Starlight Shipping Company v Allianz Marine & Aviation Versicherungs AG & Ors, England and Wales High Court (Commercial Court), Judgment, Law, casemine.com

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Attorney(S)

MR JAMES DRAKE QC and MS EMMA HILLIARD (instructed by Lax & Co LLP) for the Claimant and Third Party in 2006 Folio 815 and for the Defendants in Folio 2011 702 and 2011 1043
MR MICHAEL SWAINSTON QC and MR TONY SINGLA (instructed by Clyde & Co LLP) for the First to Fourth Defendants in 2006 Folio 815

Judges

MR JUSTICE BURTON

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Starlight Shipping Company v. Allianz Marine & Aviation Versicherungs AG & Ors

Smart Summary

Factual and Procedural Background

Plaintiff sued its insurers in the Commercial Court arising from the loss of a vessel on 3 May 2006. The Defendants included two groups of insurers, referred to as Company Market Insurers ("CMI") and Lloyds Market Insurers ("LMI"), with policies containing exclusive jurisdiction clauses for English law and courts. Liability was denied and contested. The vessel loss involved significant fatalities and contentious allegations of unseaworthiness and failure to comply with reporting and repair obligations under Class Rules.

During proceedings, Plaintiff made serious allegations against Defendant Insurers, including witness tampering and bribery to produce false evidence, and spreading malicious rumours damaging Plaintiff's reputation. These allegations were supported by affidavits from crew members. Plaintiff also claimed deliberate failure by Defendants to pay under the insurance policies, causing consequential financial loss.

In December 2007, the parties entered into Settlement Agreements with both sets of Defendants, resulting in Tomlin Orders staying further proceedings except for enforcement of those agreements. The Settlement Agreements included wide-ranging releases and indemnities, subject to English law and exclusive jurisdiction of the English courts.

In April 2011, Plaintiff and associated parties commenced nine sets of materially identical Greek proceedings against Defendants and others, alleging bad faith, fraud, and breach of obligations, seeking substantial damages and compensation for moral damage. These Greek claims relate to the same factual matrix as the original English proceedings and Settlement Agreements.

Defendants brought applications in English courts seeking summary relief to enforce the Settlement Agreements and jurisdiction clauses, and to resist Plaintiff's attempts to stay English proceedings based on the Greek claims. Intended Defendants (former solicitors of Defendants) also applied to be joined to the original action to claim relief and assert the effect of the Settlement Agreements.

Legal Issues Presented

Whether the Greek proceedings can be brought in breach of the Settlement Agreements and/or are covered by the indemnities therein.
Whether the claims in the Greek proceedings fall within the exclusive jurisdiction clauses in the insurance policies and Settlement Agreements and thus must be pursued only in England.
Whether the Defendants are entitled to enforce the Settlement Agreements and Tomlin Orders summarily without issuing fresh proceedings.
Whether the Intended Defendants may be joined to the original action under CPR Part 19 to resolve related issues.
Whether the Court should grant stays of English proceedings in light of the Greek proceedings under Article 28 of EU Regulation 44/2001.

Arguments of the Parties

Defendants' Arguments

The Greek proceedings breach the Settlement Agreements and the exclusive jurisdiction clauses in the insurance policies and Settlement Agreements.
The Settlement Agreements include indemnities covering claims brought by associated companies or organisations, thus encompassing the Greek claims.
The jurisdiction clauses, though not always expressly exclusive in the Settlement Agreements, should be construed as exclusive based on established principles and case law.
Enforcement of the Settlement Agreements, including claims for indemnity and declarations, can be sought summarily under the Tomlin Orders without issuing fresh proceedings.
Joining Intended Defendants under CPR Part 19 is appropriate to resolve connected issues and prevent abuse of process.
The Court is the first seised of the matters and has jurisdiction to grant relief, including summary relief and declarations of breach.

Plaintiff's Arguments

The Greek proceedings are not claims "in relation to the loss of the vessel" or "under" the insurance policies and thus fall outside the Settlement Agreements.
The claims involve bad faith, fraud, and breach of criminal law, which should be excepted from settlement releases under a 'fraud exception'.
The Settlement Agreements should not be interpreted as a 'clean break' preventing further claims.
The Defendants are not entitled to enforce the Settlement Agreements summarily without issuing fresh proceedings.
Applications for stays of English proceedings should be granted under Article 28 of EU Regulation 44/2001.
The joinder of Intended Defendants is an attempt to subvert the Judgments Regulation by making the English court first seised when fresh proceedings would show the Greek court as first seised.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sprung v Royal Insurance UK Ltd [1992] 1 Lloyd's I & R Rep 111 CA	Limitation on cause of action for consequential loss under insurance policies.	Followed by Tomlinson J to refuse permission to amend pleadings to add consequential loss claims.
The Italia Express No 2 [1992] 2 Lloyd's Rep 281	Earlier decision supporting Sprung on insurance claims.	Referenced to support refusal of amendment to pleadings.
Turner v Grovit [2004] ECR I-3565	Principle that injunctions to restrain foreign proceedings are generally not granted.	Noted that Defendants do not seek injunctions restraining Greek proceedings, so no breach of this principle.
Henderson v Henderson [1844] 3 Hare 100	Abuse of process doctrine preventing relitigation of matters.	Applied to conclude Greek claims are an abuse of process as they fall within Settlement Agreements.
Johnson v Gore Wood & Co (No 1) [2002] 2 AC 1	Abuse of process and res judicata principles.	Applied with Henderson to reject revival of claims covered by Settlement Agreements.
Ashville Investments Ltd v Elmer Contractors Ltd [1989] 1 QB 488 CA	Construction of dispute clauses; narrower interpretation of "under" an agreement.	Disapproved in Fiona Trust; Court adopted wider construction of jurisdiction clauses.
Satyam Computer Services Ltd v Upaid Systems Ltd [2008] EWCA Civ 487	Requirement for clear language to exclude claims involving fraud from settlement releases.	Distinguished on facts; fraud claims known at settlement were included in releases.
Fiona Trust and Holding Corporation v Privalov [2007] EWCA Civ 20	Liberal construction of arbitration and jurisdiction clauses.	Followed to construe jurisdiction clauses broadly to cover all disputes.
BCCI v Ali [2002] 1 AC 251	General release and "clean slate" principle in settlement agreements.	Applied to confirm that Settlement Agreements extinguished claims known or capable of being known.
DSM Anti-Infectives BV v Smith Klein Beecham plc [2004] EWCA Civ 1199	Application of jurisdiction clauses to settlement disputes.	Supported construction of Settlement Agreements as subject to exclusive English jurisdiction.
Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyd's Law Rep 588 CA	Jurisdiction clauses not expressly exclusive may be construed as exclusive.	Applied to construe jurisdiction clause in Settlement Agreement as exclusive.
Svendborg v Wansa [1997] 2 Lloyd's Law Rep 183	Similar principle on exclusivity of jurisdiction clauses.	Referenced in support of construing jurisdiction clauses as exclusive.
Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 Lloyd's Rep 505 CA	Jurisdiction clauses construed to confer exclusive jurisdiction absent express contrary indication.	Applied to confirm exclusivity of jurisdiction clauses in Settlement Agreements.
Hollingsworth v Humphrey [1987] CAT 1244	Enforcement of Tomlin order compromises; damages claims require separate action.	Held binding but distinguished as not precluding enforcement of indemnities and declarations in this case.
Bargain Pages v Midland Independent Newspapers [2003] EWHC 1887 Ch	CPR permits less restrictive enforcement of settlement agreements than previous case law.	Not followed; Court bound by Hollingsworth but acknowledged CPR context.
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827	Secondary obligations under contract enforceable by damages.	Supported argument that damages for breach of contract can be enforced under Tomlin Orders.
Rowland v Gulfpac Ltd [1999] Lloyd's Law Rep (Banking) 86	Equitable jurisdiction to grant quia timet relief under indemnity before loss occurs.	Applied to support creation of fund to secure indemnity under Settlement Agreements.
Ascherson v Tredegar Dry Dock & Wharf Co Ltd [1909] 2 Ch 401	Principles justifying injunctions to prevent jurisdiction from being stultified.	Referenced in support of relief to protect Defendants from Greek proceedings.
Rofa Sport Management AG v DHL International (UK) Ltd [1989] 1 WLR 902	Effect of stay orders and jurisdiction of English courts.	Applied to confirm ongoing jurisdiction and enforcement powers despite stay.
Knauf UK GmbH v British Gypsum Ltd [2002] 1 Lloyd's Law Rep 199	Principle that all issues should be tried in one court first seised.	Applied by analogy to support enforcement of exclusive jurisdiction and settlement.
Ellerman Lines Ltd v Read [1928] 2 KB 144 CA	Jurisdiction to award damages and indemnities in enforcement proceedings.	Applied to confirm jurisdiction to grant relief sought.
Union Discount Co v Zoller [2002] 1 WLR 1517 CA	Jurisdiction and enforcement of contractual obligations.	Referenced in support of jurisdiction to grant indemnity and damages relief.
CGM SA v Hyundai Mipo Dockyard Co Ltd [2009] 1 Lloyd's Law Rep 213	Jurisdiction and enforcement of agreements.	Applied in support of relief granted.
Toomey v Eagle Star Insurance Co Ltd [1994] 1 Lloyd's Law Rep 516	Principle that parties contract on basis of known law and authorities.	Referenced to support interpretation of Settlement Agreements and Tomlin Orders.
The Nukila [1997] 2 Lloyd's Law Rep 146	Reiteration of principle in Toomey on contractual intention and law.	Referenced to support contractual interpretation.
Aldi Stores Ltd v WSP Group plc [2008] 1 WLR 748	Abuse of process applies even when defendants differ in original and new actions.	Applied to support argument that claims against Intended Defendants are an abuse of process.
Dunlop Haywards (DHL) Ltd v Erinaceous Insurance Services Ltd [2008] EWHC 520	Joinder of parties under CPR Part 19 not requiring existing party to have claim against new party.	Applied to support joinder of Intended Defendants.
Shetty v Al Rushaid Petroleum Investment Co [2011] EWHC 1640	Joinder under CPR Part 19 permissible after judgment and stay.	Applied in support of joinder application.
The Selby Paradigm [2004] 2 Lloyd's Law Rep 714	Court's power to join parties even after judgment.	Referenced in support of joinder.
Prescott v Dunwoody Sports Marketing [2007] EWCA Civ 461	Joinder under CPR Part 19 after judgment.	Referenced in support of joinder.
Alan Barton v Golden Sun Holidays [2007] EWHC B6	Choice of forum does not amount to abuse if connection sufficient.	Applied to reject argument that joinder is an abuse of the Judgments Regulation.
Drouot Assurances SA v Consolidated Metallurgical Industries [1998] ECR I-3075	Treating different parties as the same for jurisdictional purposes in parallel proceedings.	Referenced in support of joinder and jurisdiction arguments.
Re Cover Europe Ltd [2002] 2 BCLC 61	Same as above regarding connected parties.	Referenced in support of joinder and jurisdiction arguments.
GIE Reunion Européenne v The Zurich España [2005] ECR I-40	Choice of forum under Article 6(2) of the Convention and abuse of process.	Referenced in support of joinder and forum choice arguments.

Court's Reasoning and Analysis

The Court began by construing the Settlement Agreements and jurisdiction clauses under English law. It found that the Settlement Agreements included wide-ranging releases and indemnities covering all claims "in relation to the loss of the vessel" and "under" the policies, including the claims now pursued in the Greek proceedings. The Court rejected narrower interpretations and 'fraud exceptions' argued by Plaintiff, noting that the alleged fraud was known or capable of being known at the time of the Settlement Agreements.

The jurisdiction clauses, although not always expressly exclusive in the Settlement Agreements, were construed as exclusive based on established principles and case law, supported by the fact that the original insurance policies contained exclusive jurisdiction clauses for English courts.

The Court held that the bringing of the Greek claims breached the Settlement Agreements and jurisdiction clauses, constituting an abuse of process under Henderson v Henderson and related authorities. However, the Court acknowledged it could not enjoin the Greek proceedings, consistent with Turner v Grovit.

Regarding enforcement of the Settlement Agreements and Tomlin Orders, the Court distinguished Hollingsworth v Humphrey, holding that claims for indemnity and declarations are properly "carrying into effect the terms agreed" and can be enforced summarily without fresh proceedings. The Court also accepted equitable jurisdiction to order the creation of a fund to protect Defendants under the indemnity, given the ongoing Greek proceedings.

The Court considered and rejected Plaintiff's late applications for stays of English proceedings under Article 28 of the Judgments Regulation, holding that the English court was first seised of the matters and thus had exclusive jurisdiction.

On the application to join Intended Defendants under CPR Part 19, the Court found jurisdiction and appropriateness to add them as parties to resolve connected issues, rejecting arguments that this would subvert the Judgments Regulation or constitute abuse of process.

Holding and Implications

The Court granted summary relief to Defendants enforcing the Settlement Agreements and exclusive jurisdiction clauses, holding that the Greek proceedings breach these agreements and must be pursued only in England. The Court rejected Plaintiff's applications for stays of English proceedings and granted Defendants declaratory relief and indemnity enforcement.

The Court permitted the joinder of Intended Defendants to the original action to address related issues and prevent abuse of process.

The direct effect is to uphold the primacy of the Settlement Agreements and English jurisdiction in this dispute, limiting Plaintiff's ability to pursue parallel claims in Greece. No new precedent was established beyond application of existing principles on settlement agreements, jurisdiction clauses, abuse of process, and enforcement of Tomlin Orders.