BP Plc v AON Ltd & Anor

This application by the Claimants (“BP”) was issued on 4 October 2005. That was to have been the first day of the trial, estimated to last 6 to 8 weeks in which BP claim damages in tort against their brokers, AON Limited. In the event the trial had to be postponed until 17 October. The application asks for permission to re-re-re-amend the Particulars of Claim in numerous respects, the most substantial amendment, and that to which this judgment relates, being to introduce a claim against the Eighth Defendant – to which I refer as “Aon Texas” – for a declaration that if and/or to the extent that claims are and/or have been brought by BP’s and/or its affiliates’ joint venture partners and/or contractors against BP and/or its affiliates’ joint venture partners for failure to procure insurance arising out of the failure to make timeous declarations to certain of the insurers who subscribed to a Global Construction All Risks Open Cover (“the Open Cover”), those insurers being referred to as “the Frankona Insurers”, Aon Texas will hold BP and/or its affiliates harmless against all such liabilities, demands, damages, expenses or losses pursuant to Clause 12 of a Service Agreement between BP and Aon Texas. It also introduces a claim for an indemnity under the same clause 12 in respect of certain settlement payments which are said to have been made to contractors for failure to procure insurance cover.

This is no ordinary application. It arises against the following remarkable background.

The Frankona Insurers constitute part of the following market who subscribed to the Open Cover. In BP v. G E Frankona Reinsurance Ltd and others [2003] 1 Lloyd’s Rep 537, Cresswell J. in deciding certain preliminary issues with regard to claims under the Open Cover held that each of the insurers did not come on risk in respect of a given eligible project unless and until a declaration to the cover was made to that particular insurer within the period of the Open Cover. That period expired at the end of June 2000. That issue arose because it had been assumed by BP’s brokers, Aon, that it was sufficient to engage cover if a declaration were made to the leading underwriters alone. In consequence of this decision, the Frankona Insurers were not liable for losses sustained by BP and/or affiliates and/or joint venture partners and/or their contractors in respect of a considerable number of projects that had been declared only to the leading underwriters by 30 June 2000. The judgment was given on 27 February 2003.

There was also a major issue before Cresswell J. as to when the level of development necessary to make a particular project eligible to be declared had occurred. The application of his decision on that issue enabled the parties to form a view as to whether the projects declared to the leading and other underwriters which Cresswell J. had not specifically considered amongst the sample projects dealt with in his judgment might be sufficiently far advanced to be eligible to be declared at the time of the declarations.

Following the judgment in the Frankona Case, BP and the Frankona Insurers settled their dispute on 10 July 2003.

In the meantime, BP and its co-insureds had commenced proceedings against the leading underwriters and certain other underwriters who had not been parties to the Frankona Case. I refer to them as “the Leading Market”. The main issue in those proceedings was whether, as BP claimed, 26 declarations made to the Open Cover gave rise to valid and subsisting contracts of insurance and whether the Leading Market was obliged to indemnify the claimants in respect of claims subject to the contract terms and conditions. The real substance of this claim was as to the eligibility of each of the declared projects. It thus re-opened the eligibility issue already determined by Cresswell J. vis-à-vis the Frankona Insurers but not vis-à-vis the Leading Market. None of the component companies in the Aon group had at that stage been sued. That was unsurprising for it is standard practice for assureds to await the service of underwriters’ defence before joining their brokers as co-defendants in the alternative. So it was not until July 2004 that BP joined as 6th to 10th defendants various of the Aon companies, including in particular the London company, Aon Limited (6^th Defendant), to which I refer as “Aon London” and Aon Risk Services of Texas Inc (8^th Defendant) to which I refer as “Aon Texas”.

For present purposes it is sufficient to summarise the main claims against Aon London and Aon Texas raised at that stage as follows.

It is to be observed that at this stage no reliance was placed on clause 12 of the Service Agreement. That provided as follows; references to Aon Risk Services being to Aon Texas:

“Aon Risk Services agrees to hold AMOCO and its affiliates harmless against all liabilities, demands, damages, expenses or losses arising from any third party claim related to the Services and Aon Risk Services performance of the Services.

Aon Risk Services hereby agrees to indemnify AMOCO against all loss, damage, costs and other expenses of any nature whatsoever incurred or suffered by AMOCO, its directors, officers and employees or by a third party as a result of any and all representations, statements, tortuous (sic) acts or omissions including negligence or breaches of obligations arising under or in connection with this Agreement by Aon Risk Services to a maximum amount of Aon Risk Services remuneration noted in Clause 6 above except in the case of third parties where Aon Risk Services will be liable for all loss, damage, injury or death to the full extent of their negligence or fault”.

Then in February 2005 the claimants abandoned all claims for breach of contract against the Aon companies, leaving the claims in negligence. In essence the Aon companies, including Aon London and Aon Texas, were said to be liable by reason only of their having been in breach of a duty of care in failing to effect cover.

However, in the summer of 2005 BP and the other claimants settled their claims against the Leading Market.

That left the claim against the Aon companies in tort, but the abandonment of the claims against the Leading Market had the effect that there ceased to be any pleaded case against Aon Texas. That is because Aon Texas had not been said to be in breach of duty of care with regard to the Frankona Insurers. Accordingly as at July 2005 – just over two months before this trial was fixed to begin – it would seem that in the further re-amended particulars of claim which would now have to be served to reflect the fact that the Leading Market insurers were no longer defendants, all claims against Aon Texas would consequentially be dropped.

BP served its draft re-re-re-amended Particulars of Claim on 16 September 2005. However, instead of simply dropping the claim in tort against Aon Texas which it did, it included a completely new claim against that defendant for an indemnity based on clause 12 of the Service Agreement. The basis of the new claim was that Aon Texas had by entering into the Service Agreement undertaken to provide a contractual indemnity in respect of third party claims related to the performance of all the brokerage services performed by all the Aon companies including Aon London

The raising of this claim against Aon Texas gave rise to a triple problem. It was not simply how, as a matter of case management, this court should exercise its discretion upon an application for permission to make a very late amendment, but how in the circumstances the court should deal with two other quite distinct dimensions to the application. These were:

It has therefore become necessary to interrupt the trial for nearly two days in order to determine what, in my experience, is a unique application.

The logical starting point must be to consider whether this court should exercise any jurisdiction over Aon Texas in respect of the clause 12 claim having regard to the fact that that company is outside this court’s jurisdiction and would not have been joined in these proceedings in respect of that claim unless leave had been given under CPR 6.20(3). The threshold ground relied upon by Mr Andrew Popplewell QC on behalf of BP is CPR 6.20(3) – BP claims against Aon London, who has been served, that there is between BP and Aon London a real issue which it is reasonable for this court to try and Aon Texas is a necessary or proper party.

I am quite satisfied that Aon Texas is a proper party, for the proposed claim under clause 12 will probably give rise to issues which overlap significantly with those issues already in play between BP and Aon London, in particular the proper construction of that clause, the eligibility issue in relation to two projects, the alternative insurance issue and the issue whether BP settled with the Frankona insurers on terms which were unreasonably beneficial to the latter. Those issues are sufficiently identified in the written openings of BP and Aon London respectively.

I am further satisfied, and this was not challenged, that the clause 12 claim gives rise to a serious issue to be tried, in the sense described in my judgment in De Molestina v. Ponton [2002] 1 Lloyd’s Rep 271.

The next question is whether it is established that this court is the forum conveniens, which in accordance with Spiliada Maritime Corporation v. Cansulex Ltd [1987] AC 460 involves the question whether this is clearly the appropriate forum, that is to say that forum where the case may most suitably be tried for the interests of all parties and the ends of justice.

In this connection the starting point is clause 13 of the Service Agreement. This provides as follows:

“It is agreed and understood that this Agreement will be subject to and construed in accordance with the laws of the State of Illinois excluding choice of law rules directing application of the law of any other jurisdiction, and both parties consent to the jurisdiction of the courts of that state.”

Consent to the jurisdiction of the courts of Illinois constitutes an enforceable non-exclusive jurisdiction clause. As such it has the following effect.

Either party sued in the Illinois courts in respect of disputes arising in relation to the Service Agreement is contractually precluded from challenging the jurisdiction of that court. If there are no proceedings in the Illinois courts, either party is free to commence proceedings in any other court having jurisdiction. To do so would not be a breach of clause 13 even if the other party objected that the courts of Illinois were a more appropriate forum. In the absence of the identified forum being designated an exclusive one, either party can start proceedings in any court prepared to exercise jurisdiction. Hence, it would not be in breach of clause 13 for BP to start proceedings on its clause 12 claim in the English court.

What therefore is the impact of a non-exclusive jurisdiction clause on the issue whether a court other than that identified by the clause is clearly the appropriate forum, as explained in The Spiliada Case, where that issue arises because of a party objecting to the non-designated court exercising jurisdiction?

There can be no doubt that it is implicit in a non-exclusive jurisdiction clause that both parties accept when they agree to it that it will be appropriate for that court in the interests of justice, as distinct from obligatory to exercise jurisdiction over all disputes which may reasonably be envisaged as arising in relation to their agreement. That, however, does not go as far as saying that it is agreed that in all circumstances that may in future arise the designated court will necessarily be the court where the case may most suitably be tried for the interests of all parties and the ends of justice. If that were so, the effect of such a clause would be indistinguishable from that of an exclusive jurisdiction clause. The forum non conveniens test would be deployed not as a flexible comparative exercise but so as to impose an inflexible constraint analogous to that imposed by a contract.

It is against that background that one has to consider the judgment of Waller J. in British Aerospace plc v. Dee Howard Co [1993] 1Lloyd’s Rep 368 at p376-7 where he observed:

“. . .on the language of the clause that I am considering here, it simply should not be open to DHC to start arguing about the relative merits of fighting an action in Texas as compared with fighting an action in London, where the factors relied on would have been eminently foreseeable at the time they entered into the contract.. . .Surely they must point to some factor which they could not have foreseen on which they can rely for displacing the bargain which they made i.e. that they would not object to the jurisdiction of the English Court.

Adopting that approach it seems to me that the inconvenience for witnesses, the location of documents, the timing of a trial, and all such like matters, are aspects which they are simply precluded from raising. . .

It is thus clear to me that the proper approach to a case of the sort that I am considering is to consider it as equivalent to proceedings commenced as of right, to apply the passage in Lord Goff's judgment in The Spiliada dealing with such actions, but to add the consideration which he did not have in mind. . .that there is a clause under which DHC had agreed not to object to the jurisdiction. That being the proper approach, and additionally it being. . .right only to consider the matters which would not have been foreseeable when that bargain was struck, I would dismiss both summonses of the defendants.”

In Ace v. Zurich Insurance Co Ltd [2001] 1 Lloyd’s Rep 618 Rix LJ. stated at p630:

“If a party agrees to submit to the jurisdiction of the Courts of a state, it does not easily lie in its mouth to complain that it is inconvenient to conduct its litigation there (i.e. to assert that the agreed forum is a forum non conveniens). As Mr. Justice Waller pointed out in British Aerospace Plc v. Dee Howard Co., [1993] 1 Lloyd's Rep. 368 at p. 376, speaking of matters of convenience in the context of a non-exclusive jurisdiction clause, it is necessary to point to some factor which could not have been foreseen in order to displace the bargain which has been agreed. In such a case that party must show some good reason or special cause why it should not be held to its agreement to submit to the agreed jurisdiction; and if it cannot do so, there seems no reason why the English Court should entertain parallel proceedings here, with their attendant evils - duplication of expense and the danger of inconsistent decisions. In the present case, however, there is no reliance by Mr. Layton on anything unforeseen, no suggestion of any strong or special cause, no identification of some matter which lies beyond considerations of convenience and goes to a matter of justice.”

The reference by Rix LJ. to the need to show some good or special cause why the party seeking to maintain the proceedings in England should not be held to its agreement to submit to the agreed jurisdiction has to be understood in the context of the facts of that case. A stay of English proceedings was being applied for where parallel proceedings were under way in the Texas courts and where those courts fell within the courts designated under the non-exclusive jurisdiction clause. Thus the English court was being invited to prevent a continuing course of conduct which was inconsistent with the agreement to submit to the jurisdiction of the designated court where proceedings were already under way. Not surprisingly, the court treated the continuance of the English proceedings as requiring a similar level of justification to that required to justify the granting of relief the effect of which would be to permit the conduct of proceedings otherwise than in the forum designated by an exclusive jurisdiction clause: cf The El Amria [1981] 2 Lloyd’s Rep 119.

In S&W Berisford & Co New Hampshire Insurance Co [1990] 1 Lloyd’s Rep 454 Hobhouse J. observed at p458:

“. . .this clause is not an exclusive jurisdiction clause. As I pointed out in Pathe v. Handmade such a conclusion does not mean that the clause ceases to be relevant in relation to an application such as that which is being made by the defendants on this summons. If the contract says that the assured is entitled to sue the underwriter in the English Courts, then it requires a strong case for the Courts of this country to say that that right shall not be recognised and that he must sue elsewhere.

In E D & F Man Ship Ltd v. Kvaerner Gilbraltar Ltd, The Rothnie [1996] 2 Lloyd’s Rep 206 Cresswell J. held that where there was a non-exclusive Gibraltar jurisdiction clause and proceedings were first commenced in England and subsequently by an action by the opposite party in Gibraltar, there should be a stay of the English proceedings. The existence of the non-exclusive jurisdiction clause created a strong prima facie case that Gibraltar was an appropriate forum and the burden of proof then passed to the English company to show “that there are special circumstances by reason of which justice requires that the trial should nevertheless take place in England”.

Further, the limited effect of a non-exclusive jurisdiction clause is clearly illustrated by the decision of the Court of Appeal in Royal Bank of Canada v. Co-operative Centrale Raiffeisen-Boerenleenbank BA [2004] 1 Lloyd’s Rep 471 in which an injunction was refused against one party who had commenced the first proceedings in New York on the day before the commencement of proceedings in England which was the designated non-exclusive forum. It was held that in spite of the non-exclusive jurisdiction clause, it could not be said that the continuance of the foreign proceedings was in breach of contract or was otherwise unconscionable vexatious or oppressive or an abuse of the English court. There were also considerations of comity involved in interfering in the New York proceedings where a trial date was likely to be fixed ahead of that in the English proceedings. It is to be observed that the non-exclusive jurisdiction clause included the following:

“Nothing in this agreement precludes either party from bringing proceedings in any other jurisdiction …. Nor will the bringing of proceedings in any one or more jurisdictions preclude the bringing of proceedings in any other jurisdiction.”

It is to be observed that in order to restrain by injunction pending proceedings in a foreign court without the basis of an exclusive English jurisdiction clause requires a threshold of oppression, vexatiousness and unconscionability much higher than that required for service outside the jurisdiction under the forum non conveniens test.

The result of these authorities is, in my judgment, that, there being no pending proceedings in the Illinois Courts, which are the forum designated by the jurisdiction clause, BP commits no breach of contract in seeking permission to serve Aon Texas with the English proceedings. Further, when this court considers whether England is clearly the appropriate forum in the Spiliada sense, BP is not called upon to justify English jurisdiction by establishing as strong reasons for preferring it to Illinois jurisdiction as would be called for if Illinois were designated under an exclusive jurisdiction clause or proceedings where there was a non-exclusive Illinois jurisdiction clause were already pending in Illinois.

It is sufficient for it to be shown that although Illinois is an appropriate forum, there is a clear balance of justice and fairness as between the parties in favour of London. By a clear balance I mean one which substantially relies on considerations which would not have been obvious to the parties at the time when they entered into the Service Agreement and a balance which while not overwhelming, is substantially more than a fine balance.

In seeking to identify what balance, if any, exists I must have regard to certain concessions offered on behalf of Aon Texas by Mr Tom Weitzman QC. These developed and became of greater scope in the course of the hearing of this application. Expressed in their final form they are as follows.

On the basis that this court did not give permission to BP to amend to raise the clause 12 claim against Aon Texas there would be undertakings by Aon Texas, and if necessary an agreement approved by the court to give effect to such undertakings, that

It is first necessary to consider the issues that would be likely to arise in the course of the clause 12 claim wherever it were litigated and to compare them with the issues which fall to be determined in the present proceedings in this court.

First there is the proper construction of clause 12 itself. That will necessarily arise for determination both for the purposes of resolving the duty of care issue which I shall have to decide in relation to the claim in tort against Aon London. It will also arise in the clause 12 claim against Aon Texas, particularly with regard to the question whether the claims or any of them are affected by the cap on liability. That term applies in a contract expressly governed by the Law of Illinois. If that differs from English law it will be the subject of expert evidence in both jurisdictions. In these proceedings resolution of that issue will be a question of fact, but before the Illinois court it will be a question of law. Accordingly, the first instance court’s decision will be more readily appealable in Illinois than England. Further, by the time the issue comes to trial in Illinois I shall have decided the proper construction of clause 12 as between BP and Aon London but not as between BP and Aon Texas. The Illinois court may eventually reach a different decision as between BP and Aon Texas, there being no issue estoppel. That would be a somewhat unsatisfactory state of affairs, but it would not involve any serious injustice at least to Aon. The two Aon companies are distinct legal persons incorporated in different jurisdictions albeit linked in the same group. The corporate structure of the Aon group exposes its components to the eventuality of such inconsistencies. However, from BP’s perspective an element of injustice may well arise, for construction for which it contends may be held correct in this court but incorrect in Illinois. That is a matter which must be given some weight in the forum conveniens balance.

In order to resolve this issue, expert evidence of Illinois Law will be called in this Court. Evidence of foreign law, particularly of that of particular states in the United States, and the need to resolve foreign law disputes is commonplace in this court so that the need for such expert evidence cannot be accorded much weight in the forum conveniens balance.

Although the only defence to the clause 12 claim against Aon Texas which has so far been divulged by those representing it, is that of time bar under Illinois Law, there may well be other defences. Of these the most likely would seem to be the assertion that two of the projects (Declarations 22 and 24) were in any event ineligible to be declared and that accordingly no loss was caused by the omission to make timely declarations in those cases. The same issues will have to be determined in the present proceedings. Evidence is due to be called before me on these matters. BP may well therefore find themselves in the position of having to call the same witnesses in two different jurisdictions and further of obtaining inconsistent decisions on eligibility and therefore on causation of loss in London and Illinois, there being no issue estoppel due to the different Aon companies involved.

Further defences raised by Aon London in these proceedings may also be relied on in the Illinois proceedings. These are the allegation that the claim of causation of loss to the Claimants was broken by BP’s omission to take out alternative insurance and/or by the settlement of the claims against the Frankona Insurers on terms unreasonably beneficial to those insurers. Witnesses are giving a substantial amount of evidence before me on these two causation issues and that evidence would have to be called again if the same causation points were advanced in the Illinois proceedings. Again there would be no issue estoppel and there might be inconsistent findings. BP would thereby be exposed to significant injustice to which some weight must be given in the forum conveniens balance.

The risk of duplication of evidence and of inconsistent decisions stems in part from BP’s decision to sue Aon London in tort and not to rely for the purposes of recovery of losses due to Aon’s negligence on a claim against Aon Texas based on the Service Agreement. That decision might well have been the understandable consequence of a pessimistic view of the prospects of successfully pursuing a claim under clause 12, but the problem of multiplicity that has arisen is the consequence of a tactical decision by BP which at the time when the Service Agreement was entered into was foreseeable at least as a theoretical possibility: the consolidation of all contractual rights and obligations in respect of brokerage in an agreement with only one of the Aon companies was foreseeably capable of leading to exactly the problems of multiplicity of proceedings which now arise. It follows that the weight to be attached to these considerations in the forum conveniens balance has to be materially reduced in the face of the non-exclusive Illinois jurisdiction clause.

It is argued by Mr Popplewell QC on behalf of BP that it is of great importance to the fair and just consideration of these issues arising in relation to both the negligence claim against Aon London and the clause 12 claim against Aon Texas that they should be tried by the same court, particularly so that each matter can be viewed in the context of the whole case against Aon London. Although I accept that this consideration has to be taken into account, I am not persuaded that it merits more than marginal weight for each of the material issues could be comprehensively evidenced and sufficiently understood by the Illinois court which is likely to be a tribunal of considerable competence.

Finally, I have regard to the offer of undertakings by Aon Texas described in its final form earlier in this judgment.

In my judgment, these undertakings would, if accepted, effectively remove many of the most substantial of the disadvantages of a trial of the clause 12 claim in the courts of Illinois, namely the need for duplication of evidence and the risk of inconsistent decisions. If one proceeds on the basis that the judgment in this Aon London trial will be given long before the trial of the clause 12 claim in Illinois, the latter trial is in reality likely to be confined to resolving the time bar issue and little else. The one concern is how and to what extent it will be possible to deploy in the Illinois court such matters of construction of clause 12 as it may be necessary to determine for the purposes of the present proceedings. However, the important consequence if the undertakings were effected would be that if precisely the same matters of construction arose in both courts they would be decided in the Illinois courts in a manner identical to that already arrived at in London. The fact that further issues might be raised in the Illinois trial is nothing to the point: it is the risk of inconsistency which gives rise to the risk of injustice. Mr Popplewell argues that although the parties may be treated as bound by the decisions on fact and law in this court, once those findings are translated to proceedings in Illinois they may be applied in a manner which fails to reflect their true substance to the effect that the result in Illinois may amount to a significant distortion of the real substance of findings here. Although I accept that it is impossible at this stage to predict accurately what findings I shall make and how my judgment will express them and further how those findings are likely to be deployed by the Illinois court, I am not persuaded that this poses a serious risk of injustice.

Having regard to these considerations I reach the following conclusion. The main areas of dispute on the clause 12 claim are likely to be limitation and causation/quantum. As to limitation, that is essentially a matter of Illinois Law and for this purpose an Illinois court must be a preferred forum for resolving such matters, although this court is obviously competent to do so. As to the construction of clause 12, the offered undertaking should minimise if not wholly eradicate the risk of inconsistency of decisions. It is indeed hard to envisage what issues of construction other than as to time bar are likely to fall for decision in the Illinois proceedings which will not already have been decided in the present proceedings. As to causation and quantum, the issues of substance arising in relation to the clause 12 claim are likely to be substantially similar to those which arise in these proceedings. There is likely to be little or nothing of substance left to decide in the clause 12 proceedings which has not already been decided in the present trial. The only obvious area is that of further contractor’s claims which subsequently emerge and/or are paid and which are not covered by my judgment. To the extent that any matters of principle arise they are likely to be dealt with by my judgment and if and so far as the issues are of pure quantum, ex hypothesi there will be no risk of inconsistency with anything in my judgment.

Given that it is by reason of the non-exclusive jurisdiction clause accepted by BP that Illinois would be an appropriate forum and given that if the undertakings offered by Aon Texas were accepted, the risk of duplication of evidence and inconsistency of decisions could be largely removed, I am not persuaded that England is clearly the appropriate forum in the Spiliada sense and I therefore conclude that leave to serve out would not be granted if Aon Texas were not already a party.

I turn now to limitation. In reliance on the evidence of Mr Carriglio, an expert witness to be called to give evidence of the law of Illinois, it is submitted on behalf of Aon that the cause of action for an indemnity under clause 12 is already time-barred under the law of Illinois and that accordingly, by application of Section 35(3) of the Limitation Act 1980, which is applicable by reason of Section 1(3) of the Foreign Limitation Periods Act 1984, this court has no jurisdiction to permit the introduction of the clause 12 claim against Aon Texas. It is submitted that the new cause of action does not fall within the exception to the prohibition on granting permission to amend, that exception being expressed in Sections 35(4) and (5) as follows:

“(4)

Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.

(5)

The conditions referred to in subsection (4) above are the following – (a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action …”

Whereas it is quite clear, as accepted by Mr Popplewell QC on behalf of BP, that, although the proposed claim against Aon Texas under clause 12 arises out of the same facts or at least substantially the same facts as the primary claim in negligence against Aon London, it does not arise out of the same facts or even substantially the same facts as the existing claims against Aon Texas, none of which are based on its negligence or fault in failing to declare projects to the Frankona Insurers within the period of the Open Cover. It is submitted nevertheless that even if the pre-existing claim which is based on the same or substantially the same facts as the proposed claim is brought against another party to the proceedings and is not in any respect directed at the defendant against whom the new claim is directed, CPR 17.4(2) still applies.

A further matter which has been raised is that there is a major clash of evidence on the Illinois Law of limitation. The period is unquestionably two years from the accrual of the cause of action, but the problem is as to when the cause of action would be said to arise in the present case. On this point Mr Carriglio and BP’s expert witness, Mr Belcove, are in sharp disagreement, for on the latter’s evidence the cause of action under the indemnity arises when suit is served by the third party claimant and accordingly, none of the claims in relation to which BP and the other Claimants claim an indemnity are time-barred. According to Mr Carriglio, however, time begins to run when the relevant claimant knew or ought to have known that a claim had been brought against it by a third party. On that basis at least some of the extant claims might be time-barred. Clearly it is impossible for this court to determine the time bar issue on this application before hearing the evidence of Mr Carriglio and Mr Belcove. Not only is there a major issue of Illinois law to decide, but on one view of the law it might well be necessary to resolve disputed issues of fact as to when the Claimant knew or ought to have known of the claims. For that purpose, further disclosure of documents would seem to be necessary and further factual oral evidence might also be necessary.

It is submitted by Mr Popplewell QC on behalf of BP that, given that the new claim arises as he submits out of the same or substantially the same facts as the existing claim against Aon London I can assume jurisdiction to grant permission to amend as a matter of general case management discretion without taking any view as to the substance of the allegation of time-bar. On that assumption he is no doubt correct, but that assumption may be wrong and accordingly I must first investigate that before conducting any discretionary exercise.

In Goode v. Martin [2002] 1 All ER 620 the Court of Appeal held that CPR 17.4(2) was to be sufficiently broadly construed to give jurisdiction to permit a time-barred claim which arose out of the same or substantially the same facts as were pleaded by way of defence by the defendant to the pre-existing claim as distinct from those facts which had been pleaded as the basis of that claim. It was held that the words of the rule had unduly limited the ambit of Section 35(s) without good reason and that although the proper construction of CPR 17.4(2) confined the jurisdiction to that narrower scope, the requirements of Section 3(1) of the Human Rights Act 1998 justified replacing that meaning by one to the following effect:

“The court may allow an amendment whose effect will be to add … a new claim, but only if the new claim arises out of the same facts or substantially the same facts as are already in issue on a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.”

It is submitted that since BP and the other claimants have already claimed a remedy against Aon London and the claim against Aon Texas arises out of the same facts as are in issue on the claim in respect of which that remedy is claimed, this court has a discretion to allow the amendment.

At first instance in Goode v. Martin [2001] 3 All ER 562 I considered the purpose of Section 35(5) in the following passage:

“Whether one factual basis is ‘substantially the same’ as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim.”

In Lloyd’s Bank plc v. Rogers [1997] TLR 154 Hobhouse LJ. said of Section 35:

“The policy of the section was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arises from those facts.”

The substance of the purpose of the exception in subsection (5) is thus based on the assumption that the party against whom the proposed amendment is directed will not be prejudiced because that party will, for the purposes of the pre-existing matters issue, already have had to investigate the same or substantially the same facts.

It follows that if that party would not previously have had to investigate the same or substantially the same facts for the purposes of a pre-existing claim because he never had been party to such a claim, the prejudice which the exception assumes not to exist does indeed exist. If the amendment is allowed that party has to embark upon investigating a claim against him which arises out of facts which he would not previously have been concerned to investigate. Accordingly, in my judgment neither CPR 17.4(2) nor Section 35(5) can be construed to have as wide a scope as that contended for by the Claimants. It follows that if and to the extent that the clause 12 claim against Aon Texas is time-barred under Illinois Law, I have no jurisdiction to conduct the discretionary exercise of deciding whether to allow the amendment.

In Goode v. Martin [2001] 3 All ER at 569 to 570 I discussed the rather unsatisfactory procedural dilemma that arises in cases where there is an issue as to whether the new proposed claim is time-barred. This is not an unusual circumstance in the Commercial Court where limitation has not infrequently to be determined by reference to foreign law. In Welsh Development Agency v. Redpath Dorman Long Ltd [1994] 1 WLR 1409 it was held by the Court of Appeal that the correct approach was that where there was an issue as to whether the new claim was time-barred, the court should not resolve that issue at the stage of the application for permission to amend but should refuse permission unless the party seeking permission could show that the other party did not have a reasonably arguable case that the new cause of action was time-barred.

In the present case, having considered the written evidence of the experts on Illinois Law, I am not satisfied that BP and the other Claimants have established that Aon Texas does not have a reasonably arguable case that the clause 12 claim is at least partly time-barred in so far as it refers to specific claims. Whether the non-project-specific part of the clause 12 claim is arguably time-barred cannot now be determined. Accordingly, I conclude that I have no jurisdiction to allow the introduction of the clause 12 claim in so far as it is project-specific and I may not have jurisdiction to allow under the non-project-specific part declaratory relief capable of covering other third party claims as yet unspecified.

Finally, there are relevant case management considerations.

Firstly, BP has failed to advance any convincing explanation for its delay in raising this point. By September 2004 contractors’ claims had already been made and payments in settlement had been made in relation to two projects. A third claim had gone to arbitration. In November 2004 Aon had served a defence expressly relying on clause 12 of the Service Agreement. In February 2005 BP abandoned its then current claim under the Service Agreement against Aon Texas. Yet it was not until 16 September 2005 that Aon gave notice of its intention to raise this point and it was not until the date fixed for the commencement of the trial that BP issued its application to amend to raise the clause 12 claim.

Secondly, although in order to resolve the clause 12 claim, it will not be necessary to call additional expert witnesses, for Mr Carriglio and Mr Belcove will inevitably have to be called on other matters of Illinois Law, it will be necessary for there to be further disclosure of documents by BP relating to the time when the contractors’ claims were notified and also probably for there to be witness statements and oral evidence on this matter. The experts will then have to issue supplementary reports. But for this, they would be called in about three weeks’ time.

I consider that this exercise will have a materially disruptive effect on the conduct of what is already a significantly complex trial, now on Day 16. On behalf of BP Mr Popplewell QC has strenuously endeavoured to make good the point that BP and Aon and their experts ought to be able to take this extra exercise in their stride. In my judgment that very much understates the additional work likely to be involved. Moreover, that disruptive effect could have been very much reduced, if not wholly avoided, if BP had mounted this application, as it could easily have done, in the early part of 2005.

Accordingly, if I had jurisdiction, I should not have considered that this application should be allowed, even with an order for costs against BP. This would not be a case where the Overriding Objective could be properly achieved by an adverse costs order.

In summary, therefore, in view of the time bar defence I have no jurisdiction as to at least part of the clause 12 claim, as it has been formulated, by reason of Section 35(5) of the Limitation Act 1980. Further, if and in so far as I have jurisdiction it would be inappropriate to exercise it in favour of the amendment with regard to application of the principles of forum non conveniens and further with regard to my general discretion in relation to considerations of case management. It follows that permission should not be given to amend the Particulars of Claim to add the clause 12 claim against Aon Texas.