Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Company Ltd [QBD (Comm)]

JurisdictionEngland & Wales
JudgeThe Honourable Mr. Justice Moore-Bick
Judgment Date21 March 2005
Neutral Citation[2005] EWHC 455 (Comm)
Docket NumberCase No: 2004 Folio 1096
CourtQueen's Bench Division (Commercial Court)
Date21 March 2005
Between
Through Transport Mutual Insurance Association (Eurasia) Ltd
Claimant
and
New India Assurance Co Ltd
Defendant

[2005] EWHC 455 (Comm)

Before

The Honourable Mr. Justice Moore-Bick

Case No: 2004 Folio 1096

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Mr. Ricky Diwan (instructed by Birketts) for the claimant

Mr. Christopher Smith (instructed by Holmes Hardingham) for the defendant

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.

The Honourable Mr. Justice Moore-Bick Mr. Justice Moore-Bick

Mr. Justice Moore-Bick

1

This matter comes before me on an application by the claimant under section 18 of the Arbitration Act 1996 for an order appointing an arbitrator to hear and determine certain disputes between the parties. It forms part of a long-running battle between the defendant, New India Assurance Company Ltd ("New India"), and the claimant, Through Transport Mutual Insurance Association (Eurasia) Ltd ("the Club"), arising out of the loss of a container of garments in the course of carriage from Calcutta to Moscow in the latter part of 1999. The container was carried by sea in the vessel Hari Bhum from Calcutta to Kotka in Finland where it was delivered to a road haulage company, Borneo Maritime Oy, for onward carriage to Moscow. The container was lost somewhere in Russia in the course of its journey to Moscow. New India insured the goods against loss or damage in transit and settled a claim by the shipper for their loss. Having done so, it is seeking to recover its loss from the Club as the liability insurer of Borneo Maritime Oy which went into liquidation and was struck off the Finnish register of companies on 26 th November 2002.

2

The circumstances giving rise to the claim and the steps that have been taken by New India to recover from the Club through proceedings in Finland under section 67 of the Finnish Insurance Contracts Act 1994 which contains provisions similar to those of the Third Parties (Rights against Insurers) Act 1930 are set out in some detail in the judgment I delivered on 18 th December 2003 in earlier proceedings between these two parties. On that occasion I determined the Club's application for a declaration that New India was bound to pursue its claim in arbitration in London in accordance with its Rules and for an injunction restraining New India from continuing the proceedings in Finland. That judgment ( [2003] EWHC 3158 (Comm)) is now reported at [2004] 1 Lloyd's Rep. 206 and it is unnecessary for me to repeat what I said on that occasion. For the reasons given in that judgment I held that New India was bound to pursue any claim against the Club in arbitration and made a declaration to that effect. I also made a declaration that the proceedings brought against the Club by New India in Finland were in breach of the arbitration clause and I granted an injunction restraining New India from continuing those proceedings, save for opposing the Club's appeal against the decision of the District Court of Kotka that New India was not bound by the arbitration clause in the Club's Rules.

3

The question whether New India is bound by the arbitration agreement has an importance which goes far beyond that of regulating the procedure by which its claim against the Club should be determined. The Club's Rules also contained a "pay to be paid" clause and an express choice of English law. As New India recognises, the combined effect of those clauses is that any claim made in arbitration in this country under the Third Parties (Rights against Insurers) Act 1930 would be bound to fail in the light of the decision of the House of Lords in Firma C-Trade S.A. v Newcastle Protection and Indemnity Association (The 'Fanti') and Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association (London) Ltd (The 'Padre Island') (No.2) [1990] 2 Lloyd's Rep. 191. However, it is possible (though this has yet to be finally decided) that the "pay to be paid" clause may not operate to defeat a claim in Finland under section 67 of the Insurance Contracts Act 1994.

4

When the matter was last before me the Club argued that the effect of section 67 of the Insurance Contracts Act is substantially the same as that of the Third Parties (Rights against Insurers) Act in that it enables a person who has a claim against an insolvent insured to pursue a claim directly against the insurer in order to obtain the benefit of the insurance. It submitted that since the contract of insurance contained an arbitration agreement, such a claim could only be brought in arbitration. New India, on the other hand, argued that the rights it sought to enforce in Finland were statutory rights independent of the contract of insurance and were therefore unaffected by the arbitration agreement. I held that in order to determine that question it was necessary to characterise the issue between the parties in accordance with English conflicts of laws rules. If the claim was properly to be characterised as one to enforce an English law obligation, the question whether it was one to which the arbitration clause applied was to be decided in accordance with English law as the law giving rise to the obligation. In those circumstances Finnish law and the provisions of the Insurance Contracts Act 1994 would be irrelevant. I concluded that the claim was to be characterised as one to enforce an English obligation and that it was one to which the arbitration agreement applied.

5

The applications before me on the last occasion raised a number of complex issues and I therefore gave New India permission to appeal. The Court of Appeal (Lord Woolf, L.C.J., Clarke and Rix L.JJ.) upheld my decision that New India's claim was one to which the arbitration agreement applied and upheld my order granting a declaration to that effect. However, it set aside the anti-suit injunction leaving New India free to pursue its claim in Finland. Much of the argument in the present case has been directed to ascertaining precisely what the court decided about the nature of the rights acquired by New India and the legal basis on which it is able to enforce them.

Jurisdiction

6

Section 18 of the Arbitration Act 1996 under which this application is made provides as follows:

"(1) The parties are free to agree what is to happen in the event of a failure of the procedure for the appointment of the arbitral tribunal…..

(2) If or to the extent that there is no such agreement any party to the arbitration agreement may (upon notice to the other parties) apply to the court to exercise its powers under this section.

(3) Those powers are—

…….

(d) to make any necessary appointment itself."

7

Mr. Smith submitted that the court's jurisdiction to appoint an arbitrator depends on there being an agreement between the parties to refer disputes to arbitration. In the present case, however, there is no such agreement. The Court of Appeal has held that New India is not a party to an agreement to arbitrate and it is apparent from the court's judgment that its position is not even to be equated to that of an assignee. Accordingly, the court has no jurisdiction in this case to exercise the powers given by section 18.

8

The foundation for this argument is to be found in paragraph 52 of the Court of Appeal's judgment which comes at the beginning of the section dealing with the arbitration clause. It reads as follows:

"52. Some of the argument in this appeal proceeded on the footing that the question is whether New India became a party to the agreement to arbitrate contained in clause D2 of the General Provisions in the Club Rules. However, we do not think that that is quite the right question and, as we read his judgment, the judge did not go so far. We accept Mr Smith's submission that New India did not become a party to an arbitration agreement. We agree that self-evidently New India was not an original party and there is no basis upon which it could be held that there was any novation or transfer to New India of the rights and obligations of the insured under the Club Rules. This is in our view important on the question whether it was appropriate to grant an anti-suit injunction discussed below."

9

That passage certainly supports Mr. Smith's argument that New India did not become a party to an arbitration agreement, but it does not on its own go far enough to establish the full extent of his case. I say that because, notwithstanding what is said in paragraph 52, the court reached the conclusion in paragraph 60 that

"if New India wishes to pursue a claim under the Finnish Act, it is bound to do so by arbitration in England because the Club is entitled to rely upon the arbitration clause, just as it is entitled to rely upon any other clause in the contract to defend the claim."

10

Then, having set out in paragraph 63 the declarations made by this court, the court said:

"64. It seems to us to follow from the conclusions which we have reached so far that the Club is entitled to the first of those declarations. For the reasons given above under the heading 'the arbitration clause', an application of English conflict of laws principles leads to the conclusion that, if New India wishes to pursue a claim under section 67 of the Finnish Act, it must do so in arbitration in London because the Club is entitled to rely upon the arbitration clause in the Club Rules, which are the very rules which New India relies upon in order to make a claim under the Act: see, in the context of the Third Parties (Rights Against Insurers) Act 1930, The Padre Island (No 1)."

11

The first of the two declarations did not in fact refer to a claim under section 67 of the Finnish Act and, as Mr. Smith accepted, it is not easy to see...

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