Neutral Citation Number: 2004 EWHC 1234 (comm.)

Case No: 2004 Folio 118




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: Wednesday 26 May 2004

Before :


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Between :



(Operating as Lloyd's Syndicate 1861)



- and -







(the corporate capital provider for Syndicate 1861 at Lloyd's for the year 2000)


(the corporate capital provider for Syndicate 1861 at

Lloyd's for the years 2001 and 2002) Claimants

- and -


Mr G. Kealey QC & Mr Brocklebank (instructed by Clyde & Co) for the Claimants

Mr D. Railton QC & Mr R. Williams (instructed by Denton Wilde Sapte) for the Defendant

Hearing dates: Monday 24 May 2004

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Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.



Mr Justice Morison

Mr Justice Morison :

  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

  3. 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 calendar year 2000. For the following year, CGU was replaced as capital provider by a company called Tonicstar Limited [Tonicstar]. 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 that time, should CGU fail to pay the amount owed, [AHA] will commence proceedings." The lawyers were required to enter into a confidentiality agreement which was governed by New York law. It is AHA's case that the audit was completed on 3 February 2004, and for two weeks after that date CGU were, deliberately, uncontactable.
  4. Instead, proceedings against AHA were started in this court by Tonicstar on 13 February 2004. Unaware that that was so, AHA issued court proceedings in New York on 17 February. Neither party had written the other a letter before action and each was unaware that proceedings in either jurisdiction were about to be started. After the New York action had started, AHA's lawyers spoke to CGU's New York lawyers and were informed that CGU "had beaten AHA to the punch". Leave to serve the English proceedings out of the jurisdiction was granted on paper by me on 1 March 2004 and the proceedings were served on AHA in New York on 9 March.
  5. CGU applied by Motion to the New York Court to dismiss the action there on jurisdictional grounds, and filed evidence in support. AHA say that it was only as a result of seeing that evidence that they became aware for the first time that the reinsurance contained an arbitration clause. By way of explanation, they say that the paper work relating to this contract was retained by their brokers at the World Trade Centre and was destroyed as a result of the events on 11 September 2001. The reinsurance form incorporated within it the "XL1 (agg)" form which includes the provision for arbitration. The arbitration clause provides for arbitration of
  6. "any dispute ... between the Reassured and the Reinsurers with reference to the interpretation of this Reinsurance or the rights with respect to any transaction involved."

  7. The arbitration clause has no express provision for the seat of the arbitration and thus for its curial law.
  8. In the light of this, AHA discontinued their New York action and issued a Demand for Arbitration on 9 April 2004. The syndicate disputed that there was any applicable arbitration clause, but made a without prejudice appointment of Mr Boswood QC as their arbitrator. The parties disagreed as to the seat of any arbitration. On 27 April 2004, AHA made an application within this jurisdiction under section 9 of the Arbitration Act 1996, seeking a stay of the proceedings brought in the name of Tonicstar pending arbitration. On 29 April 2004, the Claimants made it clear that they would seek a determination of the seat of the arbitration by this court, in the absence of agreement between the parties. On 5 May 2004, AHA brought a Petition in the New York Court seeking to compel arbitration and to restrain the English Court proceedings. It is that Petition which is the subject of the anti-suit injunction. On 6 May 2004, CGU and Tonicstar, unaware of the Petition, issued an arbitration claim form in this Court seeking, amongst other things, a declaration that the seat of any arbitration between it and AHA and of any arbitration commenced by AHA by its Demand for Arbitration was England.
  9. The Claimant's case

  10. (1) The Petition is an unjustified and tactically-driven attempt by AHA to arrogate to the New York Court issues which should naturally and properly be determined by this Court and of which, at least in part, the English Court is already seised.
  11. (2) The issues in question which should be decided in this jurisdiction are first, whether the English Court proceedings should be stayed in favour of arbitration; and second, whether the seat of the arbitration is in England or elsewhere (where the law governing the arbitration agreement is English Law). AHA were aware of this before they issued their Petition.

    (3) England is the natural forum for the determination of the stay application as was implicitly accepted by AHA when they made their application for a stay. The Petition constitutes a blatant tactical manoeuvre to prevent the English Court from determining the extent of its own jurisdiction.

    (4) The Claimants had indicated, during their disagreement in correspondence over the seat of the arbitration, that this would be a matter they would seek to raise before the English Court at the hearing of the stay application. The Petition represents an attempt by AHA to prevent this Court from deciding the question of a stay and the proper seat of the arbitration, as a matter of English law. By the Petition AHA are seeking to fix the arbitration in New York, thus pre-empting this Court's decision on the issue.

    (5) It has never been disputed that the applicable law of both the reinsurance contract and the arbitration agreement is English law. The reinsurance was placed in the Lloyd's market and was to be operated in London. The alleged misrepresentations and non-disclosures took place in London. There can be no doubt that the proceedings brought by the Claimants here were properly so brought.

    " The question which arises is whether the determination of the future progress, and scope, of those proceedings should be determined by this Court, as all parties originally envisaged, or in New York in accordance with the Defendants' tactically motivated change of tack."


    (6) The following key facts emerge from the background. First, AHA have not disputed the territorial jurisdiction of this Court - they have made no application under CPR Part 11. Their only case is that the proceedings should be stayed pending arbitration. Second, aside from the Petition there are no ongoing proceedings in New York, the New York action having been discontinued. Third, the English action was started first. Fourth, AHA have applied to this court for a stay and that is plainly the appropriate procedure. Fifth, AHA knew before they issued their Petition that the assistance of this Court was being sought on the question of stay and the seat of the arbitration. Against that background:

    "... it is plain that [AHA's] Petition in the Southern District Court of New York is a naked attempt to deprive this Court of the ability to determine issues which are naturally and properly within the province of this Court to determine, and which, at least in part, the parties have hitherto contemplated would be determined in this Court."

    AHA's case

  12. (1) At the time when the application for a stay was made in this Court "it was assumed" that Tonicstar was entitled to stand as claimant but clarification was expressly sought from the Claimants solicitors on this question. On 29 April the Claimants' solicitors stated that Tonicstar had assumed responsibility and liability for the reinsurance by reason of a reinsurance to close. That contention is misconceived as it is well established that a reinsurance to close is no more than a reinsurance of the Names for the old year by the Names for the succeeding new year Toomey v Eagle Star [1994] 1LLR 516. Although an application to amend the proceedings to include CGU in the title to the action has been made, that will be opposed. The position is that the proceedings asserting claims for misrepresentation and non-disclosure are 'empty' as the named Claimant was not a party to the reinsurance contract, nor, therefore, a party to the arbitration agreement. Therefore, permission to serve the claim on AHA outside the jurisdiction should never have been granted to Tonicstar. It is AHA's intention to apply to dispute the jurisdiction in this action on that ground. When entering an appearance, after service, AHA indicated that it would dispute the jurisdiction of the Court, although not on the basis of the wrong Claimant.
  13. (2) When Cooke J gave permission on 11 May to serve the arbitration claim form out of the jurisdiction, he was not told that AHA had issued their Petition in the New York Court. This was a failure to make full and frank disclosure, although at the time the papers seeking leave were lodged with the Court, the existence of the Petition was unknown to the Syndicate.

    (3) It is not disputed that England is a sensible forum for the determination of the stay and seat questions; but that does not mean that England is the natural forum. There are a number of clear connections with New York not least because that is the place where AHA, who is the more natural Claimant, conducts business; it is the place of the underlying risk and the place where the original losses occurred; and it is the place where AHA's witnesses are located, including the New York brokers. The underlying insurance is of an education authority of the State and is governed by the law of the State of New York.

    (4) There is nothing in the arbitration agreement which specifies the seat of the arbitration or the law which governs it. AHA does not accept that English law is the proper law of the arbitration agreement (or of the reinsurance). The Claimants have no contractual right to have the stay and seat issues determined by this Court. There is nothing unnatural or inappropriate in determining these issues in New York.

    (5) The fact that AHA made an application to this Court under section 9 of the Arbitration Act does not make this court the appropriate or natural forum to determine the outstanding issues. Any application to have the proceedings stayed had to be brought under that section and within the time specified.

    (6) By their Petition, AHA seek to compel arbitration on the ground that the parties have agreed to it. The New York Court will determine whether the disputes are within the arbitration clause. In doing so the court would apply the applicable law, if any. If the Court concluded that there was a dispute which was subject to arbitration it would compel arbitration and if no other forum were specified it would, under the Federal Arbitration Act, compel it to take place in the Southern District of New York. The reason why AHA seek to compel arbitration in New York is not to take advantage of a federal statute which, as the Claimants mistakenly fear, disregards the intentions of the parties or the provisions of the applicable law, but rather because New York is AHA's home territory; it is the place where the witnesses are located and where its documents are to be found.

    (7) It is not AHA who have sought to behave oppressively; rather it is the Claimants themselves.

    "Their conduct of the matter since at least February 2004 has been based on covert actions and stealth, the sole purpose of which has been to attempt to secure for themselves a perceived tactical advantage by litigating here."

    For example, immediately after obtaining the anti-suit injunction Tonicstar

    issued a motion in the Federal Court in New York to dismiss the Petition. This is returnable on 28 May.

    "this is a clear abuse of this Court's order and can only be designed to manoeuvre itself into a better position in New York ... Further, it shows that Tonicstar considers it appropriate for the matter to be dealt with by the New York court, notwithstanding the injunction."

    (8) This is not an appropriate case for the grant of an anti-suit injunction which is an exceptional remedy. The Claimants have no contractual right to restrain AHA from what it is seeking to do. The mere fact that there are concurrent proceedings which might determine the same issues between the parties is not sufficient for the grant of an injunction. AHA have acted throughout "above board and on notice". It is the Claimants "who have acted covertly and by stealth whenever they have thought it tactically in their interests to do so. Their recent conduct in New York exemplifies their attitude".

    The Principles of Law

  14. It seems to me that I should apply the following principles summarised by Rix LJ in the Glencore case..
  15. "The following conditions are necessary. First, the threatened conduct must be "unconscionable". It is only such conduct which founds the right, legal or equitable but here equitable for the protection of which an injunction can be granted. What is unconscionable cannot and should not be defined exhaustively, but it includes conduct which is "oppressive or vexatious or which interferes with the due process of the court"... The underlying principle is one of justice in support of the "ends of justice"... It is analogous to "abuse of process"; it is related to matters which should affect a person's conscience... Secondly, to reflect the interests of comity and in recognition of the possibility that an injunction, although directed against the Defendant personally, may be regarded as an (albeit indirect) interference in the foreign proceedings, an injunction must be necessary to protect the applicant's legitimate interest in English proceedings; he must be a party to litigation in this country at which the unconscionable conduct of the party to be restrained is directed, and so there must be a clear need to protect English proceedings... It follows that the natural forum for the litigation must be in England, but this, while a necessary, is not a sufficient reason." per Rix LJ at paragraph 42 of his judgment in the Court of Appeal in Glencore International v Exeter Shipping [2002] CLC 1090.

    The Decision

  16. I start with the question whether England is the natural forum for the litigation. It seems to me that it is. The contract of reinsurance was made here: it was placed through Lloyd's brokers; the terms and wording of the reinsurance are in Lloyd's form on a slip policy containing standard Lloyd's terms; the premiums were payable here; the claims were to be processed here; the misrepresentations and non-disclosure occurred here. Having chosen to contract in the Lloyd's market on a Lloyd's slip policy form it is to be inferred that the parties intended these provisions to be determined by the English Court [pace arbitration]. But even were there to be no implied choice of law, there is a presumption under the Rome Convention that the applicable law is that of the place of business of the party whose performance is characteristic of the contract. Here the performance of the contract which is characteristic of it is by the Reinsurer.
  17. Despite Mr Railton QC's non-admission, it seems to me clear that the proper law of the whole contract is English Law. The arbitration clause comes from standard wording of the Lloyd's brokers who acted on AHA's behalf during the broke to the Syndicate in London. I do not consider that the applicable law of the arbitration agreement is different from the applicable law of the reinsurance contract into which it has been incorporated. These factors, together suggest to me that England is the natural forum for the dispute, although I accept, of course, that the Federal Courts are well accustomed to applying the law of a foreign country. The fact that AHA's documents and many of their witnesses are based in New York does not, I think, affect the centre of gravity of this case: what was said or done and what should have been said or done in the context of the practices of the Lloyd's market is best and naturally decided here. I have not overlooked Mr Railton QC's submission that the claim is not confined to the allegation of misrepresentation and non-disclosure; there is also a complaint about the reserving policy of AHA. But, unquestionably, the centre of gravity of the dispute lies in the way the risk was broked in London. The other allegations do not affect that centre of gravity.
  18. This first necessary, but not sufficient, condition for the grant of an anti-suit injunction is satisfied.
  19. The question is whether the Court is satisfied that AHA have behaved unconscionably or oppressively or vexatiously. In my view they have, for the reasons advanced by Mr Kealey QC. It seems to me that AHA have tried to hijack the decision which is presently before this court, namely whether the arbitration clause is apt to embrace the disputes between the parties, and, if so, where its seat should be. The Syndicate is a stranger to the Federal Arbitration Act. It has not either expressly or by implication agreed that that Act should determine the matters in issue. Even if, as Mr Railton QC asserts, the New York Court will give full effect to English Law, when construing the arbitration clause, the terms of the Act itself, and the evidence before me as to how the Act operates, suggests at least that in the absence of an express choice of seat, under the Act, the seat will be the Southern District of New York. The written material relating to AHA's claim under the Petition reflects a body of law which has nothing to do with the interpretation of a contract governed by English Law. The decision by AHA both to make a section 9 application here and then immediately afterwards, without prior notice, to present a Petition to the New York Court is, in my view, at the very least, to be described as 'oppressive'. The effect of their conduct is to seek to pre-empt this court from reaching its own decision on the arbitration questions. AHA no doubt hoped that their tactic would lead to an earlier determination by the New York Court which would then be invited to restrain the English Court from considering the issue; or at the least, arguing that the decision of the New York court was final and binding as between the parties. The essential facts in this case are sufficiently close to the facts in the case of General Star International Indemnity Ltd v Stirling Cooke Brown Reinsurance Brokers Ltd [2003] EWHC 3 (Comm) 314 to make what Langley J held in that case worth citing as appropriate in this case too:
  20. The conclusion that England is the natural forum is not as a matter of law sufficient of itself for this court to grant an anti-suit injunction. That requires the extra ingredient that I must be satisfied that the complaint in New York is vexatious and oppressive or unconscionable: see Airbus Industrie v Patel [1999] 1AC 119. But in my judgment further pursuit of the New York Complaint would indeed be vexatious and oppressive. It was an attempt by SCB to hi-jack the hearing of forum issues to New York rather than England despite the logical and normal course, if thought to be sustainable, of arguing the matter in these courts in these proceedings which were of course begun first. To permit the two sets of proceedings to continue would, I think, plainly be oppressive. On the basis of my decision it would involve SCB, an English company subject to the jurisdiction of this court, not only pursuing parallel proceedings in an inappropriate forum but also seeking to restrain another English company from pursuing its claim in what I have held to be the natural forum. That SCB should not be permitted to do. I am of course conscious of the need for caution and observance of comity in this court granting anti-suit injunctions. It requires exceptional circumstances to grant such an injunction and there is always the alternative of leaving the New York court to decide for itself with such benefit as it might derive from my decision. But not only is it, as I have said, open to serious question whether the New York court even has claimed or would claim jurisdiction over Genstar but I would, with due diffidence and respect, expect the New York court to have the same distaste for parallel proceedings as this court and indeed to acknowledge this court's decision that the claim is properly brought and will be pursued here. It is also, I think, the reality of SCB's Complaint in New York that it seeks an anti-suit injunction and I can see no legitimate interest in SCB continuing to seek that relief or indeed pursuit of its claims on the merits in New York once it has been decided that the claims are to proceed in this jurisdiction. To do so would, I think, readily qualify as vexatious and oppressive. I shall therefore, as I said at the conclusion of the hearing, grant Genstar the anti-suit injunction which it seeks."

  21. Mr Railton QC said that there was nothing inherently oppressive in there being two sets of concurrent proceedings. This stemmed from a natural desire for parties to want to have their cases decided by the Courts with which they were familiar. That may be so, but an unruly rush to have cases decided by one Court rather than the other is not conducive to the doing of justice between the parties. The logical and normal course is for the natural forum to decide for itself whether it should take jurisdiction over a dispute or whether the disputes fall within the arbitration clause. This is the only Court seised of the dispute in the event that the court concludes for some reason that the arbitration agreement does not apply. AHA cannot and do not dispute the jurisdiction of this Court, which is the natural forum; whereas it is by no means clear that the Syndicate is amenable to the jurisdiction of the New York Court. That is very much in issue and will depend, I think, on the extent, if any, to which the Syndicate has business contacts within the State. It is inappropriate that the Court in New York should be asked to do this court's job for it in relation to a contract governed by English Law.
  22. The third requirement is that the remedy of an anti-suit injunction is discretionary and the Court must look at all the circumstances of the case and only make an order if the interests of justice so require. On this aspect of the case I gratefully adopt what the late Mr Justice Hobhouse said in an unreported but often cited decision in Pathe Screen Entertainment Limited & Others v Handmade Films (Distributors) Limited & Another [11 July 1989]. (I attach a copy of his Judgment to this Judgment). At page 49:
  23. "I therefore conclude that the law is that I should grant the injunction if I am satisfied that in the interests of doing justice between the parties it should be granted in all the circumstances. What is the relevant natural forum is a factor to be taken into account as are the elements of vexation and oppression that are or may be involved. The discretion has to be exercised having regard to the principles of comity. It has to be exercised with caution and, as has been pointed out by Parker LJ in M&R v ACLI [1984] 1 Lloyd's Law Reports at page 613, may call for a higher standard of proof than in the case of an application for a stay. I do not consider myself ... obliged to disregard what Lord Brandon said in Abdin v Daver at page 423:

    . "In this connection it is right to point out that, if concurrent actions in respect of the same subject matter proceed together in two different countries, as seems likely if a stay is refused in the present case, one or other of the two undesirable consequences may follow: first, there may be two conflicting judgments of the two courts concerned; or secondly, there may be an ugly rush to get one action decided ahead of the other in order to create a situation of res judicata or issue estoppel in the latter."

    Lord Diplock said in the same case (at page 412) "comity demands that such a situation should not be permitted to occur as between courts of two civilised and friendly states"; it would be, he said, "a recipe for confusion and injustice". As Bingham LJ said in Dupont No 1 the policy of the law must be to favour the litigation of issues only once in the most appropriate forum. The interests of justice require that one should take into account as a factor the risks of injustice and oppression that arise from concurrent proceedings in different jurisdictions in relation to the same subject matter."

  24. It seems to me that there are three matters, in particular, with which I should deal. The first is Mr Railton QC's submission that the proceedings in this Court are defective because Tonicstar has no right to sue. I consider that Mr Railton QC is very arguably correct as to Tonicstar's entitlement to sue. But this is a very technical point, devoid of merit. The real Claimant is the Syndicate; CGU and Tonicstar are simply the capital providers for successive years. AHA cannot have been in any doubt as to the identity of the Syndicate. I do not consider that this technical defect, if it is such, has any real bearing on the issues before me. There is an application to amend which will have to be decided in due course. The arbitration application issued in this jurisdiction has been issued in the name of both Tonicstar and CGU as capital providers for the Syndicate. The second matter is the more general contention that Tonicstar/CGU have themselves been guilty of vexatious or oppressive conduct. First, Mr Railton QC pointed out the evasive way the Syndicate behaved after it had completed its audit. They did not, as had been agreed, revert to AHA saying whether they were going to pay up or dispute the claims (and, if so, why). Instead they issued proceedings without any prior warning or normal letter before action, thus hijacking the case: AHA is a more natural claimant than the reinsurer who is seeking negative declaratory relief. They failed to make full disclosure to the Court when seeking permission to serve the arbitration claim form out of the jurisdiction. Finally, having obtained an anti suit injunction, the Syndicate, through their New York Lawyers, proceeded to issue a motion to dismiss the Petition, to which motion AHA is unable to respond. In theory, the Petition and the Motion to Dismiss it are due to be heard this Friday.
  25. Whilst I can see grounds for criticising the Syndicate's decision to start the proceedings without a letter before action, I do not think that would justify refusal of relief to which they are otherwise entitled. I imagine that the reason for their action was the fear that any letter before action would provoke a pre-emptive strike by AHA to start their action in the New York Court first: to beat the Syndicate to the punch. The failure to make full disclosure in their application to the Court for permission to serve the arbitration claim form out of the jurisdiction was not venal: had the Court dealt with the application on the day it was lodged there would not have been any non-disclosure. As to the Motion to Dismiss, that was issued within the time limits provided under the federal rules of procedure; if the step was not taken in due time, then the Court's discretion would have to be invoked. This step is no different in kind from AHA's own step in making a section 9 application in this Court. The Syndicate has taken no steps to progress their motion and at the end of the hearing I indicated that both parties' New York lawyers should inform the New York Court that it would not be 'troubled' on Friday by either party.
  26. On balance I consider that an anti-suit injunction, in the absence of an enforceable undertaking would be appropriate in this case. It will ensure that the parties' rights are determined in an orderly and predictable manner in the appropriate forum. As Lord Diplock said, concurrent proceedings in two different jurisdictions such as here is a recipe for confusion and injustice. AHA have brought this about, deliberately, in order to secure for themselves what they have perceived to be a tactical advantage which flows from the application of the Federal Arbitration Act. In my view this should not be permitted. The arbitration issues should be allowed to take place in this appropriate jurisdiction, in the logical and normal course of events.
  27. In my judgment, the injunction should be continued until further order.