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Cite as: [2001] IEHC 237

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THE HIGH COURT

Record No. 2000/727P

BETWEEN/

ANALOG DEVICES B. V.,

ANALOG DEVICES IRELAND LIMITED,

ANALOG DEVICES RESEARCH & DEVELOPMENT LIMITED,

ANALOG DEVICES INC.

Plaintiffs

-and-

ZURICH INSURANCE COMPANY,

AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY

Defendants

JUDGMENT of Mr. Justice Lavan delivered on the 18th May, 2001

The action arises out of a notice of motion filed by the second named defendant, American Guarantee and Liability Insurance Company (hereinafter "American Guarantee"), seeking an order setting aside the service on it of a Notice of Concurrent Summons dated 10 February, 2000, on the grounds that this Court had no power to permit service thereof on it outside the jurisdiction. American Guarantee also seeks an order setting aside the Order made by this Court on 31 January, 2000, authorising service on it of same. In the alternative, American Guarantee seeks an order staying the proceedings herein as against it on the grounds that proceedings concerning the same cause or matter were pending between it and the fourth named plaintiff, Analog Devices Inc., in the United States District Court for the District Court of Massachusetts prior to the commencement of the proceedings herein.

The High Court assumed jurisdiction over American Guarantee pursuant to Order 11 of the Rules of the Superior Courts, 1986, by virtue of an order of the Honourable Mr. Justice Smith made on 31 January, 2000, on an ex parte application. The provisions relevant to the establishment of jurisdiction in the instant case are contained in Order 11 Rule 1 which provides that:

"Service out of the jurisdiction of an originating summons or notice of an originating summons may be allowed by the Court whenever -

(e) the action is one brought to enforce, rescind, dissolve, annul, or otherwise affect a contract, or to recover damages or other relief for or in respect of the breach of a contract -

(iii) by its terms or by implication to be governed by Irish law, or is one brought in respect of a breach committed within the jurisdiction of a contract wherever made, even though such breach was preceded or accompanied by a breach out of the jurisdiction which rendered impossible the performance of the part of the contract which ought to have been performed within the jurisdiction...

(h) any person out of the jurisdiction is a necessary or proper party to an action brought against some other party duly served within the jurisdiction."

The proceedings arise out of a contested insurance claim brought by the plaintiffs, four related companies under the Analog Devices banner, against the first and second named defendants. The claim arises on foot of an incident which occurred on 2 August, 1999, at the plaintiffs' manufacturing plant at Raheen Industrial Estate, Limerick, when damage caused by the installation of an incorrect filter a number of months previously became apparent. It is alleged that as a result product processed between 3 April 1999 and 8 August 1999 was rendered unusable causing serious financial losses to the plaintiffs. Arising out of these alleged losses, the plaintiffs have made a claim under two insurance policies. Coverage has been denied on the basis of certain exclusions under both policies. The first policy under which a claim is made is that issued by the first named defendant, Zurich Insurance Company, and has been referred to in proceedings as the "local policy". The proceedings brought by the plaintiffs against Zurich Insurance Company have been progressing in this jurisdiction. No issue in relation to jurisdiction has arisen in relation to the first named defendant in so far as a claim under the local policy is concerned. The second policy under which a claim is made is that issued by the second named defendant, American Guarantee, and has been described in the proceedings as the "master policy". While the local policy was issued in Ireland, the master policy was issued in the United States by the second named defendant to the fourth named plaintiff, Analog Devices Inc., which is also based in the United States.

The plaintiffs issued a plenary summons in Ireland on 20 January, 2000. To bring proceedings against American Guarantee, the plaintiffs required a High Court order giving them liberty to issue concurrent summons and to serve notice thereof on American Guarantee. Leave was granted and the appropriate order in relation thereto made by Mr. Justice Smith on 31 January 2000 and the concurrent summons was issued on 10 February 2000. Notice of that date was served on American Guarantee in the United States.

In the present action, American Guarantee is challenging the Court's jurisdiction to entertain the plaintiffs' claim on the grounds that the Irish Courts do not have jurisdiction in relation thereto. It seeks orders pursuant to Order 12 Rule 26, Rules of the Superior Courts or, alternatively pursuant to the inherent jurisdiction of the Court setting aside service of the proceedings on it. Order 12 Rule 26 provides that:

"A defendant before appearing shall be at liberty to serve notice of motion to set aside the service upon him of the summons or of notice of the summons, or to discharge the order authorising such service."

It is submitted on American Guarantee's behalf that, as the plaintiffs have failed to establish that the claim falls under any of the sub-rules of Order 11 Rule 1, the case is not a proper one for service outside the jurisdiction under Order 11 Rule 5. Alternatively, American Guarantee seeks a stay on the proceedings based on the grounds that Massachusetts is the more appropriate forum to determine the dispute having regard to the fact that proceedings have been commenced and are at an advanced stage and that justice does not require that the stay sought should be refused.

The principal factors relied upon by the plaintiffs in urging that the proceedings commence in Ireland are outlined in paragraph two of their submissions. The factors as outlined are:

"(1) The incident that occurred on 2 August, 1999, occurred in Raheen, Co. Limerick.

(2) Witnesses of fact relating to the nature of the process and what transpired on the day in question are all located in Ireland.

(3) Witnesses of fact relating to the proof of loss sustained by the plaintiffs are all located in Ireland.

(4) The documentation relating to the nature of the process and the losses of the plaintiffs are located in this jurisdiction.

(5) The dispute as to whether indemnity was denied - before any inspection was carried out - at the meeting on the 3rd September 1999 relates to a meeting that occurred in Ireland.

(6) Documentation relating to the manufacturing process and the maintenance procedures (which would be of critical importance) are located in Ireland."

The plaintiffs submit that the claim against the second named defendant is one brought in respect of a breach within the jurisdiction of a contract wherever made, which gives the Court jurisdiction within Order 11 Rule 1 (e)(ii), Rules of the Superior Courts. The breach relied upon was the failure of the second named defendant to make payments under the master policy. Payment under such policy fell to be made in Ireland, it was submitted, giving the Court jurisdiction to determine whether the alleged breach had in fact occurred. In light of the forgoing authorities, the plaintiffs submit that Order 11 does not require an applicant seeking leave to serve out of the jurisdiction to establish, on the balance of probabilities, that one or more of the grounds for service out of the jurisdiction set out in Order 11, Rule 1 applies. Rather, it is submitted, the applicant is required to establish that it has a good arguable case for asserting that one or more of these grounds applies.

In support of this contention, the plaintiff cites the judgment of Barrington J in the Supreme Court in Short v. Ireland [19961 21.R. 188 at pp.219-220:

"From the forgoing discussion it is clear that the present case raises, or may raise, difficult questions of far ranging significance. Certainly the questions are too complex and difficult to be disposed of, in limine, on a motion to dismiss for want of jurisdiction. Rather they should be left to the trial judge to decide after full debate".

It is submitted by the plaintiffs that as the second named defendant is a "necessary or proper party" to the plaintiffs' proceedings against the first named defendant, the Court was also justified in exercising its jurisdiction over the second named defendant under Order 11 Rule 1 (h), Rules of the Superior Courts. It is further submitted that the commencement of proceedings in the United States by the second named defendant was designed to frustrate the determination of the matter in the appropriate forum, the Irish courts. It is submitted in the plaintiffs' pleadings that the conduct of the second named defendant "amounts to nothing more than a pre-emptive strike in terms of forum shopping" It is further submitted that the primary responsibility for delay in the present proceedings rests with the second named defendant. In determining whether the second named defendant is a "necessary or proper person" for the purposes of the Court's jurisdiction under Order 11 Rule 1 (h), the plaintiffs drew the Court's attention to the judgments of O'Hanlon J. in the High Court and Barrington J. on appeal to the Supreme Court in the previously mentioned case of Short v Ireland [1996] 21.R. 188. With regard to the provisions of Rule 1 (h), Barrington J. stated that: "The standard test to be applied in exercising this jurisdiction is whether the person out of the jurisdiction would, if he were in the jurisdiction, be a proper person to be joined as a defendant in the action against the other defendants", (at p. 216)

The plaintiffs submit that were the second named defendant resident in the jurisdiction, it would clearly have been a proper person to be joined as a co-defendant. The claim against the second named defendant arises from precisely the same incident as the claim against the first named defendant and involves the same loss on the part of the plaintiffs. It is submitted that the same evidence is relevant to both claims, and that there is a clear "link" between them. It is alleged that the issues raised by both defendants in providing the ground or grounds for denying cover to the plaintiffs are the same, as they rely on contractual provisions that are materially identical. A failure to join the defendants in the same proceedings would result in a clear risk of conflicting decisions, it was claimed.

The plaintiffs also cited the judgment of Costolloe J. in International Commercial Bank plc v. Insurance Corporation of Ireland Pic. [1989] I.R. 453 in construing Order 11 Rule 1 (h).

"...[T]he Irish courts will assume jurisdiction over a claim against a foreign domiciliary, even though the cause of action may have arisen outside the jurisdiction, once the foreign domiciliary can be regarded as a proper party to an action brought by a plaintiff in this country against an Irish domiciliary. It is also to be borne in mind that the claim against the foreign domiciliary need not be the same as that against the Irish domiciliary, once he can be regarded as a "proper" party in the action against the Irish domiciliary. The plaintiffs summons may contain two distinct causes of action against the different defendants... /...[T]he court, for example, can validly assume jurisdiction to try a claim against a defendant out of the jurisdiction on foot of a contract of indemnity made outside the jurisdiction if a co-defendant within the jurisdiction was sued on foot of a contract whose performance had been guaranteed by the foreign domiciliary", (at p. 460).

The second named defendant submits that the decision to refuse cover under the master policy was taken following a review of the claim in response to correspondence from the plaintiffs in September 1999 and was communicated to Analog Devices Inc., the fourth named plaintiff, in the United States in a letter dated 7 October 1999. Any alleged breach of the contract, it is submitted, occurred at that time in the United States, and not, as the plaintiff submits, when indemnity was denied by an agent of the first named defendant after a meeting in Limerick on September 3 1999.

Rejecting the notion that American Guarantee is a "necessary or proper party" to the proceedings against the first named defendant, Zurich Insurance Company, it is submitted by the second named defendant that the plaintiffs have failed to acknowledge that the claim against Zurich Insurance Company is a specific claim arising under a specific policy, namely, the local policy. Referring to the test as outlined by Barrington J. in Short v. Ireland, American Guarantee submits that were it resident in the jurisdiction it would not have been joined as a defendant in the plaintiffs' claim against Zurich Insurance Company under the local policy, and that, therefore, the plaintiffs have not established jurisdiction in relation to their claim against American Guarantee under Order 11 Rule 1 (h), Rules of the Superior Courts.

In the event that the Court finds that it does have jurisdiction in the matter, American Guarantee has applied in the alternative for a stay on the proceedings before this Court on the basis that concurrent proceedings in the same matter are now at an advanced stage in the United States District Court for the District Court of Massachusetts. It is seeking a declaration that it has no liability to the plaintiffs under the master policy. American Guarantee submits that the material date for the purposes of evidence in considering an application for a stay on the grounds of forum non conveniens is the date of the hearing of the application. In the present case, application was made to the court in Massachusetts before the plaintiffs applied for a plenary summons in the matter before the Irish courts. Reference was made by American Guarantee to the principles to be applied in the exercise of a discretion to stay proceedings as outlined by Lord Goff in Snillada Maritime Corporation v. Cansulex Limited [1987] 1 AC 460 in which the learned judge stated:

"The basic principle is that a stay will only be granted on the grounds of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i. e. in which the case may be tried more suitably for the interest of all the parties and the ends of justice" (per Lord Goff at p. 476).

Conclusions

On full consideration of the extent of submissions supplied by the second named defendant and the plaintiff herein I have come to the following conclusions:-

1) In relation to the plaintiffs' first submission it seems to me on balance that the conduct of the second named defendant amounts to nothing more than a form of forum shopping involving the talcing of pre-emptive legal proceedings in the United States with the intention of ultimately seeking to prevent the plaintiffs as insureds, claiming an indemnity against it in the Irish jurisdiction.

2) I also accept that the appropriate forum as between Ireland and the United States is in this country. I accept the various matters set out at paragraph 2 of the plaintiffs submissions in this regard.

3) In relation to the nature of the jurisdiction invoked by the second named defendants I again accept the authorities relied upon by the plaintiffs and the submissions thereto culminating in the following opinion of Barrington J. in Short v. Ireland [1998] 2 I.R. 188 where he stated (at pp. 219-220) as
follows:-

"from the forgoing discussion it is clear that the present case raises, or may raise, difficult questions of far ranging significance. Certainly the questions are too complex and difficult to be disposed of, in limine, on a motion to dismiss for want of jurisdiction. Rather they should be left to the trial judge to decide after full debate".

4) I also accept the plaintiffs' submissions in relation to the second named defendant being a "necessary or proper party" for the purposes of Order 11 Rule 1 (h), Rules of the Superior Courts. Once again, I rely on the opinion of Barrington J. in Short v. Ireland [19961 21.R.188

"The standard test to be applied in exercising this jurisdiction is whether the person out of the jurisdiction would, if he were in the jurisdiction, be a proper person to be joined as a defendant in the action against the other defendants", (at p. 216)

The above test was also applied by McCarthy J. In Tromso Sparebank v. Byrne (Unreported, Supreme Court, 15 December, 1989). I am satisfied that the second named defendants are a necessary or proper party to the plaintiffs' proceedings against the first named defendant.

5) In relation to jurisdiction and breach of contract, I accept that there is a stateable case that the second named defendants could be taken to have repudiated its obligations under the policy and that this repudiation occurred at Raheen, Limerick, and that Order 11 Rule 1 (e)(iii) therefore applies.

6) I accept on the submissions relied upon by the plaintiff that Ireland is the appropriate forum for the hearing of this action

7) With regard to the application to state the proceedings of lis alibi pendens, I also accept the plaintiffs' submissions. I particularly note the opinion of Costolloe J., as he then was, in International Commercial Bank Pic, v. Insurance Corporation of Ireland [1989] I.R. 453.

Having regard to the forgoing findings and authorities I have come to the conclusion that I ought to refuse the second named defendant's application to vacate the order of Smith J.