Agnew and Others v Lansforsakringsbolagens
| Jurisdiction | England & Wales |
| Judge | Evans L.J. |
| Judgment Date | 31 July 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0731-12 |
| Date | 31 July 1997 |
| Docket Number | QBCMI 96/1234/B |
| Court | Court of Appeal (Civil Division) |
[1997] EWCA Civ J0731-12
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
(MANCE J)
Royal Courts of Justice
Strand
London WC2
Lord Justice Evans
Lord Justice Hobhouse
and
Lord Justice Schiemann
QBCMI 96/1234/B
MR M ASHE QC & MISS M KELLY (Instructed by Messrs Rosling King, London EC4) appeared on behalf of the Appellants
MR M CRANE QC & MR A LYDIARD (Instructed by Messrs Clyde & Co, Guildford GU1) appeared on behalf of the Respondent
Three issues arise on this appeal from the judgment of Mance J. in the Commercial Court on 30 July 1996. He dismissed the defendants' application to set aside the proceedings, made under Order 12 Rule 8, on the ground of want of jurisdiction in the Court. The defendants appeal against that ruling on two grounds, one of which was not raised before the judge. They also apply to have the issue of jurisdiction referred for a preliminary ruling by the European Court.
The issue decided by the judge arises under Article 5(1) of the Lugano Convention (Schedule 3C to the Civil Jurisdiction and Judgments Act 1982). This provides an exception to the general rule that parties who are domiciled in a Contracting State shall be sued in the court of that State (Article 2(1)). Article 5(1) reads in part as follows, and 5(3) can conveniently be quoted also :-
""5. A person domiciled in a Contracting State may, in another Contracting State, be sued :
(1) in matters relating to a contract in the courts for the place of performance of the obligation in question……
(3) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred."
The defendants are an insurance company domiciled in Sweden. They say that pursuant to Article 2 they should be sued in Sweden. The plaintiffs, who are Lloyd's underwriters and other re-insurers of the defendants, say that Article 5(1) applies. They bring proceedings here, they submit, in "a matter relating to a contract" and that London was "the place of performance of the obligation in question". Mance J. upheld the plaintiffs' contention. The defendants conceded before him that the first requirement of Art.5(1) was satisfied : that the plaintiffs do sue "in a matter relating to contract". He was called on to decide only whether "the obligation in question" brought the proceedings within Article 5(1). If it did, then it is also conceded that the place of performance was in London.
The defendants reserved the right to withdraw the first concession on appeal, and they have done so. They submit, therefore, that the plaintiffs must bring their claim within both of the Article 5(1) requirements.
The contracts in question are contracts of reinsurance which were made on different dates during the period from November 1993 until February 1944 covering risks attaching on or after 1st January 1994 (in one case 1st January 1995). The plaintiffs claim declarations that they are entitled to cancel and avoid the Contracts on grounds of "misrepresentation of and/or failure to disclose and/or non-disclosure of" material facts. There is also a claim for breach of warranty, but this is not relied upon nor relevant for the purposes of the appeal.
The alleged misrepresentations and non-disclosures of material facts are categorised in English law as breaches of the duty of good faith which insureds and re-insureds owe to insurers and reinsurers during the negotiation of contracts and in certain respects after the contracts are concluded. One question which arises is whether this duty of good faith should properly be regarded as a contractual obligation, or whether it arises on other, more general and non-contractual grounds. The leading authorities include Merchant and Manufacturers Ins. C. v. Hunt [1941] 1 K.B. 295; Banque Keyser Ullmann S.A. v. Skandia (U.K.) Ins. Co. Ltd. [1990] 1 Q.B. 665 (C.A.) and [1991] 2 A.C. 249; The Good Luck [1989] 2 Ll.R 238. The issue is discussed in Lord Mustill's speech in Pan Atlantic Ins. Co. Ltd. v. Pine Top Ins. Co. Ltd [1995] 1 A.C. 501 and 543-4. If not contractual, the obligation arises from "the jurisdiction originally exercised by the Courts of Equity to prevent imposition" (per Luxmoore L.J. [1941] 1 K.B. at 318).
Mance J. said this :-
"In considering whether the matter is one "relating to a contract" within Article 5(1), it seems to me that such questions can largely be ignored, as being of no more than historical and domestic interest. I will however proceed on the basis that the duty of good faith exist, as Mr Ashe submitted, as a matter of general law outside the contract" (p 8).
I agree with the judge's view, but like him I will assume that the duty of good faith, which is broken by a misrepresentation or non-disclosure of material fact in the course of making a contract of insurance or re-insurance, should not be categorised as an obligation which is created by or arises under a contract. The question remains, however, whether an action in which a breach of the duty during pre-contract negotiations is alleged is nevertheless "a matter relating to contract" for the purposes of Art. 5(1).
Although the defendants conceded before him that this requirement was satisfied, the judge gave reasons of his own why he considered that the concession was rightly made. He held -
"The matter is on any objective appreciation intimately concerned with and closely related to the contracts which (it is not in dispute) were here actually made between the defendants as insurers and the plaintiffs as reinsurers".
He emphasised the fact that the relief claimed by the plaintiffs in the action is a declaration of their right to avoid the contracts. The reality is that "without the making of the contract, the matter would never come before a court at all". Whilst the duty can be described on a "pre-contract" obligation, nevertheless the duty has to be performed "when entering into an insurance contract". The action is based on the premise that contracts were made (p 9).
I would endorse the judge's reasoning, although as will appear below I prefer not to divide the question whether Article 5(1) applies into two separate sub-issues. Considering the phrase "matter relating to a contract" alone, it seems to me that an action claiming to avoid insurance or re-insurance contracts on grounds of misrepresentation or non-disclosure cannot sensibly be regarded as being outside its scope. The duty of good faith may have equitable origins, and it certainly does not arise under the terms of the contract, if one is concluded (cf. ss. 18 and 19 of the Marine Insurance Act 1906), but nevertheless it is meaningless to talk of the duty except by reference to a particular contract. There is no duty of disclosure to insurers generally but only a particular insurer with whom a contract is negotiated. What is "material" cannot be determined except by reference to the contract which is negotiated and in due course concluded. The inescapable conclusion, in my judgment, is that an action claiming avoidance on these grounds is a "matter relating to a contract" for the purposes of Article 5(1). The judgement of Rix J. in Trade Indemnity p.l.c. v. Fors. Njord [1995] 1 All E.R. 796 is to the like effect.
"Obligation in question"
In the Trade Indemnity case, Rix J. held that this requirement of Article 5(1) was not satisfied in circumstances identical with the present case. Mance J. reached the contrary conclusion. His scholarly judgment takes full account of Rix J.'s reasoning and of a number of authorities, both of this court and of the European Court. I would hold that he was correct in this respect also.
Mr Ashe Q.C. for the appellants (defendants) submits that the "obligation in question" for the purposes of article 5(1) must be a contractual obligation, although this includes not only obligations created by the terms of the contract, which on any view are "contractual obligations", but also claims which arise as the result of a contract being declared void ( Kleinwort Benson v. Glasgow C.C. [1996] Q.B. 678, which concerned restitutionary claims and not pre-contractual obligations) and claims concerned with the existence of a contract ( Boss Group Ltd. v. Boss France S.A. [1995] 1 W.L.R. 351). Neither of those causes is comparable, he submits, with the present, where it is assumed that the "obligation in question" arose separately and distinctly from the contract, as a matter of equity.
In my judgment, the reference in Article 5(1) to "the obligation in question" ought not to be considered in isolation from the remaining words in the sub-Article, any more than that article 5 should be interpreted without regard to the fact that it creates a special exception to the general rule of domiciliary jurisdiction in Article 2 ( Kaffelis v. Bankhouse Schroder, Munchmeyer & Co. [1988] ECR 5565 at 5585, para. 19). In particular, "the obligation in question" refers back to the requirement that the proceedings shall be "in matters relating to a contract". Since any proceedings of this sort will be to enforce or claim relief in respect of an obligation owed by the defendants to the claimant (or possibly vice versa if the claim, is for a declaration of non-liability), it follows that the proceedings themselves will identify "the obligation in question". If the proceedings are not brought to enforce a contract or to obtain recompense for its breach (cf. Boss Group v. Boss Group S.A. per Saville L.J. (at 356), but nevertheless they are in a "matter related to contract", then in my view the obligation in respect of which relief is claimed is the obligation whose place of...
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