Limit (No 3) Ltd & Ors v PDV Insurance Company

A contractual dispute or jurisdiction clause in a reinsurance slip must be construed in its documentary and commercial context. Where the only reference to it appears within provisions creating a special regime for USA and Canadian claims, it may be confined to that regime rather than applying to the contract as a whole. A renewal slip incorporating wording as expiring inherits that limited scope.

On forum conveniens, the claimant seeking to proceed in England must show that England is clearly the more suitable forum in the interests of the parties and justice. The judge exercises a broad discretion, considering possible issues, evidence, local knowledge, related proceedings and efficiency in the round. Firm evidence that every possible issue will arise is not always required at an early stage.

PDVSA suffered pollution losses after leaks from oil pipelines in Venezuela. Its insurer, Mercantil, had reinsured the risks with PDV Insurance Company, which had retroceded them to the appellants in the London market. Before any underlying proceedings had been commenced in Venezuela, the appellants sought declarations that they were not liable to indemnify PDV Insurance Company.

Gross J granted permission to serve the claim forms out of the jurisdiction. Moore-Bick J later set aside that permission, the service and the subsequent proceedings. He held that the attached Dispute Clause applied only to North American claims and that Venezuela was the forum conveniens. The appeal concerned the construction of the Dispute Clause and, if it was limited, whether England was clearly the appropriate forum.

Auld LJ gave the leading judgment. Tuckey LJ agreed with his reasons. Clarke LJ also agreed, adding a narrow caution on the identification of issues in forum applications.

1. Construction of the 1997 slip. The only reference to the Dispute Clause in the slip appeared within the section dealing with the special USA and Canadian regime. Read with the clause’s reference to disputes concerning matters contained in the slip, that positioning confined the clause to that regime. The construction was supported by the contractual structure and commercial context, and was consistent with the approach in Hill v Mercantile and General Reinsurance Co PLC [1996] 1 WLR 1239, Toomey v Banco Vitalicio [2003] EWHC 1102 (Comm) and Bensaude v Thames & Mersey Marine Insurance Co Ltd [1897] AC 609.
2. Construction of the 1999 slip. The words Wording as expiring incorporated the 1997 terms, including the Dispute Clause with its limited scope. The further reference to endorsements and addenda as expiring concerned later alterations and could not enlarge an original term of the earlier cover. The Court therefore did not need to determine the admissibility or contractual status of the further wording discovered during the appeal.
3. Forum conveniens. Applying the principles in Spiliada Maritime Corp v Consulex Ltd [1987] AC 460, the claimant had to show that England was clearly the more suitable forum in the interests of the parties and for the ends of justice. The inquiry was discretionary and evaluative, not a rigid mathematical exercise. The Judge was entitled to consider issues likely or possibly to arise, giving little weight to matters that were fanciful or unlikely, and to assess the factors cumulatively.
4. The Judge was entitled to give weight to Venezuelan evidence and witnesses, the application of Venezuelan law, possible disputes concerning pipeline maintenance, landowner waivers and limitation, and the risk that related disputes in the underlying insurance chain would produce inconsistent outcomes if tried separately. English governing law and London market practice did not make England clearly preferable because the likely disputes were principally factual and overseas. The concerns about the quality of Venezuelan justice were unsupported by the cogent evidence required by The Abidin Daver [1984] AC 398.
5. An appellate court should be slow to interfere with the trial judge’s forum discretion. No error of principle had been shown and the decision fell within the generous ambit of reasonable disagreement described in G v G (Minors: Custody Appeal) [1985] 1 WLR 647. The appeal was dismissed and the Judge’s order upheld.

Clarke LJ observed that, ordinarily, a defendant should identify as clearly as possible the issues said to require trial abroad and should not rely merely on speculation. The unusual, pre-emptive nature of these proceedings justified a more cautious assessment of what issues might ultimately arise.

• Court of Appeal (Civil Division) On 11 April 2005, the Court dismissed the appeal and upheld Moore-Bick J’s order.
• Queen’s Bench Division, Commercial Court On 11 November 2003, Moore-Bick J set aside Gross J’s permission to serve the claim forms out of the jurisdiction, the service and the subsequent proceedings. He held that the Dispute Clause was limited to North American claims and that Venezuela was the forum conveniens.
• Queen’s Bench Division On 20 December 2002, Gross J granted permission to serve the claim forms on PDV Insurance Company out of the jurisdiction.