Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG & Ors

As a matter of English law, an insurer commits no breach of contract or duty sounding in damages for failure promptly to pay an insurance claim. The law deems interest on sums due under a policy to be adequate compensation for late payment; this is so, even if an insurer deliberately withholds sums which he knows to be due under a policy, see Sprung v Royal Insurance [1999] Lloyd’s Rep IR 111 approving the decision in The Italia Express (No. 2) [1992] 2 Lloyd’s Rep 281. If parties agree that English law is to apply to a policy of insurance, this principle is part of what they have agreed. English law, moreover, gives no separate contractual remedy to an insured who complains that an insurer has misconducted himself before settling a claim. In either case the remedy of the insured is to sue the insurer and, if no settlement is forthcoming, proceed to judgment.

On 3rd May 2006 the vessel “ALEXANDROS T” became a total loss 300 miles south of Port Elizabeth. Her owners Starlight Shipping Company (“Starlight”) sued its insurers in respect of that loss by proceedings in the Commercial Court, 2006 Folio No 815, issued on 15th August 2006 (“the original action”). The first four Defendants in that action have been described as the Company Market Insurers (“CMI”) and the Fifth to Seventh Defendants as the Lloyd’s Market Insurers (“LMI”). There was an exclusive jurisdiction clause in the policies issued by CMI and LMI. It provided for English law and the jurisdiction of the courts of England and Wales, which is why Starlight commenced and continued its claims here in England. Liability was denied and vigorously contested. Overseas Marine Enterprises Inc (“OME”) were identified in the policies as Managers. Ince & Co acted for Starlight in the proceedings, and Hill Dickinson LLP, then Hill Taylor Dickinson, (whom I shall call “HD”) acted for the Insurers.

On 13^th December 2007 and 3^rd January 2008 these proceedings were settled for 100% of the claim, but without interest and costs, and Tomlin orders were made by consent in the light of those settlements. More than 3 years later Starlight (and other associated persons) began proceedings in Greece claiming damages from the insurers for late payment (whether deliberate or otherwise) and in respect of supposed misconduct by insurers in relation to the claim. Insurers have sought to enforce the settlement agreements referred to in the Tomlin Orders and Burton J has given them summary judgment for (inter alia) a declaration that the matters sought to be raised in Greece were part of the settlement of the claim and that Starlight (and their Managers) are bound to indemnify the insurers against any costs incurred and any sums that may be adjudged against them in the Greek proceedings. Starlight and their associates appeal with the permission of Burton J to this court.

I can take the facts very largely from the judgment below. The loss of the Alexandros T involved considerable loss of life, and the proceedings were fraught both for that reason and because the denial of liability was based in substantial part upon allegations of unseaworthiness, to which Starlight and/or OME were alleged to be privy, and upon allegations of a failure properly to report and repair damage to the vessel in accordance with Class Rules. In the course of the preparation for the proceedings, a number of specific allegations were made and pursued by Starlight, and Ince and Co on its behalf, falling into two general categories:-

These allegations had been made before the issuing of the proceedings by Starlight. They were referred to with some particularity in Ince & Co’s letter to HD of 18th July 2006. Complaints were made about attempted covert contacts with Starlight’s crew, and, in particular, an unspecified “instance of serious misconduct by one of the underwriters”. As for the malicious rumours (quaintly described as “malicious scuttlebutt”), this was described and complained of, together with its alleged effect on the market. Further reference was made in Ince & Co’s letter of 20th October 2006 to the underwriters “behaving in a reckless and irresponsible fashion in making … an allegation when they have no evidence to substantiate what they allege”. It appears that those representing Starlight obtained a sworn affidavit dated 8th January 2007 from Mr Miranda and another member of the crew, a Mr Paulino, alleging that they were given money and offered more, in return for the giving of what they regarded as untrue evidence. A Request for Further Information was served on 24th October 2007 by Starlight in the proceedings, asking probing questions about payments made, inter alia, to Mr Miranda, and as to the circumstances of approaches to the witnesses, which led to a response, dated 19th November 2007. The allegations came fully out into the open in a witness statement of Mr Nicholas Shepherd of Ince & Co, on Starlight’s behalf, dated 7th December 2007, served just prior to a Pre-Trial Review on 14th December 2007. Mr Shepherd referred (in paragraph 6) to Mr Miranda as being the apparent source of the very serious allegations which the Defendant Insurers were making, as had now become clear after exchange of witness statements, and Mr Shepherd addressed this in terms “so that the Court has some idea of what the Claimant will in due course say with regard to the bosun's veracity”: he exhibited the joint affidavit of Mr Miranda and Mr Paulino.

Mr Shepherd referred both to that affidavit and to other affidavits from crew members dealing with alleged approaches made to them by a Mr Bernardo, on the Defendants’ behalf, and suggested that “Mr Bernardo appears effectively to have been attempting to solicit untruthful evidence from those to whom approaches were made to say that the Vessel was unseaworthy”. Counsel for Starlight, Mr Brenton QC, specifically stated to Tomlinson J at the Pre-Trial Review on 14th December 2007, as recorded by the transcript (referring to Mr Shepherd’s fifth witness statement, which the judge had read), that Mr Bernardo had “approached a number of survivors and sought to persuade them to give false evidence in return for financial inducements”.

This position is summarised by Mr Crampton of Lax & Co, the solicitors then acting for the purpose of these proceedings for Starlight, in his witness statement for the purposes of the applications before Burton J:-

“5.

In their defence to the claim, the Underwriters alleged that the vessel was unseaworthy, that Starlight knew that the vessel was unseaworthy and that Starlight had in place an illegal practice, by which they refused to notify Class and the flag state authority of the vessel about defects to their vessels. These allegations were based on false evidence, which the Underwriters had obtained from the bosun, Aljess Miranda …

…

13.

In their responses to the Request for Further Information, the Hull Insurers provide details of payments totalling US$25,100.00 and €14,864.39 made by them to Mr Miranda in connection with the provision of his evidence. Throughout the English Court proceedings, Starlight vehemently denied and disputed the allegations made by Mr Miranda in the witness statements and affidavit listed above. Starlight have always maintained that Mr Miranda’s accusations relating to the condition of the Vessel and the conduct of the Starlight are completely untrue and a fabrication; and that the payments made by the Hull Insurers to Mr Miranda had the effect of motivating Mr Miranda to intentionally make … false accusations.”

The matters referred to in the second general category referred to in para 4 above related to consequential loss and damage. At the same Pre-Trial-Review, Mr Shepherd put in a sixth witness statement to support an application to amend the pleadings in order to add what were called the “Additional Sums Claims”, which he described. The proposed amendment alleged that “the Claimant has sustained and claims loss and damage over and beyond the measure of the indemnity to which it is entitled under the Policy”. In what was described as the best information which Starlight was presently able to provide, it was pleaded that, had the Defendants complied with their obligations to indemnify in accordance with the terms of the policy, Starlight would have purchased a replacement vessel, and had thus lost between US$ 45m and US$ 47.7m by way of increased capital cost and chartering losses of US$ 31,373,800.

On the basis of Sprung v Royal Insurance Tomlinson J declined leave to introduce this further claim.

In the event, the day before the hearing before Tomlinson J, LMI had entered into a Settlement Agreement with Starlight and OME dated 13th December 2007 in full and final settlement of the claim. It was a term of the Settlement Agreement that Starlight would obtain a stay by way of a Tomlin Order, and a Tomlin Order by consent between Starlight and LMI was made on 20th December 2007, in these terms:-

“UPON The Claimant and the Fifth, Sixth and Seventh Defendants agreeing terms and by consent IT IS ORDERED THAT

Save for the purposes of carrying into effect the terms agreed between the Claimant and the Fifth to Seventh Defendants, all further proceedings between the Claimant and the Fifth to Seventh Defendants shall be stayed with effect from 14th December 2007 or such earlier date as may be agreed between the parties or otherwise ordered hereafter.”

A similar Settlement Agreement was a short while later entered into in full and final settlement between Starlight and OME and CMI, dated 3rd January 2008, and pursuant to that agreement there was, by consent, a Tomlin Order entered, dated 7th January 2008, in materially the same terms, save that, whereas the other order was backdated to 14th December 2007 (the date of the hearing before Tomlinson J), this Tomlin Order had immediate effect.

In each Settlement Agreement the Assured was defined as being “[OME] and Starlight … as Managers and/or Owners and/or Associated and/or Affiliated Companies for their respective right and interest in the ship Alexandros T”.

In April 2011 (more than three years later) nine sets of Greek proceedings, in materially identical form, were issued by Starlight, by OME, by their co-Assureds under an associated Fleet Policy and by individual officers of those companies, against LMI and CMI, some of their employees or underwriters, and HD, and some of their partners or employees (“Greek 1”). The claims are for compensation for loss of hire and loss of opportunity by Starlight totalling approximately US$ 150m and for pecuniary compensation due to moral damage amounting to €1m, and similarly substantial claims by the other Claimants in respect of alleged acts, all done unlawfully and in breach of good faith for the alleged purpose of avoiding the performance by the Defendants of their legal obligations. The setting for all the claims is by reference to Articles of the Greek Civil and Criminal Code; however the factual allegations, said by the judge to be “entirely familiar” include:-

There is then a substantial section of the Greek pleadings relating to the financial consequences of the failure by the insurers to comply with their obligations under the policy and the way in which they allegedly handled the investigations. In a further set of proceedings, known as “Greek 2”, two additional heads of loss are claimed by Starlight and OME, arising out of substantially the same allegations.

In apparent recognition of the problem raised by the fact that such claims had either not been brought in England or had been ruled out as a matter of English law by Tomlinson J, Mr Crampton, in paragraph 27 of his witness statement, explained that the claims made in respect of the three vessels are advanced in two ways in the Greek pleadings, the first being that, as a result of the underwriters’ intention to avoid payment of the insurance indemnity, eventually resulting in late payment of the policy proceeds, the Claimant missed the opportunity to use the policy proceeds to invest in the three vessels, and, secondly, that, as an alleged result of the Defendants’ actions in acquiring the false evidence of Mr Miranda, his clients were not able to insure the vessels and without insurance they would not have been able to trade them and could not purchase them. He stated that his clients would “amend their pleadings prior to the hearing of the disputes in Greece so as to clarify this head of claim, such that no claim is made in respect of the late payment of the policy proceeds”. The expert evidence from the Claimant is that it is not possible to amend the pleadings in the Greek courts, but, treating the proposed draft amendment, which he exhibited, as a clarification, it did not seem to the judge that it in any way cured the defect, if defect there was. It is further said that the insurance of the three potential new vessels was rendered impossible, since all the London insurers refused to quote for the vessels because of the refusal of the Defendant underwriters to quote for them and because of the defamatory accusations spread as to the unseaworthiness of the Alexandros T. All these allegations arise out of the alleged manner in which the Defendants handled Starlight's claim in respect of the Alexandros T, and, even though the consequences and the consequential losses have expanded, and the claim for moral damages has been included, and although it seems that Starlight now relies on an expanded affidavit of Mr Miranda, the allegations, even though put into a context of Greek law, were said by the judge to be materially identical to those made prior to the Settlement Agreement.

The insurers have now brought proceedings in this country as follows:-

The judge had to decide whether the English proceedings should be stayed pursuant to Article 28 of Regulation 44/2001 of the Council of the European Union (“the 2001 Regulation”). This gives a discretion to a court of a member state of the EU to stay related pending actions, if it is not the court first seised. The judge decided that the English court was first seised of the proceedings in 2006 Folio 815 and that there was no discretion to exercise. He accepted that the English court was not first seised in relation to Folios 702 and 1043 but held that it was too late to apply for a stay after the defendants in those proceedings had served acknowledgments of service and defences. Even if that was wrong he would have refused a stay because the defendants in Greece were in breach of the exclusive jurisdiction clauses in the insurance policy and the settlement agreements.

No application had been made to the judge under Article 27 of the 2001 Regulation which requires any court other than the court first seised to stay its proceedings when proceedings involving the same cause of action between the same parties are brought in the courts of different member states. By the time the Greek parties sought permission to appeal from the judge’s orders, they had had second thoughts about Article 27 and applied for permission to appeal on the basis of both Articles 27 and 28; the judge granted these permissions. This court has therefore had to consider both Articles.

It will be convenient, therefore, now to set out the terms of those two Articles:-

“Article 27

1.

Where proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised of the action is established.

2.

Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.

Article 28

1.

Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings.

2.

Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction over the actions in question if its law permits the consolidation thereof.

3.

For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

The judge further decided to give summary judgment pursuant to CPR Part 24 and, in an order, containing 26 paragraphs, he declared that each of the claims made in the Greek actions against CMI and LMI fell within clause 2 or respectively clause 3 of the settlement agreements, that Starlight alone and Starlight together with OME were bound to hold harmless respectively CMI and LMI against each of the claims made in the Greek actions pursuant to clause 3 or 4 of the settlement agreements, that there was to be specific performance of the agreements to hold CMI and LMI harmless by establishing a fund in London from which damages for breach of the agreements to hold harmless were to be paid, that the Greek actions were in breach of the exclusive jurisdiction clauses in the settlement agreements and the insurance policies and that damages for all the breaches of contract were to be assessed with appropriate interim payments to be made. He then gave permission to appeal against all these orders including permission to argue grounds based on Article 27.

(A)Article 27

The following issues need to be decided:-

Article 28

Summary Judgment on the Merits

All these questions must be considered against the background of the now familiar jurisprudence of the European Court of Justice in Erich Gasser v Misat [2004] 1 Lloyds Rep 222, Turner v Grovit [2005] A.C. 101 and West Tankers Inc v Allianz S.P.A. (The Front Comor) [2009] 1 A.C. 1138.

In broad terms these cases decide

With these considerations in mind, one can approach the issues that need to be decided. I will deal first with Article 27, although there is a considerable overlap between the issues which arise under the two Articles.

Here there are two sub-issues the first of which is whether the filing of acknowledgements of service and defences makes it too late thereafter to ask the court to stay proceedings. This is also relevant to Article 28.

The answer to this first sub-issue is that it is not too late. The provisions of CPR 11, about (1) challenging the jurisdiction of the court by filing an acknowledgment of service which states that jurisdiction is challenged and (2) giving a further opportunity to file an acknowledgment of service after a jurisdiction challenge has been decided, are provisions about “jurisdiction” strictly so called. Applications under Articles 27 and 28 are not challenges to the jurisdiction; they regulate proceedings which are pending in two (or more) member states which potentially have jurisdiction. If the state first seised does not have jurisdiction, a challenge can be made in that state and, if it is held in that state that that state does not have jurisdiction, a party will be at liberty to proceed in any other state which does have jurisdiction. An application for a stay, however, pursuant to Article 27 and 28, accepts that the relevant state may have jurisdiction but asks the member state not to exercise that jurisdiction which it has. It is, therefore, no bar to an application under Article 27 (or indeed Article 28) that a defendant has filed an acknowledgment of service and a defence. The authorities relied on by the judge in paragraph 43 of his judgment do not relate to stay applications but to jurisdictional objections and are, with respect, therefore not in point.

The second sub-issue applies only to Article 27 and is whether the Greek parties can invoke Article 27 after

As a matter of English procedural law, this court always has discretion to entertain a new point on appeal if the respondent has suffered no prejudice which cannot be cured by costs, see Pittalis v Grant [1989] QB 605, 611 C-F per Nourse LJ. The judge’s costs order specifically seeks to preserve the costs position as ordered by him, in the event that the appellants succeed only on this new ground. It is, further, important to note not only that, if the proceedings involve the same cause of action and the same parties, a stay must be granted by the court second seised but also that the court must do so “of its own motion”. Once the point comes to the notice of the court, a stay is therefore mandatory. In these circumstances it seems to me that, on the facts of the present case, we must entertain the ground of appeal which seeks to rely on Article 27. The fact that the Greek parties expressly disavowed any intention to rely on Article 27 does not go to the exercise of discretion if the new point is otherwise suitable for argument. It does, however, mean that the reasons given for not taking the new point may well be good legal reasons; if new counsel are instructed to take the point for the first time on appeal, any argument put forward by that counsel will have to be scrutinised with some care.

Insurers have taken a somewhat associated point which, they submit, is also a bar to the stay applications. It is that once a judge has, as Burton J has, given a final judgment on the merits, the proceedings are over and Articles 27 and 28 have no further part to play because there are no longer competing proceedings or (in the language of the title of Section 9 of the 2001 Regulation) there are no longer “lites pendentes”. The consequence of that argument, although not presumably for decision by us, would be that pursuant to Article 33 of the 2001 Regulation the judgment of Burton J would have to be recognised by the courts of other member states of the European Union, including Greece.

This argument cannot be right unless and until the judgment is unappealable. If (as in this case) the judge has himself given permission to appeal his final judgment or if this court itself gives permission to appeal after a first instance judge has refused permission, the proceedings in England are still alive and are, therefore, pending rather than concluded. It would be absurd that a final judgment which was wrongly given and liable to be set aside on appeal should be able to preclude any application for a stay. It is not necessary that the final judgment should first be set aside before any application for a stay is made. It is sufficient that permission to appeal it has been given.

Now that these initial points have been cleared out of the way, I can turn to the substantive issues that arise under Article 27. It is logical to consider whether the English proceedings involve the same cause of action (and are between the same parties) as the Greek proceedings before considering whether the English court was first seised.

The question here is whether the new English proceedings (the new application in Folio 815 and the new actions Folio 702 and 1043) “involve the same cause of action” as the Greek proceedings. For this purpose a comparison of the two sets of documents will have to be made but it is first necessary to be clear what one is looking for.

It is now settled that the question whether a cause of action is the same depends on whether, to use the French words, the “cause” and the “objet” of the proceedings are the same. This translates into English as whether the substance of the proceedings and the object for which they are being pursued are the same. It is further settled that, for this purpose, one asks whether what is pleaded by way of complaint is the same; one does not look at defences whether pleaded or intended or likely to be pleaded in future. Although these principles are uncontroversial, they have given rise to some difficulty in practice.

In Gubisch v Palumbo [1982] ECR 4861, the claimant in Germany sought to enforce a contract by claiming the price of a delivered machine; the claimant in Italy asked for a declaration that no contract had been entered into or, if it had, that it had been discharged by repudiatory conduct on the part of the seller. The European Court of Justice held that these claims involved the same cause of action because one claim was the negation of the other and that a stay should be granted by the Italian court which was second seised.

In The Tatry (1994) [1999] QB 515 a cargo of soya bean oil had been allegedly contaminated by diesel oil and other hydrocarbons during the course of a voyage between Brazil and Rotterdam. The ship owners issued proceedings in Holland for a declaration that they were not liable to the cargo-owners. The only way in which the cargo-owners could get security for their claim was by arresting a sister ship in Liverpool and starting their own proceedings in England. The court referred a number of questions to the European Court of Justice including:-

“(5)

In relation to the carriage of goods by sea in circumstances where goods are discharged in an allegedly damaged condition, if (i) the shipowner commences proceedings in a contracting state which involve a claim for a declaration of non-liability to cargo interests in respect of such alleged damage, and (ii) the cargo claimants subsequently commence the proceedings in another contracting state in which they claim damages against the shipowner for negligence and/or breach of contract and/or duty in respect of such alleged damage to their cargo, do the latter proceedings involve the same cause of action as the former proceedings for the purposes of article 21 of the Brussels Convention 1968 (as amended) so that the courts of the latter contracting state must decline jurisdiction pursuant to article 21?”

(Article 21 of the Brussels Convention is now Article 27 of the 2001 Regulation).

The European Court of Justice responded:-

“39.

For the purposes of article 21 of the Convention, the “cause of action” comprises the facts and the rule of law relied on as the basis of the action.

40.

Consequently, an action for a declaration of non-liability, such as that brought in the main proceedings in this case by the shipowners, and another action, such as that brought subsequently by the cargo owners on the basis of shipping contracts which are separate but in identical terms, concerning the same cargo transported in bulk and damaged in the same circumstances, have the same cause of action.

41.

The “object of the action” for the purpose of article 21 means the end the action has in view.

42.

The question accordingly arises whether two actions have the same object when the first seeks a declaration that the plaintiff is not liable for damage as claimed by the defendants, while the second, commenced subsequently by those defendants, seeks on the contrary to have the plaintiff in the first action held liable for causing loss and ordered to pay damages.

43.

As to liability, the second action has the same object as the first, since the issue of liability is central to both actions. The fact that the plaintiff’s pleadings are couched in negative terms in the first action whereas in the second action they are couched in positive terms by the defendant, who has become plaintiff, does not make the object of the dispute different.

44.

As to damages, the pleas in the second action are the natural consequence of those relating to the finding of liability and thus do not alter the principal object of the action. Furthermore, the fact that a party seeks a declaration that he is not liable for loss implies that he disputes any obligation to pay damages.

45.

In those circumstances, the answer to the fifth question is that, on a proper construction of article 21 of the Convention, an action seeking to have the defendant held liable for causing loss and ordered to pay damages has the same cause of action and the same object as earlier proceedings brought by that defendant seeking a declaration that he is not liable for that loss.”

The court thus held that since a declaration of non-liability was effectively a mirror image of cargo-owners’ claim for damage both causes of action must be treated as being the same. I take the words “mirror image” from the judgment of Rix J in Glencore International v Shell International [1999] 2 Lloyd’s Rep 692, 697.

In Evialis v SIAT [2003] 2 Lloyd’s Rep 377 insurers had issued a certificate in respect of a cargo of cotton pellets which were the subject of a cif sale and had been damaged in the course of a voyage between Abidjan and Rouen. In June 2002 the insurers brought proceedings in Italy against the buyer who was a party to the contract of insurance contained in the certificate claiming that the buyer’s claim was time barred and that the damage was caused by inherent vice. In October 2002 the buyer brought proceedings in England claiming an indemnity in respect of the cargo damage and also that the contract contained an exclusive jurisdiction clause which required the matter to be decided in England or at least entitled the buyer to sue the insurers in England. The insurers applied to the English court for a determination that the English court did not have jurisdiction or alternatively for a stay pursuant to what was then Article 21 of the Brussels Convention. Andrew Smith J held that the English court did have jurisdiction (although not exclusive jurisdiction) but granted a stay because the central or essential issue was whether the insurers were liable for cargo damage and that was the same both in Italy and in England.

In Gantner Electronic Gmblt v Basch Exploitatie Maatschappij BV [2003] ECR 1 – 4207 the claimant in Holland claimed damages for wrongful termination of what it said was a long-term contract; the claimant in Austria claimed the price of goods sold and delivered pursuant to a number of one-off contracts to which the defendant (claimant in Holland) responded by setting off a counterclaim for breach of the long-term contract. The European Court of Justice held that the causes of actions were not the same. The fact that the defence and counterclaim in Austria relied on the long-term contract sued upon in Holland was irrelevant since that reliance only appeared in Austria as a defence.

In JP Morgan Ltd v Primacom A.G. [2005] 2 Lloyd’s Rep 665 the claimant in England sought to recover a loan made pursuant to a facility agreement; the claimant in Greece sought a declaration that the facility agreement was invalid. Cooke J held that the proceedings involved the same cause of action.

The same point arose in Lloyd’s v Sinco [2009] Lloyd’s I.R. 365 in which the claimant insurers (as here) were relying on an exclusive English jurisdiction clause which in that case was contained in a binder given to a Greek broker. The insurers had terminated the binder on the basis of purportedly fraudulent conduct on the part of the broker. The insurers began proceedings in England for a declaration and damages but had not served them before the broker sued the insurers in Greece for “clientele compensation” pursuant to statute and “financial and moral damages”. The insurers then amended their English claim to claim damages for breach of the exclusive jurisdiction clause and served the claim (as so amended) on the broker in Greece; the broker then sought a stay of the English proceedings. Beatson J refused a stay because the Greek claims were based on tort and statute while the English claims were for breach of the contract in the binder. The difference between this case and the case now before us is, of course, that there was no settlement agreement which could supposedly deny the right of the Greek claimants to bring proceedings at all.

It is, I think, clear from these authorities that if a cause of action in one member state is a mirror image of a cause of action in another member state, the cause of action will be regarded as the same. One must, however, bear in mind the reason why in these circumstances the second action must be stayed. The reason is given by the European Court in paragraph 18 of its judgment in Gubisch:-

“If, in circumstances such as those of this case, the questions at issue concerning a single international sales contract were not decided solely by the court before which the action to enforce the contract is pending and which was seised first, there would be a danger for the party seeking enforcement that under Article 27(3) a judgment given in his favour might not be recognized, even though any defence put forward by the defendant alleging that the contract was not binding had not been accepted. There can be no doubt that a judgment given in a contracting state requiring performance of the contract would not be recognized in the state in which recognition was sought if a court in that state had given a judgment rescinding or discharging the contract. Such a result, restricting the effects of each judgment to the territory of the state concerned, would run counter to the objectives of the convention, which is intended to strengthen legal protection throughout the territory of the community and to facilitate recognition in each contracting state of judgments given in any other contracting state.”

If therefore the result of refusing a stay is that there would be a risk that a Greek judgment awarding damages would not be recognised in England because an English court would regard such a claim as incompatible with the settlement agreements and that an English judgment, such as that granted by Burton J would not be recognised in Greece because the claims would be regarded as being outside the settlement agreements, a court would have to regard the consequence of refusing a stay with some concern.

It is now necessary to look at the respective proceedings.

The Greek proceedings in their current state undoubtedly rely, to some extent, on the same contract of insurance as that which was in issue in the original English action. That is awkward for the Greek claimants since, to the extent that they say that their losses are due to insurers failing to make payment within a reasonable time of the loss, not only was the English court first seised of all claims under the insurance policy but they would be liable to be met by the insurers’ reliance on the judgment of Tomlinson J as a final judgment not allowing claims made in relation to late payment to proceed. The Greek claimants have therefore undertaken in the face of the court to abandon all reliance on the contract of insurance in the Greek proceedings and to move the court in Greece, on the first occasion Greek procedural rules allow them to do so, to delete any reference to claims for late payment under the policy. No doubt that undertaking can and should be incorporated in any order this court may in due course make.

On the basis that this will ultimately be the position in Greece, the Greek claimants have claims in tort akin to the torts of defamation and malicious falsehood in English law, which in one sense are different from the insurers’ claims in England which rely on the settlement agreements. The Greek claimants nevertheless submit that the causes of action in England and Greece are essentially the same because they assert on the one hand and deny on the other liability for the consequences of malicious statements in Greece intentionally made. I would accept this submission if the case were simply an assertion of liability on the one hand and a declaration of non-liability on the other. The claims would then be mirror images of one another. Is that truly the position?

CMI’s application in 2006 Folio 815, issued on 25^th July 2011, seeks an order that the stay imposed by the Tomlin order be lifted and that they be permitted to serve particulars of counterclaim because:-

“The claimant has commenced proceedings against the first to fourth defendants and others in Greece in breach of (1) exclusive jurisdiction provisions in the underlying insurance policies between the parties and (2) the terms of settlement referred to in the Tomlin order in these proceedings dated 7^th January 2008 which terms were subject to English law and the exclusive jurisdiction of the High Court in London and because the first to fourth defendants are therefore entitled to be indemnified in respect of all consequent loss, damage and expense, and to a declaration to that effect and to an interim award of related expenses, and to the costs of the present application. The relief sought and the basis for it are more fully set out in the further particulars of counterclaim attached.”

The attached particulars of claim recite the exclusive jurisdiction clause in the policies of insurance and the terms of settlement. They then recite the Greek proceedings and say that the bringing of those proceedings constituted

LMI’s application in 2006 Folio 815, issued on 3^rd August 2011 claims in its first three paragraphs as follows:-

“1.

A declaration in such terms as may be just that all and any claims that the Starlight Shipping Company may have against the applicants or any of them under marine insurance policy CF.000220Z UMR B0302 CF000220Z (“the Policy”) concerning the “Alexandros T” have been settled under a valid and binding settlement agreement dated 13^th December 2007 (“the settlement Agreement”) which is referred to in an order made by the Commercial Court on 20^th December 2007 (“the Consent Order”) which stayed proceedings in Action 2006 Folio 815 except for the purposes of carrying into effect the terms of the Settlement Agreement.

2.

A declaration in such terms as may be just that the Starlight Shipping Company are in breach of the Settlement Agreement, and setting out each of the respects in which they are in breach, including, without prejudice to the generality of the foregoing, in commencing and continuing with claims against the applicants in proceedings in Greece before the Piraeus Multi Member Court of First Instance Maritime Division in breach of the terms of the Settlement Agreement.

3.

A declaration in such terms as may be just that the valid and binding Settlement Agreement dated 13^th December 2007 referred to in the Order made by the Commercial Court on 20^th December 2007 covers the claims brought by the Starlight Shipping Company against the applicants in Greece before the Piraeus Multi Member Court of First Instance Maritime Division and these claims have been validly and effectively settled under that agreement.”

Subsequent paragraphs then claim to be indemnified in much the same way as the CMI applicants.

It is clear that the first 3 paragraphs of the LMI application are in terms an assertion that LMI are not liable in respect of the claims in Greece. CMI’s allegation that the Greek claimants are in breach of the settlement agreements is in effect a similar assertion. It may be said that there are other causes of action in the English proceedings which are not exactly mirror images of the allegations in the Greek proceedings but to the extent that they are not, they are essentially the same in the sense that the key assertion in Greece is that there are non-contractual claims and the key assertion in England is that those non-contractual claims have been compromised by the settlement agreements. The claims for damages and indemnity are in any event parasitic on the central contention that, once a settlement had been reached, all matters in issue had been compromised. It is, of course, elementary that Article 27 has regard to causes of action rather than proceedings and that is why it is necessary to concentrate on the allegations relating to the settlement agreement. It is certainly the case that there is a considerable risk of inconsistent judgments if one of the sets of proceedings is not stayed and the rationale behind Article 27 therefore favours a stay if the Greek court was the court first seised.

I therefore conclude that, in so far as the English proceedings assert non-liability by reason of the settlement agreements, there is an identity of issues and the respective causes of action are the same. To the extent that allegations are made in England that the Greek parties are in breach of the settlement agreements or in breach of the exclusive jurisdiction clauses in either the insurance policy or the settlement agreements themselves (and that they should therefore indemnify the insurers for the cost of the Greek proceedings) they are parasitic and dependent on the basic cause of action in England for a declaration of non-liability. They cannot proceed in their own right until the underlying question of the ambit of the settlement agreements as a defence to the Greek actions in tort has been resolved.

Since there can be no doubt that the 2011 English proceedings came after the Greek proceedings, there is no need to give separate consideration to those proceedings, because the same result must follow.

Same parties?

The parties to the English 2006 and 2011 proceedings (taken together) are, at any rate in substance, the same as the claimants in Greece. No further consideration arises with respect to this issue.

Which court was first seised?

The first action was, of course, Starlight’s claim on the policy. Can it, therefore, be said that the English court was first seised of the relevant causes of action now pursued in Greece?

I have already said that Article 27 only has regard to “causes of action” rather than proceedings. It seems to me impossible to regard the proceedings in Greece, once the Greek claimants have formally abandoned their claims in contract under the policy as they have undertaken to do, as the same as the original claim brought in England. The claims that are to be pursued are claims in tort or delict equivalent to defamation and malicious falsehood; these causes of action are different from the Greek claimants’ claims to be indemnified under the policy and they are causes of action of which the English court has never been seised at any time before the applications of 25^th July and 13^th August 2011 were issued, after the date of the Greek proceedings which were issued in April 2011.

Mr Michael Swainston QC for CMI submitted, however, that the English court was first seised because it was well established by what he called the rule in Henderson v Henderson (1858) 3 Hare 100 that a litigant should bring forward all his claims at the same time rather than have them decided bit by bit. This is part of the English law of abuse of process and the court’s ability to control its own procedures. Since Johnson v Gore Wood [2002] 2 A.C. 1 it has been recognised that the rule is not absolute but is subject to broad considerations of fairness in all the circumstances. That said it is very possible that, if the claims now proceeding in Greece had been brought in England and if a court, for whatever reason, thought that they were not barred by the settlement agreements, an English court might stay or strike out the proceedings as an abuse pursuant to Henderson’s case. But does that make the English court the court first seised of the cause of action now being brought in Greece?

With some regret, I conclude that this consideration cannot make the English court the court first seised. In the first place considerations of potential abuse of process are much too nebulous a concept to bring into the question of which court is first seised. The rules about seisin are somewhat mechanistic and need to be as simple as possible in their application. Secondly to use Henderson v Henderson so as to make the English court first seised would be contrary to the decision of the European Court of Justice in Gantner where, it will be remembered, there were causes of action on different contracts (sale and delivery of goods on the one hand and breach of a long term contract on the other). If the court first seised of the original proceedings in that case (Holland) should have determined all possible claims arising from a relationship, the Austrian action should have been stayed but it was not.

Mr Swainston then developed a variant of his primary argument under this head and submitted that the English action remained alive for the purpose of enforcing the English judgment and preventing evasion of the consequences of the judgment. I cannot myself see that he has any cause of action to prevent the evasion of the consequences of a judgment. That is, however, beside the point because the only judgment entered in the English proceedings is that all proceedings “shall be stayed”,

“save for the purposes of carrying into effect the terms agreed.”

The action is, therefore, over except for the purposes of suing on the settlement agreement. Both CMI and LMI claim that they are now seeking to enforce the settlement agreement but, on any view, that is a different cause of action from the original cause of action which was a claim under the contract of insurance contained in the policy on the vessel and, for the reasons already given, it is the same cause of action as that sued upon in the Greek proceedings.

It is true that the Greek 2 proceedings were instituted after the 2011 proceedings were issued here, but Greek 2 relies on the same cause of action as Greek 1 and it is, therefore, the causes of action in Greek 1 which have to be compared with the English proceedings and it is clear that the Greek court was the court first seised of the causes of action there set out.

There is, of course, the further difficulty that the only claimant in the original English action (2006 Folio 815) was Starlight, the owner of the vessel. The Greek claimants, while including Starlight, are much more numerous. To the extent that they have causes of action at all, I cannot see how the English court could be first seised of their actions on any view.

I would therefore decide that all the English applications/actions should be stayed because the causes of action relied on in England are essentially the same as the causes of action relied on in Greece.

Article 28

The Greek claimants are not too late to apply for a stay for reasons already given.

Article 28 concerns “related actions” not “related causes of action”. For the purpose of Article 28 one therefore has to ask of any particular action whether it is related to another action. In the context of this case it is easy to see that the English actions in their current form are related to the Greek action but the critical question is whether the Greek action is also related to the original English action which is now stayed save for the purpose of enforcing the settlement agreements. Both CMI and LMI now want to enforce the settlement agreements by saying that they bar the tortious actions being brought in Greece. I have already said that the original cause of action in the English action 2006 Folio 815 (as opposed to the new causes of action arising from the Tomlin order) is not the same as the causes of action relied on in Greek 1 and Greek 2 but it does not follow from that that the actions themselves are not related. The original action may only be alive for the purposes of enforcement but if one asks whether the Greek proceedings are “related” to the English action, it is very difficult to say that they are not. Moreover, that is so whether one looks at the English action as a whole or only that part of it which still remains alive.

Mr Milligan QC for the Greek claimants submitted that it was the new cause of action arising out of the settlement agreement which created the link that caused the actions to become related and that it was, therefore, the Greek court which was the court first seised because the Greek court was initially seised of the actions which insurers now say were settled by the settlement agreement.

For this purpose he relied on two passages from the judgment of Rix LJ in FKI Engineering v Stribog [2011] 1 WLR 3264. At para 84 Rix LJ said:-

“…. where the “same cause of action” or the “same parties” are introduced only by way of service, or amendment, the relevant proceedings are only “brought” at the time of such service or amendment, not at the time of institution of the original, unamended, proceedings.”

Those observations were, however, made in relation to Article 27 not Article 28. At para 129 he said:-

“It is possible that the introduction of entirely new causes of action or parties is to be recognised as the bringing of entirely new proceedings, so that the timing of seisin … has to be looked at from that point of view, as occurs for the purposes of Article 27.”

Does this tentative expression of view in relation to “the introduction of entirely new causes of action” being tantamount to “the bringing of entirely new proceedings” mean, for the purpose of this case, that the Greek courts are to be regarded as first seised of the relevant related action?

In my opinion it does not. In the first place Rix LJ had already quoted the judgment of Saville LJ in relation to what is now Article 28 in The Happy Fellow [1998] 1 Lloyd’s Rep 13, 17 (col.2):-

“… article 21 is concerned with proceedings and article 22 with actions. The questions are whether the proceedings involve the same cause or object or whether the actions are related. It is thus a misreading of the Convention to ask which court is first seised of issues which are or might be raised within the proceedings or actions. If such were the case, then the article would achieve precisely the opposite of their intended purpose which is, to achieve the proper administration of justice within the community …”

The actual issue in The Happy Fellow, in which a French collision action preceded English proceedings by one of the owners to limit his liability, was whether the fact that that owner subsequently admitted liability in France so that the only remaining issue was that of limitation meant that the English court was first seised. This court held that the French court was first seised, although limitation had not originally been an issue in that court.

In the second place Rix LJ provided his tentative response to his tentative view in the remainder of paragraph 129 when he said:-

“Even so, it is not clear to me that in this connection article 27 and article 28 work in the same way: for article 27 is worded in terms of the bringing of actions with the same parties and the same cause of action … whereas Article 28 is worded in terms of the pendency of related actions… That emphasises that the article 28 question is asked with relation to pending actions, and not, as the article 27 question is asked, with relation to the bringing of actions. In any event, the judge is … mistaken to think that any amendment is analogous to the bringing of new causes of action or the addition or substitution of new parties.”

The new matter relied on in Stribog was a new assertion in the court first seised of the validity of an assignment relied on as part of the cause of action in the court second seised. This court held that the question whether the actions were related had to be judged at the time the application was made and, by that time, the actions were indeed related. To the extent that Rix LJ tentatively suggests that the introduction of an “entirely new” cause of action may constitute “entirely new” proceedings as opposed (I suppose) to “partially new” causes of action which would not constitute “entirely new” proceedings, I have my respectful doubts. As Saville LJ said in The Happy Fellow it is a misreading of Article 28 to ask which court is first seised of “issues”; it must likewise be wrong in an Article 28 context to ask which court is first seised of “causes of action”. That is Article 27 territory because, for the purpose of Article 28, one has to ask which court is first seised of an action, not a cause of action and, still less, an issue.

If therefore the original English action (2006 Folio 815) and the subsequent Greek actions are related (as I think they are), it was the English court which was first seised of one of those related actions. This court, as the court first seised, has no jurisdiction to stay its own proceedings, so no question of discretion arises and issues (B)(iv) and (v) do not arise.

What then of the subsequent actions, Folio 702 and 1043? These actions are undoubtedly related to the Greek proceedings which preceded them but they are also related to the first English action (Folio 815). In these circumstances, the English court is again the court first seised and there is thus no jurisdiction pursuant to Article 28 to stay these actions either.

I would, therefore, have upheld the judge in relation to Article 28 but in the light of my conclusion about Article 27 (not argued before him) that is academic.

In the light of my conclusions so far, it must follow that the summary judgments granted by the judge will have to be set aside. In these circumstances the question arises whether it would be appropriate or useful to express any view about their correctness, particularly about the crucial question of construction namely whether the tortious claims in Greece are to be regarded as having been settled by the settlement agreements.

Since that issue will have to be tried in Greece (albeit by reference to English law), it seems to me that it would not be appropriate for this court to express any view about the right construction of the settlement agreements. It is true that the settlement agreements are governed by English law and have an English jurisdiction clause. But according to Erich Gasser v Misat and Turner v Grovit it will be for the Greek court to decide whether the Greek actions should be stayed pursuant to Article 23 of the Regulation. If the Greek court does so decide, the stay in England can be lifted and the actions can proceed. If the Greek court does not grant a stay and proceeds to a hearing, the question whether the Greek claims are to be regarded as having been settled will have to be determined by English law as the expressly agreed law of those agreements. But the Greek court can receive evidence of English law just as readily as the English court can, in any appropriate case, receive evidence of Greek law.

Proceedings in all 3 actions should be stayed until further order.

I agree with Longmore LJ in relation to article 27 (which was not argued before the judge) for the reasons comprehensively set out by him.

I would add only by way of footnote that in a joint consultation paper on Insurance Contract Law; Post Contract Duties and Other Issues published on 20 December 2011 by the Law Commission and the Scottish Law Commission, at paragraph 2.87, the Commissions commented on the rule referred to by Longmore LJ in paragraph 1 of his judgment in the following terms:

“This rule is out of line with ordinary contract principles: it rests on the legal fiction that an insurer undertakes to prevent a loss from occurring. In reality, insurers do not undertake to prevent losses, but to pay defined sums of money if particular losses occur. The rule also appears unique. It has not been followed in Scotland or in other common law jurisdictions. Nor is it applied against brokers, in contracts for life insurance, or where an insurer undertakes to reinstate property.”

The Commissions have provisionally proposed that the law should be reformed, but at present it remains as Longmore LJ has stated.

I agree also that since the English applications/actions are to be stayed under article 27, the summary judgments granted by the judge should be set aside and that this court should express no view as to whether the judge was correct in his construction of the settlement agreements.

As Longmore LJ has observed, any conclusion of this court about article 28 is in these circumstances academic. I have some doubt whether the first English proceedings (2006 Folio 815) can properly be described as pending within the meaning of article 28 at the time when the first Greek proceedings were commenced. However, it is unnecessary to come to a final conclusion in relation to article 28 and I would prefer not to do so.

I respectfully agree with Longmore LJ, for the reasons he gives, that article 27 requires all the English applications/actions to be stayed and that in consequence the summary judgments entered by Burton J should be set aside. I also agree that this court should express no view upon his construction of the settlement agreements.

In the circumstances, the article 28 questions do not require answers. Longmore LJ founds his own answers to them on his conclusion that the original English action (2006 Folio 815) and the subsequent Greek actions are related. I would agree that they are but, like Toulson LJ, I would question whether that English action, which had been stayed since January 2008, was also “pending” within the meaning of article 28 when the Greek actions were commenced. Since, however, it is unnecessary to answer the article 28 questions, I do not propose to consider them further and I am not to be taken as expressing a final view on the “pending” point.