Donohue v Armco Inc. & Ors

Where parties have agreed an English exclusive jurisdiction clause, the court should ordinarily restrain foreign proceedings brought in breach of that agreement. The applicant is entitled to relief unless the party resisting it shows strong cause or strong reasons.

The clause is construed generously, covering disputes arising in connection with the agreement, including related fraud and conspiracy claims. Convenience, witnesses, documents, nationality and advantages available in the foreign forum normally carry little weight because the parties chose the forum with those matters in mind. Independent third-party litigation and a real risk of inconsistent decisions may amount to strong cause, but separate claims involving different subject matter need not prevent an injunction. Comity and a foreign court’s assumption of jurisdiction do not displace the parties’ contractual rights where the English court considers the clause valid and applicable.

Mr Donohue appealed against Aikens J’s dismissal of his application for an anti-suit injunction restraining Armco companies from pursuing fraud and related claims in the Southern District of New York. Potential co-claimants, including Wingfield, CISHL, Mr Rossi and Mr Stinson, also appealed against the refusal of joinder. APL and NNIC appealed against orders setting aside service on them.

The dispute concerned an English exclusive jurisdiction clause in a sale and purchase agreement and two transfer agreements relating to the sale of a British insurance business. The central issues were whether Armco Inc, as successor to AFSEL, was bound; which New York claims fell within the clauses; whether the continuation of related foreign proceedings constituted strong cause; and whether the potential co-claimants should be joined.

1. Disposition. By a majority, the appeal was allowed. An anti-suit injunction was granted to Mr Donohue, Wingfield, CISHL, Mr Rossi and Mr Stinson in respect of the claims within the exclusive jurisdiction clauses. Service on APL and NNIC was set aside.
2. Binding effect. Armco Inc was treated, for the purposes of the applications, as successor to AFSEL. Having consistently represented itself in related proceedings as AFSEL’s successor and obtained the benefits of that position, it could not accept those benefits while denying the corresponding burden of the jurisdiction clause. The First, Second and Third Defendants were therefore bound by the clause.
3. Construction. Exclusive jurisdiction clauses are construed generously, reflecting a presumption in favour of one-stop adjudication. The clause covered disputes arising out of or in connection with the sale and purchase agreement, including the MBO allegations, Counts 1, 2 and 8, the relevant part of Count 14, and the related RICO claims. The collection-agreement and trust-fund claims were distinct and fell outside the clauses.
4. Discretion. The governing test was whether strong cause or strong reasons justified allowing foreign proceedings to continue. Convenience, documents, witnesses, nationality, residence, foreign procedural advantages and the possibility of triple damages were generally insufficient. Separate litigation concerning materially different subject matter did not create a sufficient risk of inconsistent verdicts. The foreign court’s decision accepting jurisdiction and considerations of comity did not outweigh the contractual commitment to England.
5. Joinder. Wingfield and CISHL had substantive claims under the agreements. Mr Rossi and Mr Stinson, although not parties to the clauses, were properly joined because the connected issues were appropriately to be tried in England and they submitted to the jurisdiction. The majority considered that the relevant English forum justified joinder.
6. Brooke LJ dissented on the result. He considered Count 2 outside the clause, delay by Mr Donohue and Wingfield materially significant, and the risk of inconsistent verdicts sufficient to justify allowing all proceedings to continue in New York.

• Court of Appeal (Civil Division): allowed the appeal against Aikens J’s decision, granted anti-suit relief in respect of the claims within the exclusive jurisdiction clauses, joined the specified co-claimants, and set aside service on APL and NNIC.
• Queen’s Bench Division: Aikens J dismissed the anti-suit injunction and joinder applications and set aside permission to serve APL and NNIC: [1999] 2 Lloyd's 649.