Royal Courts of Justice
Strand
London
WC2A 2LL
Before:
MR JUSTICE NORRIS
B E T W E E N:
WINNETKA TRADING CORPORATION
AND
JULIUS BAER INTERNATIONAL LTD (1)
BANK JULIUS BAER AND COMPANY (2)
Cliffords Inn, Fetter Lane, London EC4A 1LD
Tel: 020 7269 0370
JUDGMENT
MR JUSTICE NORRIS:
Winnetka Trading Corporation is a Panamanian company. Julius Baer International Limited is, I am told, an English company; although in the proceedings commenced by Winnetka, it is said to be a Swiss corporation. I will refer to it as JBIL. It operates through a branch in Guernsey known as Bank Julius Baer & Company Limited (“BJB”). On 29th December 2005, Winnetka and BJB entered into a bank account mandate. By Clause 26 of the General Banking Conditions the mandate was to be governed by and construed in accordance with the laws of Guernsey and, ‘The parties hereby submit to the non-exclusive jurisdiction of the courts of Guernsey’. There is an issue about whether that term was in fact incorporated into the banking arrangements between Winnetka and BJB.
On 20th January 2006, Winnetka and BJB entered into a second agreement for the provision of credit. It is not directly relevant to any matter before me, but it contained an applicable law clause. By that Winnetka agreed, ‘That any legal action or proceeding arising out of or in connection with the credit agreement may be brought in the Royal Court of Guernsey and/or the High Court of Justice in England as the bank may determine and the client irrevocably submits to the non-exclusive jurisdiction of those courts’.
On 1st May 2006, Winnetka and BJB entered into a third agreement which lies at the heart of the issue. In this investment management agreement, there was a governing law clause. It provided, ‘The mandate between the client and the bank including these terms and conditions shall be governed by the laws of the island of Guernsey and the client and the bank hereby agree to submit to the jurisdiction of the Royal Court of Guernsey’. It will be noted that the word ‘exclusive’ is absent from the agreement to submit to the jurisdiction of the Royal Court of Guernsey. There is no doubt (subject to questions of whether that term was incorporated or not) that Winnetka did agree to submit to the jurisdiction of the Royal Court of Guernsey.
The nature of the claim commenced by proceedings begun in July 2008 is that Winnetka engaged BJB to purchase two tranches of shares in a company called Inyx Pharmaceuticals and although it paid for the shares, there was no delivery of the share certificates relating to the entire holding. Winnetka claims that this is a breach of its investment instructions.
In detail it says that both BJB (with whom it entered into the agreements) and JBIL owed it express duties in contract to comply with the terms of the portfolio guidelines which are governed by the provisions of the bank mandate and correctly to execute signed orders placed with it which are governed by the investment management agreement. It alleges that both BJB and JBIL owed identical duties in tort. It claims compensation for breach of contract or negligence in the execution of its instructions.
When those proceedings were launched, BJB brought an application in the Royal Courts of Guernsey for an anti-suit injunction. The terms in which the order was sought are unclear, as are the terms in which the order was granted. However, BJB was granted what has been referred to as “an anti-suit injunction.”
It is necessary to note only three points in the reasoning which led to that order being made. First the Deputy Bailiff decided that he had to take a preliminary decision, but not reach a conclusive view, about whether the jurisdiction clauses were incorporated in the agreements, namely the mandate and the investment management agreement, on which Winnetka relied. His preliminary decision was that the written agreements should prevail and Winnetka’s allegation of an oral agreement to exclude their terms should be rejected.
Secondly, he decided that upon the true construction of the applicable law clause in the investment management agreement, the parties agreed an exclusive jurisdiction provision in favour of Guernsey. He held that when the parties had omitted the words ‘non exclusive’ it would be wrong for the court to insert them. He also held that the difference in wording between the investment management agreement and the banking mandate and the credit agreement suggested that something other than the arrangements made in those cases was intended in the case of the investment management agreement.
Thirdly, he took the view that there were no strong reasons not to give effect to the exclusive jurisdiction agreement (as he held it to be) in the investment management agreement. In particular, he decided that the fact that there was a claim pleaded in negligence against JBIL was not a factor which should weigh with him.
Following the making of that order on 18th November, JBIL and BJB now pursue an application launched in September 2008 that the Court should stay generally the English proceedings commenced by the claim form because inter alia on its true construction, and having regard to the choice of Guernsey law and the fact that the Guernsey courts have exclusive jurisdiction to determine all disputes arising out of the agreements relied on, the English courts have no jurisdiction.
At the time when this application is prosecuted, Winnetka is considering an appeal against the Guernsey order for an anti-suit injunction to issue, based on three groups of reasons. First, they say that the Guernsey court made an error of fact in proceeding on the footing that JBIL was a Swiss corporation whereas it is in fact an English company. They say secondly that there was a consequential failure to address the possible impact of Article 2 of the Judgments Regulation which is not expressly mentioned in the judgment of the Royal Court but which, if Winnetka is right, has a significant influence on the correct answer to the questions raised. Thirdly, they say there has been an error of reasoning in the Royal Court judgment in dismissing the negligence claim against JBIL as being of insufficient weight. The error of reasoning is that the Deputy Bailiff appears to have assumed that if it was said that an agency relationship existed between JBIL and BJB in the making of the relevant agreements it must inevitably follow that JBIL itself could not be personally liable. It is said that that is not a correct appreciation of the law. It is in these circumstances that I have heard the application.
Mr Fulton, counselfor JBIL and BJB made initial submissions that Winnetka’s very attempt to oppose the prosecution of the banks’ September application was contempt of the Guernsey court and it was open to me simply to refuse to hear Winnetka. That application was rightly not pressed. The banks’ position therefore proceeded upon two parallel lines.
The first was to submit that, there having been a judgment of the Royal Court, considerations of comity required me here and now simply to grant a stay of the proceedings. In support of that line of argument the banks relied on the observations of Sedley LJ in Donohue -v- Armco where the learned judge is reported as saying,
‘At the back of our decision in this problematic appeal is the fact that an orderly use of available national forums depends upon a combination of mutual respect and self denial on the part of their respective courts. The risk inherent in an anti-suit injunction if unwisely granted is that it will not succeed in stopping a party whose assets are located outside the jurisdiction from litigating abroad nor dissuade the courts of other countries from entertaining the litigation against this. It is universally contrary to comity for courts to stand-by whilst a party who has contracted to litigate in one county reneges on that agreement. Comity creates an expectation that the courts of other countries will collaborate in holding the parties to the terms of an exclusive jurisdiction clause.
The present case poses these problems sharply because in a carefully reasoned judgment Judge Swartz of New York has already accepted jurisdiction on behalf of the courts of the state of New York in all matters in contention before it. As between two independent justice systems, no question of issue estoppel can arise but equally it cannot be right that the first party to get to court can by that means alone determine the nationality of the forum. In my view, the correct approach for us is to give real and respectful weight to the decision of Judge Swartz in coming to what is nevertheless our own conclusion as to whether an anti-suit injunction is appropriate.’
Now as that quotation itself recognises it is necessary for me to come to my own conclusion as to whether to grant a stay of the English proceedings; although, I am bound to give respectful weight to the decision of the court in Guernsey. As Stuart-Smith LJ put it in Donohue -v- Armco itself, at paragraph 54, ‘Comity does not require the Court to give effect to the judgement of Judge Swartz when it does not agree with his conclusion as to the effectiveness, validity and scope of the exclusive jurisdiction clause’
I therefore look at the second line of argument advanced by the banks as to why I should grant a stay. This argument proceeds on the footing that it would be a breach of contract on the part of Winnetka for it to pursue English proceedings. Implicit in that submission is that Winnetka has submitted to an exclusive jurisdiction clause in favour of Guernsey. The principle on which that argument is founded is clear. It is to be found conveniently in the speech of Lord Bingham at paragraph 24 of the decision of the House of Lords in Donohue -v- Armco[2001] UKHL 64 to this effect:
‘If contracting parties agree to give a particular court exclusive jurisdiction to rule on claims between those parties and a claim falling within the scope of the agreement is made in proceedings in a forum other than that which the parties have agreed, the English court will ordinarily exercise its discretion whether by granting a stay of proceedings in England or by restraining the prosecution of proceedings in the non-contractual forum abroad or by such other procedural order as is appropriate in the circumstances to secure compliance with a contractual bargain unless the party suing in the non-contractual forum, the burden being on him, can show strong reasons for suing in that forum. I use the word ‘ordinarily’ to recognise that where an exercise for discretion is called for there can be no absolute or inflexible rule governing that exercise.’
Founding upon that principle Mr Fulton submits that the evidence does not disclose any strong reasons why Winnetka should not be held to the bargain which it has made, which he says provides for the exclusive jurisdiction of the Guernsey Court. As against that, Mr Carlisle makes four principal submissions.
First, he says that the investment management agreement does not provide, any more than any of the other agreements provides, for exclusive jurisdiction. He says it is the case that whilst the courts of Guernsey do undoubtedly have jurisdiction, no other court is deprived of jurisdiction by the bargain of the parties. The construction of an exclusive jurisdiction clause is a matter of placing the literal words in the context in which the bargain was entered into. My provisional view would be different from that of the Deputy Bailiff in the Guernsey court. For my part, I do not see why having agreed non-exclusive jurisdiction provisions for their other relationships there is some compelling reason why the parties should have agreed an exclusive jurisdiction arrangement for the investment management agreement. However, the expression of that provisional view does not get Mr Carlisle and Winnetka home. That is because Guernsey undoubtedly does have jurisdiction as the named jurisdiction of choice and it has taken it. The question is should an English court exercise its jurisdiction in the light of that existing decision.
Although I have not been taken in detail to the authorities, they are usefully referred to in the notes to Mr Carlisle’s skeleton argument. In short, the difference between an exclusive jurisdiction clause and a nonexclusive jurisdiction clause is much narrower than it once might have appeared to be. The present rules appear to be that the fact that the parties have freely negotiated a contract providing for the non-exclusive jurisdiction of a particular court creates a strong prima facie case that that court is the correct one in which to conduct disputes. Further, that as a policy of the English law, parties will be held to their contractual choice unless there are overwhelming or at least very strong reasons for departing from that approach. Finally, when considering the overwhelming or very strong reasons, the English courts will not take account of factors of convenience that were foreseeable at the time that the contract was entered into save in exceptional circumstances which involve the interests of justice.
It is not possible to identify in the evidence before me any such overwhelming or compelling reasons. One reason is advanced to which I will refer next but subject to that there are no compelling reasons for suggesting that Winnetka is at liberty to depart from the jurisdiction of first choice, namely Guernsey.
The second point taken by Mr Carlisle is relied on as both a compelling reason why there should be a departure from the none-xclusive jurisdiction clause and an independent ground of objection. It relates to the status of JBIL. As I have indicated, he says it is an English company. From that he says, that it therefore falls within the scope of the provisions of Article 2 to Council Regulation 44 of 2001.
As is well known, Article 2 provides ‘Subject to this regulation persons domicile in a member state, shall whatever their nationality be sued in the courts of that member state’. JBIL is a legal person domiciled in England and Wales and Article 2 would therefore appear to provide that it must be sued in England and Wales. The difficulty is that Guernsey is not directly subject to the Judgements Regulations. However, it is said that the decision of the European Court of Justice in Owusu -v- Jackson [2005] QB 801 is to the effect that Article 2 will operate not only as between member states but also more broadly. Owusu -v- Jackson was a “forum non conveniens” case. The claimant domiciled in the United Kingdom had hired holiday facilities from the defendant also domiciled in the United Kingdom, namely a Jamaican villa. He sued the defendants in England. The defendants invited the Judge to decline jurisdiction in favour of the Courts of Jamaica on the basis of the doctrine of forum non conveniens. That brought into play Article 2. The court held that since Article 2 of the convention was mandatory and the convention contained no exception relating to forum non conveniens it was not open to the courts of England and Wales to decline the jurisdiction conferred on it by Article 2 on the ground that the Jamaican Courts would be the more appropriate forum. The argument appears clearly from paragraphs 20 and 30 of the report. The conclusion is stated in paragraphs 34 and 35 the key being in paragraph 35, which says
‘Article 2 of the Brussels Convention applies to circumstances such as those in the main proceedings involving relationships between the courts of a single contracting state and those of a non-contracting state rather than relationships between the courts of a number of contracting states.’
Mr Carlisle says that by parity of reasoning, if that is the rule that applies in “forum non conveniens” cases, namely that Article 2 is mandatory, it must also be the rule that applies in exclusive jurisdiction cases. It cannot be open, he says, to the English court to decline jurisdiction by granting a stay in favour of proceedings in Guernsey if Article 2 says that any claim against JBIL must be brought in the country of its domicile.
I do not accept the argument. The decision in Owusu is, it is common ground, not directly in point. The parties in that case were advancing arguments concerning forum non conveniens not exclusive jurisdictions clauses. The court did not therefore have to consider what role an agreement between the parties might play, and compare the weight to be given to the agreement between the parties with the mandatory terms of Article 2.
My own view is that the terms of Article 2 cannot deprive competent parties of their autonomy in agreeing which court shall have the jurisdiction to determine their disputes. This appears to be the view taken in Briggs and Rees. At paragraph 2.102 the authors state,
‘It is clear that Article 23 of the Regulation can have no direct application to a clause choosing the courts of a non member state. After all, neither the state’s party to the Brussels Convention nor the Council of the European Union in making the regulation could legislate for the jurisdiction of courts in non-member states.
It follows that the court should be entitled to give such effect to the agreement for the courts of a non-member state as is allowed by its own rules of the conflict of laws. As a result an English court will be entitled to give effect to a choice of court clause by staying its proceedings for a non-member state if the English court has jurisdiction from a provision lower than the hierarchy such as that given by Article 2 or Article 4.’
To the same effect is Rule 32.2 in Dicey and Morris in the chapter on jurisdiction agreements. It would appear also to have been the view, albeit apparently expressed obiter of Mr Justice Colman in Konkola Copper Mines –v- Coromin, see paragraph 46 of the judgment in the Court of Appeal ([2006] EWCA Civ 5)
I therefore do not think that Article 2 and the status of JBIL provide a compelling reason for departing from the first choice made by the parties in the exclusive jurisdiction clause (as Mr Fulton calls it). Nor do I think that it constitutes an independent factor which in its own right militates against recognising the jurisdiction of the Guernsey Court and the force of its order.
Mr Carlisle then submits thirdly that if Article 2 does not apply, where does this leave a free standing point that JBIL cannot avail itself of the jurisdiction clause, particularly in relation to the claim against it in tort? Is it not the case, says Mr Carlisle, that these proceedings must inevitably continue in England and therefore constitute parallel proceedings in respect of which there may be a conflicting decision if the Guernsey Court keeps jurisdiction under the anti-suit injunction it has issued?
This is a point which has greatly troubled me, but I am persuaded that the answer is to be found in the decision of the House of Lords in Donohue –v- Armco. In paragraph 61 of the speeches, Lord Scott expressed the view that an exclusive jurisdiction clause would be broken if any proceedings within the scope of the clause were commenced in a foreign jurisdiction, ‘whether or not the person entitled to the protection of the clause is joined as a defendant to the proceedings’. He went on to explain,
‘An injunction restraining the continuance of the proceedings would not of course be granted unless the party seeking the injunction being someone entitled to the benefit of the clause had a sufficient interest in obtaining the injunction. It would I think be necessary for him to show that the claim being prosecuted in the forum jurisdiction was one which if it succeeded would involve him in some consequential liability.’
JBIL may not itself have the benefit of an agreement about jurisdiction being conferred on the Guernsey Court but BJB does. BJB has indeed sought an injunction, being entitled to the benefit of that clause. It has a sufficient interest in obtaining the injunction. If the claim proceeds against JBIL in this country and as Winnetka says JBIL was BJB’s agent, then prima facie JBIL has a claim for indemnity against its principal BJB. It therefore has an interest in seeing that the proceedings are brought in Guernsey. Given the closeness of the connexion, which is pleaded in the particulars of claim between BJB and JBIL, given the fact that essentially identical cases are advanced against BJB and JBIL, and given that there is a claim apparently in contract against JBIL, I consider it appropriate to grant a stay against JBIL as also against proceedings against BJB. It is difficult to distinguish between them in terms of the case which Winnetka is advancing. If BJB is entitled to the benefit of the injunction, I consider that JBIL should be brought within its scope because the significance of an apparently independent claim against JBIL is diminished.
This brings me to the fourth and equally troubling point raised by Mr Carlisle. All of the arguments have so far proceeded on the footing that there is a jurisdiction clause, exclusive as Mr Fulton would have it or non-exclusive as I would see it, which governs the relationship between Winnetka and BJB and indirectly JBIL. However, that is a matter of fact which Winnetka challenges. It says there was an oral agreement, in effect, that these clauses should not be part of the arrangements between itself and its bankers and investment managers.
The Guernsey Court proceeded, as an English Court would have proceeded, on the footing that it had to act in the light of what it considered to be a good arguable case advanced by BJB. As was pointed out by Longmore LJ in Deutche Bank -v- Asia Pacific Broadband [2008] EWCA Civ 1091 at paragraph 6(d) of his judgment.
‘The question whether the court has jurisdiction always arises on an interlocutory basis before trial, so that it is possible that a trial may falsify the basis on which jurisdiction has been assumed. It is for that reason that the court has always applied a “good arguable case” test before proceedings. Having proceeded on that basis, what is to happen if at trial the basis proves to have been false notwithstanding that it was well arguable at an interlocutory stage?’
Mr Fulton’s answer to this conundrum was that the Guernsey court would at trial determine the question whether the exclusive or non-exclusive jurisdiction clauses were incorporated in the contract and if it should turn out that they were not, then the fact that Winnetka had been compelled to proceed in Guernsey when it was not bound to do so and could have proceeded in England as it preferred is something that would have to be addressed as a matter of costs.
That may be right but it does not seem to me to be satisfactory if there is some alternative means of addressing the difficulties. Whether a clause is incorporated or not in a contract is frequently made the subject of a preliminary issue. On the footing that the Royal Court of Guernsey is as well equipped as an English Court would be to address that problem, I would propose to grant a stay only on terms that BJB and JBIL undertook to this court (a) not to object to any application by Winnetka for the trial of a preliminary issue in Guernsey as to whether the jurisdiction clauses were incorporated in any relevant contract and (b) not to assert that the mere commencement of such proceedings by Winnetka in order to obtain the determination of a preliminary issue itself amounted to a submission by Winnetka to the Guernsey Courts which precluded it from thereafter arguing in favour of English jurisdiction.
Subject to that undertaking I am persuaded that I should recognise the decision of the Guernsey court. Even though I take the view that the clause in question is a nonexclusive jurisdiction clause, I also take the view that there are no compelling reasons why that provision should not be given its apparent effect. I will therefore grant a stay on those terms.