Ace Insurance Ltd v Moose Enterprise Pty Ltd

[2009] NSWSC 724

CITATION:	Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724
HEARING DATE(S):	9 April 2009
JUDGMENT DATE :	31 July 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
DECISION:	Defendant permanently restrained from taking further steps in Californian proceedings, save for discontinuing them.
CATCHWORDS:	PRIVATE INTERNATIONAL LAW– Inappropriate forum – Application for anti-suit injunction – where insurance policy contains express choice of law clause providing that disputes be determined in accordance with the laws of Australia – where policy contains submission to jurisdiction of Australian courts - where both parties resident in Australia – where insurance contract formed in Australia – where defendant commences action in California in order to gain forensic advantage not available in Australia – Whether jurisdiction clause exclusive or non-exclusive – relevant considerations - where Australian courts are natural forum– where Australian courts would have jurisdiction in any event – held: jurisdiction clause was exclusive – where Australian courts not an inappropriate forum – held: anti-suit injunction should be granted – Whether express choice of Australian law founds implied negative stipulation not to sue in a jurisdiction that would not apply Australian law – nature of choice of law clause – whether promissory or declaratory – held to be declaratory – institution of proceedings in California would be breach of implied negative stipulation arising from choice of Australian law – Whether institution of proceedings in California vexatious or oppressive – whether Californian action gives defendant forensic advantage not available under Australian law – whether Californian courts would have given effect to choice of law provision – whether Californian court would have regarded Australian law as being contrary to fundamental policy of California – held: Californian court would give effect to choice of law clause - moreover even under Californian law defendant would not gain advantage not available in Australia – where California clearly inappropriate forum – held: Californian proceedings unconscionable, vexatious and oppressive
LEGISLATION CITED:	(Californian) Civil Code, s 2778
CATEGORY:	Principal judgment
CASES CITED:	ABF Corporation v Grove Properties Company 126 Cal App 4th 204 AKAI Pty Ltd v Peoples Insurance Co Limited (1996) 188 CLR 418 Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249 Banco Atlantico SA v The British Bank of the Middle East [1990] 2 Lloyds Rep 504 (CA) Bank of Tokyo Ltd v Karoon [1987] AC 45 Britannia Steamship Insurance Assoc v Ausonia Assicurazioni SpA [1984] 2 Lloyds Rep 98 (CA) British Aerospace Plc v Dee Howard Co [1993] 1 Lloyds Rep 368 Cadre SA v Astra Asigurari SA [2005] EWHC 2626 Cannon Screen Entertainment Ltd v Handmade Films (Distributors) Ltd (11 July 1989, unreported) Catlin Syndicate Limited v Adams Land & Cattle Co [2006] EWHC 2065 Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588 CSR Limited v Cigna Insurance Australia Limited (1997) 189 CLR 345 Dunbee Limited v Gilman & Co (Australia) Pty Ltd (1968) 70 SR(NSW) 219 FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association Ltd (1997) 41 NSWLR 117 Freehold Lands Investments Ltd v Queensland Estate Pty Ltd (1970) 123 CLR 418 Gem Plastics Pty Ltd v Satrex Maritime (Pty) Ltd (NSWSC, Rolfe J, 9 June 1995, unreported, BC9504735) Golden Acres Limited v Queensland Estate Pty Ltd [1969] Qd R 378 Haskel, Inc v Superior Court (1995) 33 Cal Add 4th 963 John Kaldor Fabric Maker Pty Ltd v Mitchell Cotts Freight (Australia) Pty Ltd (1989) 18 NSWLR 172 Kay’s Leasing Corporation v Fletcher (1964) 64 SR(NSW) 195 Montrose Chemical Corp v Superior Court (1993) 6 Cal 4th 287 Nedlloyd Lines BV v Superior Court, 3 Cal 4th 459 S & W Berisford Plc v New Hampshire Insurance Co [1990] 1 Lloyds Rep 454 Shell International Petroleum Co Limited v Coral Oil Co Ltd [1999] 1 Lloyds Rep 72 Silbermann v CGU Insurance Limited (2003) 57 NSWLR 469 Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyds Rep 588 Aggeliki Charis Compania Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyds Rep 87 TNT Shipping & Development Limited v QBE Insurance Limited (NSWSC, Hunter J, 7 November 1994, unreported, BC9403633) Trafigura Beheer BV v Kookmin Bank Co [2007] 1 Lloyds Rep 669 Vita Food Products v Unus Shipping Co [1939] AC 277
TEXTS CITED:	Adrian Briggs, Agreements On Jurisdiction and Choice of Law, Oxford, Oxford University Press
PARTIES:	Ace Insurance Ltd (plaintiff) Moose Enterprise Pty Ltd (defendant)
FILE NUMBER(S):	SC 1103/09
COUNSEL:	A S Bell SC w D F C Thomas (plaintiff) J R Sackar QC w R M Foreman (defendant)
SOLICITORS:	Wotton + Kearney Lawyers (plaintiff) Arnold Bloch Leibler (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday 31 July 2009

1103/09 ACE Insurance Limited v Moose Enterprise Pty Ltd

JUDGMENT

1 HIS HONOUR: The plaintiff ACE Insurance Limited seeks an anti-suit injunction restraining the defendant Moose Enterprise Pty Ltd from continuing proceedings that it has commenced against ACE in the Superior Court of California, in which Moose seeks a declaration that, as a result of a contract of insurance made between ACE as insurer and Moose as insured and the operation of relevant Californian law, ACE is obliged to defend certain actions brought against Moose in a number of jurisdictions in the United States of America (the “Californian Insurance Proceedings”).

2 ACE is a New South Wales corporation, having its registered office and principal place of business in Sydney, and carries on business as an insurer. ACE issued a policy of insurance by which it agreed to indemnify Moose for all sums which Moose becomes legally liable to pay as compensation in respect of personal injury or property damage occurring within the policy territory during the policy period as a result of an occurrence happening in connection with Moose’s business. The policy territory as defined included the United States of America, if the personal injury or property damage arose from products exported into that country. The insurance policy was made in Australia. It contained an express choice of law clause providing that disputes were to be determined in accordance with the law of Australia, its States and Territories; a submission (not expressed to be exclusive) to the jurisdiction of any competent court in Australia; and an “Expona endorsement” with a proviso to the effect that any dispute be determined in accordance with Australian law and practice.

3 Moose is a Victorian corporation, having its registered office and principal place of business in Victoria, and develops toys for sale to retailers in Australia and distributors overseas. In California, its toys are distributed by Spinmaster Inc and sold in various stores. Amongst Moose’s products was a toy called “Aquadots” (also known as “Bindeez Beads”), which has been withdrawn from the market, both in Australia and in the United States, by reason of an allegation that it contained a toxic substance that was hazardous if ingested. A number of class actions have been commenced against Moose in various United States jurisdictions, including California, in respect of “Aquadots”, by plaintiffs who claim as damages the purchase price of the goods and “medical monitoring” costs, but, with two exceptions, not for personal injury; the two proceedings in which there is a claim for damages for personal injury were not brought in California.

4 The first three of these class actions were commenced against Moose in November 2007, two of them in the Central District of California. On or about 24 January 2008, ACE engaged the Californian law firm Clinton & Clinton to act on behalf of Moose in defence of one of the Californian actions. On 9 April 2008, the United States Judicial Panel on multi-district litigation transferred several proceedings to the United States District Court for the Northern District of Illinois for case management, and at about the same time ACE retained Clinton & Clinton to conduct Moose’s defence in connection with the consolidated proceedings. On 26 November 2008, Spinmaster (which was also a defendant in the various United States proceedings) filed a cross-claim against Moose. On about 2 December 2008, ACE gave notice that it would no longer fund Moose's defence of the Aquadots litigation. The basis upon which ACE has, at least at this stage, declined indemnity is that the policy, being confined to personal injury claims, does not respond to the claims made in the class actions.

5 On 23 December 2008, Moose commenced the Californian Insurance Proceedings; a copy of the initiating process was provided to ACE’s Australian solicitors on 5 January 2009. Moose’s motive for commencing the Californian insurance proceedings was to obtain the benefit of certain advantages that it claims are given to an insured by Californian municipal law in connection with an insurer's obligation to defend proceedings brought against the insured.

6 On 15 January 2009, ACE commenced the present proceedings and obtained an ex parte injunction – which has been continued until the present – restraining Moose from taking further steps in the Californian Insurance Proceedings. As has been explained by the High Court of Australia in CSR Limited v Cigna Insurance Australia Limited (1997) 189 CLR 345, an anti-suit injunction may be founded in a court’s inherent jurisdiction to protect the integrity of its own proceedings once set in motion [Cigna, 391-2], or in its equitable jurisdiction to restrain unconscionable conduct or the unconscientious exercise of legal rights or to enforce contractual obligations – including in the setting of commencing proceedings contrary to an exclusive jurisdiction clause, or proceedings which are “vexatious or oppressive” in the relevant sense, namely that there is nothing to be gained by the foreign proceedings over and above what might be gained in local proceedings [Cigna, 392-394]. It is the equitable jurisdiction that is invoked in the present proceedings, no proceedings in Australia having otherwise been commenced. In respect of that jurisdiction, the High Court said in Cigna (at 397-8):

In a case in which an anti-suit injunction is sought on equitable grounds, the central question is whether the court to which application is made or some other court should hear and determine the matter in issue or, at least, that aspect of it involved in the application for injunction. And where the courts concerned are, respectively, and Australian court and a court of another country, there is involved in that question the further question of whether the Australian court is an appropriate forum, in the Voth sense of it not being clearly inappropriate, for the determination that matter. The fact that there is that further question, the preclusive nature of an interlocutory anti-suit injunction and the importance of comity combine to require an Australian court to consider whether it is appropriate, in the sense that it is not clearly inappropriate, for it to determine the matter in issue before granting an anti-suit injunction.

If the Australian court decides that it is clearly an inappropriate forum, that will be the end of its involvement and the occasion for considering whether to grant an anti-suit injunction or other relief will not arise. If the Australian court reaches the opposite conclusion, namely, that it is not a clearly inappropriate forum, then it must go on to determine whether to require the applicant to seek a stay or dismissal of the foreign proceedings or to grant an anti-suit injunction.

7 ACE claims an anti-suit injunction in respect of the Californian Insurance Proceedings on five bases (I rearrange their sequence to correspond with the structure of this judgment):

· That institution of the Californian Insurance Proceedings is in breach of what, properly construed, is said to be an exclusive jurisdiction clause whereby Moose promised to litigate only in Australia;

· That institution of the Californian Insurance Proceedings in an attempt to invoke Californian municipal law is in breach of an implied negative stipulation said to arise from the express choice of law clauses, namely that the parties would not invoke any system of law other than Australian law to resolve any disputes concerning the policy;

· That the institution of the Californian Insurance Proceedings in an attempt to invoke Californian municipal law is in breach of the contractual term implied by law, that a party will not do anything to deprive the other party of the benefit or efficiency of the contractual bargain, in respect of the choice of law clause;

· That the institution of the Californian Insurance Proceedings in an attempt to invoke Californian municipal law is an abuse of process liable to be restrained in equity because, if Moose succeeded as a result of the application of Californian law, ACE would be entitled to recover equivalent damages for breach of the choice of law clause, giving rise to a circuity of action; and

· That the institution and prosecution of the Californian Insurance Proceedings in an attempt to invoke Californian municipal law is otherwise unconscionable, vexatious or oppressive.

8 Accordingly, it is necessary to consider:

· Whether an Australian court is a clearly inappropriate forum;

· If not, whether ACE should be required to apply in California for a stay or dismissal of the Californian Insurance Proceedings;

· If not, whether an anti-suit injunction should be granted on any of the grounds advanced by ACE.

Clearly inappropriate forum?

9 Moose and ACE are both Australian corporations, having their registered offices and principal places of businesses in Australia, albeit one in Victoria and the other in New South Wales. The contract of insurance was made in Australia. It contains an Australian jurisdiction clause, and an Australian choice of law clause. It could not conceivably be suggested that an Australian jurisdiction – in particular, New South Wales or Victoria – is a clearly inappropriate one.

Stay or dismissal in California?

10 There is no rule that a plaintiff must seek a stay or dismissal in the foreign proceedings, before an anti-suit injunction can be granted in the local court, and indeed that course is neither appropriate nor desirable if the application can be determined without such a step [Cigna at 395-397]. No reason is apparent why ACE should be required to seek a stay or dismissal in California before seeking an anti-suit injunction in this court.

Breach of exclusive jurisdiction clause?

11 Clause 4.11 of the Policy provides as follows:

Should any dispute arise concerning this policy, the dispute will be determined in accordance with the law of Australia and the States and Territories thereof. In relation to any such dispute the parties agree to submit to the jurisdiction of any competent court in a State or Territory of Australia.

12 The Expona endorsement contained a proviso in the following terms:

Provided that all claims which fall under the terms of this endorsement, it is agreed:

(i) the limits of liability are inclusive of costs as provided under supplementary payment in this policy.
(ii) that should any dispute arise between the insured and ACE over the application of this policy, such dispute shall be determined in accordance with the law and practice of the Commonwealth of Australia.

13 In Cigna, it was said (at 393):

In some cases, the equitable jurisdiction to restrain unconscionable conduct may be exercised in aid of legal rights. Thus, as the respondents correctly contend, if there is a contract not to sue, an injunction may be granted to restrain proceedings brought in breach of that contract, whether brought here or abroad. Similarly, an injunction may be granted in aid of a promise not to sue in a foreign jurisdiction constituted, for example, by an agreement to submit to the exclusive jurisdiction of the courts of the forum.

14 Aggeliki Charis Compania Maritima SA v Pagnan SpA (TheAngelic Grace) [1995] 1 Lloyds Rep 87 is an instance of an anti-suit injunction in aid of a contractual choice of jurisdiction clause.

15 Not every submission to jurisdiction involves a promise not to sue in a foreign jurisdiction; it will do so only if it is an “exclusive jurisdiction” clause. Whether a jurisdiction clause is an exclusive jurisdiction clause is a question of construction of the particular contract, and the absence of the word “exclusive” is not determinative. In Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249, the contract provided:

For all disputes which may arise out of the contract of insurance, all the parties interested expressly agree to submit to the jurisdiction of the courts of Budapest having jurisdiction in such matters.

16 The insurer's contention that the clause was inserted to give the insured comfort that they could sue in Budapest if they wished, but not to prevent an action being brought in England, was rejected. Romer LJ said:

The question is this: does the condition merely mean that if one of the parties to the contract is sued by the other in the court of Budapest, he will not take any objection to its jurisdiction; or, does it mean that the parties mutually agree that, if any dispute arises under the contract, it shall be determined by the court in Budapest? Having regard to the nature of the contract and its language, I am of the opinion that the latter construction is the right one.

17 Notably, for reasons that will become apparent, this case concerned an insurance policy. The clause did not use the word “exclusive”. As Waller J was later to observe, in British Aerospace Plc v Dee Howard Co [1993] 1 Lloyds Rep 368, a provision to the effect that all disputes were submitted to Budapest was enough to found a negative stipulation preventing the insurers from suing elsewhere. On the other hand, it might also be observed that the clause was for the benefit of the insured rather than the insurer.

18 In Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyds Rep 588, the relevant clause provided:

Under the jurisdiction of the English courts without recourse to arbitration.

19 The contract also provided that the governing law was that of England. Staughton LJ (with whom Buckley LJ agreed) said (at 591-2):

It is, I think, part of the matrix background, or surrounding circumstances, which ever term one chooses to use, that this was a contract made between sophisticated businessmen who specifically chose their words as to English jurisdiction for the purpose of this contract. It is not a consumer contract on a printed form, or anything like that. To my mind, it is manifest that these businessmen intended that clause to apply to all disputes that should arise between them. I can think of no reason at all why they should go to the trouble of saying that the English court should have non-exclusive jurisdiction. I can think of every reason why they should choose that some court, in this case the English court, should have exclusive jurisdiction. Then both sides would know where all cases were to be tried. It may be that in some other types of case, such as a policy of insurance, there is a reason for providing for non-exclusive jurisdiction.

20 As Waller J was to observe in British Aerospace, the word “all” was not used in the clause under consideration in Sohio, and the language was less clear than in other cases, in which terminology of “all disputes” or “any disputed” actions was employed. Further – as Waller J also pointed out – although Staughton LJ did not expressly rely on the matter, Sohio was a case in which the English court would in any event have had jurisdiction, so that there would be no need expressly to agree that it should have such jurisdiction if it were intended to be only non-exclusive.

21 In Cannon Screen Entertainment Ltd v Handmade Films (Distributors) Ltd (11 July 1989, unreported), Hobhouse J considered the following clause:

This agreement shall be construed and interpreted pursuant to laws of England and the parties hereby consent and submit to the jurisdiction of the court of England in connection with any dispute arising hereunder. The parties further agree that process in any such action may be served upon either of them by registered or certified mail at the address first above given or such other address as the party being served may from time to time have specified to the other party by previous written notice.

22 In an application for an anti-suit injunction to restrain proceedings brought in California, his Lordship held that the clause was not an “exclusive jurisdiction” clause, observing that its provisions did not:

… lend themselves to a transitive construction; the sense is that the parties submit themselves to the jurisdiction of the court not that the parties submit disputes. In the Austrian Lloyd case it was open to the court to construe the words as if they read “agreed to submit all such disputes”. I do not consider that it would be appropriate to make such an inferential insertion in these clauses. Words are an actual tool and relatively small differences in wording will produce different contractual effect. In these clauses the parties have used neither the word exclusive nor a sentence construction which is transitive. They have used words which are apt to demonstrate an intention to agree to submit to the jurisdiction of the English courts and not that there should be a contractual obligation not to have recourse to any other court. This is the natural meaning of the words used. It is consistent with the surrounding circumstances and the general matrix of the contracts and in accord with the general context in which these clauses appear in the contracts.

23 In S & W Berisford Plc v New Hampshire Insurance Co [1990] 1 Lloyds Rep 454, policies of insurance taken out on the London market through London brokers with the London office of the defendant (a New Hampshire corporation) contained a jurisdiction clause that provided: “This insurance is subject to English jurisdiction”. Hobhouse J concluded that the words were inapt to create any obligation to sue only in England, where if that were intended “it could easily have been so stated in clear words” – an observation which I take to be directed to the absence of any such word as “exclusive” or “only”. His Lordship continued:

To construe this wording as requiring the assured to sue only in England is going beyond the natural meaning of the words actually used. Further, to construe the words as declaratory is not to deprive them of significance. It is a statement to the assured, who may be foreign, that the rights he has under the policy are capable of enforcement in the English courts. Such is an apt interpretation having regard to the legal and commercial relationships created by the document and having regard to the words actually used. Such a clause, even though creating no obligation to sue only in England is a contractual acknowledgement of the jurisdiction of the English courts and a contractual agreement to the invocation of that jurisdiction. Therefore I conclude that this clause is not an exclusive jurisdiction clause. As I pointed out in Pathe v Handmade such a conclusion does not mean that the clause ceases to be relevant in relation to an application such as that which is being made by the defendants on this summons. If the contract says that the assured is entitled to sue the underwriter in the English courts, then it requires a strong case for the courts of this country to say that that right shall not be recognized and that he must sue elsewhere.

24 In British Aerospace, the relevant clause provided:

This agreement shall be governed by and construed and take effect according to English law and the parties hereto agree that the courts of law in England shall have jurisdiction to entertain any action in respect hereof and that in the event of such proceedings being commenced each party shall forthwith notify to the other an address in England for the service of documents.

25 That clause was held to be an exclusive jurisdiction clause, because there was “clear mutuality in that each party may wish to sue the other”; the use of the word “shall” was “apposite to create the language of obligation”, and the words “any action” clearly meant “all actions”. Waller J added (at 374):

In the instant case, the parties have expressly agreed to English law and there would be no need to expressly agree that the English court should have jurisdiction for the English court to have non-exclusive jurisdiction. The English court would in any event have such jurisdiction and by expressly agreeing to such jurisdiction, they must be seeking to add something ie that English would have exclusive jurisdiction.

26 To that it may be added that the obligation imposed on each party to provide an address for service in England was a powerful indication that England was to be the forum. Waller J distinguished Cannon on the bases, first, that the clause in British Aerospace was “transitive” – in the sense of submitting disputes to the English court as opposed to the parties simply submitting themselves to the jurisdiction of the English court; secondly, that there was no real purpose in submitting disputes to the jurisdiction of the English court as well as choosing English law unless the intention was to make England exclusive; and thirdly, that in British Aerospace the provision relating to an address the service was for an English address. His Lordship also distinguished Berisford, particularly referring to the lack of mutuality of the obligation in Berisford, whereas there was clear mutuality in British Aerospace; and to the use of the word “shall” in British Aerospace, which was apposite to create the language of obligation.

27 In Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588, the appellant claimed an anti-suit injunction restraining a group of borrowers and guarantors from bringing legal proceedings against it in Greece, reliant upon a contractual provision as follows:

This agreement shall be governed by and construed in accordance with English law. Each of the borrowers ... hereby irrevocably submits to the jurisdiction of the English courts and hereby irrevocably nominates Messrs Aegis (London) Ltd of 197 Knightsbridge, London SW7 England to receive service of proceedings in such courts on its behalf but the bank reserves the right to proceed under this agreement in the courts of any other country claiming or having jurisdiction in respect thereof.

28 It was upheld that, in respect of litigation instituted by the borrowers, the clause was an exclusive jurisdiction clause. Steyn LJ said that the clause should be read in a transitive sense, as it contemplated the submission of disputes to the English courts, notwithstanding that a word such as “dispute” or “action” was not used. Acknowledging that it did not expressly make it clear that the jurisdiction agreement was exclusive, the question was simply whether on its true construction the clause obliged the parties to resort to the relevant jurisdiction irrespective of whether the word “exclusive” was used. However, a particularly significant feature was the juxtaposition of the submission by the borrowers to the jurisdiction of the English court, with the option reserved in favour of the bank to sue elsewhere.

29 In TNT Shipping & Development Limited v QBE Insurance Limited (NSWSC, 7 November 1994, unreported, BC9403633), Hunter J held that a clause in an insurance policy, providing “This insurance is subject to English jurisdiction”, was not an exclusive jurisdiction clause, and did not impose a contractual obligation to litigate only in the stated jurisdiction. His Honour followed Hobhouse J in Berisford, treating the relevant provision as falling short of a contractual obligation conferring exclusive jurisdiction on the English courts and constituting more “a statement to the assured, who may be foreign, that the rights that he has under the policy are capable of enforcement in the English courts”. His Honour does not appear to have been referred to British Aerospace or Continental Bank.

30 In Gem Plastics Pty Ltd v Satrex Maritime (Pty) Ltd (NSWSC, 9 June 1995, unreported, BC9504735), the relevant policy provided that it was “subject to South African jurisdiction”, and “subject to English law and practice”. Rolfe J undertook a thorough analysis and consideration of the foregoing authorities, to which I am greatly indebted. His Honour explained that parties may always agree that the resolution of their disputes may be determined by a court to the jurisdiction of which they would not otherwise be amenable and it is then a matter of construction in all the circumstances whether they had thereby selected that jurisdiction exclusively. While use of the word “exclusive” would put the matter beyond doubt, its omission did not necessarily do so. However, if the court to which jurisdiction is given by agreement is the court that would prima facie have jurisdiction in any event, it will more readily be found to be a grant of exclusive jurisdiction (since otherwise it would be superfluous). His Honour said:

One consideration, which the decision in British Aerospace brings home, is that the usual place for a South African insurer carrying on business in South Africa to be sued would be in South Africa and, therefore, one must look for some reason why that should be stated to be the applicable jurisdiction when, in most cases, it would be in any event.

31 His Honour analysed Hobhouse J’s reasoning in Berisford, pointing out that his Lordship had not explained why the construction for an exclusive jurisdiction clause went beyond the “natural meaning” of the words used, and that while the fact that a contractual provision may be left with work to do in certain circumstances may be relevant in construing it, it was not a reason for reading down a term where to do so is unnecessary to construe it. His Honour expressed difficulty with the suggestion that the phrase was merely a contractual acknowledgement of the jurisdiction of the English courts, intended to assist in resistance of an application for a stay of proceedings commenced in the jurisdiction, and supposed that Hobhouse J’s distinction of Sohio must have been founded on the possible special considerations pertaining to an insurance contract, adverted to by the court in Sohio. As to the issue of whether “transitive” language was used, his Honour said that a submission of the parties to the jurisdiction could only be understood sensibly if it involved the submission of a dispute to the jurisdiction. Accordingly, his Honour did not follow Berisford and TNT, and held that the clause was an exclusive jurisdiction clause. (However, His Honour refused to stay the proceedings in Australia as a matter of discretion).

32 The applicable principles were summarised by Giles J (as his Honour then was) in FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association Ltd (1997) 41 NSWLR 117 (at 126-7):

(a) Whether a jurisdiction clause is an exclusive jurisdiction clause is a question of construction of the particular contract, with such regard to the circumstances surrounding the entry into the contract as is permissible.

(b) The word “exclusive” is not determinative, and a clause may be held to be an exclusive jurisdiction clause notwithstanding the absence of that or a similar word or phrase: as was said in Continental Bank NA v Aeakos Compania NavieraSA at 594, it would be a surrender to formalism to require a jurisdiction clause to provide in express terms that the chosen court is to be the exclusive forum.
(c) Although mutuality, in the sense that both parties agree to the relevant jurisdiction, has been thought to point to exclusive jurisdiction, I have some difficulty seeing why that should be so. Lack of mutuality is likely to tell against exclusive jurisdiction ( Continental Bank NA v Aeakos Compania Naviera SA ), but mutuality is consistent with no more than submission to the jurisdiction. However, when taken with other matters mutuality may assist in finding a contractual intention that disputes shall be submitted only to the courts of the relevant jurisdiction: British Aerospace Plc v Dee Howard Co ; Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd .
(d) Other language in the clause or the nature of the contract may point towards that contractual intention, for example “under the jurisdiction of the English courts” and the assumed desire for certainty in Sohio Supply Co v Gatoil (USA) Inc ; or the use of transitive language as in Austrian Lloyd (1997) 41 NSWLR 117 at 127 Steamship Co v Gresham Life Assurance Society, Ltd, British Aerospace Plc v Dee Howard Co and Continental Bank NA v Aeakos Compania Naviera SA .

(e) If the courts of the relevant jurisdiction would have jurisdiction in the absence of the clause, that may indicate that the clause was intended to confer exclusive jurisdiction: Sohio Supply Co v Gatoil (USA) Inc ; Gem Plastics Pty Ltd v Satrex Maritime (Pty) Ltd . It will not always be so, as the clause may have been intended only to put beyond doubt the existing jurisdiction ( S & W Berisford Plc v New Hampshire Insurance Co ), or be an unthinking inclusion.

33 In the light of the foregoing, the following conclusions may be expressed. First, while absence of the word “exclusive” is not determinative, the distinction between an exclusive and non-exclusive jurisdiction clause is sufficiently well-known, and the facility of making the clause manifestly an exclusive jurisdiction clause so straightforward, that its absence is not merely neutral but tends against the clause being an exclusive jurisdiction clause. Secondly, where the courts of the selected forum would have jurisdiction in any event, that tells in favour of a clause being an exclusive jurisdiction clause; a fortiori where they would be the “natural forum”. Thirdly, the suggested exception in respect of insurance policies is not well supported by the authorities, save that in the case of ambiguity the court will more readily incline to a construction that favours the insured. Fourthly, use of words such as “all” or “any” disputes, and mandatory words such as “shall”, tell in favour of a clause being an exclusive jurisdiction clause.

34 Returning to the provisions of the instant policy, ACE invokes the Expona endorsement in aid of the construction of clause 4.11, arguing that the only place in which a dispute can be determined “in accordance with the law and practice of the Commonwealth of Australia” is in Australia, since (on Moose’s case) a Californian court will not apply Australian law, but in any event because a Californian court will not apply Australian practice – practice always being a matter for the courts of the forum. I reject that submission, for two reasons. First, insofar as the Expona endorsement selects the law of Australia, it is a choice of law clause, not a choice of jurisdiction clause, and a choice of law clause does not involve a submission to the courts of the chosen legal system, even when coupled with the fact that the contract is made and to be performed in the country whose law is selected [Dunbee Limited v Gilman & Co(Australia) Pty Ltd (1968) 70 SR(NSW) 219, 221 (Wallace P), 223-4 (Walsh JA), 225 (Jacobs JA); FAI v Ocean Marine, 120F (Giles J)]. As the High Court put it in AKAI Pty Ltd v Peoples Insurance Co Limited (1996) 188 CLR 418 (at 424-5):

A choice of law clause does not constitute a submission to the jurisdiction of the courts of a chosen legal system. A choice of courts clause does.

35 Secondly, in this context, the reference to “practice” is to insurance practice, not court practice [TNT Shipping & Development Ltd v QBE Insurance Ltd, 5-6; FAI v Ocean Marine, 120F].

36 Turning then to clause 4.11 itself, and in particular its second sentence:

· The word “exclusive” is not used;

· The reference to “any such dispute” is equivalent to “all such disputes”;

· The provision can be read “transitively”, as an agreement to submit “any such dispute” to the jurisdiction of a competent Australian court;

· Given that Moose and ACE are Australian corporations and made their contract in Australia and provided for Australian law to govern it, Australian courts have jurisdiction in any event. Moreover, given those matters, Australia was the natural forum. In those circumstances, the clause was superfluous unless it conferred exclusive jurisdiction. Australia being the natural forum, there was no utility in merely giving comfort to the insured against the prospect of an application for a stay if it sued the insurer in Australia;

· The clause was included primarily for the benefit of ACE – the insurer, and thus the likely defendant in any dispute under the policy. The commercially sensible interpretation is that it was intended to require the parties to litigate in and only in Australia.

37 To my mind, the connection of each of the parties with Australia, that the policy was made in Australia, that it is governed by Australian law, and that Australia is in any event the “natural forum” for disputes under the Policy, makes this a particularly strong case for the application of the consideration that the jurisdiction clause must have been intended to do something more than provide for the non-exclusive jurisdiction that existed in any event.

38 Moose submitted that in circumstances where Moose was a Victorian Corporation, ACE a New South Wales Corporation, and the policy was made in Western Australia – so that there was a connection with three states – it was unsurprising that the parties confirmed that they would submit to the jurisdiction of any competent court in a State or Territory of Australia, including the three likely candidates New South Wales, Victoria, and Western Australia. However, I am unable to agree that this is the subject matter to which clause 4.11 was directed, in the context in which it appears. It was not concerned with the niceties of federal jurisdiction within Australia. It was concerned with truly international issues: Australia or elsewhere – not with competing jurisdictions within Australia.

39 In my opinion, therefore, clause 4.11 was an exclusive jurisdiction clause. The parties agreed to submit any dispute concerning the policy to the jurisdiction of a competent court in Australia. They implicitly agreed not to invoke the jurisdiction of courts elsewhere.

40 Moose accepted that in the event that it was held that the clause was an exclusive jurisdiction clause, it was neither appropriate nor desirable to put ACE to the additional burden of seeking a stay or dismissal of the Californian insurance proceedings. No discretionary basis for declining injunctive relief was advanced.

Contravention of negative stipulation arising from choice of law clause?

41 The second, third and fourth bases upon which ACE advanced its claim for an anti-suit injunction substantially overlap. Each of them involves the proposition that, by instituting the Californian insurance proceedings in California, Moose is contravening an implied contractual obligation said to arise from the express selection of Australian law as the governing law, which would preclude the institution of proceedings in California for the purposes of having Californian municipal law apply.

42 At the foundation of each of these arguments is the proposition that the choice of law clause is promissory in effect. The issues were considered by Professor Adrian Briggs in Agreements On Jurisdiction and Choice of Law, Oxford, Oxford University Press, [11.45]-[11.58]. Observing that the court seized with jurisdiction may not apply the selected law for a number of reasons – whether because its choice of law rules directed the judge to apply a different law; or its own choice of law rules, while accepting the right of the parties to choose the proper law, regarded the particular choice as impermissible; or that the court was directed by its own choice of law rules to apply mandatory domestic law; that the court errs in its application of the chosen law – Professor Briggs postulated whether the party who brought proceedings before the court of the forum could be said to have breached the agreement on choice of law [11.45]. Having found practically no common law authority on the question [11.46], he approached the matter in principle, and identified amongst the relevant issues whether an agreement on applicable law was a contractual term inherently incapable of being breached [11.47].

43 Professor Briggs acknowledged that there was no case which said, clearly or even ambiguously, that an agreement on choice of law was a term of a contract which may be broken – though he added that there were a number of “tantalising” authorities, in which a court had considered whether to grant jurisdiction or relief on the footing that what it regarded as the proper law of the contract should be applied, and the case should not be heard by a court that would not apply it [Banco Atlantico SA v The British Bank of the Middle East [1990] 2 Lloyds Rep 504 (CA); Britannia Steamship Insurance Assoc v Ausonia Assicurazioni SpA [1984] 2 Lloyds Rep 98 (CA); Shell International Petroleum Co Limited v Coral Oil Co Ltd [1999] 1 Lloyds Rep 72; Trafigura Beheer BV v Kookmin Bank Co [2007] 1 Lloyds Rep 669; Catlin Syndicate Limited v Adams Land & Cattle Co [2006] EWHC 2065; Cadre SA v Astra Asigurari SA [2005] EWHC 2626]. But he accepted that there was apparently no case in which a common law court had been required to rule on the submission that a contract was broken simply by bringing proceedings before a court which would not apply the law expressly chosen by the parties to govern their contract [11.51].

44 But as no case denied the proposition, the Professor, approaching the question as one of principle, argued [11.52]:

If, therefore, a party to an agreement for dispute resolution brings proceedings before a court or tribunal which will not apply the law which was promised, so far as the parties were concerned, to govern, and was agreed by them to be applicable in the resolution of disputes, he appears to have incapacitated himself from performing that which was undertaken to be done [ Lovelock v Franklyn (1846) 8 QB 371, 378]. The proposition that there was a breach is not contradicted by the absence of the jurisdiction agreement: as explained above, parties to a contract for dispute resolution may intend to settle the substantive law which will apply, while leaving the particular court in which proceedings will be brought to be determined later. The agreement on choice of law, on the law which will be applied to resolve disputes, however, necessarily implies and can only mean that proceedings will be brought before a judge who may be asked to apply, and may be expected to apply, the substantive law upon which the parties agreed.

45 The Professor acknowledged:

Not every expression of choice of law carries with it, in addition to the expression of a common intention, a promise to implement that choice of law when disputes are resolved. In principle the question is one of construction.

46 That said, he continued:

In such a case it is hard to see why the bringing of proceedings designed, more or less deliberately, to defeat the application of the contractual choice of law should be treated any differently from the case of a party who brings proceedings outside the court contractually chosen by the parties. The overturning of a specific component of their agreement is common to each, and the conclusion that it amounts to a breach of contract is hard to resist: if it looks like a breach and acts like a breach it probably is a breach.

47 Against the Professor’s argument, however, the courts have long recognized that a choice of law clause is not a choice of jurisdiction clause, and does not have the effect of a choice of jurisdiction clause [Dunbee v Gilman; AKAI v Peoples Insurance Co, 424-5]. The common law gives the parties to a contract liberty to choose a governing law for their contract [AKAI v Peoples Insurance Co, 442], albeit subject to some limitations. No doubt a contractual provision could be framed which unambiguously contained a promise to do nothing that might result in some other system of law becoming applicable. However, in my opinion that is not ordinarily the effect of a choice of law clause, which is usually declaratory of the intent of the parties, rather than promissory. I reach this conclusion to the following reasons.

48 As Lord Diplock said in Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 (at 65), giving legal meaning and effect to a contract depends on ascertaining the intent of the parties in the context of the applicable legal system:

My Lords, contracts are incapable of existing in a legal vacuum. They are mere pieces of paper devoid of all legal effect unless they were made by reference to some system of private law which defines the obligations assumed by the parties to the contract by their use of particular forms of words and prescribes the remedies enforceable in a court of justice for failure to perform any of those obligations;

49 The search for the proper law of a contract involves ascertaining the intention of the parties from the terms of the contract [Amin Rasheed & Kuwait Insurance, 61; AKAI v Peoples Insurance Co, 442]. The common law allows parties to choose expressly the applicable law. As the High Court said in AKAI v Peoples Insurance Co (at 441-442):

What is involved in enquiring whether the parties have exercised their liberty to select a governing law is the ascertainment of that which, in truth, the parties are to be taken to have agreed. This may be discerned from a direct statement in a formal written contract. On the other hand, or even in such a case of a formal written contract, it may be necessary to construe the contract as a whole in the manner we have described. In addition, there may be real difficulty in ascertaining, by the drawing of inferences from the evidence, the existence of the expressed terms of the contract. …
It is not a question of implying a term as to choice of law. Rather it is one of whether, upon the construction of the contract and by the permissible means of construction, the court may properly infer that the parties intended their contract to be governed by reference to a particular system of law. It is in this way that a submission, in the contract, to the exclusive jurisdiction of the tribunals of a particular country, may be taken as an indication of the intention of the parties at the law of that country is to be the proper law of the contract. There is, in truth, only one question here, and that is whether, upon the proper construction of the contract (which may include an expression of choice in direct language), the court may properly conclude that the parties exercised liberty given by the common law to choose a governing law that their contract. If the answer to this is in the negative, then the law itself will select a proper law.

50 In the absence of an express choice of law clause, courts search for an inferred intention, even in circumstances where it is unlikely that the parties gave the matter any thought at all [Amin Rasheed & Kuwait Insurance, 61; John Kaldor Fabric Maker Pty Ltd v Mitchell Cotts Freight (Australia) Pty Ltd (1989) 18 NSWLR 172; AKAI v Peoples Insurance Co]. The importance of AKAI lies in the recognition that “inferred choice of law” and “express choice of law” are two species of a single genus concerned with giving effect to the intention of the parties. As the High Court explained (at 441) (emphasis added):

It is not a question of implying a term as to choice of law. Rather it is one of whether, upon the construction of the contract and by the permissible means of construction, the court properly may infer that the parties intended their contract to be governed by reference to a particular system of law.

51 In our system of private international law, therefore, choice of law is about ascertaining the intention of the parties as to the legal system that is to govern their contract, not about covenants or promises that a particular legal system will apply. Where a choice of law is “inferred” rather than “express”, it is not conceivable that there would be an implied negative stipulation not to invoke the jurisdiction of a court, which would apply a law other than the chosen one. In my view, that supports the conclusion that where there is an express choice of law, there is similarly no implied obligation not to invoke the jurisdiction of a court, which will not apply the chosen law; the express choice of law is declaratory of the parties’ intention, not promissory. It may well be that the parties could frame a provision which was promissory in effect, but – given the conventional function of a choice of law clause – it would require very clear language to make it promissory rather than declaratory.

52 Support for this view is provided the circumstance that the entitlement of the parties to select the governing law is not absolute, and that there are limitations on it [Kay’s Leasing Corporation v Fletcher (1964) 64 SR(NSW) 195, 205 (Walsh J); Vita Food Products v Unus Shipping Co [1939] AC 277, 290; Golden Acres Limited v Queensland Estate Pty Ltd [1969] Qd R 378, affirmed on other grounds Freehold Lands Investments Ltd v Queensland Estate Pty Ltd (1970) 123 CLR 418].

53 In my opinion, therefore, there is good reason for the absence of authority to which a Professor Briggs refers: namely, that there is a well-established distinction between a choice of jurisdiction clause, which imposes contractual obligations on the parties, and a choice of law clause, which is merely declaratory of their intent as to the applicable legal system. Not being promissory in effect, a choice of law clause does not found implied negative stipulations.

54 While that conclusion suffices to dispose of the second, third and fourth bases of ACE’s argument, there is an additional reason why those grounds fail. In my view, the Californian court would not apply Californian law, but would apply Australian law, giving effect to the parties’ choice of law. Each of the parties called a Californian lawyer to give expert evidence of the relevant law of California: David Goodwin for Moose, and John Dimugno for ACE. Various reported decisions of the Californian courts were also in evidence.

55 Central to the dispute was Californian Civil Code ¶2778, which relevantly provides:

In the interpretation of a contract of indemnity, the following rules are to be applied, unless a contrary intention appears:

1. Upon an indemnity against liability, expressly, or in other equivalent terms, the person indemnified is entitled to recover upon becoming liable;

2. Upon an indemnity against claims, or demands, or damages, all costs, expressly, or in other equivalent terms, the person indemnified is not entitled to recover without payment thereof;

3. An indemnity against claims, or demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against such claims, demands, or liability incurred in good faith, and in the exercise of a reasonable discretion;

4. The person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct such defenses, if he chooses to do so;

5. If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter suffered by him in good faith, is conclusive in his favour against the former …

56 Clause 1.3 of the Policy made provision for the insurer to pay defence costs incurred by ACE in defending claims within the cover of the Policy:

In addition to ACE’s liability to indemnify the insured under clause 1.1, ACE will pay:

1.3.1 All reasonable legal costs and expenses incurred by the insured with the written agreement of ACE, and

1.3.2 All defence costs incurred by ACE.

These defence costs and expenses are payable subject to the following:

1.3.3 ACE is not obliged to pay any defence costs or expenses or to defend any suit after ACE’s liability under the policy to indemnify the insured has been exhausted.

1.3.4 If a payment exceeding ACE's liability under this policy to indemnify the insured is being made to dispose of a claim, the liability of ACE for defence costs and expenses is limited to the proportion that ACE's liability to indemnify the insured under this policy bears to that payment.

1.3.5 In the event of a claim being made against the insured in any court or with any other legally constituted body in the United States of America, Canada or their respective protectorates and territories, the total amount payable in respect of the claim by ACE under this policy including defence costs and expenses will not exceed the limit of liability stated in item 5 of the schedule.

57 Clause 1.5 made clear that this was so only if the insured was entitled to be indemnified under the policy in respect of the subject claim:

Where the insured is not entitled to be indemnified under this policy, ACE owes no duty of any kind and has no liability of any kind to the insured.

58 Clause 2 made provision in respect of exclusions, including:

This policy does not cover any legal liability arising out of or in any way connected with the following:

…

2.12 fines, penalties, punitive, exemplary, liquidated or aggravated damages.

59 Clause 4.5 made provision in respect of the insurer’s right to defend proceedings against the insured:

4.5.1 in respect of any occurrence covered under this policy, ACE has the right, if it so elects, to defend any suit against the insured seeking compensation for an occurrence and to bring any cross-claim in the name of the insured and even if any of the allegations in the suit the groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient; but ACE is not obligated to pay any claim or judgment or to defend any suit after ACE's liability under this policy in respect of the claim has been exhausted.

4.5.2 the insured must cooperate with ACE and comply with the terms and conditions of this policy, and assist as necessary in enforcing any right to contribution or indemnity from any person, corporation or organisation.

60 Moose contends that the application of ¶2778 to the Policy would result in clauses 1.3 and 4.5 being construed as imposing on ACE a duty to defend, as:

· An insurer has a duty to defend, so long as the facts alleged show a possibility that the claim may be covered under the policy [Goodwin, ¶ 15(e); Montrose Chemical Corp v Superior Court (1993) 6 Cal 4th 287, 295];

· An insurer seeking to terminate its duty to defend must establish the absence of any such potential with facts that eliminate the possibility that the resultant damages or nature of the action will fall within the scope of coverage [Goodwin, ¶15(e); Monstrose, 300]; and

· Once the potential for some coverage is shown, the insurer must defend the action in its entirety, even if most of the claims in the proceedings are not within cover [Goodwin, ¶15(f); Haskel, Inc v Superior Court (1995) 33 Cal Add 4th 963, 976 n.9].

61 This is to be contrasted with the uncontroversial position, under Australian law, that there is no general rule requiring the insurer to defend, or to pay defence costs, so long as there is a mere possibility that the claim might be within cover; to the contrary, the insured bears the onus of proving that the loss falls within the defined cover, and whether the insurer is obliged to pay defence costs is determined by construction of the policy; any right to payment of defence costs is by way of indemnity under the terms of the policy, and may be defeated if the insurer is entitled to refuse indemnity [Silbermann v CGU Insurance Limited (2003) 57 NSWLR 469, [65]-[66]]. Moreover, an insurer is not obliged to advance defence costs in respect of a claim where it has denied indemnity on a proper ground, and an insured cannot compel the funding of its defence in advance of a final determination of that issue [Silbermann v CGU [77]-[79]].

62 The evidence establishes that Californian law has a strong policy in favour of giving effect to contractual choice of law provisions, although less deference may be afforded to such a choice in an insurance contract where the chosen law would deprive an insured of benefits available under the local law if it were otherwise applicable. A Californian court will give effect to a contractual choice of law clause, provided that the chosen legal system has a substantial relationship to the parties or their transaction (or there is some other reasonable basis for the choice), unless the chosen system of law is contrary to a “fundamental policy” of California. If the chosen law is contrary to a “fundamental policy” of California, California will not give effect to the choice so long as California “has a materially greater interest than the chosen state in determination of the particular issue” [Nedlloyd Lines BV v Superior Court, 3 Cal 4th 459, 464-66 (1992)].

63 That these were the relevant principles was not controversial. Nor was it controversial – nor could it be – that Australia had a substantial relationship with the parties and the transaction. The critical question is whether Australian law is contrary to a fundamental policy of California. Moose contends that it is, because Australian law would not hold the insurer obliged, upon request, to defend proceedings brought against the insured, in the circumstances in which Californian law, and in particular Civil Code ¶2778, would do so.

64 No Californian decision considers whether ¶2778 is “ fundamental” in the relevant sense. The Restatement says that no detailed statement can be made of situations where a “fundamental policy” will be found. However, important indicia may be found in a number of the Californian cases.

65 Thus, in the seminal decision, Nedlloyd, in addressing the “existence of fundamental public policy”, the Supreme Court of California said (emphasis added):

We next consider whether application of the law chosen by the parties would be contrary to “a fundamental policy” of California. We perceive no fundamental policy of California requiring the application of Californian law to Seawinds’s claims based on the implied covenant of good faith and fair dealing. The covenant is not a government regulatory policy designed to restrict freedom of contract, but an implied promise inserted in an agreement to carry out the presumed intentions of contracting parties . …

66 Later, the court said:

Seawinds identifies no fundamental public policy of this state that would be offended by application of Hong Kong law to a claim by a Hong Kong corporation against its allegedly controlling shareholder. We are directed to no California statute or constitutional provision designed to preclude freedom of contract in this context.

67 Both those passages focus on the existence of a statutory or constitutional provision, designed to preclude or limit freedom of contract.

68 In ABF Corporationv Grove Properties Company 126 Cal App 4th 204, the Court of Appeal of the Fourth District of California identified as relevant indicia that the Californian statute use “mandatory, unavoidable and emphatic language” and not be “subject to override” by the parties. The court said (at 217):

California does have a fundamental policy concerning the reciprocity of attorney fee provisions in contracts. Civil Code s 1717 subdivision (a) expressly provides that, “attorney's fees provided for by this section shall not be subject to waiver by the parties to any contract which is entered into after the effective date of this section. Any provision in any such contract which provides for a waiver of attorney's fees is void”. As the court stated Ribbens International SA v Transport International Pool , supra , 47F.Supp.2d 117, “this language is mandatory, unavoidable and emphatic. Section 1717(a) is no default provision or gap-filler, subject to override by the parties. Rather it represents a basic and fundamental policy choice by the State of California that non-reciprocal attorney’s fees contractual provisions recreate reciprocal rights to such fees.

69 That passage is significant not only for its adoption of the terminology “mandatory, unavoidable and emphatic”, but also for its distinction of the circumstance where a contractual provision is “subject to override by the parties”. That is entirely consistent with the focus, in the same context in Nedlloyd, on freedom of contract.

70 It is very difficult to see how a rule that can be excluded by agreement can be described as “fundamental”. No case was referred to in which a rule which could be contracted out of (that is, which is “subject to override”) has been held to be fundamental. The cases in which the contractual choice of law has been overridden have involved statutory provisions that were protected by non-waiver provisions. Accordingly, that a provision is “subject to override” – and thus not intended to restrict freedom of contract – is a powerful if not decisive consideration.

71 Civil Code, ¶2778, admits of contrary provision. It is a rule of construction, which applies only unless “a contrary intention” appears from the relevant contract of indemnity. It was therefore not intended to restrict freedom of contract, and is subject to override. A Californian court would not regard it as a “fundamental policy” in the relevant sense.

72 The courts of California would therefore give effect to the choice of law clause contained in the insurance policy and apply Australian, not Californian, law. It follows that the institution of proceedings in California would not be a breach of the implied negative stipulation nor other contractual obligations for which ACE contends.

Vexation and oppression?

73 My conclusion that the choice of jurisdiction clause is an exclusive one relieves me of the necessity to determine whether prosecution of the proceedings in the Californian court are, according to the principles of equity, “vexatious or oppressive” [cf Cigna, 392]. However, lest I be in error on the first ground, I shall address this question.

74 Moose invoked the observations of the High Court in Cigna to the effect that foreign proceedings would not be vexatious oppressive or unconscionable if there was available in them relief or a benefit not available in local proceedings – in particular (at 393), that foreign proceedings were to be viewed as vexatious or oppressive only if there was nothing that could be gained by them over and above what could be gained in the local proceedings. In Bank of Tokyo Ltd v Karoon [1987] AC 45, Goff LJ suggested that this criteria “was very rarely fulfilled”.

75 Moose argued that in California, by application of Civil Code, ¶2778, it would enjoy such an advantage, namely that ACE would be obliged to defend the claims against Moose, regardless of the limits of cover, whereas in Australia, given that ACE had purported to decline indemnity, it would not have to do so. This argument fails, for two reasons.

76 First, my conclusion that the Californian court would apply Australian law means that there would be no such advantage for Moose in suing in California.

77 Secondly, I conclude that even applying Californian law, “a contrary intention appears” from the insurance policy, for the purposes of ¶2778. As to whether, for the purposes of ¶2778, the policy is one from which “a contrary intention appears”, I am conscious of the risk of applying Australian and not Californian rules and approaches to the construction of the policy. I take into account the strong pro-policyholder views of the Supreme Court of California, and also that a contrary intention must be clear and unambiguous. But I also take into account the rule of construction, applicable in California as here, that all words in a policy must be given meaning if possible. In clause 4.1 of the Policy, the words “if it so elects” must be given some meaning. Treating them as conferring on the insurer an obligation, rather than an election, gives them no meaning or content. The additional proviso – that ACE “is not obligated” to defend any suit after its liability in respect of the claim has been exhausted – does not detract from this; an election is often once and for all and, absent such proviso, ACE could be obliged, once having elected to defend, to do so without limitation, notwithstanding that the policy limit had been exhausted; the proviso enables ACE to invoke the limit, notwithstanding an initial election to defend. Only a construction which treats the words “if it so elects” as giving an election and not an obligation to defend, subject to the proviso at the end of clause 4.5.1, gives meaning to all the words in the clause. In my view, therefore, applying Californian law, a contrary intention appears from the policy, so that even were Californian law applied, there would be no duty to defend.

78 In my view, given the choice of law, the jurisdiction clause (even if it be non-exclusive), the location of the parties, where they made their contract, and the very faint connection with California, the invocation of Californian jurisdiction for the purpose of securing a supposed legal advantage which on the evidence before me does not exist is unconscionable, vexatious and oppressive in the relevant sense. In other words, California is a clearly inappropriate forum for the resolution of this dispute.

79 Accordingly, on this ground too, if it were necessary, I would grant the injunction sought.

Conclusion

80 My conclusions may be summarised as follows.

81 For the resolution of the insurance dispute between Moose and ACE, an Australian jurisdiction – in particular, New South Wales or Victoria – is not a clearly inappropriate one.

82 As to ACE’s contention that institution of the Californian Insurance Proceedings is in breach of an exclusive jurisdiction clause whereby Moose promised to litigate only in Australia: the connection of each of the parties with Australia, that the policy was made in Australia, that it is governed by Australian law, and that Australia is in any event the “natural forum” for disputes under the Policy, makes this a particularly strong case for the application of the consideration that the jurisdiction clause must have been intended to do something more than provide for the non-exclusive jurisdiction that the Courts of Australia had in any event. In my opinion, clause 4.11 was an exclusive jurisdiction clause, by which the parties agreed to submit any dispute concerning the Policy to the jurisdiction of a competent court in Australia, and implicitly agreed not to invoke the jurisdiction of courts elsewhere. Moose accepted that in the event that it was held that the clause was an exclusive jurisdiction clause, it was neither appropriate nor desirable to put ACE to the additional burden of seeking a stay or dismissal of the Californian insurance proceedings, and ACE is entitled to an anti-suit injunction on this ground.

83 As to ACE’s contention that institution of the Californian Insurance Proceedings in an attempt to invoke Californian municipal law is in breach of an implied negative stipulation arising from the express choice of law clause: there is a well-established distinction between a choice of jurisdiction clause, which imposes contractual obligations on the parties, and a choice of law clause, which is merely declaratory of their intent as to the applicable legal system. Not being promissory in effect, a choice of law clause does not found implied negative stipulations. In any event, Civil Code, ¶2778, is a rule of construction, which applies only unless “a contrary intention” appears from the relevant contract of indemnity. It was not intended to restrict freedom of contract, and is subject to override, and a Californian court would not regard it as a “fundamental policy” in the relevant sense. The courts of California would therefore give effect to the choice of law clause contained in the insurance policy and apply Australian, not Californian, law. It follows that the institution of proceedings in California would not be a breach of any implied negative stipulation arising from the choice of law clause. I would not grant an injunction on this ground.

84 As to ACE’s contention that institution of the Californian Insurance Proceedings in an attempt to invoke Californian municipal law is vexatious and oppressive: given the choice of law, the jurisdiction clause (even if it be non-exclusive), the location of the parties, where they made their contract, and the very faint connection with California, California is a clearly inappropriate forum for the resolution of the dispute, and the invocation of Californian jurisdiction for the purpose of securing a supposed legal advantage which on the evidence before me does not exist is unconscionable, vexatious and oppressive in the relevant sense. On this ground also, ACE is entitled to the injunction claimed.

85 My orders are:

1. Order that the defendant be permanently restrained from taking any further step directly or indirectly in proceedings number CGC-08-483371 in the Superior Court of California, County of San Francisco as against the plaintiff, save for discontinuing those proceedings.

2. Order that the defendant pay the plaintiff’s costs.

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