Mackender v Feldia. A.G.
| Jurisdiction | England & Wales |
| Judge | The Master Of The Rolls,Lord Justice Diplock,Lord Justice Russell |
| Judgment Date | 18 October 1966 |
| Judgment citation (vLex) | [1966] EWCA Civ J1018-2 |
| Court | Court of Appeal |
| Date | 18 October 1966 |
[1966] EWCA Civ J1018-2
The Master Of The Rolls
(Lord Denning)
Lord Justice Diplock and
Lord Justice Russell
In The Supreme Court of Judicature
Court of Appeal
From Mr. Justice McNair
Mr Robin Dunn, Q. C. and Mr M. J. Mustill (Instructed by Messrs Inca & Co,) appeared as Counsel for the Appellants.
Mr R. A. Maccrindle, Q. C. and Mr Anthony Lloyd (instructed by Messrs Walton's, Bright & Co.) appeared as Counsel for the Respondents.
We are here concerned with a Lloyd's jewelers block policy. In 1964 underwriters at Lloyd's issued a policy covering three European Companies who deal in diamonds and precious stones. One Company is incorporated in Switzerland, another in Belgium and the third in Italy. I will call them the diamond merchants. The policy covered the diamond merchants against loss or damage to their stock of jeweler and previous stones. It was a time policy for one year from 16th April, 1964, to the 15th April, 1965. It covered their goods anywhere in the world. The total sum insured was £450,000. The premium was £4,675. The policy contained a foreign jurisdiction clause in these terms: "Notwithstanding that this policy has been affected. In London, England, this policy shall be governed exclusively by Belgian law and any disputes arising there under shall be exclusively subject to Belgian jurisdiction, it being agreed that all summonses, notices or processes requiring to be served upon the underwriters for the purposes of such jurisdiction shall be deemed to be properly served if addressed to them and delivered to them care of Lloyd's Agent at Antwerp". I need not read further.
In January 1965 a loss occurred in Naples. Mr. Myer was the representative in Italy of the diamond merchants. He was in Naples on business carrying nearly the whole of his stock, with him. Diamonds and pearls worth nearly £50,000. All in a small brief case which he carried but he had it tied to his wrist with a steel chain. He was talking to a friend outside a shop when he was jostled. The brief case was snatched from him. The steel chain was broken or cut. All the diamonds and pearls were gone. The diamond merchants made a claim on Lloyd's underwriters for the loss. The precise figure was £48,266. The underwriters engaged assessors to look into the claim. As the resultof the investigation they discovered, so they said, that the diamond merchants made a practice of smuggling diamonds into Italy. They employed couriers to evadethe Italian customs. It is said that Mr. Myer may be prosecuted in Italy for illegally importing diamonds.
After considerable negotiation, Lloyd's underwriters rejected the claim. They say it is contrary to English policy to insure goods which are intended to be smuggled into a friendly foreign country. They also say that the diamond merchants were guilty of non-disclosure and that they failed to disclose that it was in the course of their business to smuggle goods into a friendly foreign country. Lloyd's underwriters say if they had known of this fact, they would not have undertaken the insurance.
Where is the dispute to be tried? Lloyd's underwriters would like it tried in England. They have issued a writ in the English Courts asking that the policy be declared void for illegality and avoidable for non-disclosure, and that it be rescinded or annulled. They applied for leave to serve this writoutof the jurisdiction on the diamond merchants. Mr. Justice Riskily granted leave ex prate. Mr. Justice McNair, after hearing the diamond merchants, affirmed the decision. Now the diamond merchants appeal to this Court. They pointout that the policy contains the foreign jurisdiction clause and they ask that this dispute be decided in Belgium. The diamond merchants have themselves filed proceedings in the Belgian Court claiming paymentof this £48,266 on accountof the loss. They appear to have obtained leave from the Belgian Courts to serve proceedings on Lloyd's underwriters and those proceedings are being carried on in Belgium. The question we have to decide is whether the English proceedings should now be continued.
The rules of Court are wide enough to cover the case for service outof the jurisdiction. Order, rule 1(f) says that it is permissible if an action is brought to annul or otherwise affect a contract "made within the jurisdiction". This contract was undoubtedly made within the, jurisdiction. The negotiations between the underwriters and the brokers were herein London, the slip signed here, and the policy issued outof and signed at Lloyd's Policy Signing Office.
But although there is jurisdiction to give leave, it is a matter of discretion as to whether it should be granted. Mr. Dunn for the diamond merchants says that, in view of the foreign jurisdiction clause, the Court should not give leave. But Mr. MacCrindle for the underwriters says that the foreign jurisdiction clause ought not to be given such importance in this case. He says that the foreign jurisdiction clause only applies where a contract has been truly created and formed. Here he says thatowing to the non-disclosure, there was no true contract - no real consent by the underwriters - and that, on this basis, the contract it self falls down, including even the foreign jurisdiction clause.
I can well see that if the issue was whether there ever had been any contract at all, as, for instance, if there was a plea of non stratum, then the foreign jurisdiction clause might not apply at all. But here there was a contract, end when it was made it contained the foreign jurisdiction clause. Even if there was non-disclosure, nevertheless non-disclosure does not automatically avoid the contract. Itonly makes it avoidable. It gives the insurers a right to elect. They can either avoid the contractor affirm it. If they avoid it, it is avoided in this sense that the insurers are no longer bound by it. They can repudiate the contract and refuse to pay on it. But things already done are not undone. The contract is not avoided from the beginning butonly from the momentof avoidance. In particular, the foreign jurisdiction clause is not abrogated. A dispute as to non-disclosure is "a dispute arising under" the policy and remains within the clause: just as does a dispute as to whether one side or other was entitled to repudiate the contract, see Heyman v. Darwin, 1942 Appeal Cases, p. 356.
It seems to me that Mr. Macromedia's argument (to the effect that non-disclosure strikes out the whole contract) isnot well founded. The foreign jurisdiction clause is a positive Agreement by the underwriters that the policy is governed exclusively by Belgian law. Any dispute under it is to be exclusively subject to Belgian jurisdiction. That clause still stands and is a strong ground why discretion should be exercised at. Gains leave to serve outof the jurisdiction.
As to illegality, I would only say this: The underwriters were clearly innocent. The diamond merchants may have had an unlawful intention to smuggle goods into a friendly foreign country. But their illegality would not affect the formation of the contract. It would only make it unenforceable. It would mean that they could not recover on the policy. This dispute again comes within the foreign jurisdiction clause.
It all comes to this: The English Courts have discretion whether or not to give leave to serve this writoutof the jurisdiction. Seeing that the underwriters have agreed to a foreign jurisdiction clause which gives exclusive jurisdiction to the Belgian Courts, I think we should allow these disputes to be decided in the Courts of Belgium. We should not give leave to serve this writoutof the jurisdiction.
I would therefore allow the appeal.
The contract which is the subject matter of these proceedings was undoubtedly made in-England. The slip was initialed in London and the policy signed on behalf of underwriters by the manager of Lloyd's Policy Signing Office there. The English High Court accordingly had power to give leave to serve the writ upon the defendants outside the jurisdiction, and unless service is set aside and the action stayed, it will have jurisdiction to hear and to determine it. But leave to serve a writoutside the jurisdiction is always discretionary. The jurisdiction which the High Court claims over defendants who are neither present nor ordinarily resident in this country, when it grants leave under Order 11, is wider than any corresponding jurisdiction which it recognizes as possessed by a foreignCourtover defendants who are not presentor ordinarily resident in the foreign State. And because it is a claim which conflicts with the general principles of comity between civilized nations, it is one which should be exercised with caution. I cannot do better than echo the words of Lord Justice Scott in George Monroe Ltd. v. American Cyanamid & Chemical Corporation, 1944, 1 King's Bench, p. 432, at p. 437: "Service outof the jurisdiction at the instance of our Courts is necessarily prima facie interference with the exclusive jurisdiction of the sovereignty of the foreign country where service is to be affected. I have known many Continental lawyers of different nations in the past criticize very strongly our law about service outof the jurisdiction. As a matter of international comity it seems to me important to make sure that no such service shall be allowed unless it is clearly within both the letter and the spiritof Order 11".
The application for leave to serve a writoutside the jurisdiction under Order 11 is made ex prate. On that application which in the present case came before or Justice Riskily, the only question on which he had to satisfy himself was...
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