Judgments - Agnew (Suing on his own behalf and in a representative capacity on behalf of all members of Lloyd's Syndicates 672, 79, 1023 and 590) and others v. Länsförsäkringsbolagens A.B.

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    The so-called "obligations" relied upon by the appellant are in similar case. There is, of course, a duty to act honestly, and a dishonest misrepresentation may give rise to an action in tort for damages for fraud. But there is no contractual obligation not innocently to misrepresent the facts during contractual negotiations. Such a misrepresentation does not found a claim for breach of contract, though any concluded contract which is induced by the misrepresentation is voidable at the suit of the representee.

    English law draws a clear distinction between misrepresentation and non-disclosure. There are, of course, exceptional cases where in the particular circumstances silence amounts to a positive statement. Apart from these, however, there is normally no duty to disclose information which is material to the other party's decision whether or not to enter into the contract. English law knows no general obligation of good faith in pre-contractual negotiations. In this respects it differs from civilian systems. There is, however, an exception in the case of contracts where in the nature of the case knowledge of the relevant facts is in the exclusive possession of one of the parties. Such contracts are described as contracts "of the utmost good faith." The party who is in possession of the relevant facts must make full disclosure of them to the other party. If he does not, the other party may have the contract set aside ab initio. Contracts of insurance (which for this purpose includes reinsurance) are the paradigm example of such contracts. The insured is bound to make a fair presentation of the risk to the insurer. If he does not, the insurer may avoid the contract. This is so whether the insurer is able to prove a positive misstatement of the facts or merely a failure to state them fairly.

    It is tempting to equate the duty of the insured to make a fair presentation of the risk with the obligation of good faith which obtains in civil law systems, but it would in my view be a mistake to do so. French law recognises a general "obligation de bonne foi dans la formation des contrats," breach of which gives rise to liability in delict. German law has embraced the concept of "culpa in contrahendo", which gives rise to liability whether or not a contract is concluded, and accordingly is also not considered to be based on contract. But both sound in damages, and thus differ from the English doctrine, which is incapable of giving rise to contractual or tortious liability whether or not a contract is concluded but merely serves to render any resulting contract voidable.

    It is true that, as the respondents have stressed, English judges tend to describe the obligation to make full disclosure, where it exists, in terms of duty and obligation. It is also true that Section 18(1) of the Marine Insurance Act 1906, which prescribes the corresponding duty in the case of marine insurance, is couched in mandatory terms, though it does not use the expressions "duty" or "obligation." But all that is meant is that the insured is bound to make full disclosure if he wishes to achieve a fully binding contract. We employ similar language when we speak of compliance with formal requirements. We say that a contract "must" be in writing, or that it "must" be signed by the parties. But there is no obligation on either party to observe the requisite formalities. Failure to do so does not constitute a breach of a contractual obligation; it merely prevents the formation of a binding contract.

    In my view, while the expression "obligation in question" has an autonomous meaning, it must be limited to an obligation non-performance of which gives rise to contractual liability, and does not extend to what, when properly analysed, is merely a condition precedent to the formation of a fully binding contract. This conclusion is reinforced by the consideration that, as Evans L.J. recognised, the respondents' arguments, if accepted in full, would permit cases like the present to be litigated in the forum loci contractus contrary to the general scheme of the Convention.

    I should add that in my opinion it would make no difference if the contract contained an express warranty on the part of the insured that it had made full disclosure of all relevant facts. Such a warranty, which is sometimes included in the contract, adds nothing. It does not convert a condition precedent to the formation of a binding contract into an independent contractual obligation. It is no more than a warranty that the condition has been satisfied, and serves primarily as a reminder of its existence.

    On the related question, I am not persuaded that the so-called obligation to make full disclosure has any place of performance within the meaning of that expression in Article 5.1. It is true that, if the appellant had made a fair presentation of the risk, it would have done so in London where the risk was in fact presented to the respondents. But I do not think that that is enough. "The place of performance of a contractual obligation" must surely mean the place where the contract stipulates that the obligation ought to be performed, not the place where it would have been performed in practice if it had been performed at all. This is reasonably clear in the English version of the Convention, but it is crystal clear in the German, French and Italian versions. Of course, a "negative obligation" not to be guilty of duress or undue influence has no place of performance (though it is inappropriate to describe this as an obligation at all) but the same is true of the "obligation" to make full disclosure which has both positive and negative aspects. It has no place stipulated for performance. A misrepresentation can be corrected and a failure to make disclosure can be remedied at any time and in any place prior to the conclusion of the contract. This reinforces the conclusion that the so-called "obligation" of full disclosure is not a contractual obligation which the party in default has promised to perform but rather a condition precedent to the formation of a fully binding contract.

    In my opinion the respondents are not alleging the breach of a contractual obligation which ought to have been performed in London, and the Court of Appeal were wrong to conclude that they are permitted by Article 5.1 to bring the proceedings in England. This gives rise to a difficult question on which the Court of Justice has not hitherto pronounced. It is this. Where the dispute concerns a matter relating to a contract but the plaintiff's claim that he is not liable is not founded on the breach of any particular contractual obligation by the defendant, is the jurisdiction conferred by Article 5.1 excluded altogether, or does Article 5.1 operate to confer jurisdiction on the courts for the place of performance of the contractual obligation from which the plaintiff seeks to be relieved? The jurisprudence of the Court of Justice suggests that strict compliance with Article 5.1 is required, and that the Court does not strain to make the Article apply. It takes refuge in the fact that the plaintiff can always sue the defendant in the courts of the Contracting State where the defendant is domiciled. But we are not called upon to decide this question, for as I have explained neither party contends for the place of performance of the obligation from which the respondents seek to be relieved.

Article 5.3: "matters relating to tort, delict or quasi-delict."

    The respondents also rely on Article 5.3, which applies in matters relating to tort, delict and quasi-delict, and which confers jurisdiction on the courts for the place where the harmful event occurred. Their claim to bring the present proceedings within this principle is hopeless. The application of Article 5.3 is excluded by the fact that the matter relates to a contract, for the two are mutually exclusive. The failure to make a fair presentation of the risk and not to misrepresent it does not give rise to contractual or tortious liability under English law, and cannot therefore be classified as delictual. Finally there is no relevant harmful event, since apart from the costs of negotiation and preparation of the contract, which are not recoverable in English law, the plaintiff suffers no loss. The appellant does not bring proceedings in order to recover a loss, but to avoid one.


    I would allow the appeal and stay the proceedings.


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