Gard Marine & Energy Ltd v Lloyd Tunnicliffe and Others
| Jurisdiction | England & Wales |
| Judgment Date | 09 October 2009 |
| Neutral Citation | [2009] EWHC 2388 (Comm) |
| Docket Number | Case No: 2007–351 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 October 2009 |
[2009] EWHC 2388 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr Justice Hamblen
Case No: 2007–351
Mr Andrew Hunter (instructed by Clyde & Co) for the Claimant
Mr Peter MacDonald Eggers (instructed by Barlow Lyde & Gilbert) for the 2 nd Defendant
Hearing dates: 17 th September 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Hamblen:
Introduction
This action concerns reinsurance claims made by the Claimant (“Gard”), a Bermudan company, against the First Defendant (“Advent”), a Lloyd's syndicate, and the Second Defendant (“Glacier Re”), a Swiss reinsurer.
The original policy insured Devon Energy Corporation (a US company) in respect of inter alia property and business interruption risks, initially for the period from 1st July 2003 to 1st September 2005. The period was extended to 1st September 2007 by an endorsement dated 4th August 2005, which stipulated that there be a combined single limit of US$400 million “any one accident or occurrence in respect of losses arising out of a Named Windstorm in the Gulf of Mexico”.
Gard insured 12.5% of this risk (i.e. US$50 million). Prior to confirming its participation in the underlying risk, in early August 2005, Gard placed an order with its broker, the Lloyd's brokers, Agnew Higgins Pickering & Company (“AHP”), for excess of loss reinsurance to reinsure its whole proposed 12.5% line in respect of losses in excess of a deductible of US$250m (100%). This was a renewal of reinsurance which Gard's predecessor had had for the period to 1 September 2005.
Gard reinsured the risk under two excess of loss reinsurance slips, under each of which the reinsurers agreed to “pay up to Original Package Policy limits / amounts / sums insured excess of USD250,000,000 (100%) any one occurrence of losses to the original placement” (“the Sum Insured clause”).
The two placements were made by AHP as follows:
(1) London market underwriters (Advent, Ascot, Map and Axis) subscribed to a slip in respect of a reinsurance order of 7.5% of the whole (“the London Market slip”).
(2) Glacier Re signed a slip in respect 100% of a reinsurance order of 5% of the whole (“the Glacier Re slip”).
In September 2005, Devon Energy Corporation sustained damage to its insured interests in the Gulf of Mexico by reason of Hurricane Rita and presented a claim against Gard under the original policy up to the full limits of the policy. The claim was subsequently settled in a global sum of US$365 million, of which Gard bore 12.5%.
Following settlement of the underlying claim, Gard made claims against its reinsurers. It calculated the reinsurance claim on the basis that the US$250m deductible in the Sum Insured clause is a deductible which is referable to 100% property values, and so where a claim is made in respect of property in which Devon had less than 100% interest, the deductible falls to be “scaled” to reflect the lower interest.
For a short period the entire market disputed the scaling of the deductible. However Axis and Ascot soon paid on the claim as presented. Glacier Re and two of the four Lloyd's reinsurers, Advent and Map, continued to dispute that the basis of scaling the deductible was correct and, argued, instead, that the full deductible should be applied. After proceedings were issued, Map agreed to accept the scaling approach.
Glacier Re paid the sum it considered was due under the Glacier Re slip, namely US$5,750,000, on the basis that the excess attachment point was US$250 million and has declined to pay the balance on the grounds that it is not so obliged. Indeed, Glacier Re contends that it was not liable for any part of the claim and claims to be entitled to recover the sum so paid.
Procedural history
The current action was commenced by a claim form issued on 25th March 2007. Three defendants were named in that claim form, Advent, Map and Glacier Re. The claim form was served on Glacier Re on 26th June 2007.
Glacier Re objected to the jurisdiction of the English Court. That objection however was held in abeyance, because on 13th September 2007, the current proceedings against Glacier Re were stayed, in consequence of Glacier Re having earlier commenced proceedings in Switzerland (on 14th May 2007), seeking repayment of sums paid under the Glacier Re reinsurance contract on the grounds that Glacier Re was not liable to indemnify Gard.
On 17th April 2008, Gard obtained permission to amend its Particulars of Claim (removing Map as a defendant) and to add the broker, AHP, as a defendant. The claim against the broker is for damages in the event that Advent's and/or Glacier Re's defences to the reinsurance claims are successful.
In June 2009, the Swiss Federal Court dismissed an appeal by Glacier Re, holding that the Swiss Court did not have jurisdiction, because Gard was not domiciled in Switzerland.
As a consequence of the Swiss Federal Court judgment the stay of the action ordered in September 2007 was lifted and the English Court is again seised of the claim against Glacier Re. Glacier Re's objections to the jurisdiction of the English Court now therefore need to be addressed.
The grounds of jurisdiction asserted by Gard
Gard seeks to establish the Court's jurisdiction pursuant to article 5(1) and/or 6(1) of the Lugano Convention (being the applicable jurisdiction regime as between the United Kingdom and Switzerland). Gard argues that:
(1) The Court has jurisdiction pursuant to article 5(1) because the relevant contractual obligation was to be performed in London pursuant to an alleged custom and practice of the London market.
(2) The Court has jurisdiction pursuant to article 6(1), because the claim against Glacier Re is intrinsically connected with the claim against Advent and AHP.
Glacier Re takes issue with both of these grounds and submits that the Court must or should decline jurisdiction.
In those circumstances, Gard would be permitted to sue Glacier Re in its country of domicile, Switzerland, pursuant to article 2 of the Convention.
It is well established that provisions, such as Article 5(1) and 6(1), which allow a defendant to be sued in a country other than that of his domicile, are to be construed narrowly.
The burden of proof in the present case rests on Gard. It must establish a good arguable case that the case falls within Article 5( 1) or 6(1). This has been said to mean that it has “a much better argument than the defendants, on the material available at present”—see Bols Distilleries BV v Superior Yachts Services Ltd [2006] UKPC 45, [2007] 1 WLR 12 at [28].
Before addressing these issues, the matter of applicable law needs to be considered.
Applicable law
There is a dispute between the parties as to whether the law applicable to the Glacier Re reinsurance contract is Swiss law (as Glacier Re contends) or English law (as Gard contends).
In order to determine the applicable law, reference is to be made to articles 3 and 4 of the Rome Convention (as incorporated by the Contracts (Applicable Law) Act 1990). Article 3 provides that:
“A contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case.”
The London Market slip is subject to an express choice of English law and jurisdiction. There is no such express choice in the Glacier Re slip.
Gard, however, contends that there is an implied choice of English law in the Glacier Re slip. It is said that this implied choice is made clear by the following:
(1) The slip was in English, in a London market form. The slip also used specific London Market wording. It is well established that such matters are sufficient to demonstrate an implied choice of law.
(2) Both parties were clearly aware that the Glacier Re slip was part of facultative reinsurance protection intended to provide consistent and coherent reinsurance cover to such participants on the primary insurance cover as ordered reinsurance. This could only be achieved if the same applicable law applied to all the lines that were written on the reinsurance (which then fell to be allocated by the brokers). Both Gard and Glacier Re must therefore be taken to have agreed that English law should govern the Glacier Re reinsurance as well as the Lloyd's reinsurance.
This is disputed by Glacier Re on the following grounds:
(1) The choice of policy form (the J(A) form being a mere policy jacket) and the London market clauses were incidental to the scope and operation of the Glacier Re reinsurance contract.
(2) The absence of an express choice of English law is indicative that English law was not intended to apply to the Glacier Re slip. London market placements now commonly require the insertion of an express choice of law clause. The fact that the London market slip refers expressly to English law and the Glacier Re slip does not militate against the argument that English law is the chosen law.
(3) There was therefore no (express or implied) choice of English law. On the contrary, the choice of Swiss law as the applicable law is reasonably demonstrated, the most telling factor in favour of a choice of Swiss law being the fact that the slip was placed...
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