Centro Internationale Handelsbank AG v Morgan Grenfell Trade Finance Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Rix J. |
| Judgment Date | 03 March 1997 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 March 1997 |
Queen's Bench Division (Commercial Court).
Rix J.
David Donaldson QC and Jeffrey Onions (instructed by Herbert Smith) for the plaintiff.
Michael Brindle QC and Timothy Howe (instructed by Freshfields) for the defendant.
The following cases were referred to in the judgment:
Baker v Courage & CoELR [1910] 1 KB 56.
Brickfield Properties Ltd v NewtonWLR [1971] 1 WLR 862.
Brueton v WoodwardELR [1941] 1 KB 680.
Jose Cardoso de Pina v MS “Birka” Beutler Schiffahrts KGUNK [1994] ILPr 694.
Kalfelis v Bankhaus Schroder, Munchmeyer, Hengst & CoECAS (Case 189/87) [1988] ECR 5565; [1990] 2 CEC 22.
Leaf v International GalleriesELR [1950] 2 KB 86.
Letang v CooperELR [1965] 1 QB 232.
Maskell v HornerELR [1915] 3 KB 106.
Owens Bank Ltd v BraccoELR [1994] QB 509.
Sarrio SA v Kuwait Investment Authority [1997] CLC 280.
Steamship Mutual Underwriting Association Ltd v Trollope & Colls (City) LtdUNK (1986) 33 BLR 77.
Tatry v Maciej RatajECAS (Case C-406/92) [1994] ECR I-5439; [1995] CLC 275.
Virgin Aviation Services Ltd v CAD Aviation ServicesUNK [1991] ILPr 79.
Welsh Development Agency v Redpath Dorman Long LtdWLR [1994] 1 WLR 1409.
Westdeutsche Landesbank Girozentrale v Islington London Borough CouncilUNK [1994] 4 All ER 890.
Stay of proceedings —“Related Actions”— Under forfaiting transaction bank bought letter of obligation and related export credit insurance — Underlying contract and insurance governed by Italian Law — No payment made on letter or insurance policy — Bank sued insurers in italy and seller of letter in England — Bank sought to stay English action — Whether actions were “related” Under Brussels Convention — Whether actions could and should be heard together — Whether there was risk of irreconcilable judgments — Whether English action should be stayed — Civil Jurisdiction and Judgments Act 1982, Sch. 1 (Brussels Convention ), Art. 22.
This was an application by the plaintiff (“CentroBank”) to stay its action in England on the basis that the action and proceedings in Italy were related actions under art. 22 of the Brussels Convention.
Under a forfaiting transaction the defendant (“Morgan Grenfell”) sold CentroBank the right to payment under a letter of obligation issued by the Republic of Equatorial Guinea and the benefit of an insurance policy underwritten by an Italian export credit insurer (“SACE”). The letter and the insurance policy related to an underlying agreement between the Republic and an Italian company (“Bertoni”) for the supply of drinking water in the Republic. The forfaiting transaction was governed by English law. The underlying agreement was governed by Italian law. The Republic failed to pay under the underlying agreement or the letter of obligation. SACE did not pay under the insurance policy. The plaintiff took proceedings in Italy under the insurance policy against SACE. SACE's defence was that the Republic's reason for not paying was Bertoni's non-performance, a peril not covered by the policy. Later the plaintiff commenced proceedings against the defendant in England. The plaintiff claimed first for breach of contract, alleging that it was an implied term of the forfaiting contract that Bertoni had performed its obligations under the underlying agreement; secondly, the plaintiff claimed in restitution on the ground that it had paid for a consideration that had wholly failed. CentroBank did not want to sue Morgan Grenfell in Italy and had no plans to do so.
The defendant opposed the stay on the ground that the court lacked jurisdiction to stay, because it could only stay the subsequent action under art. 22 if it could be combined with the first action in the first jurisdiction. In any event, as an exercise of the court's discretion, if it existed, there should be no stay: even if related within the meaning of the article, the actions did not overlap very much; the English court was well suited to rule upon an English law forfaiting transaction; the English action, although second in time, was likely to overtake the Italian action; the English action might be capable of being decided on a preliminary point; and if the plaintiff had wanted to stay an action only commenced as a protective measure it should have applied for a stay immediately.
(The plaintiff also sought, before the action was stayed, leave to amend the points of claim endorsed on the writ. The defendant opposed the amendments on the ground that they raised new causes of action which had become time-barred since the issue of the writ.)
Held, declining to stay the English proceedings:
1. A decision whether the Italian action against SACE and the English action against Morgan Grenfell were “related actions” within the meaning of the third paragraph of art. 22 did not depend on a finding that the action against Morgan Grenfell could be brought in Italy and consolidated with the action against SACE. (Jose Cardoso de Pina v MS “Birka” Beutler Schiffahrts KG [1994] ILPr 694, not followed.)
2. There was a real difference between asking whether the actions could be brought together and asking whether they should be brought together. Where an action was stayed on the court's own motion under the first paragraph of art. 22, the court did not need at that time to be satisfied that both actions could be brought together in the court first seised: and the court might subsequently be persuaded, by evidence that the two actions could not in fact be brought together in the court first seised, to revoke its stay.
3. If the plaintiff succeeded against SACE in Italy, there was no risk of irreconcilable judgments. Even if the plaintiff failed against SACE on the ground of SACE's defence, because non-payment by the Republic resulted from Bertoni's own fault in not performing the underlying agreement, the plaintiff might also fail against Morgan Grenfell on issues which had no point of contact with the action against SACE and did not raise a risk of irreconcilable judgments. However, there was a material risk that failure against SACE on the ground of Bertoni's non-performance would become the central ground of CentroBank's action against Morgan Grenfell and therefore the actions were related and the court had a discretion to stay the English action.
4. There was no presumption in favour of a stay. The parties in the two actions were different. If CentroBank ultimately wished to pursue its action in England, after defeat in Italy, the risk of irreconcilable judgments could not be avoided. Where the question of a stay arose on an application the burden of proof or persuasion was on the applicant.
5. If the only issue or the critical issue in the English action was whether or not Bertoni had performed its Italian law contract with the Republic, then there would be much to say in favour of a stay. However, the risk of irreconcilable judgments was a risk contingent on many separate matters, and at the end of the day perhaps unavoidable. Morgan Grenfell might succeed on one or other of the issues wholly separate from anything in dispute in the Italian action, and that by way of a preliminary hearing. In the circumstances it would be wrong, against Morgan Grenfell's opposition, to stay the action. CentroBank could have avoided all risk of irreconcilable judgments by joining Morgan Grenfell in the proceedings in Italy in the first place and it would not be unjust to CentroBank to put it in the position of litigating inconsistent claim in different courts at the same time. On the contrary, it would be unjust to prevent Morgan Grenfell from active defence of the suit against them.
Rix J: The proceedings before me concern a forfaiting transaction under which the defendants, Morgan Grenfell Trade Finance Ltd (“Morgan Grenfell”), sold to the plaintiffs, Centro Internationale Handelsbank Aktiengesellschaft (“CentroBank”), for FF 14,881,571 the right to payment of FF 17,679,254 under a letter dated 17 June 1989 issued by the Republic of Equatorial Guinea (the “letter of obligation”) and the benefit of an insurance policy underwritten by SACE (the Sezione Speciale per l'Assicurazione del Credito all” Esportazione, which I suppose is the Italian equivalent of ECGD). Both the letter of obligation and the insurance policy were entered into pursuant to an agreement (the “underlying agreement”) made between the Republic of Equatorial Guinea (the “Republic”) and an Italian company called Bertoni SNC (“Bertoni”) under which Bertoni agreed to carry out a project for the supply of drinking water to nine townships in the Republic at a total cost of FF 17,679,254, the same sum as was due under the letter of obligation. The Republic failed to pay any sum under either the underlying agreement or the letter of obligation. SACE have made no payment under the insurance policy. As a result CentroBank have commenced proceedings in Italy under the insurance policy against SACE, and these proceedings in England against Morgan Grenfell under the forfaiting contract (also known as the “primary contract”).
CentroBank now seek before me to stay their own action in England against Morgan Grenfell on the basis that both it and the Italian action are related actions, that the Italian action is the earlier in time and thus the Italian court is the court first seised. They rely on art. 22 of the Brussels Convention 1968 (the Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, which has of course entered into English law under the Civil Jurisdiction and Judgments Act 1982 ). However, before the action is stayed they first seek leave to amend the points of claim endorsed on their writ. Both applications are opposed by Morgan Grenfell, the former on the grounds that this court lacks jurisdiction to stay and in any event should not stay this action in its discretion, the latter on the ground that CentroBank's draft amendments raise new causes...
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