Teekay Tankers Ltd v STX Offshore & Shipping Co

The Defendant (“STX”) challenges the jurisdiction of the English court to hear the Claimant’s (“Teekay”) claim for damages for repudiation of an Option Agreement dated 5 April 2013 (the “Option Agreement”).

There are two applications before the court which give rise to overlapping issues

The first is STX’s application challenging the jurisdiction of the English court under CPR Part 11. STX argues that the service of the Claim Form (which was effected on STX’s registered UK establishment) was not effective. Alternatively, if STX was validly served, STX asks the English court to grant a stay on forum non conveniens grounds. STX’s case is supported by the 1 ^st and 2 ^nd witness statements of Mr Gray, the 1 ^st witness statement of Mr Kang, the first witness statement of Mr Clarke and the exhibits to those statements.

The second is Teekay’s application for permission to serve out of the jurisdiction under CPR r. 6.37. This application only arises if service on STX within the jurisdiction was ineffective. In that case, Teekay seeks permission to serve the proceedings out of the jurisdiction on STX’s head office in South Korea. STX accepts that there is a gateway for service out and that the claim has a reasonable prospect of success. Accordingly, the only issue (which is closely related to STX’s application for a stay on forum non conveniens grounds) is whether England is the proper place in which to bring the claim. Teekay’s case is supported by the 1 ^st witness statement of Mr Brown and the exhibits thereto.

Teekay is a publicly-listed (NASDAQ) shipping company, which owns and operates a fleet of tankers. It is incorporated in the Marshall Islands, has its corporate head office in Bermuda and an affiliate which it relies on in relation to shipping matters based in Vancouver.

STX is a company incorporated in the Republic of Korea, which operates a number of shipyards in South Korea.

In around early 2013, STX bid for contracts for the construction of 113,000 DWT Crude / Product Ready Oil Tankers (the “Tankers”). On 15 March 2013, STX and Teekay entered into a Letter of Intent pursuant to which:

Teekay agreed to purchase four firm units of the Tankers and STX agreed to build the same; and

STX agreed to grant Teekay options to enter into contracts for a further three sets of four units of the Tankers.

Pursuant to the Letter of Intent, on 5 April 2013, a package of related contracts were concluded:

Each of four subsidiaries of Teekay entered into a Shipbuilding Contract with STX for the construction of one Tanker (each, a “Shipbuilding Contract”) at a price of US$42.5 million; and

STX and Teekay entered into the Option Agreement pursuant to which, “… in consideration of the Buyers entering into the Shipbuilding Contract[s]…”, STX granted Teekay the option to “… order three (3) sets of four (4) additional units identical to the Vessels (the “First Optional Vessels”, “Second Optional Vessels”, “Third Optional Vessels” respectively)”. The Option Agreement provided that, if Teekay exercised any of its options, the parties were to enter into shipbuilding contracts in the form and content identical to the Shipbuilding Contracts, logically amended, within ten days after the exercise of the option. Apart from slight increases in the prices, the only substantial amendment to the Shipbuilding Contracts was in respect of the delivery dates, which (by clause 4) were to “be mutually agreed upon at the time of Teekay’s declaration of the relevant option, but [STX] will make best efforts to have a delivery within 2016 for each First Optional Vessels, within 2017 for each Second Optional Vessels, and within 2017 for each Third Optional Vessels”.

STX failed to provide the Refund Guarantees required under the Shipbuilding Contracts, claiming that it had become impossible to procure their issue from in the form stipulated in the Shipbuilding Contracts.

On 18 December 2013, the buyers terminated the Shipbuilding Contracts consequent upon STX’s alleged repudiatory breaches.

Following termination, the buyers have commenced arbitrations (the “London Arbitrations”) under the LMAA rules in accordance with the arbitration agreements in each of the four Shipbuilding Contracts. The buyers claim ‘loss of bargain’ damages at common law. The London Arbitrations are expected to reach a hearing in the first half of 2015.

In broad terms, STX defends the London Arbitrations on the grounds that: (i) the provision of a Refund Guarantee was not a condition and/or STX did not repudiate the contracts by its conduct; (ii) the buyers’ only remedy, in accordance with the express terms of the contracts, was to terminate the contracts without compensation, (iii) there was a collateral oral agreement, made during the negotiations in Vancouver, that the contracts would be terminated on a ‘drop hands’ basis if Refund Guarantees could not be obtained, and/or STX is entitled to rectify the agreements to that effect, (iv) the contracts were frustrated by STX’s inability to obtain Refund Guarantees, and/or (v) the buyers elected to affirm the contracts. STX also challenges the quantum of the claim.

Teekay purported to exercise the first option for four Tankers on 2 October 2013 and the second option for four Tankers on 22 November 2013.

STX refused to enter into contracts for the optional vessels because, it said, it would “be unable to procure Refund Guarantees for the First Optional Vessels”. Instead, STX contended that the Option Agreement was void or unenforceable.

On 6 February 2014, Teekay terminated the Option Agreement consequent upon STX’s alleged repudiatory breach. Teekay issued its Claim Form in this Court on 11 April 2014, claiming damages in the sum of US$179 million plus interest.

STX has explained that it intends to defend these proceedings on the grounds that: (i) the Option Agreement is void for uncertainty because there is an ‘agreement to agree’ delivery dates and/or STX did not validly exercise the options because it sought to impose delivery dates, (ii) there was an oral agreement, made during the negotiations in Vancouver, that Teekay would not exercise its options in circumstances where STX was unable to procure Refund Guarantees, (iii) even if contracts had been concluded following Teekay’s exercise of its options, Teekay’s only remedy for failure to provide the Refund Guarantees would have been to terminate those contracts without compensation (such that Teekay has suffered no loss), and (iv) that the Option Agreement was frustrated by STX’s inability to obtain the Refund Guarantees which would have been required under the contracts which were to be executed. Again, STX also challenges the quantum of Teekay’s claims.

Issues (ii), (iii) and (iv) are similar to the issues arising in the London Arbitrations. The quantum issues are also likely to raise similar issues and expertise relating to the market value of the Tankers at the relevant time. Issue (i) gives rise to questions of English law concerning the validity and construction of the Option Agreement.

The Option Agreement is expressly governed by English law but does not contain any arbitration/jurisdiction agreement.

The Issues which arise may be summarised as follows:

Was STX validly served at STX within the jurisdiction?

If so, should the proceedings be stayed on forum non conveniens grounds?

If not, should permission be given to serve out of the jurisdiction?

Issues (2) and (3) turn on the question of forum conveniens/forum non conveniens.

Teekay served its Claim Form at St Magnus House, 3 Lower Thames Street, London (“the London address”). It claims that it was entitled to do so pursuant to s.1139(2) of the Companies Act 2006 and/or CPR r. 6.9(2) para. 7.

With effect from 3 March 2014, STX has been registered with Companies House as “having established a UK establishment in the United Kingdom” pursuant to s. 1046 of the Companies Act 2006.

Accordingly, Teekay contends that service on STX (being an “overseas company”) can be effected under s.1139(2) of the Companies Act 2006, which provides:

I shall take each of the alternatives under s. 1139(2) in turn.

By s.1056(a) of the Companies Act 2006, the regulations relating to registration of overseas companies “ must require an overseas company to register – (a) particulars identifying every person resident in the United Kingdom authorised to accept service of documents on behalf of the company, or (b) a statement that there is no such person” (emphasis added). The Act therefore mandates the regulations to require either particulars of a person(s) authorised to accept service on behalf of the company or a statement that there is no such person.

This requirement is linked with s.1139(2)(a), which requires service of documents on a “person… authorised to accept service of documents on the company’s behalf” at his or her “registered address”; that is, by s.1139(3), the address “shown as a current address… in… the register available for public inspection”. S.1056(a) ensures that the details of any such person will be registered and, therefore, available for public inspection.

The relevant regulations are the Overseas Companies Regulations 2009 No. 1801. Reg. 7 of those Regulations requires an overseas company to include in its particulars:

When STX filed the particulars of its London address (using the prescribed form OS IN01), it completed Part 7 (headed “Person authorised to accept service”) by identifying Mr Kang in Section K1 (headed “Details of person authorised to accept service of documents in the UK”). Mr Kang’s service address was given as the London address.

Accordingly, Teekay submits that applying s.1139(2)(a) of the Companies Act 2006, service was validly effected on STX by leaving the documents at the London address, being Mr Kang’s “registered address”.

STX contends that Mr Kang was not in fact authorised to accept service of such documents because Reg. 7 (and the OS IN01 form) refer to a “person resident in the United Kingdom… authorised to accept service of documents on behalf of the company in respect of the establishment ” (emphasis added) and that the claim is not in respect of the UK establishment.

It submits that the words ‘in respect of the establishment’ limit the authority in question to documents/process concerning transactions involving the establishment itself. It says that the intent is to avoid a requirement being imposed on an overseas company which has the effect that proceedings and other documents may be served on the local office of a company in relation to transactions of the company which are unrelated to the local office, and thereby to circumvent the usual process that would be required for service on an overseas company, including the overseas company being deprived of the extended timescales for the provision of a response which apply in respect of service abroad and which reflect the greater difficulties that overseas companies have in responding to process.

STX further submits that this is consistent with the provisions of the Eleventh Council Directive 89/666/EEC (“the Directive”) concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State, which is implemented through section 1139(2). STX points out that the purpose of the Directive, as reflected in the recitals, includes:

I reject STX’s case for a number of reasons:

The starting point is s.1139(2)(a) of the Companies Act 2006 which provides that a “document may be served on an overseas company” by service on “the registered address of any person resident in the United Kingdom who is authorised to accept service of documents on the company's behalf ” (emphasis added). This sub-section is expressed in general terms and is not limited to claims in respect of the UK establishment. Further, the reference to “registered address” indicates that a person delivering a document is intended to be able to identify the appropriate person and his/her service address from the public Companies House register.

s.1056(a) of the Companies Act 2006 is expressed in mandatory terms. The regulations “must” require registration of “… particulars identifying every person resident in the United Kingdom authorised to accept service of documents on behalf of the company ” (emphasis added) and not some narrower form of authority to accept service. On STX’s case that mandatory statutory purpose is not carried out. On its construction there is neither a person authorised to accept service on behalf of the company nor a statement that there is no such person. There is merely a person authorised to accept service on behalf of the company in respect of a limited class of business.

Had it been intended to limit the impact of Reg. 7 (so as to countermand the express requirement of s.1056(a) of the 2006 Act) the provision would have expressly so provided, as, for example, by stating “in respect of the business carried on by the establishment”.

STX’s case involves reading in words to that or similar effect. Various versions were given in oral argument, such as in respect of “dealings or transactions” or “any transactions conducted” or “anything done which is ancillary to the carrying on of business or the business itself” of the establishment.

I accordingly agree with Teekay that Reg. 7 requires particulars to be given of persons authorised to accept service of “… documents on behalf of the company…”. The words “in respect of the establishment” attach to the “person”, not the “documents”. That is, a company is required to register the details of each person who – in respect of that establishment – is authorised to accept service of documents on behalf of the company.

It is to be noted that none of the leading texts suggest that service on a registered person under the Companies Act 2006 provisions is limited to documents in respect of the UK establishment’s business: see Palmer’s Company Law at paras. 2.523 and 18.037; Dicey, Morris & Collins on the Conflict of Laws at para. 11-114.

Further, this construction is consistent with the Explanatory Memorandum to the Companies Act 2006, which provides that s.1139 “… ensures that there is a place at which a document may be served on a company registered under the Act”. It also accords with the Commentary to the Company Law Reform Bill which noted that clause 790 (as it then was) “… ensures that there is a place at which a document may be served for all companies registered in the UK ( including registered overseas companies )” (emphasis added).

It is also consistent with the statutory and historical context as explained by the Court of Appeal in Saab v Saudi American Bank [1999] 1 WLR 1861.

That case concerned an earlier provision of the Companies Acts dealing with service on the branch of an overseas company, namely s.694A of the Companies Act 1985. This provided that process may be served at the branch “in respect of the carrying on of the business of the branch”.

In giving the judgment of the court Clarke LJ stated as follows at [10-15]:

In summary, the historical position had long been that in relation to service of overseas companies it was not necessary to establish any link between the subject matter of the proceedings and the business carried out in the UK. Such a link was required under s.694A in relation to service on a branch, but the Court regarded this as being anomalous and further considered that there was nothing in the Directive which explained why s.694A was drafted in this way.

Had a link been intended to be required under the Companies Act 2006 provisions dealing with service on overseas companies there was therefore a statutory precedent for so providing, albeit one that had been criticised as being anomalous. However, no such linkage provision was included.

The Court of Appeal judgment also undermines STX’s argument that the Directive provides support for its construction. As Clarke LJ observes, the Directive is principally concerned with disclosure of information and does not contain any requirement of a link between legal process and business operations.

For all these reasons I therefore find that service at Mr Kang’s registered address was good service on STX under s.1139(2)(a) of the Companies Act 2006.

If that is wrong then the next question which arises is whether there was good service under s.1139(2)(b) of the Companies Act 2006.

If service was not validly effected on Mr Kang, then Teekay was entitled to serve STX at “… any place of business of the company in the United Kingdom” under s.1139(2)(b) of the Companies Act 2006. This is the same test as provided in CPR r. 6.9(2) para. 7, on which Teekay also relies. That provision permits service on “any other company or corporation” at “any place within the jurisdiction where the corporation carries on its activities; or any place of business of the company within the jurisdiction”.

STX contends that its London address was not a “place of business of the company”.

It relies on the evidence of Mr Kang which it contends establishes the following:

Teekay’s first answer to STX’s contention is that by voluntarily registering its particulars under s.1046 as an overseas company, it cannot deny that it has a place of business within the jurisdiction. It contends as follows:

The purpose of s.1139 was to enable any company, including an overseas company which has registered particulars, to be served. Therefore, s.1139 should not to be capable of operating in a manner which produces the result that there is no place of service for an overseas company under s.1139(2).

An overseas company is required to register within one month of “having opened” (reg. 4) and must identify the “date on which it was opened” (reg. 7(1)(b)). Accordingly, by the time that a registration is made, the UK establishment must already have opened; it is not possible to register a UK establishment which is to open in the future.

As soon as a UK establishment closes, the overseas company must give notice of that fact (and therefore deregister) forthwith (reg. 77(1)).

Therefore, for so long as there is a UK establishment shown on the register at Companies House, there is necessarily an ‘open’ UK establishment for that overseas company.

If an overseas company has a UK establishment, it necessarily has a “place of business” in the United Kingdom.

This is made all the clearer by the definition of a UK establishment (reg. 2) as either “(a) a branch within the meaning of the Eleventh Company Law Directive (89/666/EEC) or (b) a place of business that is not such a branch” which is “in the United Kingdom”. A “branch” within the meaning of the Directive is a narrower concept than a place of business. As the Court of Appeal stated in the Saab case at [15]: “a branch is a more permanent establishment than a mere place of business”. Although the concept of a “branch” is not defined in the Directive, for there to be a branch, there must be a place of business. A “place of business that is not such a branch” is also, necessarily, a place of business.

It follows that, by virtue of registering a UK establishment, STX has necessarily confirmed that it has a place of business within the United Kingdom. This is why the draftsman of s.1139(2) could be confident that that sub-section would always provide an address for service on an overseas company which has registered particulars with Companies House.

This provides certainty and obviates the need to embark on a factual enquiry as to what tasks are being undertaken by the particular UK establishment and when and if it might have entered into leasing arrangements etc.

On Teekay’s case, the place of business is the London address. In Section H4 of its OS IN01 form, STX confirmed that its UK establishment was at the London address; that it had “opened” on 12 February 2014; and that the “business carried on at the UK establishment” was that of “liaising office”. STX should not be allowed to deny the truth of these particulars, not least in circumstances where the public is intended to be able to rely on the register and it is a criminal offence knowingly or recklessly to make a misleading or false statement in any document sent to the registrar.

I consider that there is considerable force in these arguments and in Teekay’s contention that STX should not be allowed to go behind the statement which it made as a matter of public record that it has opened a UK establishment where it is carrying on business. In my judgment registering a UK establishment involves opening that establishment as a place of business in the UK, for all the detailed reasons given by Teekay. Once a place of business has been opened in this way then there is a place of business in the UK even if it has yet to start carrying on business.

STX contends that it is necessary for business activities to be carried on for there to be a place of business. It relied on the Court of Appeal’s observation in Lakah Group v Al Jazeera Satellite Channel [2004] BCC 703 at [8] that it agreed with the judge’s finding that “the test for the place where a corporation “carries on its activities” or a company “has its place of business” for the purposes of CPR r.6.5(6) was effectively the same”. However, that was in the context of a case where no place of business had been established and the argument was centred on the circumstances in which there may be a place of business even though there is no established place of business.

If, contrary to my finding, registering and opening a UK establishment is insufficient then the next question is whether STX has a place of business in the UK as a matter of fact having regard to all the evidence.

The authorities show that “any place of business” is to be construed broadly. It extends to a place where the overseas company conducts business activities, even if incidental. For example, in South Sea India Shipping Corp Ltd v Export-Import Bank of Korea [1985] 1 WLR 585 a Korean bank established an office in London for the purposes of gathering information on the United Kingdom, providing information on the activities of the bank for the purpose of promoting economic relations, and conducting other liaison activities. The Court of Appeal concluded that the company had established a place of business in the United Kingdom, even though it did not conclude any banking transactions in London. On the other hand, “an address with which the company has no more than a transient or irregular connection” will not be sufficient. See the Lakah Group case at [41] per Gray J as endorsed by the Court of Appeal at [8] (of the subsequent judgment).

STX stresses that there must be some business activity being carried on for there to be a place of business and submits that at the material time in this case there was (as yet) no or no sufficient business activity.

In my judgment the evidence as a whole does establish that STX was carrying out business activity and had a place of business at the material time. In particular:

In its OS IN01 form STX declared that it had opened a UK establishment as from 12 February 2014 which was conducting the business of a “liaising office”. This is at least prima facie evidence that STX did carry out such business activities from its London address. Mr Kang describes this as a “notional date”, but it is not. It is a formal statement of fact made as a matter of public record.

Mr Kang states that he has authority on behalf of STX “to negotiate the leasing of the Office premises, manage the expenses of the Office, and otherwise deal with its accounts and enter into contracts for accommodation and cars”.

Mr Kang also states that since October 2013 the only STX entity which wished to have and was prepared to pay for an office in London was STX.

STX held itself out, on its website, as having a “London Office” at Saint Magnus House. Mr Kang, his colleague Mr Bae (Deputy President and Europe Offshore & Shipbuilding Marketing Chief) and a secretary work at that office.

Mr Kang accepts that STX’s London address is identified on the website “to facilitate contact for anyone wishing to get in touch with these companies”. STX has established an office, with which it has more than a transient connection, at which people wishing to do business with STX are able to make contact. Providing a local point of contact is itself a business activity for a company which seeks to win contracts internationally.

STX’s London Office has entered into contractual arrangements relating to its activities in London, including opening a bank account and agreeing to take over the lease of its office. These are business activities.

STX’s case relies on form rather than substance. It acknowledges that STX’s London address will be a place of business, but contends that this will not occur until the lease is fully signed off and visas have been transferred. This timing issue arises because the lease and visas were held by STX Corporation, a holding company. These were in the process of being transferred over to STX at the material time, but it was already the fact that STX was the only STX company interested in operating the London office.

For all of those reasons, I find, if necessary, that as a matter of fact the London address is a “place of business”, at which STX was validly served pursuant to s.1139(2)(b) of the Companies Act 2006 and/or CPR r. 6.9(2) para 7.

If STX has been validly served in England, it can only obtain a stay of these proceedings on forum non conveniens grounds if it shows (the burden being on it) that there is another court with competent jurisdiction in which the claim can clearly or distinctly be tried more suitably for the interests of all the parties and for the ends of justice: Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460 at 474-478; Dicey, Morris & Collins, Rule 38(2)(a). If STX has not been validly served then it needs to obtain permission to serve out which (given that there is no issue as to jurisdiction) requires satisfying the court that England and Wales is “the proper place to bring the claim”. In effect, the burden is reversed and it is necessary for Teekay to show that England is clearly the most appropriate forum.

I propose to address this issue under the following headings:

Governing law;

Witnesses;

Documents;

The London Arbitrations;

Korean Proceedings.

The Option Agreement is expressly governed by English law which, it is common ground, would be applied by both this court and the Korean courts.

The majority of the issues in this case are ones of English law, rather than of fact. Those issues are of some complexity. The issues of English law include:

Whether clause 4 of the Option Agreement (concerning delivery dates) was an ‘agreement to agree’ such that the Option Agreement is void for uncertainty. This gives rise to issues both as to the requirements for certainty under English law and to questions concerning the implication of terms.

Whether, if the shipbuilding contracts had been concluded following Teekay’s exercise of its options, Teekay’s only remedy when STX failed to provide Refund Guarantees would have been to terminate without compensation in accordance with Articles 11(g) and (h) of the Shipbuilding Contracts. This gives rise to issues about the interaction of contractual remedies and common law remedies for repudiatory breach, as well as construction of those clauses. The difficulties which may arise in the construction of such clauses are illustrated by the different answers given by Burton J and the Court of Appeal in respect of a similar question (but on different wording) in Stocznia Gdynia SA v Gearbulk Holdings Ltd [2010] QB 27.

Whether Teekay can rely on the doctrine of frustration because it would have been unable to obtain Refund Guarantees if it had entered into the shipbuilding contracts.

Issues relating to quantification of damages, including the date of assessment.

STX contends that this is a case in which there is no factor connecting the claim to England other than the choice of English law to govern the contract and that in such a case it is only where “novel, complex or undecided” issues of English law arise that the choice of English law is a factor of significance. In this connection it relies on the observations of Eder J in Mujur Bakat v Uni.Asia General [2011] EWHC 643 (Comm) at [20]. STX further submits that there are no issues in this case that are novel, complex or undecided to the extent that this factor outweighs the complete absence of any other connecting factor of the claim to the jurisdiction of the English Court.

The observations made by Eder J were made in the context of that particular case. As he recognised at [17] the weight to be given to the choice of English law depends on the circumstances of each particular case – “That factor would have a different weight in different circumstances”.

In the circumstances of this case I consider that the choice of English law is a matter of real significance given in particular that (i) the essence of the parties’ dispute relates to matters of law; (ii) those matters of law raise issues of complexity which will require extensive argument and citation of authority, and (iii) they are issues of a kind which can be more reliably determined by the English courts applying their own law rather than by courts in the very different Korean legal system and it will be more inconvenient and costly for those issues to be determined in the Korean courts.

The real issues in dispute in this case are legal. There is likely to be some factual evidence relating to factual matrix and the alleged collateral contract. There may also be factual evidence relating to quantum. However, the core issues in the case are of a legal nature. Those issues are of some intricacy and complexity. They will involve extensive citation and consideration of authority. They will also involve close consideration of the language of the Option Agreement, construed in its factual matrix. The nuances to be drawn from that factual matrix may well be subtle ones. I agree with Teekay that the English court is best placed to resolve such questions. As Teekay submits, it is “a matter of common sense” that where (as here) the issues are complex and the legal systems are very different, the English court applies its own law more reliably than a foreign court, and its appellate courts are better able to correct errors of law Dicey, Morris & Collins para. 12-034.

Whilst the Korean court is no doubt capable of resolving these issues it is a less appropriate forum for doing so. In particular the evidence shows that:

The Korean legal system is very different from the English common law system.

The Korean courts have relatively little experience of applying English law because most contracts which are governed by English law (e.g. shipbuilding contracts) contain London jurisdiction/arbitration clauses. Although STX disagrees, it has identified only three Korean cases in which English law has been applied over a period of 25 years.

The Korean court would determine issues of English law based on expert opinions, which would need to be translated into Korean. Experts would have to travel to Korea, where they would be examined through interpreters. All of the potentially voluminous materials relied upon by the experts (e.g. reported cases) would need to be translated. This is inconvenient both because (i) this procedure increases costs (which are not recoverable beyond the fixed costs allowed for any claim), and (ii) addressing complex issues in a foreign language is both inefficient and risks misunderstandings.

Witness evidence will primarily be relevant to the question of whether a collateral oral agreement was concluded during negotiations in Vancouver to the effect that Teekay would not exercise its options if STX was unable to obtain Refund Guarantees. This was not pleaded in STX’s Korean proceedings (although it is said that it can still be introduced by amendment). It seems most likely that there will be two witnesses from each side on this issue.

It is unlikely that any significant evidence will be required from any further witnesses to address the reasons why the banks refused to provide Refund Guarantees to STX. Some factual evidence may be required in relation to quantum and the relevant date for assessment of damages, but not to the extent suggested by STX in oral argument.

The location of witnesses is a factor in favour of Korea, but it is not a strong factor. There are witnesses in both Canada (for Teekay) and South Korea (for STX), all of whom appear to travel regularly – including to London. Teekay’s witnesses can only give evidence in English (which would be easiest in England) and STX’s witnesses would prefer to give evidence in Korean (which would be easiest in South Korea). The costs of the witnesses attending trial in Korea and England are unlikely to be significantly different. If STX’s witnesses speak reasonable English, England might well be more convenient in that they would then give evidence in English with the assistance of an interpreter as and when required. Likewise, their witness statements would be prepared in English without the need for translation. On the other hand, all of Teekay’s witnesses’ evidence would require interpretation in South Korea and their witness statements would need to be translated from English into Korean.

In addition, there is the issue of expert evidence on quantum. Teekay has already appointed an expert in England on the issue of quantum (valuation) and the likelihood must be that STX will do the same (if it has not already done so), particularly in light of the London Arbitrations.

This is not likely to be a document heavy case. However, all of the communications passing between the parties and the contractual documents (which are likely to be the focus of any dispute) are in English, as are all of Teekay’s documents. STX’s internal documents will be in Korean, but they are likely to be of much less relevance than the documents crossing the line between the parties, and they are in English.

This factor favours England given that (i) there will plainly be less translation required if the proceedings are conducted in English – reducing costs; and (ii) since the key documents will be in English, the English court is likely to be better placed to construe those documents. In addition to that, the majority of any Korean documents that might be relevant will already have been translated in relation to the London Arbitrations.

The parties (or related companies) and their respective London legal teams are already engaged in London Arbitrations in respect of the Shipbuilding Contracts, which will come to hearings during the first half of 2015.

There is a substantial degree of overlap in issues between these proceedings and the London Arbitrations, including (i) whether an oral collateral agreement was concluded during the negotiations in Vancouver concerning what was to happen if STX could not obtain Refund Guarantees, (ii) whether the buyers can claim damages at common law for repudiation in the event of a failure to provide Refund Guarantees, (iii) whether the contracts were frustrated by STX’s inability to obtain Refund Guarantees, and (iv) issues of quantum, including as to the market value of these Tankers.

I agree with Teekay that this is a strong factor favouring the convenience of proceedings in England. In particular:

The parties’ London lawyers will become familiar with all of the evidence, issues of law and arguments in the course of preparing for the London Arbitrations. It would be efficient for them to prepare and deploy the same arguments in the High Court in London in respect of the claim under the Option Agreement. It would be much less efficient to have a separate set of Korean lawyers become familiar with the very same matters for the purposes of preparing and presenting a claim before the South Korean courts.

It would be easier for witness evidence prepared for the London Arbitrations to be adapted for use in the English High Court, than for use in the courts of South Korea. Relevant parts of the witness statements for the London Arbitrations could be used with almost no changes in the English High Court, but would require translation and (most likely) changes of substance for use in South Korea.

Similarly, legal argument (skeleton arguments, etc.) prepared for the London Arbitrations could be used in the High Court. Such arguments could not be used in South Korea, where such evidence would need to be given by independent experts. Independent experts could not simply be given the parties’ arguments and expected to adopt (or even to adapt) them.

The same quantum experts appointed for the London Arbitrations could easily give (similar) evidence in the High Court. However, if these proceedings were held in South Korea, it would be necessary either to appoint different experts, or to have the experts used in the London Arbitrations prepare reports in Korean and travel to South Korea to be examined (through interpreters).

In these circumstances it is substantially more convenient for both sets of closely related proceedings, which are running in parallel, to be heard in a single place (i.e. London) given the efficiencies that could be achieved by having a single team of lawyers and experts preparing, in large part, a common set of evidence and arguments.

STX relies on the fact that it commenced proceedings in the Seoul District Court on 20 March 2014, in which it seeks a declaration of non-liability under the Option Agreement.

I agree with Teekay, however, that in the circumstances of this case the fact that proceedings have been commenced in South Korea is of no real weight in identifying the appropriate forum. The English proceedings were commenced only a few weeks later (on 11 April 2014) and were served on STX long before the Korean proceedings were served on Teekay. No substantive steps have been taken in either set of proceedings, in particular because each party is currently challenging the jurisdiction of the other court. Accordingly, this is one of those cases where, because the proceedings have not got beyond initiating process, the foreign proceedings are of little relevance in identifying where the action can most conveniently be tried - see Dicey, Morris & Collins, para. 12-043. The outcome of this application should not “be affected by what is little more than an accident of timing” as to which party happened to start its proceedings first - Du Pont v Agnew [1987] 2 Lloyd’s Rep. 585, 593. This is all the more so given that STX is not the natural claimant but has brought a claim for a negative declaration - Dicey, Morris & Collins, para. 12-049.

A further reason why no great weight should be placed on the fact that STX started its claim just a few weeks earlier is that STX induced Teekay to refrain from commencing proceedings in the High Court earlier. The position is as follows:

In March 2014 the parties were in discussion as to whether any claims under the Option Agreement should be referred to London arbitration, in common with the Shipbuilding Contract claims.

On 11 March 2014, Teekay’s solicitors (“CDG”) stated to STX’s solicitors (“MFB”) that Teekay would commence High Court proceedings unless STX confirmed, by 14 March 2014, that it agreed to ad hoc arbitration.

On 13 March 2014, MFB asked for a further week to respond because, it said, arbitration might well be acceptable but STX’s decision-making was slow. CDG confirmed that it would wait a further week, i.e. until 20 March 2014.

CDG again chased MFB on 21 March 2014 On 24 March 2014, MFB provided “as a matter of courtesy” a copy of the proceedings which STX had commenced in South Korea on 20 March 2014.

Had MFB not said on 13 March 2014 that arbitration might well be acceptable but that STX was still in the process of deciding, Teekay would in all likelihood have commenced proceedings in the High Court (as it had expressly said that it would).

In summary, factors (1), (3) and (4) point to England as the convenient forum, and (1) and (4) strongly so. Factor (2) is a slight pointer in favour of Korea. Factor (5) is of no real weight in this case. In all the circumstances I am satisfied, for the detailed reasons outlined above, that England is clearly and distinctly the most appropriate forum for trial in the interests of the parties and for the ends of justice. It follows that if, contrary to my findings on Issue (1), Teekay needed permission to serve out then I would grant it. It also follows that STX’s application for a stay on forum non conveniens grounds fails.

In conclusion I find that the Claim Form has been validly served and I refuse STX’s application to stay these proceedings on forum non conveniens grounds. Further, if Teekay had needed permission to serve the Claim Form in South Korea I would have granted it.