Tonicstar Ltd v American Home Assurance Company [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Morison J. |
| Judgment Date | 26 May 2004 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 26 May 2004 |
Queen's Bench Division (Commercial Court).
Morison J.
G Kealey QC and J Brocklebank (instructed by Clyde & Co) for the claimants. C
D Railton QC and R Williams (instructed by Denton Wilde Sapte) for the defendant.
The following cases were referred to in the judgment:
General Star International Indemnity Ltd v Stirling Cooke Brown Reinsurance Brokers LtdUNK [2003] EWHC 3 (Comm).
Glencore International AG v Exter Shipping Ltd [2002] CLC 1090.
Pathe Screen Entertainment Ltd v Handmade Films (Distributors) Ltd (11 July 1989, Hobhouse J).
Toomey v Eagle Star Insurance Co LtdUNK [1994] 1 Ll Rep 516.
Insurance — Reinsurance — Arbitration — Conflict of laws — Anti-suit injunction — Facultative excess of loss reinsurance — Arbitration clause not specifying seat of arbitration — Proceedings in England and New York — Whether England natural forum — Whether reinsurance governed by English law — Whether New York proceedings unconscionable — Whether anti-suit injunction appropriate.
This was the return date for an injunction granted without notice restraining the defendant, AHA, from pursuing proceeding in the New York courts.
CGU and Tonicstar provided capital for a Lloyd's syndicate which entered into a reinsurance contract with AHA. The syndicate asserted that it had the right to avoid the policy on grounds of misrepresentation and non-disclosure. The reinsurance contained an arbitration clause, but that had no express provision for the seat of the arbitration. AHA threatened proceedings in New York, but before they were issued Tonicstar issued English proceedings.
The parties disagreed as to the seat of any arbitration. AHA made an application under s. 9 of the Arbitration Act 1996, seeking a stay of the proceedings brought in the name of Tonicstar pending arbitration. AHA then brought a petition in the New York court seeking to compel arbitration and to restrain the English court proceedings. It was that petition which was the subject of the anti-suit injunction. CGU and Tonicstar, unaware of the petition, issued an arbitration claim form seeking, amongst other things, a declaration that the seat of any arbitration between it and AHA was England.
The claimants argued that the petition was an unjustified and tactically-driven attempt by AHA to arrogate to the New York court issues which should naturally and properly be determined by the English court and of which, at least in part, the English court was already seised.
AHA argued that there was nothing in the arbitration agreement which specified the seat of the arbitration or the law which governed it. AHA did not accept that English law was the proper law of the arbitration agreement (or of the reinsurance). The claimants had no contractual right to have the stay and seat issues determined by the English court. There was nothing unnatural or inappropriate in determining those issues in New York.
Held , continuing the anti-suit injunction:
1. England was the natural forum for the litigation. The reinsurance was placed through Lloyd's brokers; the terms and wording of the reinsurance were on a slip policy containing standard Lloyd's terms; the premiums were payable in England, where claims were to be processed; the alleged misrepresentations and non-disclosure occurred in England. Having chosen to contract in the Lloyd's market on a Lloyd's slip policy form it was to be inferred that the parties intended those provisions to be determined by the English court (pace arbitration). But even were there to be no implied choice of law, there was a presumption under the Rome Convention that the applicable law was that of the place of business of the party whose performance was characteristic of the contract, which in this case was the reinsurer. The proper law of the whole contract was English law. The applicable law of the arbitration agreement was the same as that of the reinsurance contract. The fact that AHA's documents and many of its witnesses were based in New York did not affect the centre of gravity of the dispute which lay in the way the risk was broked in London. England was the natural forum and the first necessary, but not sufficient, condition for the grant of an anti-suit injunction was satisfied.
2. AHA had behaved unconscionably or oppressively or vexatiously. It had tried to hijack the decision which was presently before the English court, namely whether the arbitration clause was apt to embrace the disputes between the parties, and, if so, where its seat should be. Even if the New York court gave full effect to English law, the terms of the Federal Arbitration Act suggested that in the absence of an express choice of seat, under the Act, the seat would be the Southern District of New York. The decision by AHA to make a s. 9 application and then immediately afterwards, without prior notice, to present a petition to the New York court was at the very least to be described as oppressive. The effect of that conduct was to seek to pre-empt the court from reaching its own decision on the arbitration questions. The logical and normal course was for the natural forum to decide for itself whether it should take jurisdiction over a dispute or whether the disputes fell within the arbitration clause. (General Star International Indemnity Ltd v Stirling Cooke Brown Reinsurance Brokers Ltd[2003] EWHC 3(Comm) considered.)
3. In the absence of an enforceable undertaking, an anti-suit injunction would be appropriate. It would ensure that the parties' rights were determined in an orderly and predictable manner in the appropriate forum. Concurrent proceedings in two different jurisdictions were a recipe for confusion and injustice. AHA had brought that about, deliberately, in order to secure what it perceived to be a tactical advantage which flowed from the application of the Federal Arbitration Act. That should not be permitted. The arbitration issues should be allowed to take place in the appropriate jurisdiction, in the logical and normal course of events.
Morison J:
1. This is a return date for an injunction granted without notice by Gross J on 13 May 2004. By his order made without notice, the defendants, AHA, were restrained from proceeding with or taking any steps (other than to abandon or discontinue) in pursuit of its Petition to compel arbitration in the New York Federal Court for the Southern District dated 5 May 2004. AHA say that I should discharge the injunction “which should never have been granted”.
2. The background to the dispute between the parties arises out of a facultative excess of loss reinsurance contract made between AHA and a corporate syndicate, 1861. At the date of the contract, the Syndicate's capital was provided by Commercial Union Corporate Member Limited (CGU), who remained the capital provider for the G calendar year 2000. For the following year, CGU was replaced as capital provider by a company called Tonicstar Ltd. In the normal way, at the end of the year there was a reinsurance to close to reflect these arrangements. At this stage of the narrative I shall not distinguish between the two capital providers but refer instead to the Syndicate. In April 2003 the Syndicate asserted that it had the right to avoid the policy on the grounds of misrepresentation and non-disclosure. In September of that year, through their New York lawyers a request was made to carry out an audit of AHA's files in New York. This request was accepted on terms that “CGU will either pay its outstanding balance in full, or provide a formal position setting forth its reasons for refusing to pay within two weeks of completing the inspection. At...
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