New Hampshire Insurance Company v Strabag Bau Aktiengesellschaft
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LLOYD,LORD JUSTICE STOCKER,LORD JUSTICE STUART-SMITH |
| Judgment Date | 26 November 1991 |
| Judgment citation (vLex) | [1991] EWCA Civ J1114-3 |
| Docket Number | 91/1031 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 November 1991 |
[1991] EWCA Civ J1114-3
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 POTTER)
Royal Courts of Justice
(ON APPEAL FROM MR JUSTICE HOBHOUSE)
Lord Justice Lloyd
Lord Justice Stocker
Lord Justice Stuart-Smith
91/1031
(Suing on Behalf of Themselves and All Other Underwriters Subscribing To a Collective Policy of Insurance 707/FCL 101356 Except Colonia Kolnische Versicherungs Gesellschaft)
And
(Consolidated by a Consent Order dated the 12th day of January 1990)
(Suing on Behalf of Themselves and All Other Underwriters Subscribing To a Collective Policy of Insurance 707/fcl 101356)
(Suing on Behalf of Themselves and All Other Underwriters Subscribing To a Collective Policy of Insurance 707/fcl 101356)
MR MURRAY PICKERING Q.C. and MR ALEXANDER LAYTON, instructed by Messrs Kennedys, appeared for the Appellants (Plaintiffs).
MR TIMOTHY WALKER Q.C. and MR WILLIAM WOOD, instructed by Messrs Cameron Markby Hewitt, appeared for the Respondents (Defendants).
Section 3 of the Brussels Convention 1968, which has the force of law in the United Kingdom by virtue of the Civil Jurisdiction and Judgments Act 1982, is headed "Jurisdiction in Matters Relating to Insurance". Article 7 provides,
"In matters relating to insurance, jurisdiction shall be determined by this Section…".
Article 11 provides,
"…an insurer may bring proceedings only in the courts of the Contracting State in which the defendant is domiciled, irrespective of whether he is the policy-holder, the insured or a beneficiary".
The main question in the present case is whether "matters relating to insurance" means what it says, or whether it bears a restricted meaning.
The plaintiffs, New Hampshire Insurance Co. and other insurers, say that the purpose of section 3 of the Convention is to protect those who are in a weak social or economic position. The defendants are three substantial civil engineering and construction companies. Two of them are domiciled in Germany, the third in Austria. The plaintiffs say that they are in no need of protection. They have equivalent or comparable bargaining power with the insurers. Accordingly section 3 of the Convention does not apply. The plaintiffs are not obliged to bring proceedings against the German companies in Germany for avoidance of the policy, as they would otherwise be obliged to do if section 3 of the Convention applied. They can bring proceedings in England, by obtaining leave to serve out of the jurisdiction under Rules of the Supreme Court Order 11.
Before I come to the main question, I must first set the scene, and deal with a number of preliminary issues.
Strabag Bau A.G. and Bilfinger and Berger A.G. are both German companies with their seat in the Federal Republic of Germany. They are therefore to be treated as domiciled in Germany by virtue of Article 53 of the Convention. Universale Hoch und Tief Bauaktiengesellschaft is domiciled in Austria. In 1981 the three companies formed a joint venture to enter into a contract for the construction of Basrah international airport.
They were required to take out insurance with the National Insurance Co. of Iraq (the "NIC policy") covering various building risks. They also took out a collective policy with the plaintiffs dated 18th May 1982. The policy indemnifies the defendants against (in broad terms) claims not covered by the NIC policy and claims which, though covered, remain unpaid after a period of six months. The policy contains an arbitration clause which provides,
"If any difference shall arise between the Insurers and the Insured as to the amount to be paid under this Policy (liability being otherwise admitted), such differences shall be referred to an Arbitrator…"
There is no governing law clause in the policy. Nor is there a jurisdiction clause in respect of claims not covered by the arbitration clause.
The insurance was placed in accordance with the usual practice in the London market. New Hampshire, the leading underwriter, has its seat in the United States of America. But it has a representative in London, American International Underwriters (UK) Ltd ("AIU"). Leslie and Godwin Ltd are insurance brokers who were acting on behalf of the defendants. Early in 1981 they prepared and presented a slip, which was initialled by AIU on behalf of New Hampshire, in respect of its proportion of the risk. Other insurance companies on the risk are from Germany, Sweden, Italy, France and the United States. But the bulk of the risk was placed with UK insurers. The wording of the policy was prepared by Leslie and Godwin, and agreed by AIU. The policy came into effect on 1st July 1981. It was subsequently renewed from time to time. The final expiry date was 31st October 1989.
Since 1981 a variety of claims have been paid. The construction project was completed in August 1987. But there was then a two-year maintenance period. In March 1989 the defendants presented a series of very large claims based on corrosion damage to the foundations of the airport building, with resulting subsidence. The amount claimed is between £20m and £60m. Six months later, on 8th September 1989, AIU wrote to Strabag Bau avoiding the policy on the ground, inter alia, (i) that the NIC policy had been allowed to lapse in or about August 1987 and (ii) that the defendants had failed to disclose that the NIC policy had been allowed to lapse prior to subsequent renewals of the collective policy. By letter dated 5th December 1989, New Hampshire's English solicitors wrote on behalf of all underwriters to Bilfinger and Universale to inform them of the avoidance of the policy, and to repudiate all liability.
All except three of the insurers issued a writ against Strabag Bau on 8th September 1989. It was served on 22nd September 1989. They issued a writ against Bilfinger and Universale on 5th December 1989. Meanwhile on 19th October 1989 the defendants had issued proceedings against the plaintiffs in the regional court of Cologne. The three remaining insurers issued a writ against Strabag Bau on 16th November 1989. It was served on 7th December 1989.
In an affidavit in support of the application for leave to serve out of the jurisdiction, the plaintiffs say that the Convention does not apply, for example because of the arbitration clause. The ground on which they sought leave to serve out of the jurisdiction was that the contract was made in England and was by implication governed by English law.
On 12th October 1989 Strabag Bau issued a summons asking that the writ be set aside, on the ground that the German courts had exclusive jurisdiction under the Brussels Convention. On 24th January 1990 Bilfinger issued an identical summons. On 7th February 1990 Universale issued a similar summons, but on the ground that as the proceedings against Strabag Bau and Bilfinger were subject to the Convention, the court should in its discretion refuse leave under Rules of the Supreme Court Order 11, so that all proceedings might be heard in the same forum.
The Arbitration Issue
On 27th October 1989 the plaintiffs issued separate proceedings in which they claimed a declaration that the disputes between the parties had been validly referred to arbitration.
I can deal with the arbitration issue very shortly. After submissions on behalf of the plaintiffs which Potter J. described as lengthy and somewhat strained, he held that the arbitration clause applied to disputes as to quantum, but not disputes as to liability. I should have regarded the point as almost unarguable. Happily there is no appeal from that part of Potter J.'s decision.
I turn then to the Convention issues. The application came before Potter J. on 6th December 1989. He was concerned only with the action against Strabag Bau, since the writ against Bilfinger and Universale had only been issued the previous day. Parallel applications in the later action came before Hobhouse J. on 21st November 1990.
Article 35
The first question turns on Article 35 of the 1978 Accession Convention, which provides,
"If the parties to a dispute concerning a contract had agreed in writing before the entry into force of this Convention that the contract was to be governed by the law of Ireland or of a part of the United Kingdom, the courts of Ireland or of that part of the United Kingdom shall retain the right to exercise jurisdiction in the dispute".
I remind myself that in interpreting Article 35 I must not only apply principles of law laid down by the European court, but must also adopt what may be called a European, or purposive approach. In Henn and Darby v. Director of Public Prosecutions [1981] A.C. 850 at 905 Lord Diplock said,
"The European Court, in contrast to English courts, applies teleological rather than historical methods to the interpretation of the treaties and other Community legislation. It seeks to give effect to what it conceives to be the spirit rather than the letter of the Treaties; sometimes, indeed, to an English judge, it may seem to the exclusion of the letter".
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