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Defendant applied to set aside an order granting the Claimant permission
to serve its claim form out of the jurisdiction on the Defendant at its
head office in Canada. This case examines the proper construction of a
retrocession contract having regard to the terms and conditions of the
underlying policy.
The retrocession
contract at the heart of the dispute was on a Lloyd's form, NMA 1779,
and was expressed to be subject to, "the same terms, clauses and
conditions as in the Original except as may be expressly provided hereby".
One of those conditions was the service of suit clause which read, "service
of suit clause (Canada) NMA 1998". There is however no service
of suit clause for Canada with number NMA 1998. There is a service of
suit clause for Canada number NMA 1970a. There is also a service of
suit clause (USA) NMA 1998.
The dispute
arose after the Defendant sought to recover monies under the retrocession
from the Claimant following a claim on the underlying policy. The Claimant
paid a first tranche of US$1.3m on a without prejudice basis, but as
time went on it became clear that parties were in dispute over the interpretation
of the underlying policy and how claims under it should be adjusted.
In short, the Defendant demanded the balance of monies and eventually
the Claimant sought permission from the English Court, which was granted,
to serve a claim form on the Defendant in Canada for a negative declaration
that nothing was owed by them to the Defendant, and for recovery of
the US$1.2m that they had already paid. Three weeks after service, the
Defendant filed a complaint against the Claimant and THB, the Californian
producing brokers for the retrocession, in the Federal Court of the
Central District of California. That complaint asserted that the Californian
Court probably had jurisdiction over the dispute because the English
law suit only partially encompassed the issues between the parties and
did not include THB.
Whereas
the service of suit clause for Canada gave an address in Canada where
English proceedings could be served, the service of suit clause for
the USA was not actually a service of suit clause but was more a jurisdiction
clause conferring jurisdiction to courts within the USA. The Defendant
said that the country was wrongly specified in the retrocession slip
and that therefore USA jurisdiction applied, whereas the Claimant said
that it was the NMA number that was wrong and that the clause gave permission
to serve out of the English jurisdiction, in Canada. If the Defendant
was right, the parties would have submitted to the jurisdiction of Courts
in America and there would be little credibility in contending that
the English court was the more convenient forum.
The Claimant
sought jurisdiction in England, and, significantly, it argued that the
court was entitled to take account of the fact that in the draft version
of the slip for the previous year the word USA was deleted from the
service of suit clause and Canada substituted, but leaving the NMA number
unchanged. That became reproduced in the final version of the slip.
For the subsequent year, although this never came to fruition, the draft
slip had a service of suit clause which simply referred to Canada without
any reference to NMA or a number.
The Judge
concluded that England was a more appropriate forum for the determination
of the disputes between the parties than California. The Judge agreed
that the centre of the dispute lay in the proper construction of the
retrocession contract having regard to the terms and conditions of the
underlying policy and two faxes from THB. The real question therefore
was what, as a matter of English law, the retrocession contract meant.
The Judge
acknowledged that the fact that the contract was governed by English
law would not universally be of significance to jurisdictional matters,
however, it was likely to have most weight in those cases, such as this,
which were essentially all about the proper interpretation of that contract.
The Judge felt that the only powerful factor in support of the Defendant's
application was that they may wish to pass on to their producing broker
the consequences of the Claimant succeeding against them. However, the
Defendant could take procedural steps in England to ensure that THB
would be bound by the English Courts' judgment. The Judge did not think
that the contingent dispute between the Defendant and THB should be
allowed to determine where the principal dispute was to be heard. The
"tail" should not be allowed "to wag the dog". In
any event, in reality, the parties had corresponded directly with one
another rather than through THB.
The Judge
agreed with the Claimant that because the type script of the service
of suit clause had been altered to substitute Canada for the USA, the
contractual documents bore out the issue that the service of suit clause
was Canada. The Judge therefore concluded that the Claimant had discharged
the burden of proof that the case was more conveniently and appropriately
tried in England than in California. Had he reached the opposite conclusion
on the correct service of suit clause then he would have acceded to
the Defendant's application for proceedings to take place in California.
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