Dornoch Ltd & Ors v Westminster International BV & Ors

The mega-size trailer hopper dredger, WD Fairway, to which I shall refer hereafter as ‘the vessel’, became a constructive total loss as a result of a collision off China in March 2007. The vessel was at the time owned by the First Defendant, one of the companies in the Boskalis Group.

The vessel’s hull and machinery cover was written in two layers. The primary layer of up to €5 million was underwritten by seven insurance companies of which six are incorporated in the Netherlands, Fortis Corporate Insurance NV, HDI-Gerling Verzekeringen NV, Aegon Schadeverzekering NV, Allianz Global Risks Nederland, Generali Schadeverzekering Maatschappij NV, Mutual Insurance Association ‘Munis’ UA, whilst the seventh, BDM NV, Antwerp, is incorporated in Belgium. The policy to which these underwriters subscribed is governed by English law but contains a Dutch exclusive jurisdiction clause. I shall refer to these seven insurance companies as the proposed additional Defendants. If joined, they would be Defendants 5-11. Fortis and Munis are already, respectively, the 14^th and 15^th Claimants, and thus if the proposed joinder is permitted, will be both Claimant and Defendant in the same action.

The excess policy, €145 million in excess of €5 million, was written by the Claimants. It too is governed by English law.

On 27^th March 2007 the owners tendered notice of abandonment to the hull and machinery underwriters.

By 16^th April 2008 the hull and machinery underwriters had each for their own proportion paid the insured the amount due in respect of the constructive total loss of the vessel.

On or about 30^th July 2008 the hull and machinery underwriters each for their own proportion paid the insured the amount due to the salvors of the vessel by way of settlement of the salvage and wreck removal claim.

The underwriters say that in the circumstances they impliedly accepted the notice of abandonment and exercised their rights to take over the vessel pursuant to Sections 63(1) and/or 79(1) of the Marine Insurance Act 1906. They say further that that implied acceptance and/or exercise of rights was confirmed on 25^th August 2008 when the insured offered to purchase the vessel from the hull and machinery underwriters for €25 million, which offer was rejected.

The underwriters say that in these circumstances they were entitled to possession of the vessel and to call for registration in their name. They also say that the insured held the vessel on trust for the hull and machinery underwriters, alternatively that the hull and machinery underwriters had an equitable lien on the vessel in their respective proportions.

It is common ground that by December 2008 all bar one (or possibly two) underwriters had expressly stated that they wished to exercise their rights to take over the vessel.

On 9^th January 2009 the first Defendant sold the vessel to the Fourth Defendant, a related company for €1000. The First Defendant admits that it did so in order to prevent the underwriters from themselves realising the market value of the vessel. They contend that they were entitled so to do because in their contention not all of the underwriters had, by the time of the sale, either impliedly or expressly elected to take over the vessel.

The vessel is allegedly unique or at any rate unusual. The market in which she might be sold is both buoyant and highly competitive. In the contention of the underwriters, the price at which the Boskalis Group might purchase the vessel from underwriters would or might include a substantial premium to prevent the vessel from coming into the hands of their competitors.

It is accepted by the insured that they must account to the underwriters for the market value of the vessel. The underwriters say that assessment of that market value might prove difficult in the absence of an arm’s length sale.

In these circumstances the Claimant excess underwriters and the existing four Defendants are agreed that the following issues arise for decision in this action:

The Claimant excess layer underwriters wish to join the primary layer underwriters as Defendants to the action. They wish them to be bound by the court’s determination of the issues which arise or which may arise as between all of the underwriters. They say that there are important issues on which it is essential or at any rate desirable that all underwriters should be bound inter se. One such issue which may be of significance is the entitlement of underwriters whose collective proportions fall short of 100% of the total cover to possession of the whole of the vessel.

The proposed additional Defendants have consented to their joinder as Defendants. They have agreed that, if joined, they will appear in the action without the need for service upon them. The first three Defendants however object to the joinder of their primary layer underwriters as additional Defendants. They say that such a joinder would be subversive of the exclusive Dutch jurisdiction clause in the primary layer policy, upon which they wish and are entitled to rely. They say that it would be subversive because although it is said that the purpose of the joinder is to ensure that underwriters are bound inter se by the judgment of the English court, in fact any determination of the English court in an action to which both insured and insurer are party will also bind them as against each other. It is common ground that the jurisdiction clause precludes the proposed additional Defendants being joined as Claimants without the consent of the first three Defendants, which is not forthcoming.

Accordingly, the Claimants apply to join the proposed additional Defendants, who as I have already remarked include two of their own number. The application is made pursuant to CPR 19.2 which provides, so far as relevant:-

“(1)

This rule applies where a party is to be added or substituted except where the case falls within Rule 19.5 (special provisions about changing parties after the end of a relevant limitation period).

(2)

The court may order a person to be added as a new party if—

it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or

(a)

there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.”

Mr Iain Milligan QC, for the Claimants, says that they are entitled as of right to join the additional Defendants because pursuant to Council Regulation (EC) No.44/2001, the ‘Judgments Regulation’, the court has jurisdiction over them in relation to some issues which may arise between the insurers inter se. He relies upon Articles 6.1 and 24 which provide;-

“Article 6

A person domiciled in a Member State may also be sued;

(1)

where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims 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; …

Article 24

Apart from jurisdiction derived from other provisions of this Regulation, a court of a Member State before which a defendant enters an appearance shall have jurisdiction. This rule shall not apply where appearance was entered to contest the jurisdiction, or where another court has exclusive jurisdiction by virtue of Article 22.”

The Dutch exclusive jurisdiction agreement is of course a provision which falls within Article 23 rather than Article 22.

I do not consider that the Claimants would be entitled as of right to the joinder of the proposed additional Defendants even if the Regulation allocates relevant jurisdiction. The Regulation may sometimes require a court to stay its own proceedings or to decline jurisdiction – Articles 27 and 29, or even to recognise or to enforce a judgment given in another Member State – Articles 33 and 38. However I do not read either Article 6 or Article 24 as compelling the court to exercise the jurisdiction with which it is thereby invested. So far as concerns joinder in an existing action, CPR 19.2 confers upon the court a discretion.

Mr Tom Weitzman QC, for the First to Third Defendants, submits that the joinder of the proposed additional Defendants is neither necessary nor desirable. If the primary layer underwriters consent to be joined and propose simply to follow or to adopt the stance taken by the excess layer underwriters, then presumably they would be willing to agree to be bound by the decision of the court without the necessity for their joinder as parties. If however they propose to make submissions or to adopt a stance different from those or that hitherto espoused by the excess layer underwriters, then that is capable of disrupting the timetable established for resolution of the issues, which all agree should be determined quickly so that the present impasse can be resolved.

I agree with Mr Weitzman. I was told that the primary layer underwriters had not in fact been asked whether they would simply agree to be bound, as between themselves and the excess layer underwriters, by the court’s determination. However I can see no reason in principle why the primary layer underwriters should not agree to be bound, as between themselves and the excess layer underwriters, by any decision of the court. Moreover, if the reason for their declining so to agree should they do so is a desire to take a position different from that of the excess layer underwriters, then the existing timetable is indeed imperilled, as they may not be ready to proceed on 12^th February and, equally, it would be important for the First to Third Defendants, and indeed the Claimants, to have notice of their intentions.

There is no indication that the primary layer underwriters in fact wish to take a position different from that of the excess layer underwriters and in these circumstances I propose simply in the exercise of my discretion to decline to accede to the Claimants’ application for joinder. Joinder is not shown to be necessary. It follows that I do not need to decide whether reliance by the insured upon the Dutch exclusive jurisdiction clause represents a complete bar to joinder of the primary layer underwriters as Defendants in this action. I am glad not to have to do so since it is a point on which I heard no argument.

I am concerned that reliance by the insured upon their exclusive jurisdiction clause may in fact be more tactical and obstructive than principled. On any issue as between insured and primary layer insurers arising under a marine insurance policy governed by English law the Dutch court would, I imagine, give considerable if not conclusive weight to the determination of the English court of the like issue arising as between the insured and the excess layer insurers.

I heard only the briefest of argument on Articles 6 and 24, but I shall record my preliminary conclusion that they do not here assist the Claimants in any event. So far as concerns Article 6, the draft Re-Amended Particulars of Claim before me assert no claims by the Claimants against the proposed additional Defendants. It is difficult to see that Article 6 is by its terms engaged. There is no relevant claim. Article 24 deals only with the position after entry of appearance, and does not, in my preliminary view, assist when the court is considering joinder, or, perhaps, permission to serve out of the jurisdiction. Ordinarily, I should have thought, Article 24 is likely to be invoked in this context where one party to an exclusive jurisdiction agreement seeks to establish jurisdiction against the other party thereto, although I do not need on this application to decide whether it is so limited.