Equitas Ltd & Anor v Wave City Shipping Company Ltd & Ors

A party may seek a negative declaration in the courts identified by the jurisdiction rules for tort claims, even while denying that any tort was committed. The relevant jurisdictional gateway covers the existence of the alleged tort as well as its consequences. A profit commission in a reinsurance contract does not, by itself, induce the insurer to breach the underlying insurance contract. Liability for inducing breach requires knowledge of the contract and an intention to interfere with it, together with the other elements of the tort. Declaratory relief may be granted where a threatened claim is ill founded and the claimant has a legitimate need for clarification.

Equitas Limited and Equitas Reinsurance Limited sought declarations against Wave City Shipping Company Limited, Robin Services Limited and Leoninus Shipping S.A. The defendants had threatened claims alleging that profit commission provisions in reinsurance arrangements caused Hellenic War Risks Mutual Association to breach or terminate underlying insurance contracts, or otherwise committed torts against them.

The defendants failed to acknowledge service or participate in the proceedings. The court therefore considered default judgment, service and jurisdiction under the relevant European regulations, the validity of the threatened tort claims, and whether declaratory relief should be granted.

1. Default judgment and jurisdiction. The claimants had complied with the procedural requirements for judgment in default and with the applicable service requirements. The court had jurisdiction under Article 5(3) of Council Regulation EC 44/2001 because the alleged tortious act would have occurred in London, where the reinsurance was written.
2. Negative declarations. Article 5(3) permits proceedings in the place where the harmful event occurred or may occur. That jurisdiction is available for a negative declaration even though the claimant denies that the contract existed or that a tort was committed. The reasoning in Boss Group Limited v Boss France S.A. [1997] 1 WLR 351, approved in Agnew v Lõnsforsõkringsbolagens [2001] 1 A.C. 223 and adopted in USF Ltd v Aqua Technology [2001] All E.R. (Comm) 856, applied by analogy to tort. A negative declaration was not a substantive ground for declining jurisdiction, and the claim was not impermissible forum shopping.
3. Inducing breach of contract. The tort requires an intentional interference with a known contract which causes a breach and damage, unless the interference is justifiable. A profit commission may make reinsurance more profitable when an underlying claim is rejected, but that economic effect does not establish an intention to induce breach. There was no evidence that the relevant reinsurers intended to cause Hellenic to breach its insurance contracts, nor that any breach occurred because of a profit commission provision. The claims therefore had no foundation.
4. Other claims and declaratory relief. Equitas and ERL were not parties to the relevant reinsurance arrangements, and their responsibility did not extend beyond 1992, whereas Robin and Leoninus became members of Hellenic later. The threatened claims were also probably time barred. The defendants had been given ample opportunity to withdraw the threats or defend. Declarations were therefore appropriate, and the defendants were ordered to pay the claimants’ costs summarily assessed at £42,765.

First instance decision. The defendants did not acknowledge service or participate in the proceedings. The court entered judgment in default and granted the declarations sought.