Rimpacific Navigation Inc. and Another v Daehan Shipbuilding Company Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE DAVID STEEL,Mr Justice David Steel |
| Judgment Date | 24 November 2009 |
| Neutral Citation | [2009] EWHC 2941 (Comm) |
| Docket Number | Case No: 2009 FOLIOS 295 AND 1168 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 November 2009 |
[2009] EWHC 2941 (Comm)
Mr Justice David Steel
Case No: 2009 FOLIOS 295 AND 1168
Case No: 2009 FOLIOS 296 AND 1169
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Vasanti Selvaratnam QC & Sandra Healy (instructed by Ince & Co) for the Claimants
David Wolfson Q.C. & Michelle Menashy (instructed by Mc Dermott Will & Emery) for the Defendant
Hearing dates: 9 & 10 November 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice David Steel :
There are two applications before the court:
i) The Defendant's application made pursuant to CPR 11.1 for an order that the English Court has no jurisdiction to determine the claims.
ii) The Claimants' application for anti-suit injunctions restraining the Defendant from pursuing related proceedings issued in South Korea.
Rimpacific Inc, the Claimant in Folios 295 and 1168, is a Panamanian company. It was at all material times the disponent owner of the vessel Jin Man. Wonder Enterprises Ltd, the Claimant in Folios 296 and 1169, is a Liberian company. It was at all material times the disponent owner of the vessel Jin Pu. Rimpacific and Wonder are together referred to as the Claimants.
The claims relate to two charterparties dated 21 September 2007 on largely identical terms pursuant to which each Claimant agreed to charter the two vessels to Daehan Shipping Co. Ltd (“the charterers”).
Clause 53 in each charterparty made provision for the charterers to furnish a guarantee letter from “Daehan Cement” or “Daeju Construction”. It is the Claimants' evidence that the charterers in due course proposed that the guarantor of the charterparties be changed from Daehan Cement or Daeju Construction respectively to Daehan Shipbuilding Co. Ltd (“the Defendant”). This proposal was accepted by the Claimants.
The Defendant provided two written guarantees dated 20 December 2007 in respect of all amounts due by the charterers under the respective charterparty. Each of the guarantees was signed by Mr. Ie Su Oh. He was identified as the “CEO/President” of the Defendant and each guarantee bore what appeared to be an official stamp. Each guarantee contained a jurisdiction clause in the following terms:
“This guarantee shall be governed in every respect by English law. Any disputes arising under or in connection with this guarantee shall be referred to the exclusive jurisdiction of the English Courts.”
As from about November 2008, in the wake of the collapse in the dry cargo freight market the charterers failed to pay hire due under the charterparties. In due course the Claimants referred their claims for outstanding hire to arbitration in early 2009. Further the Claimants issued claim forms on 5 March 2009 (folios 295 & 296) against the Defendant under the guarantees. On 13 March 2009 Gloster J granted the Claimants permission to serve the claim forms on the Defendant in South Korea.
On 27 March 2009 the first arbitration awards were made in the claims brought by the Claimants against the charterers. Wonder was awarded $4,774,187.50 plus interest and costs and Rimpacific was awarded $3,970,156.25 plus interest and costs in respect of outstanding hire.
Shortly before the issuance of those awards the Claimants purported to accept the charterers' repudiatory breach of the charterparties and terminated them. Two further arbitration awards were made dated 29 June 2009 by virtue of which the Claimants were awarded sums in respect of damages. Wonder was awarded $16,215.266.78 plus interest and costs and Rimpacific was awarded $15,115,942.34 plus interest and costs.
In the meantime, on 17 June 2009 the Claimants were served with a complaint that in fact had been filed on 19 February 2009 by the Defendant before the Seoul Central District Court for a declaration of non-liability under the guarantees. The Claimants are currently disputing the jurisdiction of the Korean court to hear those claims.
The Claimants re-amended the claim forms in September 2009 to reflect the outcome of the first and second arbitration awards and obtained permission to serve the same out of the jurisdiction. On the same day new but identical proceedings against the Defendant (folios 1168 and 1169) were issued as a precautionary measure in the event that the Claimants would not be able to serve the re-amended claims on the Defendant prior to the expiration of validity of the claim forms.
Separability
At the heart of the dispute between the parties is the Defendant's contention that the letters of guarantee on which the Claimants rely are not (or strongly arguably are not) binding. Thus the first issue that arises is whether the Claimants have a good arguable case that there is jurisdiction under paragraph 6(c) or 6(d) of CPR 6 & PD 3.1. This in turn gives rise to a threshold point raised by the Claimants. It is this. Is this issue to be determined by reference to the existence and validity of the guarantees or to the existence and validity of the law and jurisdiction clauses.
In other words, the question arises as to whether the law and jurisdiction clause is potentially separable. The Claimants in this regard rely by way of analogy on Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40 and upon Deutsche Bank AG v Asia Pacific Broadband Wireless Communication Inc [2008] EWCA Civ. 1091.
In Fiona Trust owners sought to rescind charterparties, including arbitration agreements contained within them, on the grounds that they had been induced by bribery. The issue arose as to whether, assuming the owners had an arguable case that the charters had been validly rescinded, they also had an arguable case that the arbitration agreement had been rescinded as well.
This in turn involved consideration of Section 7 of the Arbitration Act 1996:
“7 Separability of arbitration agreement
Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.”
The House of Lords held that the arbitration clause survived the avoidance of the charterparties. The reasoning is set out in paragraph 17 of the speech of Lord Hoffmann:
“17 The principle of separability enacted in section 7 means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a “distinct agreement” and can be void or voidable only on grounds which relate directly to the arbitration agreement. Of course there may be cases in which the ground upon which the main agreement is invalid is identical with the ground upon which the arbitration agreement is invalid. For example, if the main agreement and the arbitration agreement are contained in the same document and one of the parties claims that he never agreed to anything in the document and that his signature was forged, that will be an attack on the validity of the arbitration agreement. But the ground of attack is not that the main agreement was invalid. It is that the signature to the arbitration agreement, as a “distinct agreement”, was forged. Similarly, if a party alleges that someone who purported to sign as agent on his behalf had no authority whatever to conclude any agreement on his behalf, that is an attack on both the main agreement and the arbitration agreement. ”
It was the Defendant's case that Mr. Oh had no authority to enter into the guarantees on the Defendant's behalf because no board approval had been obtained. Thus it was submitted the arbitration clause stood or fell with the primary agreement. The Claimants' response was that it was not suggested that Mr. Oh as CEO had no authority to enter into any guarantees on the company's behalf let alone no authority to enter into an English law and jurisdiction agreement. Accordingly it was contended that the law and jurisdiction clause remained in existence and still furnished the forum and legal basis on which the question whether there was a concluded guarantee was to be decided.
In this regard the Claimants relied on the following passage in Lord Hoffman's speech:
“18 On the other hand, if (as in this case) the allegation is that the agent exceeded his authority by entering into a main agreement in terms which were not authorised or for improper reasons, that is not necessarily an attack on the arbitration agreement. It would have to be shown that whatever the terms of the main agreement or the reasons for which the agent concluded it, he would have had no authority to enter into an arbitration agreement. Even if the allegation is that there was no concluded agreement (for example, that terms of the main agreement remained to be agreed) that is not necessarily an attack on the arbitration agreement. If the arbitration clause has been agreed, the parties will be presumed to have intended the question of whether there was a concluded main agreement to be decided by arbitration.”
The Claimants further submitted that this approach to severability was not confined to the field of arbitration and relied in that respect on Deutsche Bank. Here a claim, falling within Council ...
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