Society of Lloyd's v White [2004] VSCA 101

Court of Appeal (Vic)|2004-06-04|Before: WINNEKE, P., BUCHANAN and EAMES, JJ.A.

Practice and procedure - Contractual submission to exclusive jurisdiction of foreign court - No issue estoppel - Applications to stay local proceedings refused - Leave to appeal refused.

I have had the benefit of reading the reasons which Buchanan, J.A. proposes to deliver in disposing of the applications for leave to appeal. I agree with his Honour, for the reasons which he gives, that the applications for leave should be refused.

In 1981, the respondent ("White") became a name or member of the applicant ("Lloyd's"). Lloyd's, an incorporated body, regulates an international insurance market that operates in England. Underwriting in the market is performed by syndicates consisting of names, that is, persons who have executed a general undertaking in favour of Lloyd's and have been accepted by Lloyd's as members. The syndicates specialize in underwriting particular forms of risks. The names join a syndicate for a year of underwriting. Each policy consists of individual contracts made by names, each of whom is only liable for his or her share of the risk. The name's liability is unlimited. The business of each syndicate is conducted by a managing agent who collects premiums, pays claims and effects the insurance. The names are obliged to employ members' agents who advise the names which syndicates they should join and keep them informed of material factors which affect their underwriting. White was an active underwriting member of Lloyd's between 1 January 1981 and 31 December 1992.

White provided security to Lloyd's in the form of irrevocable letters of credit from Commonwealth Bank of Australia. In 1986 the names, including White, were required to give a written undertaking to Lloyd's in order to continue underwriting as names. Clauses 2.2 and 2.3 of the undertaking provided:

"2.2 Each party hereto irrevocably agrees that the courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature arising out of or relating to the Member's membership of, and/or underwriting of insurance business at Lloyd's and that accordingly any suit, action or proceeding (together in this Clause 2 referred to as `Proceedings') arising out of or relating to such matters shall be brought in such courts and, to this end, each party hereto irrevocably agrees to submit to the jurisdiction of the courts of England and irrevocably waives any objection which it may have now or hereafter to (a) any Proceedings being brought in any such court as is referred to in this Clause 2 and (b) any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon each party and may be enforced in the courts of any other jurisdiction. 2.3 The choice of law and jurisdiction referred to in this Clause 2 shall continue in full force and effect in respect of any dispute and/or controversy of whatsoever nature arising out of or relating to any of the matters referred to in this Undertaking notwithstanding that the Member ceases, for any reason, to be a Member of, or to underwrite insurance business at, Lloyd's."

In the late 1980s and early 1990s persons to whom policies had been issued by syndicates of Lloyd's suffered huge losses and incurred significant liabilities which were covered by the policies. They arose chiefly from the north European storms of 1987, Piper Alpha and Hurricane Gilbert in 1988, Hurricane Hugo, the San Francisco earthquake, Exxon Valdez in 1989, the north European storms of 1990 and, most importantly, the significant increase in liability for personal injuries caused by asbestos. In the 1970s and 1980s, there were many syndicates infected with asbestos-related risks which had been persistently underestimated. The procedure at Lloyd's was that each year's accounts were, at the end of a three-year period, closed into the next year's accounts. The effect was that the new names inherited losses of massive proportions. When names were called upon to contribute to the losses, litigation broke out between the names and Lloyd's in England, the United States of America, Canada, Australia, Belgium and before the European Commission.

In 1995 and 1996, Lloyd's drew down the letters of credit which White had obtained from Commonwealth Bank of Australia. On 29 May 1997, Commonwealth Bank of Australia commenced proceedings in the Supreme Court against White for the amount paid to Lloyd's pursuant to the letters of credit. On 10 December 1997, White was given leave to join Lloyd's as a third party. A statement of claim was filed in the third party proceeding alleging misleading and deceptive conduct contrary to s.52 of the Trade Practices Act 1974 of the Commonwealth and s.11 of the Victorian Fair Trading Act 1985, negligent misrepresentation and breach of the companies legislation on the basis that an underwriting membership of Lloyd's was a prescribed interest. It was also alleged that it would be contrary to public policy and unconscionable for Lloyds to rely upon the exclusive jurisdiction clauses in the general undertaking, for White's agreement to give the undertaking was obtained when Lloyd's knew of its potential liability under the Trade Practices Act, the Fair Trading Act and the companies legislation for misrepresentations to members, and procured his agreement to shield itself from that liability.

On 29 January 1999, Lloyd's applied to stay the third party proceedings, relying on the exclusive jurisdiction clauses in the undertaking. Byrne, J. refused to stay the proceeding.[1] He held that prima facie White should be held to his bargain and bore the onus to show strong cause why the discretion to stay the proceeding should not be exercised[2], but concluded that he had discharged the onus. His Honour said that it was undesirable that an exclusive jurisdiction clause should circumvent statutory protection for investors and against misleading or deceptive conduct and one of the issues in the case was the impropriety of Lloyd's in introducing an exclusive jurisdiction agreement into its contractual relationship with White. The Court of Appeal refused leave to appeal against the decision of Byrne, J. and the High Court refused special leave to appeal against the decision of the Court of Appeal.

The present applications are for leave to appeal against decisions by Warren, J. and Mandie, J. refusing further applications by Lloyd's to stay the third party proceeding, applications made subsequently to the decision of Byrne, J. Before those judges Lloyd's relied upon what it described as new facts which emerged in the course of litigation in England between White and other names on the one hand and Lloyd's on the other hand. Accordingly, it is necessary to briefly recount some of the history of that litigation.

On 28 February 2000, proceedings were commenced in England by Lloyd's against Sir William Jaffray Bt. and other names. The names launched a counterclaim alleging that Lloyd's had made fraudulent representations in brochures, reports and accounts to induce them to join Lloyd's or continue as underwriting members of Lloyd's. The representations concerned exposure of Lloyd's' members to asbestos-related claims and the reserves required to meet the claims.

The names' counterclaim was limited to fraud because s.14(3) of the Lloyd's Act 1982 provided that Lloyd's was not liable for damages for "negligence or other tort, breach of duty or otherwise" in respect of any act or omission in carrying out its functions affecting, inter alia, admission to membership and the underwriting business of any member "unless the act or omission complained of was done or omitted to be done in bad faith ...."

On 3 March 2000, Cresswell, J. in the High Court in England granted an interim injunction in favour of Lloyd's restraining the names in the Jaffray proceedings from pursuing in the courts of any country other than England any claim against Lloyd's arising out of the names' membership of Lloyd's or the underwriting of insurance business of Lloyd's. The injunction was granted to restrain breach of the exclusive jurisdiction clauses in the undertaking to Lloyd's. On 3 November 2000, judgement in the Jaffray proceeding was given in favour of Lloyd's. On 2 February 2001, the interim anti-suit injunction was made permanent.

The names appealed to the Court of Appeal against the judgment in the Jaffray proceeding. On 26 July 2002, the appeal was dismissed and subsequently leave to appeal to the House of Lords was refused. In the course of its reasons, the Court of Appeal said that Lloyd's had published a brochure falsely representing that Lloyd's had in place a rigorous auditing system in relation to the making of reasonable estimates in respect of, inter alia, incurred but not reported claims. As a consequence of those observations a number of names, including White, applied to a judge in the High Court in England in a proceeding known as the "Laws proceeding" for leave to bring claims under the Misrepresentation Act 1967 and in negligence. By reason of the provisions of the Lloyd's Act, the causes of action were available only to names who had joined Lloyd's before the commencement of the Act. The Act also limited the ambit of the claim which White could make. White has indicated that he does not intend to proceed with his claim in the Laws proceeding. Nevertheless, he remains a party to the proceeding, for he is apparently reluctant to incur a liability for costs by discontinuing his claim.

On 24 April 2001, Lloyd's made a second application to stay the third party proceeding in the Supreme Court. It was contended that two significant events had occurred since the first application for a stay had been refused, namely, the granting of the anti-suit injunction by Creswell, J. and the success of Lloyd's in the Jaffray proceedings.

The application was refused by Warren, J., as her Honour then was. Her Honour said that as the Court of Appeal had granted leave to appeal from the decision in the Jaffray proceeding in favour of Lloyd's, a stay should not be granted for the names might succeed. Her Honour discounted the anti-suit injunction granted in England on the basis that the Australian consumer protection acts "were not taken into account or at least were not given the extent of the weight and significance that would have attached in this jurisdiction."

A third application to stay the third party proceedings was made on 25 March 2003. The new facts relied upon by Lloyd's on this occasion were that the decision at first instance in the Jaffray proceeding had been upheld in the Court of Appeal and the House of Lords had refused leave to appeal, that White had been granted leave to bring a claim otherwise than in fraud in the Laws proceeding, and the claim in that proceeding was based upon the same facts as those relied upon in the Supreme Court to found the claims made pursuant to statute.

Mandie, J. said that as White had disavowed an intention to proceed with any claim in England, his inclusion in the Laws proceeding was not a basis justifying a stay. His Honour otherwise refused to characterize the matters advanced by Lloyd's as new facts requiring the question of a stay to be revisited.

Each of the decisions complained of concerned the exercise of discretion on a point of practice and procedure rather than the exercise of discretion determining substantive rights. In the application of the well-established principles governing the review of discretionary judgments[3], extra restraint is required in such a case.[4]

Warren, J. and Mandie, J. accepted that earlier decisions refusing to stay the third party proceeding created no issue estoppel between the parties as they were interlocutory. Accordingly, the decisions could be revisited if new facts had emerged.[5] Mr Myers, counsel for Lloyd's, submitted in this Court that Warren, J. and Mandie, J. erred in the manner in which they dealt with the new facts advanced on behalf of Lloyd's. Their Honours, it was said, assumed that the earlier decision of Byrne, J. was correct and considered whether the new facts warranted departure from that decision. It was submitted that once new facts were established, the court was required to consider the entire matter afresh, taking into account the facts previously considered together with the new facts.

In my opinion, neither Warren, J. nor Mandie, J. fell into error in the manner contended by Lloyd's. While Warren, J. did say that Byrne, J.'s decision "created an important factor in the exercise of the discretion as to whether or not to permanently stay the proceeding", and took into account the refusals of leave to appeal from his Honour's decision, she reviewed a number of the authorities and independently reached the conclusion that the proceeding could continue in the Supreme Court for, she said, the courts in England could not give relief under legislation equivalent to the Trade Practices Act or the Fair Trading Act. In reaching her conclusion, Warren, J. appears to have weighed the developments since Byrne, J.'s decision advanced by Lloyd's.

To bolster his submission that White should be held to his bargain represented by the general undertaking containing the exclusive jurisdiction clauses, it was submitted by counsel for Lloyd's that as there were thousands of names from many different countries, it was necessary to stipulate one system of law to determine their claims in order to provide equity between the names. It would be inequitable if some names could escape liability by relying upon laws denied to other names.[6] Causes of action based on these laws could not be litigated in England.[7] In my opinion, Warren, J. was entitled to emphasize the importance of White's ability in Victoria to invoke the protection of the Trade Practices Act, Fair Trading Act and companies legislation, laws embodying specific policies directed against practices which the legislature has deemed oppressive or unjust.[8] Membership of Lloyd's was sold in many marketplaces. Customers in each market were entitled to the protection of the laws regulating commerce in that market. When it entered a foreign jurisdiction Lloyd's was required to deal with the legal system it found. In my view, names in markets without effective consumer protection laws have no legitimate complaint about the operation of laws in other jurisdictions simply because they may produce different results. It is one thing to require claims to be determined by the courts of one country; it is another to require all claims to be determined by the same laws whether or not they are the appropriate laws to govern the transaction giving rise to a claim.

For good measure her Honour said, quoting Hayne, J.A. in D A Christie Pty. Ltd. v. Baker that White was entitled to the benefit of the policy of "finality of judicial determinations and against a person being vexed twice in the courts for the same matter."[9] In other words, nothing new had been brought forward to warrant reconsideration of the matter. In the Jaffray proceeding, Cresswell, J. decided that the representations relied upon by the names had not been established. The same representations found White's claims in the Victorian proceeding, although they are now advanced as innocent rather than fraudulent representations. The fact that White seeks to litigate the same issue again is perhaps not irrelevant to the question whether the proceeding should be stayed. Nevertheless, in my opinion, the first basis upon which Warren, J. dealt with the new fact, that is, by taking it into account together with the facts considered by Byrne, J., properly disposed of the application.

It was submitted on behalf of Lloyd's that the decision of Cresswell, J. granting an anti-suit injunction in favour of Lloyd's constituted an issue estoppel against White, and that was a relevant new fact because one of the reasons advanced by Byrne, J. for holding that the proceeding should not be stayed was the attack made by White on the exclusive jurisdiction clause. In my opinion, Warren, J. correctly rejected the injunction as a new fact which bore upon the question of a stay of the proceeding. In the statement of claim before her Honour, the exclusive jurisdiction clauses were challenged on the basis that their dominant purpose was to shield Lloyd's from the statutory protection afforded White by the Trade Practices Act, the Fair Trading Act and the Companies (Victoria) Code and thus it was alleged that the clauses were void as being contrary to public policy. No such public policy was in issue in the High Court in England. Cresswell, J. referred only to the attack on the exclusive jurisdiction clauses based upon unconscionable conduct and said:

"The Jaffray judgment precludes any allegation that the EJC was procured by fraud or similar wrongdoing on the part of Lloyd's."

While issue estoppel can be based on a foreign judgment[10], there must be identity of issues. The issue in the decision said to constitute an estoppel must be the same as the issue in respect of which estoppel operates.[11] For like reasons, I do not think that comity required this Court to stay its proceeding.[12]

In his reasons for the decision, Mandie, J. said:

"In my opinion, the reasoning of Byrne, J. and of Warren, J. is as much applicable to the present state of the third party proceeding (as set out in the Fourth Amended Statement of Claim) as it was at the time of those earlier applications. I am not persuaded that the reasoning of Warren, J. is arguably rendered inapplicable by anything that has since occurred. I conclude that it is an abuse of process to renew any stay application because there is no new matter or event justifying a further application for a stay."

Counsel for Lloyd's seized upon the second sentence and submitted that it showed that his Honour assumed the correctness of Warren, J.'s decision and simply determined whether the new facts required departure from it. I do not agree. When the remark is set in its context, I think Mandie, J. did not view the matters relied upon by Lloyd's as new facts that required the question of a stay to be reconsidered. In my view, Mandie, J. properly characterized the matters relied on by Lloyd's as irrelevant in the sense that they did not constitute considerations to be taken into account in the exercise of the discretion to stay the proceeding. White's failure to successfully appeal from Cresswell, J.'s decision in the Jaffray proceeding did not require a reappraisal of the question of a stay, and, in my view, his Honour was entitled to treat White's declared intention to withdraw from the Laws proceeding as depriving his participation to that point of significance.

This Court cannot exercise the discretion to stay the proceedings merely because Warren, J. or Mandie, J. have taken a different view from that which the judges of this Court would have taken if they had been in their place. The discretion is only reopened if this Court reaches the clear conclusion that, by reason of some identifiable error or the unreasonableness of the decision, one or both of the judges

below failed properly to exercise the discretion committed to them. For the reasons I have stated, I do not think that any such error has been demonstrated. Further, I do not consider that substantial injustice would be occasioned to Lloyd's if it were required to face causes of action available to White because he was recruited as a name in Victoria.[13] Accordingly, I would refuse leave to appeal.

For the reasons given by Buchanan, J.A., I agree that the applications for leave to appeal from the decisions of Warren, J. (as her Honour then was) and Mandie, J. should be refused.

[1] Commonwealth Bank of Australia v. White [1999] VSC 262; [1999] 2 V.R. 681.

[2] The Eleftheria [1970] P 94; Oceanic Sun Line Special Shipping Company Inc. v. Fay [1988] HCA 32; (1988) 165 C.L.R. 197 at 230-1 per Brennan, J.; Akai v. The People's Insurance Company Ltd. (1996) 188 C.L.R. 418 at 428-9 per Dawson and McHugh, JJ.

[3] See House v. The King [1936] HCA 40; (1936) 55 C.L.R. 499; Mace v. Murray [1955] HCA 2; (1955) 92 C.L.R. 370.

[4] Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. [1981] HCA 39; (1981) 148 C.L.R. 170 at 176-7 per Gibbs, C.J., Aickin, Wilson and Brennan, JJ., Contender 1 Ltd. v. L E P International Pty. Ltd. [1988] HCA 60; (1988) 63 A.L.J.R. 26 at 28 per Wilson, Dawson, Toohey and Gaudron, JJ.

[5] See D A Christie Pty. Ltd. v. Baker [1996] VicRp 89; [1996] 2 V.R. 582.

[6] By reason of the provisions of the Lloyd's Act, names who could only invoke the laws of England were limited to causes of action with an element of moral turpitude in respect of transactions after 1982.

[7] The Society of Lloyd's v. Daly, unreported, High Court of Justice (Tuckey, J.) 27 January 1998; Society of Lloyd's v. Fraser, unreported, Court of Appeal (England) 31 July 1998.

[8] Cf. Kay's Leasing Corporation Pty. Ltd. v. Fletcher [1964] HCA 79; (1964) 116 C.L.R. 124 at 143 per Kitto, J.

[10] Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No. 2) [1966] A.C. 853.

[11] New Brunswick Railway Co. v. British and French Trust Corporation Ltd. [1939] A.C. 1; Ramsay v. Pigram [1968] HCA 34; (1968) 118 C.L.R. 271 at 276 per Barwick, C.J.; Co-ownership Land Development Pty. Ltd. v. Queensland Estates Pty. Ltd. (1973) 47 A.L.J.R. 519.

[12] Laker Airways Ltd. v. Sabena [1984] USCADC 103; (1984) 731 F. 2d 909 at 933-4, 937-8 per Wilkey, J.; AirBus Industrie GIE v. Patel [1998] UKHL 12; [1999] 1 A.C. 119 at 136 per Lord Goff of Chieveley.

[13] Niemann v. Electronic Industries Ltd. [1978] VicRp 44; [1978] V.R. 431 at 441 per Murphy, J.; BHP Petroleum Pty. Ltd. v. Oil Basins Ltd. [1985] VicRp 72; [1985] V.R. 756 at 758, 759-60, 763-4 per Fullagar, J.; X v. Director of Public Prosecutions [1995] VICSC 195; [1995] 2 V.R. 622 at 626 per Callaway, J.A.

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