Equitas Ltd and Another v Wave City Shipping Company Ltd and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 13 May 2005 |
| Neutral Citation | [2005] EWHC 923 (Comm) |
| Docket Number | Case No: 2004 Folio No. 443 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 13 May 2005 |
[2005] EWHC 923 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Justice Christopher Clarke
Case No: 2004 Folio No. 443
David Bailey (instructed by Elborne Mitchell) for the Claimants
Hearing dates: 6 th May 2005
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.
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.
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.
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.
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.
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.
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...
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