271 In Henry v Henry at 591, Dawson, Gaudron, McHugh and Gummow JJ observed that:-
"…the fact that there are or, even, that there may be simultaneous proceedings in different countries with respect to the same controversy, is highly relevant to the question whether the local proceedings are oppressive in the sense of "seriously and unfairly burdensome, prejudicial or damaging", or vexatious, in the sense of "productive of serious and unjustified trouble and harassment". And it also follows that courts should strive, to the extent that Voth permits, to avoid that situation."
272 Their Honours also observed in Henry v Henry at 592 that other considerations to be taken into account include the order in which the proceedings were instituted, the stage which the proceedings have reached and the costs which have been incurred.
Permanent Stay - Connecting Factors
273 In Voth, Mason CJ, Deane, Dawson and Gaudron JJ said at 565 that in some cases the primary judge hearing a stay application may conclude that it is desirable to give detailed reasons weighing the various factors and explaining why the local forum is or is not an inappropriate one. Ordinarily, however, their Honours said it will be unnecessary for the judge to give lengthy reasons.
274 This is not an ordinary case but since in my view the outcome of the stay application turns upon the issue of "juridical advantage", I propose to deal relatively briefly with the factors which connect the subject matter of the proceedings to the competing forums.
275 I will deal separately with one of the connecting factors, namely choice of law and submission to jurisdiction clauses, later in my judgment.
276 It seems to me to be clear that subject to the decision of the House of Lords in HIH v Chase, there is a very substantial overlap between the UK proceedings and the Australian proceedings.
277 There was the same degree of overlap with the United States proceedings but the effect of the decision of Gammerman J is that the insurers are barred from raising the claims of misrepresentation and non-disclosure.
278 The observations which I make as to connecting factors are therefore limited to the proceedings on foot in the United Kingdom.
279 The case pleaded by the applicants in the Australian proceedings raises virtually all of the critical issues which arise in the UK proceedings. The Phoenix Representations have their genesis in the claims made in the Phoenix proceedings. The Phoenix Non-Disclosures, with the exception of those pleaded in paragraph 47.10, are based upon the Phoenix Representations. Both sets of proceedings arise out of a common factual substratum.
280 It is true, as the applicants said at [161] of their initial written submissions, that there are issues raised in the Australian proceedings which do not arise overseas. However, it is evident from an examination of the applicant's list of solely Australian issues that they are limited to the precise elements of the cause of action pleaded in the Statement of Claim.
281 Examples of these are the content of the representations made by Heath to ReAc as opposed to the content of the representations made by Heath to HIH or AIG and the question of Mr Kelly's reliance.
282 Although it appears that there are questions raised in relation to some of the specific representations pleaded in the second part of the Statement of Claim which may have no equivalent in the UK proceedings, those representations were made by PML or ICE and it is plain that the role and abilities of Mr Bradstreet are critical to the issues in the Australian and UK proceedings.
283 A most striking feature of the overlap between the UK and Australian proceedings is that the truth or otherwise of the claims of misrepresentation and non-disclosure turns in large part on the evidence of Mr Walwin and Ms Hamilton. The issues of fact raised by their evidence of the falsity of the misrepresentations and the failure to disclose material facts seem to be identical here and in the UK.
284 I accept that they are willing to give evidence in Australia but it would be extraordinary if two UK resident witnesses whose evidence gave rise to the Phoenix allegations were prepared to give evidence in Australia but not in the United Kingdom.
285 The appellants made much of the fact that the respondents in the Australian proceedings have not filed defences. Thus they said it is unclear what the real issues will be and who will give evidence for the respondents in Australia.
286 It seems to me that if the claims of misrepresentation are to be pursued in the Phoenix action, it is likely that the insurers will call Mr Walwin and Ms Hamilton. Accordingly, there must be a real prospect of inconsistent findings of fact between the Federal Court and the Commercial Court in relation to their evidence.
287 The claims against Heath and Chase in the Phoenix action are for fraud and it is possible that central parties such as Mr Dixon and Mr Bassett will not be called to give evidence. Nevertheless, on the issues raised by the pleadings in the UK proceedings and the Australian proceedings, it is my view that there is a real prospect of inconsistent findings of fact between the evidence of those witnesses in the UK and Australian proceedings.
288 The proceedings in the United Kingdom have been on foot for over 3 years. Vast documentary discovery has been given there. Much of it would have to be repeated here although as Chase's solicitor, Mr L'Estrange, said in his evidence it would be necessary to consider all of the documents to determine their precise relevance to the Australian proceedings.
289 In summary, it seems to me that, but for the legitimate juridical advantage arising from the Trade Practices Act claim, the controversy considered as a whole would be vexatious or oppressive in the Voth sense, namely that the Australian proceedings would be productive of serious and unjustifiable trouble or seriously and unfairly burdensome; see CSR v Cigna at 400-401.
290 This would be so even though ReAc is not a party to any of the UK proceedings. The position is therefore different from Henry v Henry where the parties to both sets of proceedings were identical.
291 What would have made the Australian proceedings vexatious in the absence of the Trade Practices Act claims is the fragmentation which arises from the commencement of proceedings in this Court in which the applicants seek to agitate questions which are already in issue overseas. I do not think it is vexatious to commence other proceedings upon the hypotheses that the insurers will lose in the UK. There is no reason why ReAc and Monde Re cannot seek to protect their own positions in case of that eventuality. However, but for the Trade Practices Act cause of action the appropriate course would have been for them to do so in the jurisdiction where proceedings are already on foot.
292 Indeed, Monde Re is already a party to the Commercial Court proceedings in "Complicity" and "Forever Mine". Again, if it were not for the Trade Practices Act claim, the proceedings here would be plainly oppressive in the Voth sense.
Permanent Stay - TradePractices Act Claim
293 The Federal Court cannot be a clearly inappropriate forum if it is the only forum in which the cause of action pleaded in the Statement of Claim can be fully and properly entertained.
294 This proposition also holds true in my opinion if there is a significant risk that the Federal Court is the only such forum because, in that event, the moving parties will not have discharged their onus of establishing that no injustice will be occasioned by a stay.
295 Chase sought to deal with this by adducing evidence that, under applicable English choice of law rules, the relief which the applicants seek under the Trade PracticesAct would be available in the UK. This evidence was given by Mr Crane.
296 The effect of Mr Crane's evidence is that insofar as the applicants claim damages under the Trade Practices Act, their claim would be characterised under English Conflict of Laws Rules as a claim in tort. He did not deal with the claim for an indemnity as part of the "smorgasbord" of relief available under s 87 but he assumed that this would be treated in the same way as a claim for damages for conflict of laws purposes.
297 The English Conflict of Laws Rules which an English court would apply in order to determine which system of law governs a claim in tort are found in the Private International Law (Miscellaneous Provisions) Act 1995 ("the PIL Act"). The relevant provisions came into force on 1 May 1996, that is prior to the commission of the alleged "torts" in the present proceedings.
298 Section 11(1) of the PIL Act provides that the applicable law is the law of the country in which the events constituting the tort or delict in question occur.
299 Section 12 of the PIL Act spells out circumstances in which the general rule is displaced. In deciding the "displacement" question, the Court weighs the significance of the facts which connect the tort to the place where the events occurred against other factors connecting the tort to another country. Those factors include "factors relating to the parties, to any of the events --- or to any of the circumstances or consequences of those events."
300 English choice of law rules on contractual obligations are now governed by the Rome Convention which was adopted as part of the law of the UK by the Contracts (Applicable Law) Act 1990. The Rome Convention contains uniform rules which apply throughout the European community where there is a conflict of laws in relation to contractual obligations. The Act came into force on 1 April 1996.
301 Article 1 of the Rome Convention provides that the rules of the Convention apply to "contractual obligations" in any situation involving a choice of law between the laws of different countries.
302 It is unnecessary to set out the rules in any detail. Article 3 provides, subject to certain exceptions, for freedom of choice of the governing law. Article 4 provides for the law applicable in the absence of choice. There, the contract is to be governed by the law of the country with which it is most closely connected.
303 Article 8 provides that the existence and validity of a contract are to be determined by the law which would govern it. Article 10 provides that the law applicable to a contract governs its interpretation, performance, consequences of breach including damages and the extinguishment of obligations.
304 Mr Crane divided the applicants' claims for relief into two heads, namely damages on the one hand and avoidance of the contracts on the other.
305 Upon the facts on which he was asked to assume as to the making of the Phoenix Representations and the specific representations and the failure to disclose the Phoenix Non-Disclosures, Mr Crane's opinion is that an English court would apply the general rule under s 11 of the PIL Act so that the Trade Practices Act claim for damages could be maintained in the UK courts.
306 The applicants sought to meet this evidence by calling Mr Briggs who is a practicing barrister, a co-editor of the current edition of Dicey and Morris The Conflict of Laws 13th Ed 2000 ("Dicey and Morris") and a prolific author in the area of English private international law.
307 Mr Briggs' evidence was that the applicants' claim for damages and indemnity would be characterised as tortious for English conflict of laws purposes. He said that this characterisation would apply to claims for damages in respect of conduct which induced entry into a contract with the person responsible for the conduct and, possibly, in respect of claims for damages for conduct which induced entry into a contract with a third party.
308 Mr Briggs agreed with Mr Crane that the question of avoidance of the contracts would be characterised for English conflict of laws purposes as contractual and this would be determined according to the proper law of the contract.
309 Mr Briggs and Mr Crane disagreed on the characterisation of the TradePractices Act claims. In Mr Crane's view, an English court would be most unlikely to accept Mr Briggs' argument that the claim for damages is to be characterised as contractual for English choice of law purposes.
310 Mr Briggs' argument called in aid the provisions of Article 5 of the Brussels Convention which was adopted by the Civil Jurisdiction and Judgments Act 1982. That Convention deals with jurisdiction of the contracting States. It is referred to in the preamble to the Rome Convention and Mr Briggs said that a UK court would seek to interpret the Rome Convention in a manner which was harmonious with the Brussels Convention.
311 Article 5(1) of the Brussels Convention provides that a person domiciled in a contracting State may be sued "in matters relating to a contract" in the courts of the place for performance of the obligation. Article 5(3) provides that in matters relating to tort or delict the person may be sued in the courts of the place where the harmful event occurred.
312 In Mr Briggs' opinion, an analogy is to be drawn between the meaning of "contractual obligations" in the Rome Convention and matters relating to a contract "in the Brussels Convention". Thus, in Mr Briggs' view, a claim under the Trade Practices Act in respect of conduct which induced entry into the contract would be a matter relating to a contract and hence a contractual obligation.
313 Mr Briggs also called in aid the European rule against cumulation of causes of action. Thus, if a claim could be brought under English law in the alternative in either contract or tort, European law would permit only one head of liability. It follows according to Mr Briggs' evidence that if the subject matter of these proceedings is litigated in the UK an alternative claim in either contract or tort would not be recognised for English choice of law purposes and the claim would be treated as a contractual obligation.
314 Mr Crane dealt with all of the existing authorities on this question. The relevant authorities are Agnew v Lansforsakringsbolagens AB [2001] 1 AC 223 ("Agnew"); Source Ltd v T.U.V. Rheinland Holding AG [1998] QB 54; Fonderie Officine Tacconi SpA v Heinrich Wagner Sinto Maschinenfabrik GmbH (HWS) [2002] ECR 0; Alfred Dunhill Ltd v Diffusion Internationale de Maroquinerie de Prestige SARL [2002] 1 All ER (Comm) 950 ("Alfred Dunhill"); Domicrest Ltd v Swiss Bank Corporation [1999] QB 548 ("Domicrest"); Raiffeisen Zentralbank Osterreich Ag v Alexander Tranos [2001] I.L Pr 9 ("Raiffeisen"); Base Metal Trading Limited v Ruslan Borisovich Shamurin [2002] CLC 322 ("Base Metal Trading") and Dicey and Morris at [32-025].
315 None of these authorities support Mr Briggs. He acknowledged under cross-examination by Mr Bathurst that his views were not supported by Dicey and Morris (although he is not an author of this chapter) and that his views were rejected by Mr Justice Moore-Bick in Base Metal Trading.
316 Moreover, although Mr Briggs did not concede the point, the authorities referred to by Mr Crane, most notably Agnew, Alfred Dunhill and Domicrest are not consistent with the view that the expression "contractual obligations" is to be interpreted as widely as "matters relating to a contract".
317 Mr Briggs conceded under cross-examination that there is no case in which the ratio supports his views. Nor does the dicta to which he referred in cases such as Raiffeisen support his thesis.
318 It seems to me that, on the existing authorities, Mr Crane's opinion is correct. However, even if it is, the question which would arise in the UK is whether, for the purposes of s 11 of the PIL Act, Australia is the country in which the events constituting the tort occurred. That will depend upon evidence to be considered by an English court. As Mr Hutley submitted, there would be a range of factors which would bear on the question. I am not in a position to second-guess the ultimate decision of the English court as to what law would be the proper law for English choice of law purposes.
319 In any event, I cannot, on the evidence before me, exclude the real possibility that the general choice of law rule for tort laid down in s 11 of the PIL Act will not be displaced by the provisions of s 12.
320 One of the circumstances which an English court may be able to take into account in order to displace the general rule is that the parties to the underlying contracts were bound by the Truth of Statements clause. It would no doubt be said by Chase that the reinsurance arrangements also attracted this provision and that the Truth of Statements clause excludes claims in tort other than for deceit. If so, it would follow that even though the misrepresentations are alleged to have occurred in Australia, the Trade Practices Act claim would be excluded under English choice of law rules. It is well established that exclusion clauses do not have that effect under the Trade Practices Act; see [19] above.
321 Thus, in my view there is a real risk that the Trade Practices Act claim for damages or relief under s 87 could not be conducted in the UK. The decision would therefore be akin to that which was dealt by Byrne J in Commonwealth Bank of Australia v White (No 1) [1999] 2 VR 681 at 705-706 (cited by her Honour Warren J in Commonwealth Bank v White (No 3) [2000] VSC 259). In those proceedings Lloyds sought a permanent stay of the action in Melbourne upon the ground that similar issues were raised in the proceedings in London. Mr White was a party to both sets of proceedings. There was a claim in London for negligent misrepresentation and a claim in Victoria under the Trade Practices Act and the Corporations Law. Byrne J refused the stay and said at 705-706:-
"The claims of Mr White based on misleading and deceptive conduct and breaches of the companies legislation have no counterparts in the London litigation ---
Accepting that there will be trouble and expense for Lloyds to conduct both proceedings, it can hardly be said that is unjustified for Mr White to bring the claim in a jurisdiction in which this is permitted rather than one where it is not."
322 The effect of the evidence of Professor Burrows, Norton Rose Professor of Commercial Law at Oxford University and the author of leading English texts, is that there are substantial differences between English law relating to misrepresentation and non-disclosure and the law which applies in Australia under the Trade Practices Act. The principal differences for present purposes are that, under the Trade Practices Act, a representation may be as to a future matter, innocent misrepresentation may sound in damages, there is a reversal of onus with respect to future matters and it is not possible to contract out of liability. Accordingly, under English law the remedies which would be open to ReAc and Monde Re are more restricted than in a claim under the Trade Practices Act.
323 In my view, the following observations of Lord Browne-Wilkinson in Australian Commercial Research & Development Ltd v ANZ McCaughan Merchant Bank Ltd [1989] 3 All ER 65 at 72-73 apply with equal force to the present proceedings:-
"I think when one does take the Act into account it becomes clear that Australia is the appropriate forum. The Australian Act provides a statutory remedy in addition to common law remedies in relation to the provision of services to Australians both in relation to acts done in Australia and apparently in certain circumstances to acts done outside Australia by non-Australians but having an impact within Australia. I have considerable doubts whether the English court if called on to adjudicate on this matter would apply the Australian Trade Practices Act 1974 as part of the applicable law in this action. It may be that it would do, but it seems to me unlikely. Even if the English court did apply the Trade Practices Act in deciding this case, it is manifest that the Australian courts are very much better qualified to deal with that Act than any English court would be. The proper law of the contract is the law of Queensland. The claim in tort will include a claim for a statutory tort under the Trade Practices Act. Therefore Australian law is the only possible law applicable in relation to the dispute, which is between what are two essentially Australian parties. In a case where the defendants are not Australian, or not in essence Australian, I would find it very difficult to know to what extent it was necessary or desirable that one should give effect to the Australian Trade Practices Act 1974. But it seems to me, where you have an Australian plaintiff claiming breach of duties in relation to the provision of financial services by an Australian group of companies, it is plainly more appropriate that that case should be decided where the protection of the Australian Trade Practices Act is made available and enforceable."
324 Dr Hardingham relied upon the decision in Williams v The Society of Lloyds [1994] 1 VR 274 as authority for the proposition that the Trade Practices Act claim should not of itself operate as a bar to a permanent stay. However, in my view, it is evident that the Court granted a stay in those proceedings because the case turned upon allegations which went to the very foundation of the conduct of Lloyds' insurance market in London. This was, quintessentially an issue connected with the UK and the Trade Practices Act claim did not provide a sufficient countervailing factor; see at 324-325.
325 For reasons set out above at [218] it would not be open to the applicants to run the Trade Practices Act claim in the USA.
326 I accept the submission of counsel for the applicants that the present proceedings are in effect the converse of CSR v Cigna. The co-existence of local and foreign proceedings is not vexatious or oppressive where relief is available in one forum which is not available in the other; see CSR v Cigna at 395.
Permanent Stay - Governing Law on the question of the right to avoid the contracts
327 The terms of the contracts of insurance provide for the contracts to be governed by English law and for the parties to submit to the jurisdiction of the English courts.
328 Although the reinsurance slips provide for the contracts to follow the wording, terms and conditions of the original policies, the English courts have held that these general words do not incorporate the terms of choice of law clauses in the underlying contracts; see Gan Insurance Co Ltd v Tai Ping [1999] Lloyds Rep IR 472; AIG Europe (UK) Ltd v Anonymous Greek Insurance [2000] Lloyds Rep IR 343.
329 In considering the factors which will determine the country with which the contracts are most closely connected, the factors will include the activities of the broker and the market in which the broker operates; see Dicey and Morris at [33-208].
330 There is accordingly a real possibility that an English court would find that English law governed the various policies of reinsurance brokered by Heath in the London market.
331 Thus, if ReAc and Monde Re were to seek to bring their claims in the UK under the Trade Practices Act, it is likely that an English court would hold that the question of avoidance was governed by English law without any occasion for the application of Australian law; see Akai Pty Ltd v People's Insurance Co Ltd [1998] 1 Lloyds Rep 90; cf Akai Pty Ltd v People's Insurance Company Ltd (1996) 188 CLR 418.
332 This is a further reason why the Federal Court is not a clearly inappropriate forum.
Loss or damage or "likely to suffer loss or damage"
333 Dr Hardingham and Mr Douglas submitted that the proceedings are hypothetical and premature because no question of ReAc and Monde Re's liability can arise on the contracts of reinsurance until the liability of the primary insurers is determined in the overseas proceedings.
334 In my view, the proceedings are not hypothetical because the primary insurers have not accepted the purported avoidance of the reinsurance policies by ReAc and Monde Re. Moreover, the recent proceedings instituted in New York, as to which see [350] to [353] below, make it clear that the proceedings are not hypothetical.
335 It seems to me that ordinarily a reinsurer can seek to have its dispute with the reinsured determined without waiting for any questions of liability to be determined in proceedings in respect of the underlying policy; the decision of the English Court of Appeal in AIG Europe (UK) Limited & Ors v The Ethniki [2000] 2 All ER 566 is an example of this. However, here the question which arises is whether the applicants have suffered or are likely to suffer loss so that a cause of action under s 82 or s 87 of the Trade Practices Act has accrued.
336 The applicants submitted that they have suffered loss because ReAc has paid $1.72m under the policy for the film "Letters from a Killer". Although there is a reference to this payment in Schedule 5 to the Statement of Claim, the cause of action for recovery of those moneys would lie in restitution and no such cause of action has been pleaded.
337 It is unnecessary for me to give further consideration to the question of whether loss has been suffered because in my opinion it is sufficient for the purposes of this application that loss is "likely" to be suffered. It is now well established that the Court does not take a narrow view of s 87. An entitlement to damages under s 82 is not a prerequisite to relief. It is sufficient that there is a real possibility of loss under the existing policies of reinsurance; see State of Western Australia v Wardley Australia Limited (1991) 30 FCR 245 at 261 (per Spender, Gummow and Lee JJ); Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 (per Black CJ, Gummow and Cooper JJ); see also the discussion of the authorities in Akron Securities v Iliffe at 364 per Mason P. However, that is a matter for the final hearing.
338 It is true that, assuming a contravention of s 52 is established, the Court will need to consider all the circumstances before the range of arguably appropriate remedies is selected from the "remedial smorgasbord"; see the discussion of the authorities in Akron Securities v Iliffe at 366-367 per Mason P. That too is a matter for the final hearing.
Submission to jurisdiction clauses in primary policies of insurance written by Monde Re in the USA
339 Each of the policies referred to in Schedule 3 to the Statement of Claim contained a choice of law clause in the following terms:-
"Each of the insurers hereby irrevocably submits itself to the jurisdiction of the United States District Court for the Southern District of New York (or in the event the District Court does not have jurisdiction or does not exercise jurisdiction for any reason whatsoever, to the State courts of the State of New York), for the purposes of any suit, action or other proceeding arising out of or based upon this policy or the subject matter hereof brought by the insured or any of its successors or assigns in either of the above-referenced forums. Each of the insurers, to the extent permitted by applicable law, (A) hereby waives, and agrees not to assert, by way of motion, as a defense, (sic) or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this policy or the subject matter hereof may not be enforced in or by such court and (B) hereby waives the right to assert in any such action, suit or proceeding any offsets or counterclaims except counterclaims that are compulsory. Each of the insurers hereby consents to service of process by mail at the address to which notices are to be given. Each of the insurers agrees that its submission to jurisdiction and consent to service of process by mail is made for the express benefit of the insured and final judgment against the insurers in any such action, suit or proceeding shall be conclusive, and may be enforced in any other jurisdiction (A) by suit, action or proceeding on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and of the amount of the claim or liability of the insurers therein described or (B) in any other manner provided by or pursuant to the laws of such other jurisdiction, provided, however, that the insured may at its option bring suit, or institute other judicial proceedings against the insurers or any of their respective assets in any State or Federal Court of the United States or of any country or place where such insurer or such assets may be found.