Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Christopher Clarke J. |
| Judgment Date | 10 September 2010 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 September 2010 |
Queen's Bench Division (Commercial Court).
Christopher Clarke J.
Alexander MacDonald (instructed by XL Services UK Limited) for the claimant.
Charles Dougherty (instructed by Clyde & Co) for the defendant.
The following cases were referred to in the judgment:
AIG Europe (Ireland) Ltd v Faraday Capital Ltd [2007] 2 CLC 844.
Burson v German Union Insurance Co [1905] OJ No 51.
Dornoch Ltd v Mauritius Union Assurance [2006] Ll Rep IR 127; [2006] 1 CLC 714 (CA).
EI DuPont de Nemours & Co v AgnewUNK [1987] 2 Ll Rep 585.
Forsikringsaktieselskapet Vesta v ButcherUNK [1986] 2 Ll Rep 179.
Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd [1998] CLC 1072; [1999] CLC 1270 (CA).
HLB Kidsons v Lloyd's Underwriters [2007] EWHC 1951 (Comm).
Irish Shipping Ltd v Commercial Union Assurance Co Plc (The Irish Rowan)ELR [1991] 2 QB 206.
Lincoln National Life Insurance Co v Employers Reinsurance Corp [2002] 2 Ll Rep IR 853.
Prifti v Musini Sociedad Anonima de Seguros y Reaseguros [2003] EWHC 2796 (Comm); [2004] 1 CLC 517.
Royal & Sun Alliance Insurance plc v Dornoch Ltd [2005] 1 CLC 466.
Teck Cominco Metals Ltd v Lloyd's Underwriters 2009 SCC 11; [2009] 1 SCR 321.
Tiernan v Magen Insurance Co LtdUNK [2000] ILPr 517.
Travelers Casualty & Surety Co of Canada v Sun Life Assurance Co of Canada (UK) Ltd [2006] EWHC 2716 (Comm).
Tryg Baltica International (UK) Ltd v Boston Compania de Seguros SA [2005] Ll Rep IR 40.
Van Breda v Village Resorts Ltd [2010] ONCA 84.
Wace v Pan Atlantic Group IncUNK [1981] 2 Ll Rep 339.
Insurance — Conflict of laws — Service out of jurisdiction — Forum non conveniens — Canadian not-for-profit reciprocal insurance exchange providing primary insurance cover to municipalities in Ontario — Excess of loss reinsurance contract placed in London market — Typical London market slip policy form incorporating standard London market terms — Dispute over proper construction of excess provisions in reinsurance contract relating to annual aggregate deductible — Alleged breach of claims co-operation clause — Reinsured issued proceedings in Ontario claiming damages for breach of reinsurance contract — Reinsurer claimed declarations as to effect of reinsurance contract and of nonliability — Service out of jurisdiction on basis that reinsurance contract made in England, through English agent and governed by English law — Implied choice of English law — Applicability of English law important but not conclusive factor in retaining jurisdiction — Materiality of existence of concurrent proceedings — Existence of Canadian proceedings against producing broker not reason for declining jurisdiction — Application to set aside service out dismissed — Rome Convention, art. 4.
This was an application by the defendant, Ontario Municipal Insurance Exchange (“OMEX”), for an order that the service of a claim form on it in Ontario be set aside on the ground that England was not the proper forum for the dispute between the parties.
OMEX was a Canadian not-for-profit reciprocal insurance exchange which provided primary insurance cover to a number of municipalities in Ontario. OMEX obtained reinsurance in various layers on the London market.
The dispute between the parties related to the failure of the claimant Lloyd's syndicate (XL) to pay the sums said to be due to OMEX under an excess of loss policy. The policy was on a typical London market slip policy form incorporating a number of standard London market terms.
There was a dispute as to the proper construction of the excess provisions in the reinsurance contract relating to the annual aggregate deductible. Also, XL resisted OMEX's claim on the basis that there had been a breach of the claims co-operation clause.
After XL rejected OMEX's claims under the reinsurance contract on the basis of a breach of the notification requirements, OMEX issued proceedings in Ontario claiming damages on the basis that XL had failed to honour the terms of the reinsurance contract. The statement of claim asserted that the reinsurance contract was governed by Ontario law.
XL issued proceedings in England claiming declarations as to the effect of the reinsurance contract and a consequential declaration that XL was under no liability to indemnify OMEX thereunder. Permission to serve out was granted on the basis that the reinsurance contract was made in England, through an agent trading in England and was said to be governed by English law. OMEX applied to set aside the order.
Held, dismissing the application:
1. The reinsurance contract contained no express choice of proper law. XL had much the better argument for saying that the correct inference was that the parties to the reinsurance contract impliedly chose English law (applying the Rome Convention). Although it would be possible for the contract to be governed by some different law, the factors which pointed to English law were very strong. It would be surprising if a policy on a Lloyd's slip, broked through a Lloyd's broker with a Lloyd's underwriter on behalf of a Lloyd's syndicate, was governed by a law other than that of England, particularly when the contract in question referred to Lloyd's market clauses habitually used in contracts governed by English law, and when the characteristic performance was to be by an English underwriter. (Vesta v ButcherUNK[1986] 2 Ll Rep 179considered.)
2. The fact that the parties had impliedly chosen English law was of considerable significance; first, because the choice of the only alternative venue might deprive XL of the benefit of English law, to which the parties agreed, and rights under the condition precedent in the claims co-operation clause to which, under that law, it was entitled. Secondly, the chief subject matter of the dispute — the proper construction of the excess provisions — was particularly suited for determination by the English court, whose habitual business included the resolution of reinsurance disputes between reassureds and Lloyd's underwriters in accordance with well-developed principles of law and construction. Thirdly, some evidence of the circumstances and context in which the slip was signed might be relevant and any such evidence was likely to be located in London. (Tryg Baltica International v Boston Compania de Seguros[2005] Ll Rep IR 40considered.)
3. If English law was likely to be the applicable law only because England was the place of characteristic performance, the disadvantage to XL of running the risk that the Ontario court would apply a different law, and thereby deprive XL of a defence otherwise available to it under English law, was the same. That factor was somewhat more significant if the effect was to deprive XL of a benefit for which the parties impliedly contracted but it remained a potent one even if English law applied only because England was the place of characteristic performance of the reinsurance contract.
4. The fact that OMEX was the first to commence proceedings was not a factor of significant weight. Nor was the fact that OMEX had sued the producing broker in Canada. The existence of that claim did not outweigh the factors in favour of English jurisdiction. Nor did the possibility of Canadian witnesses having to give evidence. The circumstance that the reassured was a Canadian mutual did not mandate Canadian jurisdiction. Nor did the existence of an agent in Ontario for Lloyd's underwriters mean that Ontario was the most appropriate forum.
Christopher Clarke J:
1. This is an application by the defendant, Ontario Municipal Insurance Exchange (“OMEX”) for an order that the service on it of a claim form in Ontario be set aside on the ground that England is not the proper forum for the dispute between the parties.
2. Stonebridge Underwriting Limited, the claimant, is a Lloyd's underwriter. It brings the present claim for a declaration on its own behalf and on behalf of all underwriting members of Lloyd's Syndicate 990 for the 2001 and 2002 years of accounts. XL London Market Ltd (“XL”) is the managing agent of the syndicate. For convenience I shall refer to the claimant and XL collectively as XL.
3. OMEX is a Canadian not-for-profit reciprocal insurance exchange which provides primary insurance cover to a number of municipalities in Ontario, under whose Insurance Act it is licensed. A reciprocal insurance exchange is a risk-sharing arrangement owned by its members: it is essentially a form of mutual. OMEX only operates in Ontario and has no presence outside Ontario. OMEX is governed by a “Reciprocal Insurance Exchange Agreement” dated 13 December 1988. According to the witness statement of Ms Sarah Jones, on behalf of XL, OMEX ran two separate risk pools involving Ontario municipalities:
(a) the OMEX Program, which was the main programme, providing liability and automobile insurance cover, mainly to large municipalities, up to a limit of $50 million1; and
(b) the SUG OMEX Program (with a $5 m level of cover and covering smaller municipalities, who were some of the members of the Rural Ontario Municipal Association (“ROMA”).
The SUG program arose because under the terms of the Reciprocal Insurance Exchange Agreement it was possible to set up sub-groups for underwriting purposes. One such group — Special Underwriting Group 1 (“SUG 1') — was set up pursuant to an agreement between the members of that group and OMEX dated 12 December 2007.
4. The OMEX Program was administered by employees of OMEX while the SUG OMEX Program was, in the relevant period, administered by Jardine Lloyd Thompson Canada Inc. (“JLT Canada”)2. JLT Canada arranged for reinsurance cover on the London market for both programs. The reinsurance was placed by JLT Risk Solutions Ltd (“JLT London”) in various layers.
5. The dispute between the parties relates to the Claimant's failure to pay the sums said to be due to OMEX...
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