, following a disagreement about the amount of security, wrote to a number of Hellenic’s members threatening to arrest their ships in lieu of the security demanded. On 22^nd March 2002 Wave commenced three sets of proceedings against 24 directors and members of Hellenic claiming the same remedies as had been claimed against Hellenic and US $1 million for defamation on the basis that the individual members were liable for Wave’s loss on the footing that Hellenic was a Greek “civil cooperative”. In May 2002 Wave filed arrest proceedings against a vessel owned and operated by an Hellenic Board member. On 20^th August 2002 Wave sought to wind Hellenic up. That petition was withdrawn in November 2002; but it was substituted by an identical petition lodged by Robin. That was rejected in December and judgment was given in Hellenic’s favour in July 2003. In March 2003 Leoninus lodged a further winding up petition which was rejected in August 2003. Also in March 2003 the proceedings against the directors and members of Hellenic 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 Hellenic claiming $ 15,000,000, excluding interest and costs, comprising Wave’s original claims and $10,000,00 for alleged defamation of Robin and Leoninus. Wave also served a memorandum on the Greek Minister of Merchant Marine alleging that Hellenic was in breach of EU law insofar as it had established an office in Greece following Wave’s obligations. These complaints were later rejected. 

3.  Hellenic was, in respect of years up to and including the date of the loss of Demetra Beauty, 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 Hellenic, (“1992 and prior business”) have been reinsured by ERL (either directly or indirectly) and retroceded by ERL to Equitas.  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 Equitas.  ERL and Equitas represent in this action the Lloyds’ syndicates which reinsured Hellenic 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 Hellenic’s contracts of reinsurance led by Janson Green Syndicate 79.

4.  On 1^st April 2004 the defendants’ Greek lawyer, Mr George Latsoudis, wrote a letter to Hellenic’s managers, Thomas Miller, which included the following passage:

“In addition, we have now been instructed by the clients to sue the Janson Green Syndicate 79 and Equitas 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 Equitas.

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 Equitas upon the basis that a profit commission provision in the relevant reinsurance operated so as to cause Hellenic 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 Hellenic to refuse to pay valid claims and, in particular, the claim in respect of the Demetra Beauty.

6.   On 16^th June 2004 Elborne Mitchell, solicitors for Equitas and ERL wrote on their behalf, and on behalf of those whom Equitas 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 Equitas and Janson Green Syndicate 79 in the manner indicated in the letter of 1^st 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 16^th June 2004 in the form attached not to make claims against Equitas, ERL or those whom they  represent.

7.   On 2^nd July 2004 Elborne Mitchell indicated a preparedness to extend the deadline to 6^th 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 5^th 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 1^st April 2004. On 9^th 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 Equitas in the manner indicated in the letter of 1^st April and to state whether his clients were Wave, Robin and Leoninus, 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 13^th 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 1^st April.  On 22^nd 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 Equitas and ERL invite the Court to declare (putting it shortly) (i) that neither of them nor those the represent is liable to Wave in respect of the loss of the Demetra Beauty by reason  of any claim by Wave that, on account of the terms of the reinsurance contracts with Hellenic, the relevant underwriters or the claimants  wrongly interfered with the contracts of insurance between Hellenic and Wave, and (ii) that neither of them nor those they represent is liable to Robin or Leoninus in respect of any loss in connection with any termination of the insurance between Hellenic and those corporations in 1999 arising out of any claim that, on account of the terms of the reinsurance contracts with Hellenic, the relevant underwriters or the claimants  wrongly interfered with the contracts of insurance between Hellenic and Robin or Leoninus.

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 Wave, and Liberia in the case of Robin and Leoninus; (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 Lõnsforsõkringsbolagens [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 3^rd 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 Hellenic 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 (4^th 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 Equitas 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 Hellenic was regarded as a competitive one. Further neither Equitas 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 Hellenic 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 Wave 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 Robin or Leoninus in relation to their expulsion is concerned it appears that they did not become members of Hellenic until 1994 and 1998 respectively. Neither Equitas 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, Wave City Shipping Company Limited (‘Wave’), in respect of any loss, expenditure, liability or damage incurred or sustained by Wave in consequence of or in connection with the loss of the vessel DEMETRA BEAUTY on 6^th January 1991, which was entered with The Hellenic Mutual War Risks Association (Bermuda) Limited (“Hellenic”), arising out of any claim by Wave that by, on account of, or in consequence of  the terms of the reinsurance contracts or arrangements between Hellenic 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 Hellenic and Wave, conspired to injure Wave or otherwise committed any tortious act of which Wave was the victim;

(b)	neither the First nor the Second Claimant nor any of the  Underwriters is liable to the Second  Defendant, Robin Services Limited (‘Robin’), in respect of any loss, expenditure, liability or damage incurred or sustained by Robin in consequence of or in connection with the alleged termination of the contract of insurance between Hellenic and Robin in respect of the vessel LEO in December 1999 arising out of any claim by Robin that by, on account of, or in consequence of the terms of the reinsurance contracts or arrangements between Hellenic 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 Hellenic and Robin, conspired to injure Robin or otherwise committed any tortious act of which Robin was the victim;

(c)	neither the First nor the Second Claimant nor any of the  Underwriters is liable to the Third  Defendant, Leoninus Shipping SA (‘Leoninus’), in respect of any loss, expenditure, liability or damage incurred or sustained by Leoninus in consequence of or in connection with the alleged termination of the contract of insurance between Hellenic and Leoninus in respect of the vessel LEADER L in December 1999 arising out of any claim by Leoninus that by, or on account of, or in consequence of the terms of the reinsurance contracts or arrangements between Hellenic 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 Hellenic and Leoninus, conspired to injure Leoninus or otherwise committed any tortious act of which Leoninus was the victim.