OT Africa Line Ltd. v Magic Sportswear Corporation & Ors

These proceedings concern a principal sum of 30,000 Canadian dollars. They have given rise to a scale of litigation out of all proportion to the sum concerned. There are parallel actions in Canada and in this court. The litigation shows few signs of abating. The present applications involve jurisdiction issues. The real issues are for trial, if they are ever tried, another day or days at an uncertain future date. The question for this court, which is a question which has already been addressed at first instance and on appeal in the courts of Canada, is essentially whether such a trial should take place in Canada or the courts of this country or, indeed, however regrettably, both. The issues raised are, nonetheless, to my mind, both difficult and important. They raise matters of real principle. Whilst the attractive vista of such legal disputes should not cause the parties or the court to lose sight of the fact that commercial disputes are, at least usually, about money and the need, when the legal costs come to dominate the sums involved, to be alert to finding a way to limit those costs, the plain fact is that these parties do consider the issues to be of such general importance that the underlying dispute has become of relative insignificance. It is also the principled concern of the court that the conflicts of jurisdiction apparent require the court to proceed with due caution and of course proper regard and respect for the courts of Canada and Canadian law.

The dispute arises out of an alleged short delivery of goods carried by the Claimant in this court (“OTAL”) from New York to Monrovia. OTAL is an English company. It also has offices in Toronto. The First and Second Defendants in this court (“Magic” and “Blue Banana”) are the cargo interests. Magic was the shipper. It is a Delaware Corporation which had business interests in New York. Blue Banana was the receiver. It is a Liberian Corporation. The evidence suggests that both Magic and Blue Banana are, and were prior to the issue of the Canadian proceedings referred to below, dormant. In March 2002 Magic and Blue Banana claimed short delivery following the arrival of the goods in Monrovia. OTAL contends that the goods were fully delivered to Blue Banana. The Third to Fifth Defendants in this court (to whom I will refer as “the insurers”) were the insurers of the cargo or (in the case of the Fifth Defendant) agents for insurers. They are all Toronto-based Canadian companies.

The goods were loaded on board the Mathilde Maersk on 5 February 2002 and transhipped at Le Havre on the Suzanne Delmas on 21 February. OTAL issued a bill of lading on 5 February. The bill of lading was issued at Toronto where the ocean freight was payable.

Clauses 24 and 25 of the Conditions on the reverse of the bill of lading provided:

“24.

USA/CANADA CLAUSE

If the Bill of Lading covers the transportation of the goods to or from ports of the United States of America or Canada this Bill of Lading shall be subject to United States Carriage of Goods by Sea Act 1936 and/or subject to Carriage of Goods by Water Act 1936 of Canada which shall be incorporated herein and the provisions of said act shall govern before loading and after discharge and throughout the entire time the goods are in the custody of the Carrier. If anything herein contained to be invalid or unenforceable under the provisions of said act such circumstances shall not affect the validity or enforceability of any other part or term of this Bill of Lading. The Carrier shall not be liable in any capacity whatsoever for loss, damage or delay of goods while the goods are not in his actual custody.

25.

LAW AND JURISDICTION

(1)

Any claim or dispute whatsoever arising in connection with the carriage under the Bill of Lading shall exclusively be governed by English law and determined by the High Court of London.

(2)

In the event that anything herein contained is inconsistent with any applicable international convention or national law which cannot be departed for private contract, the provisions hereof shall to the extent of such inconsistency but no further be null and void.”

On 1 August 2003 Magic and Blue Banana commenced proceedings before the Federal Court Trial Division in Toronto. The evidence shows that the proceedings were in fact instigated by the insurers exercising rights of subrogation. The claim was for $30,000.

The basis on which the insurers invoked the jurisdiction of the Canadian Court, despite clause 25 of the Conditions of the bill of lading, was Section 46(1) of the Canadian Maritime Liability Act 2001 which provides:

“46(1) If a contract for the carriage of goods by water to which the Hamburg Rules do not apply provides for the adjudication or arbitration of claims arising under the contract in a place other than Canada, a claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada that would be competent to determine the claim if the contract had referred the claim to Canada where:

(a)

the actual port of loading or discharge under the contract, is in Canada;

(b)

the person against whom the claim is made resides or has a place of business, branch or agency in Canada; or

(c)

the contract was made in Canada.”

Sub-sections (b) and (c) applied because OTAL had a place of business, branch or agency in Canada and the bill of lading was issued in Toronto.

The court has been provided with a number of public statements about the rationale for the enactment of Section 46. They range from providing Canadian importers and exporters with a right to pursue cargo claims in Canada (which has no relevance to the present dispute) to an unashamed attack on what was perceived to be a monopoly of the British courts over such claims. The intentions of the parties, expressed in their contract, is not wholly overridden both because the Canadian Court retains a discretion to refuse jurisdiction on grounds of forum non conveniens and because a choice of law, as distinct from choice of jurisdiction, clause remains effective.

On 2 September 2003 OTAL issued proceedings in this court against Magic and Blue Banana. OTAL claimed a declaration that the cargo shortage claim was false and an anti-suit injunction and damages relying on clause 25 of the Conditions to the bill of lading.

OTAL sought permission to serve the proceedings out of this jurisdiction and an interim anti-suit injunction. Permission to serve out was sought under CPR 6.20(5)(c) and (d) relying on clause 25.

On 8 September Gross J granted permission to serve out and an anti-suit injunction in respect of the Canadian proceedings. On 28 October Magic and Blue Banana (again at the instigation of the insurers) filed an Acknowledgement of Service indicating an intention to contest the jurisdiction. However, no jurisdiction application was made thereafter and so, in accordance with CPR 11(5), both Magic and Blue Banana are to be treated as having accepted that this court has jurisdiction to try OTAL’s claims against them.

Notwithstanding the anti-suit injunction the Canadian proceedings have continued. OTAL, also on 8 September, filed a challenge to the jurisdiction of the Canadian court. Judgment on that challenge was given on 22 December. The challenge was rejected. In the course of her judgment, Madam Prothonotary Milczynski, found that the conditions of Section 46 were satisfied, that the Act “clearly removes the determining or binding effect of a forum selection clause in a bill of lading” and that Canada was the appropriate forum for the trial of the claim. The last of these findings was addressed in paragraph 18 of the judgment as follows:

“In this case, taking into account all of the facts and surrounding circumstances relating to the shipment of goods from New York to Monrovia, including the value of the goods, the fact that the true Plaintiffs are in Canada, the Defendants have business interests in Canada, and most particularly the fact that most if not all of the material witnesses will come from Monrovia and/or New York, (which factor favours neither England nor Canada), I find that the most convenient and appropriate forum for the determination of the Plaintiff’s claim, including the interpretation and application of English law, is this Court.”

OTAL appealed this decision to the Federal Court Judge. The appeal was heard in February 2004. It was dismissed on 23 August by Mr Justice John A. O’Keefe. It was held that the Prothonotary’s analysis of the issues was “not clearly wrong nor did she exercise her discretion based upon a wrong principle or upon a misapprehension of the facts”. OTAL has now lodged a further appeal against this decision to the Canadian Federal Court of Appeal. The Appeal has not yet been scheduled for a hearing.

No further steps were taken in the proceedings in this court until, on OTAL’s application, on 5 April 2004, Cooke J made an order pursuant to CPR Part 19 granting OTAL permission to join the insurers as Defendants to the action (and amend the claim accordingly) and to serve the amended claim on the insurers out of the jurisdiction in Canada.

The grounds on which the claim was served on the insurers out of the jurisdiction were:

There are four applications now before this court. The Defendants seek orders that:

OTAL seeks an anti-suit injunction against the insurers.

I will address the four applications in the order stated.

Mr McParland, for the defendants, submitted that Canadian law was “the applicable law” under section 11 of the Private International Law (Miscellaneous Provisions) Act 1995 and under Canadian law no tort had been committed. He therefore further submitted that OTAL had failed to show a “good arguable case” for service out of the jurisdiction on this basis.

Section 11(1) of the 1995 Act provides that “the general rule” in the case of a claim in tort is that the applicable law is the law of the country in which the events constituting the tort occur. Where elements of those events occur in different countries Section 11(2)(c) provides that the applicable law is the law of the country in which the most significant element or elements occurred. It was in Canada that the insurers caused Magic and Blue Banana to issue the proceedings of which OTAL complains as a breach of contract. Mr Collins did not (rightly in my judgment) seek to submit that in this case “the general rule” should be displaced pursuant to the provisions of Section 12 of the Act. Section 9(4) of the Act therefore requires this court to look to Canadian Law to determine whether or not an actionable tort occurred.

The tort of procuring a breach of contract exists in Canadian law and indeed mirrors English law. The requirement that the conduct of the procurer be “wrongful” is the battleground between the parties.

Mr Collins, for OTAL, submits that because Canadian law accepts that the contract in question is governed by English law so too is the question of breach. OTAL has served evidence from a Canadian lawyer (Mr Hourigan) to the effect that by Canadian law where a person deliberately procures a breach of contract by another person “wrongfulness” is presumed “and the tort of procuring breach of contract is complete subject to the defendant establishing some justification for its action”. The submission (and evidence) continue that Section 46 does not provide for an equal or superior right or justification because it only permits a claim to be brought in Canada but does not absolve a party who does so from a breach of contract if such there is under the proper law of that contract.

Mr McParland submits that Section 46 (together with the decisions of the Canadian courts) has the effect that the impugned conduct of insurers is not wrongful or at least is justifiable. He submits that the proper law of the contract is of no relevance and in any event Condition 25(2) of the Bill of Lading recognises that the jurisdiction clause can be rendered null and void by inconsistent national laws. He also submitted that there was insufficient “separation of interest” between Magic and Blue Banana of the one part and insurers of the other part to allow a claim of procurement of breach of contract to be brought, and that the costs of the proceedings in England were not properly classified as damage and would in any event have been incurred.

In my judgment Mr McParland is right in his main submission. In circumstances where Canadian law and court decisions enable insurers properly to bring the proceedings they have brought in Canada in the names of Magic and Blue Banana I think it fanciful to suppose that Canadian law would also outlaw such conduct as tortious. It follows that service out of the jurisdiction on this basis should be set aside.

I would add that had it been necessary to decide whether or not there was a sufficient “separation of interests” between an insurer bringing a subrogated claim and the insured I would have decided that there was. The interests may be but are not necessarily the same. The identity of the parties is separate. They are separate legal entities. The Fifth Defendant is not itself an insurer nor exercising rights of subrogation. Insurers claim not to be bound by the contract made by Magic and Blue Banana nor by orders of this court directed against those companies. But they also claim to have an identity of interest such that their conduct is not to be separated from the conduct of those companies for the purpose of the tort. I do not think insurers can have their cake and eat it. I also think that there is a good arguable case that the costs of the English proceedings are recoverable as damages: see Union Discount Co v Zoller [2002] 1 WLR 517.

CPR 6.20(17) permits service out of the jurisdiction for the purpose of seeking a costs order against a third party. The procedure for seeking such an order is set out in CPR 48.2 which requires the joinder of the party to the proceedings “for the purposes of costs only”. Mr McParland rightly submits that this jurisdiction is exceptional and that it is “even more exceptional” if the applicant for such an order has a cause of action against the non-party and could have joined them on that basis to the proceedings: see Symphony Group Plc v Hodgson [1994] QB 179, at 193A/C. But I do not think it follows that in circumstances where the applicant may have a direct claim (as here with the claim in tort) and a claim limited to costs it is impermissible to advance both at the same time as a basis for permission to serve out of the jurisdiction. The bases may be alternatives and one may (also as here) fail. But they do not in my judgment require an election to be made in circumstances in which the overall considerations for the court are whether or not a good arguable (not good) case is required and whether or not permission to serve out should be granted as a matter of discretion.

It is at the least well arguable on the evidence that it is the insurers who are the interested party in this litigation in both countries. They control and fund it. In those circumstances there is also at least a good arguable case that a third party costs order would be made against the insurers: see Symphony Group at 191G to 192D and Chapman v Christopher [1998] 1 WLR 12.

I see no justification for setting aside the permission for service out of the jurisdiction on this basis.

The claim for an anti-suit injunction against the insurers is one in respect of which jurisdiction is claimed under CPR 6.20(3) on the basis that a claim is made against Magic and Blue Banana which has been served upon them and the insurers are necessary or proper parties to that claim. In circumstances in which there is, as I think there is, a good arguable case that it is insurers who are seeking to conduct the Canadian proceedings in the name of Magic and Blue Banana in what is or may become in breach of the existing anti-suit injunction against those companies, I think OTAL has made out this ground of jurisdiction also. True it is that this court might have powers which could be exercisable against the insurers without their having been joined as parties but better they should be joined and able to advance their cases on that basis. Whether or not it would be appropriate to grant permission to serve out on this basis as a matter of discretion raises the same issues as arise on OTAL’s application for an anti-suit injunction against the insurers. Those issues are considered below.

The first application by the insurers fails save to the extent that the permission granted under CPR 6.20(8)(a) must be set aside.

Mr McParland’s submission in support of this application is essentially that these proceedings should be left to the Canadian courts and to avoid duplication and as a matter of practicality these courts should bring the proceedings here to a stop.

Mr Collins understandably points to the established jurisdiction of this court (paragraph 11). He also of course points to the exclusive jurisdiction clause agreed between and binding upon OTAL, Magic and Blue Banana. The principles on which English courts approach anti-suit injunctions are to be found in decisions of the highest authority such as Donohue v Armco [2002] 1 Lloyd’s Rep 425. They include giving effect to exclusive jurisdiction clauses unless there are “strong reasons” for not doing so. The reasons which were held to have that effect in Donohue were the existence of related claims which fell outside the jurisdiction clause and involved parties not parties to the relevant contract for which the natural forum for trial and the only forum in which all the claims could be tried together was New York rather than the English forum chosen by some parties for some claims.

It requires, therefore, some exceptional justification for an English court to stay proceedings in this country when England is the exclusive jurisdiction chosen by the parties to resolve the very dispute between them. I see nothing in the present circumstances which could begin to justify such an exceptional course unless it is to be found in the very fact that Canadian legislation seeks to override the agreement of the parties. That is indeed the question the answer to which, I think, governs the outcome of all three remaining applications. I propose to address it separately after first considering each application on what I might call conventional grounds. I shall refer to the question as the overriding issue.

In terms of appropriate forum, and despite the decisions of the Canadian courts, I can see nothing which would begin to justify a departure from the general approach to exclusive jurisdiction clauses. The only connection with Canada is that Canada was the country where the contract was made, the freight was payable and OTAL has an office. None of those matters are of any relevance to the dispute. Canada has no other connection with the parties to the litigation in Canada. One party is English, one American and one Liberian. Nor does it have any other connection with the goods or the shipment. If it were the case that the place of issue of a bill of lading and/or the presence of an office were sufficient of themselves to establish an appropriate forum different from the forum and law chosen by the parties, it would represent a radical departure from the principles applied by this court which I do not think can be justified.

Thus, but for the overriding issue, I do not think the Defendants have made out a case for a stay of these proceedings.

In my judgment the issues are the same as those which arise on the application for a stay. Condition 25(2) of the bill of lading does not apply because it is accepted that Section 46 is not mandatory but permissive. It therefore requires “strong reasons” for this court not to give effect to the exclusive jurisdiction clause and, subject to the overriding issue, I do not think the Defendants have shown any such reasons. Indeed Mr McParland acknowledged that there were no “good reasons” in English terms for the present Defendants to have commenced the proceedings in the Canadian courts other than the fact that the insurers were Canadian and what might coyly be termed perceived tactical advantages in seeking a resolution of the dispute.

There is jurisdiction to injunct those who threaten or intend to assist others to breach an injunction: see Hubbard v Woodfield (1913) 57 S.J. 729 and Acrow Ltd v Rex Chainbelt Inc [1971] 1 WLR 1676. In this case, the insurers are acting directly and deliberately. At the least it is a fair inference that unless restrained they intend to pursue the proceedings in Canada in breach of the present anti-suit injunction restraining Magic and Blue Banana from doing so. But for the overriding issue, I think this court would and should extend that injunction against insurers and so grant OTAL’s application to that effect.

For the reasons which I have stated in my judgment the only basis on which the Defendants can justify the relief they seek or resist the relief sought by OTAL is that if this court does not follow that course there will be a clash of jurisdictions, with the appalling prospect of an apparent challenge from this court to Canadian legislation and the cost and disruption of the same claims proceeding in two jurisdictions with the added risk of different outcomes. Moreover those prospects have already resulted in expense out of all proportion to the amount involved in the cargo claim.

The stark question is whether such considerations are sufficiently exceptional to justify this court proceeding in a manner which would be contrary to the manner in which it would otherwise proceed.

In seeking to answer that question I think the following factors have some significance:

I do not find the answer to what I have called the overriding issue easy, particularly so in the individual circumstances of this case. But I have reached the conclusion that there is insufficient logic in treating Section 46 as giving rise to some exceptional circumstance beyond the usual case where a party seeks to proceed in another court, relying on the principles by which that court is guided in the exercise of its own jurisdiction, and does so despite an exclusive jurisdiction clause binding upon that party. In such circumstances, English law is, I think, established at the highest level that an anti-suit injunction should be granted essentially to ensure that the parties abide by the agreement they have made.

In my judgment, therefore, the overriding issue is to be decided in favour of OTAL. The consequence is that the three applications made by the Defendants are refused and OTAL’s application for an anti-suit injunction based upon the claim to jurisdiction under CPR 6.20(3) is granted. I will expect the parties to prepare an appropriate order and will hear them on any ancillary matters and disputes about the order when this judgment is handed down.