Sunderland Marine Mutual Insurance Company Ltd v Wiseman & Ors

This is a dispute over jurisdiction. The choice is between England and Scotland. The Claimant says England. The Second and Third Defendants say Scotland. They seek declarations that this court has no jurisdiction over the claim. Alternatively they seek a stay on the basis of forum non conveniens. The First Defendant has taken no steps in the proceedings. The Claimant has applied for a default judgment against him under C.P.R. Part 12.3.

The Claimant is a mutual insurance company specialising in the insurance of fishing vessels. At the relevant time its registered and business office was in Sunderland.

The Defendants are and were at the relevant time domiciled in Scotland where they live and where the proceedings were served upon them without permission to serve out of the jurisdiction purportedly pursuant to Schedule 4 to the Civil Jurisdiction and Judgments Act 1982 (“The 1982 Act”) and CPR 6.19.

The First Defendant is currently serving a prison sentence of 32 months in Dundee prison. That sentence was imposed on his admission of the conduct alleged against him in the present claim.

The First Defendant was the owner and Master of the MFV Seaward Quest (“the vessel”). He was also the assured under a Hull and Machinery Risks policy effective from midnight on 31 December 1993 until midnight on 31 December 1994 agreed by the Claimant. The cover for a total loss was £584,750. The policy was expressly subject to English Law. The vessel was mortgaged to the Bank of Scotland.

The Second Defendant is the First Defendant’s brother. He was a crew member and a Mate on the vessel. The Third Defendant was a crew member of and a Second Engineer on the vessel.

The vessel sank and was lost on 16 October 1994 at or near the Otter Bank, 60 miles west of Shetland and outside territorial waters.

The Claimant alleges that the three Defendants conspired to and did scuttle the vessel by opening the seacocks and did so in order to make a fraudulent claim on the insurance. The allegation is founded on a confession made by the First Defendant which came to the Claimant’s attention in June 2004 and later led to his sentence of imprisonment at the Peterhead Sheriff Court imposed on 30 November 2006. In his confession, the First Defendant implicated the other Defendants. They each deny any involvement in any scuttling of the vessel. In about January 1995, after investigating the claim, the Claimant had paid £518,750 to the Bank of Scotland and the balance of the policy monies (£66,000) to the First Defendant.

It is alleged in the Particulars of Claim that “on a date and/or dates prior to 16 October 1994” the Defendants “agreed and conspired…to deliberately sink the vessel at sea in order to claim monies under the contract of insurance.” That conspiracy, if such it was, plainly occurred in Scotland.

Under the heading “The Fraudulent Insurance Claim” paragraphs 18 to 20 of the Particulars of Claim (so far as relevant) allege:

“18.

Shortly after the sinking of the vessel, the Claimant investigated the sinking of the vessel and took written statements from each member of the crew on the vessel including signed witness statements each dated 19^th October 1994 from the First, Second and Third Defendants.

…

19.

Each of the First to Third Defendants knowingly and fraudulently misrepresented to the Claimant that the vessel had flooded and sunk accidentally.

20.

Such misrepresentations were material to the Claimant’s decision as to whether or not to indemnify the First Defendant under the policy of insurance and were intended by the First to Third Defendants to be relied upon and were relied upon by the Claimant in deciding whether to indemnify the First Defendant under the contract of insurance.”

The statements referred to were taken and signed in Scotland. The Claimant appointed solicitors and surveyors in Aberdeen to investigate the loss and assist with the statements. Mr Sowerby, then a Senior Claims Adjuster employed by the Claimant and resident in Durham, assisted with the interviews. The loss had been notified by telephone from Scotland from the First Defendant’s agents to Sunderland on 17 October 1994. The evidence suggests that no claim form was ever prepared or submitted but Mr Sowerby prepared a detailed file note recommending to the Senior Claims Manager that the claim be paid.

Under the heading “The Liability of the Second and Third Defendant” paragraphs 26 to 29 of the Particulars of Claim allege:

“26.

The Second and Third Defendants’ owed duties to the Claimant in the tort of negligence and/or the tort of deceit and/or in the tort of conspiracy to use unlawful means and/or the tort of conspiracy to injure:-

1)

Not to conspire with the First Defendant to deliberately sink the vessel and thereafter to assist the First Defendant in making a claim for an indemnity against the Claimant in respect of the losses thereby resulting.

2)

Not to assist the First Defendant to deliberately sink the vessel and thereafter to fraudulently claim insurance monies under the contract of insurance;

3)

Not to fraudulently and/or deceitfully and/or deliberately misrepresent to the Claimant that the vessel had been sunk accidentally when it had in fact been scuttled;

4)

Not to knowingly assist the First Defendant in wrongfully and/or fraudulently obtaining monies from the Claimant under the policy of insurance.

27.

In breach of such duties and/or fraudulently and/or deceitfully in their witness statements each dated 19^th October 1994 each of the Second and Third Defendants made and signed such statements

1)

Knowing such statements to be false or being reckless as to whether such statements were false; and

2)

Intending such statements to be acted upon by the Claimant in determining whether to indemnify the First Defendant in respect of the loss of the vessel.

28.

Such statements influenced the Claimant to indemnify the First Defendant in respect of the loss of the vessel.

29.

In the premises the Second and/or Third Defendants are each, jointly with the First Defendant, liable to repay the Claimant all monies paid by the Claimant to the First Defendant under the contract of insurance and/or for a similar sum in damages in tort and/or in restitution.”

Faced with Mr McPherson’s submission on behalf of the Second Defendant that the claim in restitution could not even arguably be the subject of English jurisdiction and therefore the Claim Form could not in any event validly have been served out of the jurisdiction under C.P.R 6.19, Mr Chambers, for the Claimant, said that the restitution claim was abandoned. The hearing proceeded on that basis but without prejudice to further consideration of the question should it prove material.

There is no evidence as to how the payment of the claim was made apart from that which I have already stated (paragraph 8). Mr Chambers said in answer to the Court that Bank of Scotland may have been paid by bank transfer or cheque and the First Defendant was probably paid by cheque. He said the Claimant’s bank account was in England and the relevant branch of the Bank of Scotland was in Scotland. This is hardly satisfactory in a case in which the Claimant’s primary submission is that English jurisdiction is to be founded largely on the fact that payment was authorised in and made from England. It is even less satisfactory when the Third Defendant had, by his solicitor’s letter dated 24 May 2007, and in his witness statement dated 11 June, raised the very point that there was no evidence to show from or to where payment was made and done so both before and after the Claimant’s evidence was served.

There is other material evidence directed to the issue of forum non conveniens. It is addressed later in that context. The one comment I would make here is that whilst the Third Defendant suggests this claim could be conducted significantly (50%) cheaper in Scotland the Claimant refutes that and puts forward a difference of only about 10%. As ever, the probability is likely to be somewhere between the two but the Claimant’s evidence is more detailed and researched and I therefore accept that the difference is not likely to be of the nature put forward by the Third Defendant but much closer to that suggested by the Claimant.

Schedule 4 to the 1982 Act determines the jurisdiction of the Courts of the constituent parts of the United Kingdom.

Rule 1 of Schedule 4 to the 1982 Act provides that:

“Subject to the Rules of this Schedule, persons domiciled in a part of the United Kingdom shall be sued in the courts of that part.”

That is the basic rule. It looks to the domicile (as defined) of the person to be sued, not of the Claimant.

Rule 2 of the Schedule provides for “special jurisdiction”:

“Persons domiciled in a part of the United Kingdom may be sued in the courts of another part of the United Kingdom only by virtue of Rules 3-13 of this Schedule.”

This “special jurisdiction” provides for “consumer” and employee claims to be brought in the country of the domicile of the Claimant, but otherwise addresses claims of a particular type setting criteria for jurisdiction largely based on the location of the subject of the claim or agreement.

The only provision on which the Claimant relies is Rule 3(c) of Schedule 4. That provides that:

“A person domiciled in a part of the United Kingdom may, in another part of the United Kingdom, be sued…in matters relating to tort…in the courts for the place where the harmful event occurred…”

The emphasis is mine. If the Claimant cannot show that England is the “place where the harmful event occurred” this court has no jurisdiction.

The effect of sections 16(3) and 16(4) of the 1982 Act is that the meaning and effect of Rule 3(c) of Schedule 4 is to be determined having regard to the principles laid down by the European Court of Justice (the ECJ) in determining the analogous provisions of the Brussels/Lugano Conventions and Council Regulation (EC) No 44/2001 of 22 December 2000 (“the EC Regulation”).

The effect of the decisions of the ECJ on the analogous provisions of the Conventions and the Regulation is, I think, well summarised in Briggs and Rees Civil Jurisdiction and Judgments (4^th Edn. 2005) at 2.156 to 2.160 on pages 188 to 196.

The governing authority is the case shortly entitled Bier v. S.A. Mines 21/76 [1976] ECR 1735. The words “the place where the harmful event occurs” have an autonomous meaning not limited to how they would be interpreted by national law. They encompass both the place where the damage occurs and the place of the event giving rise to that damage. A Claimant can therefore found jurisdiction for the claim in either of those places. I shall refer to the alternatives as Bier 1 (place where damage occurs) and Bier 2 (place of the event giving rise to that damage).

The analysis in 2.157 of Briggs & Rees explains that Bier 1 does not mean the place where the damage was suffered. If it did, the effect would be close to making the domicile of the Claimant a sufficient criterion for jurisdiction. It is not easy always to distinguish the place where damage occurs from the place where it is suffered; of course they will often be the same.

It is important, I think, to keep in mind the words of the judgment of the ECJ in Dumez France v. Hessische Landesbank Case C-220/88 [1990] ECR 1-49 at paragraphs 17 to 20:

“17.

It is only by way of exception to the general rule whereby jurisdiction is attributed to the courts of the state of the defendant’s domicile that Title 11, Section 2, attributes special jurisdiction in certain cases, including the case envisaged by Article 5(3) of the Convention. As the Court has already held (Mines de Potasse d’Alsace, paragraphs 10 and 11), those cases of special jurisdiction, the choice of which is a matter for the plaintiff, are based on the existence of a particularly close connecting factor between the dispute and courts other than those of the State of the defendant’s domicile, which justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and efficacious conduct of the proceedings.

18.

In order to meet that objective, which is of fundamental importance in a convention which has essentially to promote the recognition and enforcement of judgments in States other than those in which they were delivered, it is necessary to avoid the multiplication of courts of competent jurisdiction which would heighten the risk of irreconcilable decisions…

19.

Furthermore, that objective militates against any interpretation of the Convention which, otherwise than in the cases expressly provided for, might lead to recognition of the jurisdiction of the courts of the plaintiff’s domicile and would enable a plaintiff to determine the competent court by his choice of domicile.

20.

It follows from the foregoing considerations that although, by virtue of a previous judgment of the court (in Mines de Potasse d’Alsace, cited above), the expression ‘place where the harmful event occurred’ contained in Article 5(3) of the Convention may refer to the place where the damage occurred, the latter concept can be understood only as indicating the place where the event giving rise to the damage, and entailing tortious, delictual or quasi-delictual liability, directly produced its harmful effects upon the person who is the immediate victim of that event.’”

Bier 2 is addressed at 2.160 of Briggs & Rees. The ECJ jurisprudence is clear that the national definition of the relevant cause of action was not a material consideration. If the answer can be found without refined analysis so much the better.

In Domicrest Ltd v. Swiss Bank Corporation [1999] 1 Lloyd’s Rep 80 Rix J held that in a case of negligent misstatement the place where the harmful event occurred was where the misstatement originated and not where it was received and acted upon. Rix J referred, at page 92, to “the harmful event which sets the tort in motion” but added that “the place where the damage occurs…is quite likely to be at the place of receipt and reliance.” In the circumstances of that case that did not assist the Claimant. The Court of Appeal, in ABCI v. BFT [2003] EWCA Civ 205 approved Rix J’s reasoning and conclusion at paragraph 41.

In Newsat Holdings Ltd v Zani [2006] EWHC 342 (Comm) the Claimants, companies incorporated in Bermuda, alleged that the Defendant had made false representations in London to its London lawyers causing it to make investment decisions resulting in significant wasted expenditure. David Steel J followed Domicrest (and other authority) in deciding that in the context of negligent or fraudulent mis-statement the place where the harmful event giving rise to the damage occurred was where the mis-statement was made (held not to be London) not where it was received. He also held that the fact that the Claimant had incurred a liability to pay the fees (over US$500,000) of the London solicitors was not sufficient to found jurisdiction. The payment of the fees was in fact made from and to accounts outside the jurisdiction.

In London Helicopters Ltd v. Heliportugal Lda – Inac [2006] EWHC 108 (QB) a Portuguese defendant company issued a certificate in respect of work done on a helicopter engine which the claimant, an English company, which had bought the engine, alleged contained negligent misstatements. The claimant had compromised a claim brought against it by another English company to which it had on-sold the engine. Simon J held that those circumstances were sufficient for the English courts to have jurisdiction. Simon J also followed Domicrest. To quote part of the headnote to the report in [2006] 1 All E.R. Comm 595:

“The domestic court would not necessarily be assisted by a detailed analysis of the particular cause of action under the national law relied upon. In principle, on a given set of facts, the application of the test of where the damage had occurred ought to yield the same jurisdictional result wherever the claim was made. The place where the damage had occurred (within the meaning of that test) was not the place where a claimant had simply suffered financial loss. It was necessary to see where the event giving rise to the damage produced its initial, direct, immediate or physical harmful event. The domestic court should examine with particular care any assertion that the place where the damage had occurred was the place where the claimant was domiciled. Applying that approach in the instant case, the initial and direct damage had occurred when the certificate was received and relied on by the claimant in England. England was the place where significant damage had been done to the immediate victim of the harmful act; and therefore the place where the damage had occurred.”

I respectfully agree. In particular I think that there are real risks that the application of Bier 1 and Bier 2 may result in the emasculation of the basic rule that the domicile of the defendant founds jurisdiction. The “special jurisdiction” is a derogation from that rule based, as stated in Dumez France, on the existence of a particularly close connecting factor between the relevant dispute and the courts of another country.

It was Mr Chambers’ submission that, as he put it, even if Domicrest was followed (which in my judgment is now beyond argument) “damage occurred under Bier 1 in England where monies were paid by the Claimant to the [First] Defendant as a consequence of the scuttling of the vessel in Scotland…” This is based on the submission that the damage suffered by the Claimant was “the payment of the fraudulent claim”. He also submitted (Bier 2) that the “harmful event” was “the presentation, acceptance and eventual payment of the fraudulent insurance claim” in and from Sunderland. But the main focus of his submission was on Bier 1.

The Defendants submit that the conspiracy or unlawful agreement (if such it was) was made in Scotland, put into effect in Scotland when the vessel sailed from Scotland, and the material representations (the statements) were made in Scotland to the Claimant’s representatives in Scotland. Insofar as any connection has been shown with England it is no more than the fact that the object of the conspiracy was to obtain payment to the First Defendant or his bankers in Scotland from an English insurance company. Consistently with the UK authorities to which I have referred, the Defendants submit that the “harmful event” is the conspiracy or the misrepresentation and that “event” undoubtedly occurred in Scotland.

As regards Bier 1, it was the Defendants’ submission that in a case of economic loss such as this it would normally, if not inevitably, be the case that the economic consequence would impact at the place where the Claimant had its bank account which would either be fortuitous or, more probably, the place of its domicile. Bier 1, it was submitted, is not to be equated with “the place from which payment is made” or where the decision to pay is made or where the loss is incurred. There is no more, and possibly less, logic in focusing on that place than on the place where payment is received and so, if such it be, where the object of the conspiracy or misrepresentation is achieved.

In my judgment, the Defendants’ submission are much to be preferred on both Bier 1 and Bier 2. The “harmful event” alleged was the conspiracy to scuttle the vessel and the alleged dishonest representations made in the statements. The only connection with England is that it was the country in which the decision to pay the claim was made and from which, I am prepared to assume, payment was made. I think authority, with which I agree, is clear that those circumstances are insufficient to establish jurisdiction by analogy with Bier 2 and, whilst Bier 1 can be read in terms wide enough to include the place from which payment is made, and no authority addressing the precise point has been cited to me, I do not think it right that it should be. To do so would, I think, be to emasculate the basic rule; it could provide a charter for Claimants to select a jurisdiction of their choice; and it would be to ignore what remains the statutory test that the court is to seek the place where “the harmful event occurs.”

It I am right on the Jurisdiction question, that suffices for the Defendants. Nonetheless I will address this issue as it was fully argued. There are two questions. The first is whether the principles of forum non conveniens have any application at all. The Claimant submits not; the Defendants submit they do. The second, if the Defendants are right on the first, is whether or not the Defendants have shown that Scotland is “clearly or distinctly” the more appropriate jurisdiction to hear the claim.

Both the leading textbooks support the application of the principles: Dicey, Morris & Collins, The Conflict of Laws (14^th Edn. 2006) vol 1 at 12.024; Briggs & Rees at 2.234 (Q13). The point was determined to the same effect by Tugendhat J in Lennon v Scottish Daily Record [2004] EWHC 359 (QB). I agree. There is nothing in Community Law which dictates a different conclusion. Owusu v Jackson [2005] 2 WLR 942 precludes the application of the principles between Member States. But the Regulation is directed to United Kingdom jurisdiction, not to jurisdiction within the United Kingdom. In the latter context some choice of jurisdiction rule is required. Section 49 of the 1982 Act retains the principles where they are not inconsistent with the Conventions. The principles are well established and well known. Mr Chambers submitted that if it were necessary to address competing jurisdictions within the United Kingdom the “first seised” rule could be imported by analogy. I see no reason to do that where the principles are available and applicable in the circumstances envisaged by section 49.

It is agreed that both jurisdictions are available, the relevant law is in all probability the same, and no party is seeking or has identified some procedural or other legitimate advantage to be found in one jurisdiction but not the other.

The relevant factors are of a more practical nature.

The Claimant refers to the claim against the First Defendant. But it is likely to be resolved by a default judgment. The First Defendant has, in effect, admitted liability. The Claimant has at least two potential witnesses, both of whom live in the North-East of England. But they are to prove the representations in the statements and reliance upon them by accepting the claim on the insurance. There must be a strong prospect (the statements are signed) that those matters will not be in issue. The documentation is readily manageable.

On the other hand, the issues are likely to relate to events on board the vessel and the Defendants’ part in them. Mr Chambers said the Claimant would want to call the First Defendant. But all 3 Defendants would be better served by proceedings in Scotland. 3 other crew members were on board. 2 have been traced and are also resident in Scotland. The other Second Engineer, also resident in Scotland, may have evidence to give concerning the condition of the vessel. So, too, the surveyors instructed by the Claimant. As I have said, the evidence suggests that the costs in Scotland would be lower.

In my judgment, particularly in a case in which the Defendants and most, if not all, other likely witnesses are, private individuals of, no doubt, limited means, whose homes are in Scotland, but the Claimant is a substantial insurance company, practical considerations of residence and cost can and should be given considerable weight, in this case in favour of Scotland. The claim and circumstances have a strong connection with Scotland and almost none with England. Had it been material therefore I would have ordered a stay of the claim in favour of Scotland’s jurisdiction on the ground that it was clearly the more appropriate jurisdiction to hear the claim.

This court has no jurisdiction. I will hear the parties when this judgment is handed down on the form of order to be made and any ancillary matters which cannot be agreed. The judgment was supplied to the parties in draft on 19 June 2007