Meadows Indemnity Company Ltd v Insurance Corporation of Ireland Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NEILL,LORD JUSTICE MAY,LORD JUSTICE NOURSE |
| Judgment Date | 18 May 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0518-5 |
| Docket Number | 89/0505 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 May 1989 |
and
[1989] EWCA Civ J0518-5
Lord Justice May
Lord Justice Neill
and
Lord Justice Nourse
89/0505
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr. Justice Hirst)
Royal Courts of Justice
MR. R. AIKENS, Q.C. and MR. N. HOWARD (instructed by Messrs Ince & Co.) appeared on behalf of the Respondents/Plaintiffs.
MR. S. ISAACS (instructed by Messrs Davies Arnold & Cooper) appeared on behalf of the Respondents/First Defendants.
MR. J. THOMAS, Q.C. and MR. R. JACOBS (instructed by Messrs Travers Smith Braithwaites) appeared on behalf of the Appellants/Third Party to the First Defendants.
The appellant in these appeals is the International Commercial Bank plc (ICB), a company incorporated in England and carrying on a banking business in England.
The respondents are The Insurance Corporation of Ireland plc (ICI), a company incorporated in the Republic of Ireland and a subsidiary of the Allied Irish Bank, and The Meadows Indemnity Co. Ltd. (Meadows), a company incorporated in Guernsey and a subsidiary of a company incorporated in the USA. ICI is an insurance company but is now under administration in the Republic of Ireland. Meadows is an insurance and reinsurance company.
The appeals are from orders made by Hirst J. on 28th May 1988 in an action in the Commercial Court: 1987 M No. 4546. The judgment is reported at [1989] 1 Lloyds L.R.181.
In or about September 1983 certain negotiations took place for the purpose of obtaining a loan to enable Amaxa AG (Amaxa) to buy a luxury hotel in Greece then owned by A. Kazantzis Hotel Tourist and Building Enterprises SA. Mr. C. Kazantzis was then the principal shareholder in Amaxa.
In addition to the negotiations for the loan, negotiations also took place in order to obtain credit guarantee insurance whereby the lender of the purchase money would be insured against any risk of default by Amaxa.
At the outset of the negotiations relating to the guarantee insurance Mr. Kazantzis asked Leslie and Godwin, the London insurance brokers, to obtain suitable cover. Leslie and Godwin in turn approached ICI who got in touch with Meadows as proposed reinsurers. It was subsequently alleged that in the course of these negotiations and discussions certain representations were made which affect the validity of the contracts of insurance and reinsurance.
On 24th November 1983 Mr. Grace, the former general manager of ICI, signed a cover note on behalf of ICI confirming or purportedly confirming insurance of the loan of 11.5 Swiss francs in favour of an assured described as "Trust to be named (the Lender)". At that stage ICB had not yet come on the scene, the proposed lenders being a different bank.
ICB first became involved on 23rd January 1984 and the loan agreement between Amaxa and ICB was signed on 9th February 1984. For the purpose of the present proceedings, however, it is not necessary to trace in detail the negotiations relating to the contracts of insurance and reinsurance.
In 1987 Amaxa defaulted on the loan. On 9th June 1987 ICB called on ICI to pay on the contract of credit guarantee insurance. No payment was made, however, and on 1st September 1987 ICB began proceedings in the Republic of Ireland seeking to recover 11.5 m. Swiss francs and interest.
At the beginning of 1988 ICI applied to the Court in Ireland for a stay of the Irish action. This application was dismissed by Mr. Justice Gannon on 12th February 1988 and his decision was upheld by the Irish Supreme Court on 14th April 1988. In addition ICI have obtained leave in the Irish courts to issue and serve third party proceedings on Meadows in the Irish action.
Meanwhile, on 7th October 1987, Meadows issued the writ in the present proceedings in England. The relief claimed, as set out in the Amended Points of Claim served on 26th July 1988, was in these terms:
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"(a) Against ICI:
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(I) A declaration that Meadows is entitled to avoid the reinsurance contained in or evidenced by the slip dated 30th January 1984 and/or
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(II) a declaration that Meadows is not bound to indemnify ICI in respect of any loss suffered by ICB in respect of the loan agreement,
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(III) a declaration that ICI is and/or was entitled to avoid the insurance.
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(b) Against ICB:
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(I) A declaration that ICI is and/or was entitled to avoid the insurance,
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(II) a declaration that ICI is not bound to indemnify ICB in respect of any losses suffered by ICB in respect of the loan agreement."
On 22nd December 1987 ICI issued a third party notice under RSC Order 16 Rule 8 claiming the following relief against ICB:
"ICI claim against you a declaration that they are entitled to avoid the contract for insurance with yourselves or alternatively are not liable to indemnify you thereunder, and requires the question of their entitlement to avoid the contract of insurance or alternatively to refuse to indemnify you thereunder should be determined not only as between Meadows and yourselves and Meadows and ICI but also as between ICI and yourselves."
In December 1987 ICB issued a summons to strike out the writ and the Amended Points of Claim in the action brought by Meadows against ICB on the footing that Meadows could not obtain a declaration against ICB and further on the ground of forum non conveniens. In March 1988 ICB issued a further summons to stay the Third Party proceedings brought by ICI against ICB. This application was on the basis of forum non conveniens.
The summonses were heard before Mr. Justice Hirst who gave judgment in open court dismissing the applications.
ICB now appeal by leave of the judge against parts of the orders made by him.
Before this Court there are three applications by ICB:
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(1) An application to strike out the writ and Amended Points of Claim in the action brought by Meadows on the footing that Meadows have no locus standi to obtain declarations against ICB.
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(2) An application for a stay of the Meadows' action on the grounds of forum non conveniens.
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(3) An application to stay the third party proceedings brought by ICI against ICB in this country on the grounds of forum non conveniens.
I shall turn first to deal with the application to strike out the claim for declarations against ICB.
The Claim by Meadows for Declarations relating to the Contract between ICI and ICB
It is not in dispute that Meadows would be entitled to claim a declaration as to the validity of the contract of reinsurance entered into between themselves and ICI. Meadows seek to go further, however, and to obtain a declaration as to the validity of the underlying contract of insurance, that is, the contract between ICI and ICB. In making this further contention Meadows have the support of ICI.
ICB, on the other hand, contend that, except in very limited circumstances, declarations cannot be made at the suit of a person who is not a party to the contract of which the validity is impugned.
In order to resolve this issue it is necessary to examine the nature and scope of an action for a declaration.
Declaratory judgments have their origin in the practice of the old Court of Chancery, where declaratory judgments could be made provided some consequential relief was sought at the same time. This practice was modified by section 50 of the Chancery Procedure Act 1852 whereby it was provided that:
"No suit in the said Court shall be open to objection on the ground that a merely declaratory decree or order is sought thereby, and it shall be lawful for the Court to make binding declarations of right without granting consequential relief."
This section was construed, however, as meaning that, though a claim for consequential relief was not necessary, a declaratory judgment would not be given unless consequential relief could also have been given in the same proceedings. It has been suggested that this construction of section 50 was too narrow, but the point is no longer of relevance because since 1883 the matter has been governed by a rule of court, formerly RSC Order 25 rule 5 and now (since 1962) Order 15, rule 16.
Order 15 rule 16 is in the following terms:
"No action or other proceedings shall be open to objection on the grounds that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed."
This new Rule was recognised as making an important change in the law. Lindley M.R. described it in Ellis v. Duke of Bedford [1899] 1 Ch.494 at 515 as "an innovation of a very important kind" and, a few years later, Stirling L.J. in West v. Sackville [1903] 2 Ch. 378 at 393 said that it had made "a great change in the law with reference to declaratory judgments".
Some thirty years after the new rule was introduced it was subjected to close and critical examination in Guaranty Trust Co. of New York v. Hannay [1915] 2 K.B. 536. In that case the plaintiffs had been sued by the defendants in America to recover the amount of a bill of exchange which had been sent by the plaintiff to the defendants for acceptance and which had been paid by the defendants at maturity. The bill of lading which had been attached to the bill of exchange was in fact a forgery. The plaintiffs brought an action in England claiming declarations to the effect that, by presenting the bill of exchange for acceptance with the bill of lading...
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