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The Inter-Pacific Bar Association (IPBA) is an organisation with some similarities to the International Bar Association (IBA), with a regional focus on Asia-Pacific. Its 27th annual conference took place in Auckland between 6 and 9 April this year. The conference is well attended by lawyers and others with an interest in legal developments and issues in the Asia-Pacific region, although attendance is not limited to lawyers from that region alone. In recent years there has been a notable increase in the number of attendees from Europe and other areas outside Asia-Pacific.

Not unlike the IBA, the IPBA annual conference has some initial plenary sessions followed by parallel sessions organised by the various committees, and attendees may pick and choose which sessions interest them. I attended the following sessions:

Hot topics on investment treaty arbitration

This session included some interesting presentations on:

Impact of ethical standards on international arbitration

The contributors provided updates from their jurisdictions in relation to issues about the potential for transnational standards of behaviour in international arbitration and how any such standards might be enforced.

Emergency arbitrator: a useful tool or useless phenomenon

This session began with a 30 minute mock emergency arbitration under the Singapore International Arbitration Centre (SIAC) Rules to give participants a flavour of how emergency arbitration is used in practice. After the mock arbitration, the remainder of the session was a roundtable discussion on a number of points of interest arising in relation to emergency arbitration. These included:

  • The interface between such a remedy and recourse to national courts.
  • Difficulties surrounding the enforcement of emergency awards.
  • The position of third parties who might have some interest or control in relation to the subject matter of emergency relief.

The panel also debated differences of approach between institutions and users, which were very marked, considering the similarity of the rules. For instance, the SIAC has already administered 57 requests for emergency arbitration, whereas in a similar timescale the London Court of International Arbitration (LCIA) has only been approached once for a request for an emergency arbitrator to be appointed, and the LCIA Court had declined to appoint an emergency arbitrator in that case. That led to the well-known decision in Gerald Metals SA v Timis. The session concluded by noting that under most institutional rules, it is possible to opt out of emergency arbitration regimes, and by considering the pros and cons of opting out in terms of not cutting down on the ability to approach a national court for assistance.

Privilege and its impact on discovery/document production

Delegates split into six small roundtables for this session. This was in order to consider the possibilities of regulation of matters of privilege by soft law similar to the IBA Guidelines for the Taking of Evidence in International Arbitration. This was generally welcomed as an idea that could work in practice and ensure uniformity in international arbitration across jurisdictions, with different national approaches to privilege. Issues were identified in relation to privilege arguably being substantive in nature, rather than procedural, and how that might affect attempts to harmonise by soft law.

National interference in arbitration: is the idea of “free & fair” international arbitration under threat

In this session, the panel debated a number of challenges to the system of international arbitration. These included:

  • Guerrilla tactics ranging from uncooperative approaches to document production to kidnap of arbitrators.
  • The use and misuse of institutional rules to try to combat improper behaviour.
  • The potential use by states of tax assessments to wipe out arbitral awards made against them in favour of the party whose tax liability is being assessed.
  • The innovative approach of the courts in Hong Kong in awarding indemnity costs as the rule where frivolous challenges to arbitral awards are dismissed.
  • The well-known development in the UAE of Law 257 which could in theory lead to the imprisonment of arbitrators for failing to act fairly.

Efficient arbitration: techniques to minimise delay and expense in international cross-border disputes

The panel in this session debated a number of practical issues including dichotomies in approach between pleading and memorial styles for submissions in international arbitration, bifurcation of issues to increase efficiency, and the potential for summary awards in suitable cases.

Insurance disputes: successful strategies for both insureds and insurers

This was a lively joint session between the Dispute Resolution and Arbitration Committee and the Insurance Committee. Various practical issues were debated from the perspectives of both insureds and insurers.

Comment

What struck me in attending these sessions was that the same issues, which we see arising in all forms of dispute resolution, and in particular arbitration, in England, are being played out across the world in other jurisdictions in a similar way.

In recent years, the IPBA has seen a steady increase in membership and in the number of attendees at each conference. It is a significant achievement for the Auckland organising committee to have achieved almost 800 registrations for a conference in such a far flung place. Next year’s annual conference will take place in Manila between 14 and 16 March. For anyone with a general interest in the Asia-Pacific region and who is keen to learn first-hand about the latest legal issues arising and being debated there, this might be an ideal opportunity for some genuinely interesting conferencing.

Should you have any further queries as to Ravi Aswani please do not hesitate to contact her clerks Luke Irons or Chris O’Brien by email or telephone 0207 440 6900.

Introduction

Amit has recently acted for an IP whose office is one of the largest appointment takers in the country. He appeared for the respondent at several hearings on an application to review a BTO.

Background

The out-going officeholder had his licence revoked by the IPA for misappropriation of monies, running to six figures, from numerous estates. This resulted in a BTO, which was granted by the Court on paper.

The ex-administrator of the company (who was rejected as liquidator of the company) applied to review the BTO in his capacity as a creditor for his time costs.

The Application

The principal basis of the application was an alleged failure by the incoming officeholder to notify the Court that he had been nominated by the out-going officeholder, which was said to have cast doubt over his impartiality.

The incoming officeholder's nomination was pursuant to the IPA giving the out-going officeholder the opportunity to select his successor. The incoming officeholder was the fourth one that was approached by the outgoing officeholder who agreed to take over a significant number of cases.

The respondent was neutral on the application, but certainly picked some holes in the applicant's arguments.

The Court was asked to determine whether in light of the objections put forward by the applicant and the facts and circumstances known to the Court at the time of the hearing of the application for the review, the Court would still have made the BTO.

The Outcome

The application gave rise to two key interesting points:

1. Is it appropriate for an out-going officeholder to nominate his successor?

First and foremost this must be a question for the IP's governing body. The Court indicated there will usually have to be further factors, rather than merely nomination, although that might be enough.

2. If the Court is satisfied that the BTO should be amended, should it only interfere with the one estate in which the applicant has an interest or the entire BTO?

The applicant creditor only has standing to ask for a review of the BTO for the estate in which it has an interest. An IP's governing body has standing to ask for a general review. The Court indicated that it has a residual discretion to review BTOs and the stance of the governing body would be a powerful factor when exercising this discretion. On this occasion, the IPA and the Insolvency Service had remained neutral.

After repeated hearings and the Court having given a clear indication on the application, it was granted by consent. There followed a contested costs hearing at which a costs order in favour of the respondent against the applicant IP personally was made.

The President of the Queen’s Bench Division and the Chancellor have this week confirmed that the new Business and Property Courts will be formally opened in Birmingham by the Lord Chief Justice, the Rt Hon. Lord Thomas of Cwmgiedd, on Thursday, 6th July 2017. 

The new courts have already been strengthened by two key judicial appointments.  Former St Philips commercial barrister, His Honour Judge David Worster, has been appointed as the new Mercantile Judge while the city’s booming Chancery Court has been strengthened by the appointment of another St Philips alumnus, His Honour Judge Patrick McCahill QC. Judge McCahill joins the exceptional Chancery line-up of Judges Charles Purle QC, Simon Barker QC and David Cooke.

The Business and Property Courts in Birmingham will combine the strengths of the city’s Chancery court with the Mercantile and Technology and Construction Courts (TCC), and will introduce flexible listing and modern procedures.  The new courts aim to meet three objectives:

  1. ensuring that each case is managed to deliver progress to trial without delay
  2. trial by the most appropriate judge (whether a resident specialist judge or a High Court judge)
  3. the provision of an efficient and effective service utilising modern technology to best advantage

This innovation has been the result of the combined efforts of the HMCTS Birmingham, Regional and High Court teams and the specialist judges and the Circuit and District Bench, who have been working hard for a year on an implementation plan to convert the vision to a reality.   They in turn also received invaluable support and service suggestions from the Midlands business community, led by the High Sheriff for the West Midlands, Dr Keith Bradshaw, the Midland Chancery and Commercial Bar Association (MCCBA), the Birmingham Law Society and senior commercial litigators.

Ed Pepperall QC, Chairman of the MCCBA, commented: “The MCCBA warmly welcomes the launch of the new Business and Property Courts. The new courts, which are supported by a strengthened local judicial team and by a greater commitment to having full High Court judges sitting in the city, will ensure that Lord Justice Briggs’ assertion that ‘no case is too big to be tried in the regions’ is very much true in Birmingham.

The Association is delighted by the appointment of Judge David Worster as the city’s new Mercantile judge. Judge Worster will be known to many as a very effective commercial barrister. Since his appointment to the bench, he has proved himself to be a fair and user-friendly judge who has earned the trust and respect of the legal community. He is ideally placed to resurrect the fortunes of the Birmingham Mercantile Court. 

The Association also welcomes Judge Patrick McCahill QC back to Birmingham. Judge McCahill was a very successful Chancery & Commercial barrister in the city before his appointment as Chancery judge in Bristol. He returns to us after 10 years’ exile with an excellent reputation as a popular and respected judge.”

Business and Property Courts will also sit in London, Manchester, Leeds, Bristol and Cardiff, with expansions to Newcastle and Liverpool likely in the future. Birmingham is, however, first off the mark. 

Andrew Dinsmore has been selected to speak on Day 2 of the Lloyd’s Maritime Academy’s five-day event on Time & Voyage Charterparties. His seminar will consider the legal and practical implications of off-hire clauses with an analysis of common clauses and the recent case law including The Global Santosh [2016] UKSC 20.

The details of the event can be found here.

Should you require any further information as to Andrew Dinsmore please contact Luke Irons or Chris O’Brien.

This article first appeared on the Practical Law Dispute Resolution blog on 21 March 2017.

Overview of the application

In Attheraces Ltd and another v Ladbrokes Betting and Gaming Ltd and others, potential proceedings concerned the alleged misuse of horseracing broadcasts (the off-tube commentaries).

The applicants sought disclosure about how certain off-tube commentaries had been produced, claiming that they did not know how they had been produced but needing to know this so that they could consider their cause of action. The applicants therefore applied under section 33(2) of the Senior Courts Act 1981 and pursuant CPR 31.16 for pre-action disclosure.

As can often happen, after the application had been issued but before the hearing, further information had been provided by the respondents. This was through correspondence and by way of evidence in response.

Focusing on the evidence only, albeit acknowledging the dispute as to the adequacy of the pre-application correspondence and whether the application was ever warranted, Marcus Smith J said it had relieved the applicants of the ignorance of the source. Accordingly, whilst the applicants may not have had the necessary information to draft a claim when the application was issued, they did now.

The provision of the information had also meant that the basis of the claims in the application to what was postulated at the hearing had changed substantially. The scope of the documents sought against the Ladbroke/Coral Group respondents (first to fifth respondents) had to be substantially modified. The scope of those documents sought against the BetFred respondents (sixth and seventh respondents) had to be wholly revisited. These modifications were dealt with in a draft order, produced by the applicants on the day.

The respondents contended that what was now being sought, by way of the draft order, was such a drastic change to the application that the application should have been refused on that ground alone. The applicants maintained that they were simply refining their application, based on the information provided by the respondents in evidence.

Marcus Smith J rejected the respondents’ contention. However, he determined that the evidence provided had either answered, or gone a long way towards answering, the basis of the application, such that the applicants had a choice at that point. The choice was either to take stock in light of the information they had, or to press on with a materially different application. The judge said that the applicants’ choice was theirs to make, but that they should bear the consequence (which ultimately they did).

The decision

The test under CPR 31.16(3) is a two-stage test: stage one, are the conditions of CPR 31.16(3)(a) to (d) met? Stage two, if so, how should the discretion be exercised?

CPR 31.16(3)(a) requires that a respondent to an application must be likely to be a party to proceedings. Similarly, CPR 31.16(3)(b) requires that an application must be likely to be a party to proceedings. The judge was satisfied that it was “likely” (meaning no more than “may well”) that both applicants would be parties and that at least one of the respondents would be.

CPR 31.16(3)(c) states that the disclosure sought must be that which would fall within the duty of standard disclosure and therefore an application for pre-action disclosure should be “crafted with great care, and should be limited to what is strictly necessary”. Unfortunately for the applicants, it was here that they began:

“… to pay the price for the absence of any clear formulation of their case against the Ladbrokes/Coral Group and the Betfred Group… a properly articulated conspiracy and passing off claim against the Respondents – even if it had gaps or blanks or square brackets – would have been enormously helpful in determining whether the documents within the classes of disclosure sought by the Applicants fell (on the balance of probabilities) within standard disclosure”.

The classes of documents sought had been so widely drawn that it would seemingly have been impossible for the respondents to have successfully argued that none of the documents fell within standard disclosure. However, the judge held that the order could have been more properly refined and improved. Whether a party would be permitted to go back to the drawing board, to reconsider the scope of the disclosure sought, depends on the circumstances. However, the judge stated that he would not have permitted it in this case, due to the likelihood of this leading to a further contested hearing.

Finally, CPR 31.16(3)(d) states that the objectives of pre-action disclosure are to:

  • Dispose fairly of the anticipated proceedings.
  • Assist the dispute to be resolved without proceedings.
  • Save costs.

This subsection has both a jurisdictional and discretionary aspect. The judge held that the applicants could not show a real prospect that any of the three objectives could be met. Whatever may have been the position when the application was made, information had been provided such that the jurisdictional stage failed.

Points to take away from the case

  • Applications can present a moveable feast; if the issuing of the application yields the necessary information, step back and consider how you will satisfy the jurisdictional point.
  • It is often useful to send the application to the respondents in draft form to try and elicit a response before the cost of issue.
  •  If the information given in response (both to the draft application and after issue) goes some way but not far enough, check what outstanding information is necessary to meet the objectives of CPR 31.16(3)(d) and amend the basis of your application in advance. Do not leave it until the day to move the goal posts.
  • In this case, the judge had no interest in trawling through the protracted correspondence to determine whether or not the information had been provided. Put the response in evidence form.
  • Widely drawn orders or requests are likely to fall foul of the conditions. Ask yourself: What do I need? Would this form part of standard disclosure? How does obtaining the document at this stage satisfy the objectives of CPR 31.16(3)(d)?
  • Think critically about your own case and whether the information sought really is necessary pre-issue, or whether it can be properly dealt with once all the cards are on the table.

We are delighted to announce that Ed Pepperall QC has been named as Birmingham Law Society’s “Barrister of the Year” at the BLS 2017 Legal Awards.

Ed received his award from journalist and author John Sergeant at the ceremony on 9th March at The ICC in Birmingham.

Other winners on the night were:

Trainee Solicitor of the Year

  • Matthew McDonald – Trowers & Hamlins LLP

Paralegal of the Year

  • Kiri Tamber – Anthony Collins Solicitors LLP

Chartered Legal Executive of the Year

  • Norman Rea – Dignity Funeral Services Ltd

Assistant/Associate Solicitor of the Year

  • Sheree Green – Anthony Collins Solicitors LLP

Corporate Social Responsibility and Pro Bono Lawyer of the Year

  • Lorna Gavin – Gowling WLG (UK) LLP

Partner of the Year

  • Rebecca Warren – Pinsent Masons LLP

Corporate Team of the Year

  • DLA Piper UK LLP

In-House Legal Team of the Year

  • Coventry City Council

Law Firm of the Year (sole practitioners up to 4 partners)

  • Fountain Solicitors

Law Firm of the Year (5-15 partners)

  • The Community Law Partnership

Law Firm of the Year (16+ partners)

  • Eversheds Sutherland (International) LLP

Lifetime Achievement Award

  • Chris Owen

Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17

On 15 March 2017 Lord Hughes (with whom Lord Neuberger, Lady Hale, Lord Kerr, Lord Clarke, Lord Wilson and Lord Sumption agreed) handed down judgment in the case of llott, turning over the decision of the Court of Appeal and restoring the order of the District Judge from 2007. 

The full article from Lydia Pemberton can be found here.

The Court of Appeal recently handed down judgment in Excalibur Ventures v Texas Keystone Inc [2016] EWCA Civ 3436 (Comm), which is an important case on the liability of third-party litigation funders for a non-party costs order under CPR 46.2

The background

The High Court litigation had seen Excalibur [‘E’], essentially a shell company, pursue Gulf Keystone for various relief arising from a dispute about oil fields in Kurdistan. E’s solicitors were on a Conditional Fee Agreement, and received third-party funding in the region of £31.75m by the time the 60-day trial finished. The funding arrangements were quite complex and do not require repeating in order to explain the principles set out in the judgment.

After a long and complex trial, E’s claim failed in its entirety, and a crushing judgment from the trial Judge described it as a ‘speculative and opportunistic’ claim which suffered a ‘resounding, indeed catastrophic, defeat.’ The solicitors for E were criticised for their ‘aggressive and unacceptable correspondence’. E was ordered to pay the Defendants’ costs on the indemnity basis; despite E having been ordered to pay security for the Defendants’ costs, there was a shortfall of almost £5m.

The first-instance Judge found that the funders were liable for a non-party costs Order on the indemnity basis, pursuant to CPR 46.2 and s.51(3) Senior Courts Act 1981, but subject to the Arkin cap (i.e. that the funders’ liability should be limited to the sum which they had invested in the action on behalf of E). There were appeals from the various lenders on various grounds, as set out below. 

Arguments in the Court of Appeal

It was common ground between all parties that: 

  • Parties who purely fund the litigation but have no interest in its outcome should not face a costs Order, but it will be an important factor if the funder has a vested interest in the outcome; 
  • The Court has a wide discretion under CPR 46.2; and 
  • The Court can take into account whether the funder is considered to be the real party interested in the outcome of the litigation, or there is some other conduct which makes it just and reasonable to make the order.

Three of the appellant funders accepted their liability for a non-party costs order, but disputed the indemnity costs order, arguing that a standard-basis costs order was appropriate. One appellant (‘Platinum’) argued that, because it had only contributed funds for payment of security for costs, that sum should not count towards its Arkin cap (i.e. because it was simply security for costs provided in response to the opponent’s application, rather than being a positive contribution to its own party’s fighting fund). 

The judgment

The Court emphasised that funders would follow the fortunes of the party they funded. Even if the funder were not guilty of any reprehensible conduct, there was no reason to disassociate its outcome from that of its lawyers and client. Funders such as those in this case were not particularly interested in access to justice, but in securing a good return on a commercial investment, and they must face the consequences of failure with those whose cases they fund. 

The Court also criticised the ‘feeble’ due diligence carried out by the funders into the merits of E’s claim, and encouraged funders to apply greater scrutiny to the prospects of a claim as it develops (which can be properly done without straying into champerty), even if represented by top-flight lawyers. 

The argument about security for costs was also rejected. The Court’s approach was that if a funder provides security for costs, it is also gambling on a positive outcome and a commercial success for themselves; it would be wrong to excuse them of the risk of their party losing and there being any liability for costs over and above the amount of security ordered, for example when the security is assessed prospectively on the standard basis but the final costs order is on the indemnity basis. 

Summary 

The key points to take away from this judgment, and to advise any funding clients on, are as follows:

  • If a commercial funder backs a party which then loses at trial, the funders’ fortunes generally mirror those of their party, regardless of the funders’ conduct;
  • There is an obligation on funders to demand proper ongoing scrutiny of a case’s merits, and to reconsider their position if those merits drop sufficiently low;
  • The position of a commercial funder providing funds for a party’s ongoing costs and disbursements is no different to a funder simply providing funds which have been ordered as a result of an application for security for costs. Either way, there is a commercial gamble being undertaken, which brings with it an inevitable risk factor.

To view Ali's full profile, please click here.

Monday, 17 October 2016 00:00

Property Insight - October 2016

The older farmers reaping what they sow … and the young farmers who have earned their corn.

Equity, justice and the proportionate remedy for the next generation of farmers.

David Stockill

RECENT CASE 

Roger Moore v Stephen Moore and Till Valley Contracting Limited, Ch D, unreported, 19 August 2016 (Simon Monty QC sitting as a Deputy Judge of the Chancery Division)

This proprietary estoppel case all started with the claimant’s attempt to dissolve a farming partnership between himself, his son and a related company.  In truth, the claim resolved into a counterclaim by the son (Stephen) for his father (Roger)’s interest in the farm, and the partnership issues had nothing more than a “walk on” part.  That was all the truer since Roger, by the trial was listed had become incapacitated by reason of his Alzheimers.  

The subject farm had originally been owned by Roger’s father, who then gifted it to Roger and his brother Geoffrey.  Since, very much in contrast to Stephen, Geoffrey’s sons took no real interest in the farm, on his retirement he gave his half share of the partnership to Stephen in return for a discounted payment from the partnership of £500,000.   So that was the proprietorial position on paper which faced the Court.  But Stephen’s acquisitive claim against his father went further than that under the principles of proprietary estoppel, and was based on a lengthy history.

Stephen had worked on the farm since his childhood, at weekends and evenings and college holidays and subsequently full-time. He became a salaried partner in about 1998 (page 31) and earned £200 per week for 45/50 hours (with 100 hours during harvest time). His income rose to £590 per fortnight from which he paid £190 per month as a pension contribution. In 2003/4 he became an equity partner, sharing in the profits. From partnership, the assets in the farm were transferred to the company, the second defendant.

Did Stephen succeed in his is action to gain a greater interest in the farm?  And if so, to what extent, on what equitable principles and why is this case an advance on the Supreme Court case of Thorner v Major which was heard at first instance by Deputy High Court Judge John Randall QC and which went all the way to the Supreme Court?

In his article David Stockill reviews the recent farming cases where proprietary estoppel has been asserted, the full article can be found here.

Introduction

The Yusuf Cepnioglu concerned another case of a foreign statute giving the victim the right to sue the wrongdoer’s insurer directly without needing to first sue the insured. Unless such a right exists then the victim cannot sue the insurer directly since he is not a party to the insurance contract. Such a need usually arises where the insured has become insolvent and the third party seeks to obtain the benefit of the insurance rather than compete with other creditors for what may be limited or non-existent assets. In English law the relevant legislation is currently contained in the Third Parties (Rights Against Insurers) Act 1930 (to be replaced by the Third Parties (Rights Against Insurers) Act 2010). 

Facts

On 8th March 2014 the vessel YUSUF CEPNIOGLU (“the vessel”), operating on a liner service between Turkey and North Africa, grounded on the Greek island of Mykonos. Salvage services were rendered but the vessel was a total loss. At the time of the grounding the vessel was carrying 207 containers. The cargo was being carried pursuant to 74 bills of lading issued by the time charterers. The proper law and jurisdiction of the bills was that of Turkey. Cargo claims had been notified to both the owner and charterers of the vessel who were both Turkish companies. The charterers commenced arbitration proceedings in London against the owner pursuant to the time charter. 

The vessel’s owner was a member of the claimant P&I Association (“the Club”). The owner therefore had insurance against third party claims pursuant to its Club cover. Those terms provided for English law and London arbitration, for the Club only to be liable if the owner had paid the claims against it (“the pay to be paid” clause) and, further, that an arbitration award was a condition precedent to the Club’s liability. 

In May 2014 the defendant charterers commenced proceedings in Turkey in which they sought to attach the Club’s assets in Turkey up to a value of US$13.5m as security for a claim pursuant to the Turkish Insurance Contract Law which gave the charterers a right of direct action against the Club. The Club sought an anti-suit injunction in England in respect of these proceedings and the intended “substantive” proceedings in support of the right of direct action. This was granted at first instance and the charterers then appealed to the Court of Appeal (“CA”). 

The decision

The CA first examined the proper characterisation of the claim and decided that this had to be done by looking at whether the charterers’ right to sue the Club direct was essentially a contractual right (in which case it would be governed by English law as the proper law of the contract) or an independent right (in which case it would be governed by Turkish law). Relying on the judge’s findings of fact on Turkish law the CA agreed with the judge that the essential content of the right appeared to be reflected in the contract between the Club and the member. The factors that supported this were, for example, that under the Turkish law the loss had to be in respect of insured perils, within the policy terms, and contractual time and cover limits applied as well as the law and arbitration clause (the latter subject to a possible public order exception). The victim’s right in Turkish law was to a large extent circumscribed by these contractual provisions between the Club and its member. The other factors such as the unenforceability of the “pay to be paid” clause in Turkish law and the judge’s cautious finding that the Club “may” remain liable to the victim, even after its liability to the member had been discharged, were not enough to change this. The charterers were therefore exercising essentially a contractual right and therefore were bound to accept that their claim was governed by English law and must be arbitrated in London. 

The Turkish proceedings were in contravention of this obligation. The CA went on to hold that the Club was entitled to an anti-suit injunction. In doing so, the CA decided that the test to be applied was that set out in Aggeliki Charis Compania Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87, which applied by parity of reasoning, the third party time charterers being obliged to comply with the arbitration clause even though they were not a party to the arbitration agreement. Hence, an injunction would be granted to restrain the foreign proceedings, unless there was good reason not to grant it. There was no need for the Club to show vexatious or oppressive conduct as contended by the charterers and the CA refused to follow The Hari Bhum (No. 1) [2005] 1 Lloyd’s Rep. 67 instead preferring DVA v Voest Alpine (The Jay Bola) [1997] 2 Lloyd’s Rep 279. Since there was no good reason why an injunction should not be granted and no question of delay or any inequitable conduct on the part of the Club, an anti-suit injunction would be maintained as that was the only way that the charterers could be required to recognise the Club’s right to have the dispute referred to arbitration. 

Comment

Regarding the proper characterisation of the claim, the CA preferred the factors relating to the contractual provisions, which limited the victim’s right in accordance with the terms of the contract, and used these to define the essential content of the right. In doing so, the CA’s judgment effectively determined the claim since the claim would then be determined by English law, under which the “pay to be paid” rule provides a complete defence to the insurers if liability has not been discharged by the insured. This was despite the fact that no such defence appeared to exist under the Turkish law being invoked by the charterers. The contrary argument is that the victim is suing precisely because the insured has not and will not pay. Therefore, to regard the relevance of the Turkish exclusion of the “pay to be paid” clause as being of only a “limited extent” may be controversial in some circles. Some may indeed argue that these factors should define the characterisation of the right. However, this argument was rejected by the CA and the outcome in this case is defensible on the basis that the Club has entered an insurance contract governed by English law and therefore its rights should be determined in accordance with that, including the “pay to be paid” provision, thus giving priority to contractual rights over the right to direct action. The case thus confirms previous case law that where the foreign statute follows the contractual provisions then, although much will depend on the terms of the statute, English Courts are likely to characterise the claim as essentially contractual and thus enforce any English law and jurisdiction/arbitration clause.  

In addition, the CA has clarified that in such cases the relevant test for grant of an anti-suit injunction is that in The Angelic Grace and that an injunction will therefore be granted unless there is a good reason not to do so. The fact that the victim is not a party to the insurance contract which is the subject of the direct action does not mean that the test to be applied is that of whether the foreign proceedings are vexatious and/or oppressive. Therefore, in such cases, the courts will grant injunctions on the more readily provable basis that such injunctions will be granted to protect a contractual right. 

Ishfaq Ahmed