Star Reefers Pool Inc. v JFC Group Company Ltd

JurisdictionEngland & Wales
JudgeRix,Sullivan,Lewison L JJ
Judgment Date20 January 2012
CourtCourt of Appeal (Civil Division)
Date20 January 2012

[2012] EWCA Civ 14

Court of Appeal (Civil Division).

Rix, Sullivan and Lewison L JJ.

Star Reefers Pool Inc
and
JFC Group Co Ltd.

Steven Gee QC and Peter Stevenson (instructed by Swinnerton Moore LLP) for the appellant.

Charles Kimmins QC and Luke Pearce (instructed by Stephenson Harwood) for the respondent.

The following cases were referred to in the judgment:

AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSCUNK [2011] EWCA Civ 647; [2011] 2 CLC 51.

Airbus Industrie GIE v Patel [1998] CLC 702; [1999] 1 AC 119.

Aktas v AdeptaUNK [2010] EWCA Civ 1170; [2011] 2 WLR 945.

British Airways Board v Laker Airways LtdELR [1985] AC 58.

CNA Insurance Co Ltd v Office Depot International (UK) LtdUNK [2005] EWHC 456 (Comm); [2012] 1 CLC 283.

Deutsche Bank AG v Highland Crusader Offshore Partners LP [2009] 2 CLC 45; [2010] 1 WLR 1023.

Donohue v Armco Inc [2002] CLC 440.

EI du Pont de Nemours & Co v AgnewUNK [1987] 2 Ll Rep 585.

Elektrim SA v Vivendi Holdings 1 Corp [2008] 2 CLC 564 (CA).

Eras EIL Actions (No. 2)UNK [1995] 1 Ll Rep 64.

Glencore International AG v Exter Shipping Ltd [2002] CLC 1090.

Masri v Consolidated Contractors International Co SAL [2008] 1 CLC 887; [2009] QB 503.

Midland Bank v Laker AirwaysELR [1986] QB 689.

Shell International Petroleum Co Ltd v Coral Oil Co Ltd (No. 2)UNK [1999] 2 Ll Rep 606.

Societe Nationale Industrielle Aerospatiale (SNIA) v Lee Kui JakELR [1987] 1 AC 871.

South Carolina Insurance Co v Assurantie Maatshappij “De Zeven Provincien” NVELR [1987] AC 24.

Tonicstar Ltd v American Home Assurance CoUNK [2004] EWHC 1234 (Comm); [2012] 1 CLC 271.

Trafigura Beheer BV v Kookmin Bank Co [2006] 2 CLC 643. Turner v Grovit[2002] CLC 463; [2002] 1 WLR 107.

Shipping — Guarantees — Anti-suit injunction — Claimant shipowner chartered two vessels to Cypriot company — Charter obligations allegedly guaranteed by Russian defendant — Arbitration commenced in respect of unpaid hire under charters — Defendant commenced Russian proceedings for declarations that guarantees ineffective under Russian law — Claimant obtained anti-suit injunction restraining Russian proceedings on basis that guarantees arguably governed by English law, England natural forum and Russian proceedings vexatious and oppressive — Whether Russian proceedings vexatious — Russian proceedings not commenced with a view to frustrating determination of dispute in England — Application of Russian law in Russian court legitimate juridical advantage — Defendant had not submitted to English court — No agreement to litigate or arbitrate in England — Proceeding in Russia not unconscionable — Considerations of comity led to conclusion that anti-suit injunction should not have been granted.

This was an appeal by the Russian defendant (JFC) against the judge's grant of an anti-suit injunction of proceedings in Russia (see [2010] EWHC 3003 (Comm)).

JFC Chartered Ships Through Nominee Companies. In The Present Case It Guaranteed The Chartering Obligations Of Its Nominee Kalistad, A Cypriot Company, To The Respondent Shipowner, Star Reefers.

The Charterparties Provided For London Arbitration With English Law To Apply. However, JFC Was Not A Party, As Guarantor, To The Charterparties Or To Their Arbitration Clauses. The Guarantees Upon Which Star Reefers Relied Were Contained In Two Letters Signed On Behalf Of JFC.

Kalistad fell behind in its hire payments of the chartered vessels. Star Reefers commenced arbitration in respect of unpaid hire against both Kalistad and JFC, calling on each of them to appoint their arbitrators. JFC appointed its arbitrator without prejudice to its contention that it was not a party to the charterparties or their arbitration agreements.

JFC then commenced proceedings in Russia in which it sought declaratory relief to the effect that the guarantees were ineffective because its letters were an offer to which it had received no reply from Star Reefers by way of acceptance.

JFC's claim form cited extracts from the Russian Code to the effect that under Russian private international law the international transactions of a Russian party were governed by Russian law, and that under Russian law JFC's offers of guarantee had not been accepted.

Kalistad purported to redeliver the vessels on the ground of Star Reefers' repudiation of the charterparties. In turn Star Reefers accepted Kalistad's conduct as repudiatory and terminated the charterparties. Star Reefers commenced English proceedings, seeking payment under JFC's guarantees of unpaid hire and damages for repudiation of the charterparties. It obtained, without notice to JFC, an anti-suit injunction preventing JFC pursuing its Russian proceedings. Star Reefers obtained permission to serve its proceedings out of the jurisdiction on JFC in Russia, on the basis that the guarantees were arguably governed by English law, that England was the natural forum, and that JFC's action in Russia was vexatious and oppressive.

JFC's challenge to the English court's jurisdiction was dismissed: [2011] EWHC 339 (Comm); [2011] 2 Ll Rep 215. The anti-suit injunction was continued on the basis that JFC's proceedings in Russia were vexatious because they were commenced with a view to frustrating the determination of the dispute in England and because of the apparent weakness of the point taken in Russia.

JFC argued that the judge was wrong on both those points and had ignored the legitimate juridical advantage which JFC could only obtain in Russia by reference to an argument derived from Russian law, and the fact that JFC had not submitted to the English jurisdiction and was making it clear that it would not do so; also the judge had omitted any consideration of comity.

Held , allowing the appeal and discharging the anti-suit injunction:

1. The judge's conclusion that the Russian proceedings were commenced with a view to frustrating the determination of the dispute in England was unjustified. There was nothing which JFC could do in commencing proceedings in Russia to frustrate any proceedings in England. At the time of JFC's issue of its claim in Russia, no valid proceedings had been commenced in England, only Star Reefers' invalid claim to commence an arbitration against JFC. JFC had not promised to litigate or arbitrate in England, and was entitled to stand aloof from English litigation. It had not submitted to the English court, and had made it reasonably clear that it planned not to do so.

2. The second principal matter relied on by the judge was the apparent weakness of JFC's case under Russian law. However, that case could not be described as hopeless or doomed to failure. On the contrary, the judge said that he was unable to resolve the issue which arose on the experts' reports under Russian substantive law. In the circumstances, the judge appeared to have entirely overlooked the circumstance that JFC had a legitimate juridical advantage in the Russian court, unavailable to it in England, namely the application of Russian rather than English law to the substance of the parties' dispute.

3. It was also relevant that this was not the typical case of vexatious conduct created by the issue of foreign proceedings in the face of English proceedings in which the foreign defendant had participated and from the consequences of which he was seeking to extricate himself by the multiplication of litigation abroad.

4. The judge erred by taking no account of considerations of comity. It was not necessary to protect the English proceedings that an anti-suit injunction be given against the foreign proceedings. The weakness of the case concerning vexatious conduct combined with the caution prompted by considerations of comity led to the conclusion that an anti-suit injunction ought not to have been granted.

JUDGMENT

Rix LJ:

1. This appeal is against the judge's grant of an anti-suit injunction of proceedings in Russia. The appellant, JFC Group Co Ltd (“JFC”), defendant below, is a Russian company which has brought proceedings in Russia for a declaration that it is not bound under two guarantees which the respondent, Star Reefers Pool Inc (“Star Reefers”), a Cayman Islands company, claimant below, relies upon. Indeed, since the grant of the injunction by Teare J in his judgment and order dated 23 November 2010, Star Reefers has obtained summary judgment against JFC under the guarantees in the sum of just over $16 million. That was in the absence of any defence from JFC, which, having lost its challenge to the English court's jurisdiction, has not entered an appearance in these proceedings.

2. The essential question which arises on this appeal is whether Teare J was right to say that JFC's Russian proceedings were vexatious or oppressive. It is suggested on behalf of Star Reefers that that finding was an exercise in discretion, and that no effective appeal can be mounted against it. In my view, however, such a finding is an evaluative judgment, and a condition precedent to the grant of any injunction in such a case as this, where no exclusive English jurisdiction or arbitration clause has been agreed between the parties. In this respect it is analogous to the concept of abuse of process: see Aktas v AdeptaUNK[2010] EWCA Civ 1170; [2011] 2 WLR 945 at [53]. In both cases, those of vexatious or oppressive conduct and abuse of process respectively, an evaluative assessment has to be made, which is not an exercise of discretion but a matter on which there is, in theory, a right or wrong answer. If the answer is that such conduct exists, there then arises a question of discretion as to whether an injunction against foreign proceedings in the one case, or a stay of domestic proceedings in the other case, will be granted. It may be of course that the finding of vexatious conduct or of an abuse of process carry the court almost the whole way to its decision to grant an injunction or a stay: but that does not affect the fact that...

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