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ELIZABETH VUONG[*]
In private international law, injunctions restraining a party from commencing or continuing proceedings in a foreign court, otherwise known as anti-suit injunctions, are coming to play an increasingly important role. [1] This controversial mechanism gives courts an important opportunity to affect the course of litigation abroad, [2] and is invoked by parties to determine the jurisdiction in which the dispute is to be heard. Its increased use reflects a recent trend in conflict of laws away from the traditional domain of choice of law, towards problems of jurisdiction. [3] It is in the light of these developments that the case of CSR Limited v Cigna Insurance Australia Limited & Ors [4] is particularly significant. In this case, the High Court took the opportunity to develop the principles governing the exercise of discretion in granting anti-suit injunctions. In 1990, in Voth v Manildra Flour Mills Pty Ltd, [5] the High Court clarified the principles governing a stay of local proceedings on the ground of the inappropriateness of the forum (forum non conveniens), but did not consider the rules relating to a restraint of foreign proceedings. While recent decisions in the United Kingdom, [6] resolved the principles governing anti-suit injunctions in these jurisdictions, the law on this issue in Australia remained unclear. In CSR v Cigna, the majority laid down a two step test for granting anti-suit injunctions based on the court’s equitable jurisdiction. However, while the basic test is sound and consistent with overseas decisions, its application by the majority is open to criticism.
The main parties to this case were CSR Limited (CSR), a company which operates mines in Australia and in the United States, and Cigna Insurance Australia Limited (Cigna), the lead insurer of CSR. Both companies were incorporated in Australia. Other parties were also joined to the proceedings, including other insurers of CSR, CSR America (a subsidiary of CSR), and Cigna Corporation Inc (Cigna's parent company). The latter two companies were incorporated in the United States.
The main issue in dispute was whether Cigna was liable, under the insurance policy with CSR, to indemnify CSR for claims made in 1991 by CSR's employees and ex-employees in the United States for asbestos related injuries. These claims had been brought against CSR in New Jersey. CSR claimed that Cigna was liable to indemnify it, but Cigna denied that it was liable. CSR and CSR America then brought proceedings in New Jersey seeking declarations that they were entitled to indemnity with respect to the American asbestos claims from Cigna, and Cigna Corporation, as the alter ego of Cigna.
The second issue in the New Jersey proceedings related to the non-contractual liability of Cigna. This non-contractual liability stemmed from a series of communications between CSR and Cigna in which CSR sought an admission from Cigna that it was liable under the insurance policies to indemnify CSR for the asbestos related claims, and Cigna refused to do so. Cigna refused to renew CSR's insurance policy unless it withdrew its claims for indemnity. CSR then wrote a letter to Cigna which appeared to withdraw its claims for indemnity. Cigna relied on this letter as a basis for denying its liability to indemnify CSR. CSR claimed that it was coerced into withdrawing the claims by Cigna's threat not to renew its policy. Therefore, if the letter did preclude it from seeking indemnity from Cigna, then Cigna was liable in damages for tortious interference with CSR's contractual relations, for tortious interference with its prospective economic advantage and for misrepresentation. CSR also claimed statutory damages for this conduct under the United States Sherman Act and its New Jersey counterpart.
In response to the proceedings brought in New Jersey by CSR, Cigna and some of CSR's other insurers brought proceedings in New South Wales. They sought firstly, anti-suit injunctions to restrain CSR and CSR America from taking further steps in the New Jersey proceedings. Secondly, they sought a negative declaration to the effect that they were not liable to indemnify CSR and CSR America in respect of the asbestos-related claims. They also sought a declaration to the effect that they were not involved in any conspiracy or unlawful conduct to force CSR to withdraw the 1991 claims. By way of a cross claim, CSR and CSR America sought orders staying or adjourning the NSW proceedings on forum non conveniens grounds.
At first instance, Rolfe J dismissed CSR's application for a stay of the NSW proceedings, and granted the anti-suit injunctions sought by Cigna to restrain the New Jersey proceedings. The Court of Appeal refused to grant leave to appeal Rolfe J's decision, but did not give detailed reasons. CSR then appealed to the High Court. The High Court, by a majority [9] in a joint judgment (Brennan CJ dissenting), reversed the decision of Rolfe J and the Court of Appeal, granting the stay of the NSW proceedings, and ordering that the application for the anti-suit injunctions be dismissed.
The majority outlined that two grounds may be relied upon by the court in granting anti-suit injunctions, and a different test for granting them should be adopted depending on which ground is relied upon. The first ground is based upon the inherent jurisdiction of the court to protect the integrity of the court's processes. On the basis of this inherent jurisdiction, a court may grant an injunction to restrain a person from commencing or continuing foreign proceedings if they interfere with or have a tendency to interfere with proceedings pending in the local court. [10] The majority referred to Lord Goff in Société Nationale Industrielle Aerospatiale v Lee Kui Jak [11] who pointed out, that where, for example:
an estate is being administered in this country, or a petition in bankruptcy has been presented... or winding up proceedings have been commenced... an injunction is granted to restrain a person from seeking, by foreign proceedings, to obtain the sole benefit of certain foreign assets. [12]
The majority stated though, that this power is not confined to closed categories, but is to be exercised when the administration of justice so demands. [13]
The second ground which may be relied upon for granting anti-suit injunctions is derived from the court's equitable jurisdiction to restrain unconscionable conduct or the unconscientious exercise of legal rights. The categories of unconscionable conduct are also not closed. The court’s equitable jurisdiction was relied upon by Cigna in the present case. It claimed that the foreign proceedings instituted by CSR were unconscionable because they were brought in breach of an agreement not to sue, and secondly, because they were vexatious and oppressive since relief could be obtained in the local proceedings.
The majority held that where the equitable jurisdiction of the court is relied upon to grant an anti-suit injunction, a two step test must be fulfilled. Firstly, the court must determine that it is an appropriate forum to hear the matter. [14] This involves the application of the test of forum non conveniens laid down in Voth – that NSW is not a clearly inappropriate forum. [15] If the court finds that it is a clearly inappropriate forum, then this is the end of the matter. However, if the court finds that it is not a clearly inappropriate forum, then it must go on to decide whether it should grant an anti-suit injunction. The second part of the test then requires the court to ask whether the foreign proceedings involve any unconscionable conduct or unconscientious exercise of legal rights. When the inherent jurisdiction of the court is relied on, there is no two step test. In such cases, the question of whether the court is an appropriate forum does not arise because it is the only court with any interest in the matter. [16]
Brennan CJ in his minority judgment did not clearly lay down a two step test. He considered that anti-suit injunctions based on the court’s equitable jurisdiction should be granted where it is appropriate to avoid injustice. [17]
In applying the first limb of the test, the majority held that NSW was a clearly inappropriate forum. In coming to this conclusion, the majority resolved both the first limb of the anti-suit injunction test, and the issue of whether to grant a stay of the local proceedings on forum non conveniens grounds. CSR thus succeeded in its application for a stay of the local proceedings. The majority applied the test in Voth to some extent, but specified that the test differs where the issues in the foreign proceedings and the local proceedings are not the same. Here, the issues were not the same because the New Jersey proceedings were only concerned with the American asbestos claims, whereas the NSW proceedings related to both the American and Australian claims. Secondly, the New Jersey proceedings dealt with CSR’s claims for statutory damages under the Sherman Act, but the NSW proceedings did not. The majority held that where the issues in the two proceedings are not the same:
(T)he question is not whether the Australian court is a clearly inappropriate forum for the litigation of the issues involved in the Australian proceedings. Rather, the question must be whether, having regard to the controversy as a whole, the Australian proceedings are vexatious and oppressive in the Voth sense of those terms... . [18]
The majority held, in applying its modified test on forum non conveniens, that NSW was a clearly inappropriate forum because the NSW court was not competent to determine the non-contractual liability of Cigna, since those claims were based on American statute. [19] Further, the NSW proceedings were oppressive because the central purpose of Cigna in instituting the NSW proceedings was to prevent the continuation of the New Jersey proceedings. The majority stated that proceedings which are brought for the dominant purpose of preventing another party from pursuing remedies available in courts of another country, but not available locally, are oppressive. [20]
In contrast, Brennan CJ held that NSW was not only, “not clearly inappropriate” to hear the dispute, but that it was the natural forum, [21] adopting the language of the English test on forum non conveniens. [22] Brennan CJ came to this conclusion on the basis of the many factors which connected the dispute to the forum. In relation to the contractual liability of Cigna, some of the connecting factors were that the parties to the contract were incorporated in Australia, the contract was entered into in Australia, and the law to be applied in resolving the issue is NSW law. For the non-contractual liability of Cigna, the alleged tortious conduct took place in NSW, and the law to be applied in resolving the claim is NSW law.
In considering the second step of the test, the majority pointed out that the categories of unconscionable conduct are not limited to defined categories. However, in applying the second step, the majority restricted its consideration to only two recognised categories. The majority considered firstly, whether the proceedings were vexatious or oppressive considering that the dispute could be resolved in NSW, and secondly, whether there was a breach of an obligation not to sue. [23] The majority considered that the first category of cases referred to situations where the plaintiff had commenced proceedings against the defendant in relation to the same subject matter both in this country and overseas. Since CSR only initiated one set of proceedings, and because the NSW and New Jersey proceedings did not deal with the same issues, the present case did not fall within this category. [24] Further, for the proceedings to be vexatious and oppressive, it must be shown that complete relief is available in the local forum. This was not shown here. In relation to whether CSR breached an obligation not to sue Cigna, the majority held that the letter from CSR did not clearly constitute an agreement not to sue. In addition, neither CSR America nor Cigna Corporation were parties to that alleged agreement. [25] Therefore, in bringing proceedings in New Jersey, CSR was not acting unconscionably. Brennan CJ agreed that the proceedings were not vexatious or oppressive on the basis that there were concurrent proceedings in two forums because additional remedies were available in New Jersey. [26] However, he found that the claims of contractual liability by CSR did amount to a breach of a prior obligation not to sue. He held that Cigna had established a prima facie case that such an obligation existed. [27] Brennan CJ then considered a third category which the majority did not consider, that the foreign proceedings were unjust because they interfered with domestic policy. [28] He held that the claims of non-contractual liability in the foreign proceedings fell within this category because it was contrary to domestic policy to invoke foreign law to make conduct illegal which was legal in the place where it occurred. He stated the principle:
If a party engages in conduct at a time and in a place in which that party is free to engage in that conduct without incurring liability, or the risk of liability, for the consequences, a domestic court of that place which is the natural forum for determining the legal effect of the conduct may treat it as unconscionable for another party to sue the first party in the courts of another country to enforce a liability that attached to the conduct under the laws of the other country. [29]
In laying down a two step test, the majority found that it was necessary for a stricter test to apply to anti-suit injunctions than for stays of local proceedings on forum non conveniens grounds because of the preclusive nature of anti-suit injunctions and the importance of comity. By requiring a two step test to be fulfilled, the intention was to lessen the chance of anti-suit injunctions being granted. The same strategy was adopted by the Privy Council in SNIA v Lee and the Canadian Supreme Court in Amchem Products v British Columbia (Workers' Compensation Board). [30] Under these two tests the court first had to determine that the local court was the appropriate forum to hear the dispute, and then whether the continuation of the foreign action would constitute an injustice.
The majority in CSR v Cigna pointed out that anti-suit injunctions, unlike other forms of interlocutory relief, rather than preserving the subject-matter of a proceeding pending its final adjudication, determines the court in which the subject-matter at issue will be heard. [31] Thus, the court which grants the injunction is the court which will hear and determine the matter at issue, and the foreign court is precluded from hearing the dispute. Since the injunction precludes the plaintiff from having the issue heard in the foreign court, the local court should ensure that it is the appropriate forum to hear and determine the matter, before it decides that the foreign court should not decide the issue.
International comity was another justified concern of the court in laying down a stricter test for granting anti-suit injunctions. A definition of comity was provided in the case of Hilton v Guyot:
“Comity”, in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition, which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or other persons who are under the protection of its laws. [32]
The majority noted that although an anti-suit injunction operates in personam, preventing the plaintiff from commencing or continuing foreign proceedings, “it nevertheless interferes with the processes of the foreign court and may well be perceived as a breach of comity by that court”. [33] This is because the local court, by granting an anti-suit injunction, is effectively determining that the foreign court should not exercise jurisdiction over the case before it, rather than allowing the foreign court to decide this for itself. This may create a “hostile atmosphere between the foreign and domestic courts which undermines comity”. [34]
Despite this concern for international comity, the majority declined to recognise that there was a general rule that anti-suit injunctions should not be granted unless the applicant has moved for a stay or dismissal of the foreign proceedings. The majority held that the different circumstances in which anti-suit injunctions may be granted does not permit such a general rule. It may also be argued that this rule places a great deal of confidence in the foreign court declining to exercise its own jurisdiction in appropriate circumstances, and this attitude is not justified considering the case law in this area. [35]
While the reasoning behind the two step test is sound and justified, the actual content given to the two limbs of the test, and their application to the case by the majority, is quite unsatisfactory. The first limb of the test laid down in CSR v Cigna can be criticised on two grounds. Firstly, it may be argued, that in adopting the forum non conveniens test in Voth, that the local forum must not be a clearly inappropriate forum, the first limb is too easy to satisfy, particularly considering the court's concern with international comity. This test contrasts with the test in SNIA v Lee which requires the local court to determine that it is the more appropriate forum, consistently with the test in Spiliada. It also contrasts with the Amchem test which requires it to be shown that the foreign court is not the more appropriate forum before an anti-suit injunction is granted.
It may be argued that these two tests are more difficult to satisfy, and hence are more consistent with the interests of international comity. The majority in Voth argued that in practice, the answer would usually be the same whether it was asked whether the local court was not a clearly inappropriate forum or whether it was clearly the more appropriate forum. However, the questions are distinctly different, and there could be many cases where the local court is not clearly inappropriate, but where it is not more appropriate. Further, although the majority in Voth explicitly rejected the test in Spiliada on the basis of efficiency and practicality, it may be argued that concerns for international comity require that the Spiliada test be adopted when considering whether the court should grant an anti-suit injunction.
The second, and more important, criticism of the first limb of the test is the way in which the majority purported to modify the forum non conveniens test for cases where the issues in the local and foreign court are not the same. The test in Voth requires that in establishing whether the local court is a clearly inappropriate forum, the court must weigh up the relevant factors connecting the dispute to the forum, and then consider whether there is any legitimate juridical advantage to the plaintiff in suing in the local forum. [36] The test in CSR v Cigna, which gives precedence to the fact that the plaintiff has raised issues which the local court is incompetent to determine, and almost ignoring the factors connecting the dispute to the forum, cannot be a modification of the test in Voth because it is quite clearly inconsistent with it. The approach undermines the whole basis of the forum non conveniens doctrine which is finding the forum with the closest connection to the action and the parties. The newly formulated forum non conveniens test would allow the claims of the plaintiff in the foreign forum to determine whether the foreign forum or the local forum is the most appropriate. This encourages clever pleading of foreign claims to include matters, especially statutory matters, not available locally to ensure that the dispute is heard in the foreign forum. The inability of the local court to determine issues raised in the foreign court is a factor more relevant to the second limb of the anti-suit injunction test. In SNIA v Lee, Lord Goff stated that the Court of Appeal in that case had erred by taking into account the advantages of the foreign forum in deciding which forum was the natural forum. These juridical advantages should have been considered in the second limb of the anti-suit injunction test. He held that the juridical advantages sought by the plaintiff:
are not so much connecting factors with Texas which now render Texas the natural forum as advantages available to the plaintiffs in Texas of which, they submit, it would be unjust to deprive them. [37]
It appears that the majority made the same mistake in CSR v Cigna.
The second limb of the CSR v Cigna test is similar to those in SNIA v Lee and Amchem, but also distinct from them. The majority required that unconscionable conduct or an unconscionable exercise of legal rights on the part of the plaintiff in bringing the foreign proceedings be shown. This contrasts with SNIA v Lee which requires the defendant to show that justice does not require that the action should be allowed to proceed in the foreign court. [38] Here, account must be taken not only of injustice to the defendant if the plaintiff is allowed to pursue the foreign proceedings, but also of the injustice to the plaintiff if they are not allowed to proceed. [39] The second limb of the Amchem test largely conforms with this. In this respect, the judgment of Brennan CJ is consistent with these authorities, since he also prefers the concept of injustice to unconscionability. The practical effect of this difference in terminology is uncertain. However, it seems that the concept of unconscionability is more restrictive since it focuses on the conduct of the plaintiff in bringing the foreign proceedings, rather than on the objective injustice of those proceedings.
There are essentially three categories of injustice or unconscionability in relation to which courts have granted anti-suit injunctions based on their equitable jurisdiction. As George Bermann points out, these categories have three broadly stated objectives:
(T)he prevention of highly inconvenient or vexatious litigation, the vindication of a prior and independent obligation not to sue, and preservation of the enjoining court's own jurisdiction or other local policy-based need to forestall foreign judicial proceedings. [40]
The majority in CSR v Cigna only considered the first two categories of cases, while Brennan CJ considered all three and based his decision to grant an anti-suit injunction on the third category. In the case of Midland Bank Plc v Laker Airways Ltd, [41] the English Court of Appeal granted an anti-suit injunction on the basis of this third category. The facts of the case were similar to CSR v Cigna in that the plaintiff in the foreign proceedings sought to invoke United States anti-trust laws against a United Kingdom banker for conduct which took place in England. In that case, Lord Dillon held that
(I)t is unconscionable and unjust for a person who is subject to the jurisdiction of the English courts to seek to invoke the United States jurisdiction under these United States Acts against an English company or individual who is not subject to United States jurisdiction. [42]
The failure of the majority to even consider this category for granting injunctions when it is well established, and when the facts clearly call for its consideration, shows a significant deficiency in the judgment. Alternatively, if the majority adopted the same test as SNIA v Lee, it could have taken domestic policy into account indirectly. Under that approach, the availability of damages under American statute may be considered as an advantage to the plaintiff, but one that is not legitimate, or one that is not unjust to deprive the plaintiff of, considering that NSW law applies to the conduct in question.
The two step test laid down by the majority in CSR v Cigna for granting anti-suit injunctions should be welcomed because it recognises the preclusive nature of these injunctions, upholds international comity, and is consistent with overseas authorities. However, the content given to the two parts of the test, and the way in which they were applied by the majority, was unsatisfactory. Firstly, the modification by the majority of the Voth test for cases where the issues in the local and foreign forum are not the same means that plaintiffs may be able to dictate the outcome of the test by invoking remedies of the foreign forum not available locally. Consequently, objective criteria, such as the factors connecting the dispute to the forum, are relegated to insignificance. Secondly, in deciding whether there was unconscionable conduct by the plaintiff in bringing the foreign proceedings, the majority failed to consider the consequences of these proceedings on domestic policy. Hence, the decision may have a negative long-term impact on the law in this area in terms of fairness and local policy.
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URL: http://www.austlii.edu.au/au/journals/SydLawRw/1998/8.html