Sam Purpose AS v Transnav Purpose Navigation Ltd (Rev 2)

On 1 February 2017, I granted an initial anti-suit injunction in conventional terms. The hearing was ex parte on notice and in fact, I had the benefit of a skeleton argument from the Defendant although it did not appear at the hearing, nor was it represented.

There is an approved transcript of my judgment that day, which sets out the relevant background.

Today is the return day of that injunction and also the final hearing of this claim for permanent injunctive relief. The position of the claimant is that it now wants the usual final form of the injunction which is not merely that the Defendant should be restrained from pursuing or continuing the foreign litigation but that is should not take positive steps to discontinue it. The Defendant’s position today is that there should be no further injunctive relief.

The Claimant, Sam Purpose AS (“Sam”) is the owner of a vessel called Sam Purpose. It has a claim against the Defendant charterers Transnav Purpose Navigation Limited (“Transnav") in respect of unpaid hire and other charges in the region of US$500,000 but also damages, following Sam’s termination of the charter party by reason of Transnav’s alleged default. Sam however, also owes Transnav US$2.43m by reason of the other contractual arrangements made between them, as set out in more detail in my earlier judgment. On that footing, a net sum of about US$2m is owed by Sam to Transnav.

However, Sam says that it has a very substantial additional claim for damages arising out of Transnav’s repudiation of what was a six-year charter, and the present estimate of that claim is about US$3m. If that is taken into account, then Sam becomes the net creditor as it were, and significantly so. Both parties are to some considerable extent in straightened financial circumstances.

The vessel ended up in the port of Lagos. It was first arrested in October 2016 by creditors unconnected with Transnav. Sam has not offered any security in respect of that prior arrest but says that it has the financial resources to do so, provided that the later arrest to which I am now turning, is removed.

That later arrest was effected by Transnav on the basis of the liquidated sums owed to it by Sam to which I have already referred. Transnav issued proceedings in the Nigerian High Court on 10 January 2017. An order for the arrest swiftly followed on 19 January.

The relevant suite of agreements made between Sam and Transnav, including the charterparty all contained a London arbitration clause. There is no dispute but that the subject matter of the substantive claim in Nigeria falls squarely within that clause. Indeed, as a result of this dispute, Sam had commenced an arbitration here under the various relevant agreements, by notices of appointment, dated 7, 16 and 23 January 2017, Transnav appointed its nominated arbitrator and joined in the arbitration proceedings but reserving the right to challenge the jurisdiction of the arbitrators. Nothing much has happened in the arbitration since then.

As I set out later in this judgment, it is well-established that the Court’s power to make an anti-suit injunction does not extend to the situation where the other party has simply arrested a vessel as security for the underlying claims to be arbitrated. Had Transnav had the ability in Nigeria to arrest the vessel without more, so as to stand as security for its claims to be brought by way of arbitration here, Sam could have no complaint.

However, it was submitted to me (on the basis of Nigerian law as summarised by Mr Afun, Sam’s first Nigerian lawyer) that in Nigeria, it was impossible to obtain the arrest of a vessel without commencing the substantive claim there as well. And to judge from Transnav’s skeleton argument produced to me at the last hearing, that much appeared to be common ground.

On the face of it, then, there was jurisdiction to issue an anti-suit injunction in respect of the Nigerian proceedings on the usual basis that their inception had violated the various arbitration agreements subsisting between the parties. Therefore, as a first step, Transnav was prevented by an injunction from maintaining or continuing those proceedings. And if, by a final injunction, they were ordered to cease those proceedings, if the effect of that was that the arrest would be discharged as well, then so be it. See further, paragraphs 11, 13, 20 and 21 of my judgment.

Since the making of that order, a number of things have happened. First of all, by 29 January, Sam had also consulted another lawyer, Mr Atoyebe and the intention was that he would replace Mr Afun. There was some delay in dealing with this and indeed both the new and old lawyers had filed conditional appearances in the Nigerian proceedings. Points were taken about this and who was the correct lawyer to serve. For present purposes, all I need to record is that this issue has now gone away because the Nigerian Court has accepted today that there had been a valid change of representation.

More significantly, on 8 February and on the face of it, in clear breach of the injunction Transnav applied for judgment in default on its substantive claims against Sam and that application was due to be heard on 23 February. Unsurprisingly Sam took exception to that and advised Transnav that his was a breach of the injunction and it would take proceedings against the individuals concerned for contempt of court. This, equally unsurprisingly, prompted Transnav to withdraw its application for judgment in default on 13 February. There is still no clear reason why this exercise was attempted at all. Meanwhile, on 10 February, Mr Atoyebe filed an application on behalf of Sam challenging the jurisdiction of the Nigerian Court. Essentially what it said was that the inception of the original proceedings were themselves an abuse because they flouted the arbitration clauses and indeed did not even advert to them in the Statement of Claim and matters of that kind . If that application succeeded it would result in the dismissal of the proceedings entirely, including the original arrest. On 16 February, the application was adjourned at the request of Transnav to 24 February and there was then a further adjournment to 28 February because Transnav’s lawyers said that the position as to the change of representation for Sam had not yet been formalised. There was then a yet further adjournment until today

In the meantime, on 23 February 2017, but subsequent to Sam’s application to challenge jurisdiction, Transnav applied to stay its own substantive proceeding proceedings in Nigeria on condition that the arrest remain in place.

This was pursuant to s10 (1) and (2) of the Nigerian Admiralty Jurisdiction Act 1991 which state as follows:

“(1)

without prejudice to any other power of the Court, where-

(a)

it appears to the Court in which a proceeding commenced under this Act is pending that the proceeding should be stayed or dismissed on the ground that the claim concerned should be determined by arbitration (whether in Nigeria or elsewhere) or by a court of a foreign country; and

(b)

a ship or other property is under arrest in the proceeding, the court may order that the proceeding be stayed on condition that the arrest and detention of the ship or property shall stay or satisfactory security for their release given as security for the satisfaction of any award or judgment that may be made in the arbitration or in a proceeding in the court of the foreign country.

(2)

The power of the court to stay or dismiss a proceeding commenced under this Act includes power to impose any conditions as are just and reasonable in the circumstances…”

This provision had not been referred to at or before the hearing on 1 February, either by Sam in its evidence or submissions, or by Transnav in its skeleton argument. It is plainly relevant to the conduct of this matter going forward. Transnav has submitted that the failure by Sam to refer to it previously amounts to material non-disclosure which should lead in any event to the existing order being discharged and no further injunction being granted. I will deal with that particular submission later in this judgment.

Today there has been a further procedural development in the Nigerian Court. It has now pronounced itself satisfied as to the proper transfer of representation on behalf of Sam and it is now ready to hear both parties applications’ ie Sam’s application to dismiss and Transnav’s application for a stay. It will do so at the same time. Sam’s position perhaps understandably is that it does not join in the application for a stay since it has a more fundamental objection to the proceedings but if it fails to make that good, then it would support a stay which will dispose of them albeit leaving the arrest in place.

Both of those applications will now be heard on Tuesday 7 March. I considered whether, in the light of that, and in the light of an objection to some new evidence, whether there was any utility in having the hearing today rather than awaiting the outcome but Sam was keen that I should reach a view on the materials before me, not least because it was maintaining its position that it should have final injunctive relief of the discontinuance kind.

Sam’s essential position is that neither s10 nor Transnav’s belated application to seek a stay pursuant to it makes any difference. It says that the only course now is to order that Transnav should take such steps as are necessary to discontinue the Nigerian proceedings entirely and if that happens, then the arrest will go as well. That is its submission, even though, had their only ever been an arrest granted without substantive proceedings (as is the case in some other jurisdictions), Sam would not have been granted an order against the defendant to discontinue it.

Sam prays in aid the fact that whatever the position now, Transnav had clearly commenced proceedings in breach of the arbitration clause and its earlier conduct suggested that it was not doing so merely to obtain the arrest. Sam points to passages in the arrest application which suggest that it was being sought as security not for a claim to be tried by way of arbitration but for its claim “herein” ie in the Nigerian claim. It points to the fact that after the injunction it applied for judgment in default and that there was no application to stay under s10 until Sam had threatened contempt proceedings.

For its part, Transnav says that it was entitled to take points about Sam’s legal representation and whatever may have gone on in the past, the present position is that it has no interest in the Nigerian proceedings save insofar as they have permitted an arrest. If a s10 stay is granted, then the proceedings will be stayed which is what should happen when there is an arbitration agreement in favour of a tribunal elsewhere. If s10 nonetheless allows the arrest to remain in place, that is no reason for an injunction because functionally, the position would then be as if the foreign court had been able to grant an arrest only. The fact that proceedings in Nigeria contemplated the continuation of the substantive claim, is not now relevant. Any order to discontinue the Nigerian proceedings which would discharge the arrest would be wrong where those proceedings can simply be stayed in any event.

There is still some uncertainty in the Nigerian case because the two applications have not yet been heard, but one does have at least the knowledge that neither side is seeking to delay the hearing of those applications (now imminent) and from the point of view of Sam, its right to dismiss the claim altogether has been preserved because the Nigerian court will hear both applications together.

I now turn to the law.

The starting point in my judgment is the statement of principle given by Jonathan Hirst QC sitting as a Deputy in Kallang Shipping v AXA [2009] 1 LRep. 124 (“Kallang No. 2”). Following a detailed review of the authorities including The Lisboa and a consideration of the Brussels Arrest Convention of 1952, he said this in paragraph 78:

“..the English Court will not restrain a party to an English arbitration clause from arresting a vessel in another jurisdiction where the sole purpose of the arrest is to obtain reasonable security for the claim to be arbitrated or litigated in England. Section 11 of the Arbitration Act 1996 also assumes that a Claimant can properly arrest a vessel in order to obtain security for an arbitration claim. The precise basis on which the Court acts – construction of the arbitration clause or discretion – is not authoritatively established but the general approach is clear enough. Where, however, the Claimants’ actions go beyond simply seeking reasonable security for the arbitration proceedings, there is a breach of the arbitration clause which the English Court will restrain.”

Whether the foreign proceedings impugned go beyond seeking reasonable security for the arbitration is a question of fact and analysis in each case. Thus, to take the example of what happened in Kallang Shipping v Axa [2007] 1 LRep 160 (“Kallang No. 1”) a decision of Gloster J (as she then was), the claimant sought before the foreign court security in exchange for the release of the vessel. If that would have the indirect effect of the claim having to be litigated in that jurisdiction or if it would have an adverse impact on the arbitration here, then that would be going beyond the seeking of a reasonable security, from the English Court’s point of view. So an injunction could be granted; but it would have to be tailored to meet the particular circumstances and go no further than necessary. Otherwise the result might be an attack on the arrest itself which would not be justified.

Further, the consideration of whether injunctive (or further injunctive) relief was necessary has to be determined by reference to the facts as they are at the time of the hearing. If, by that stage, the foreign court had changed its position so that there was now no risk to the arbitration and no risk of the claim ending up in whole or in part elsewhere, then there would be no need for injunctive relief. That approach, focussing on whether the injunction was necessary as distinct from prior breach was made plain as long ago as 1889 in Proctor v Bayley in the Court of Appeal (1889) 40 ChD 390. At p398 Cotton LJ said this:

“It does not follow that because a man has done a wrongful act, and injunction will be granted against him even though he is liable for damages for the wrong. The Court of Chancery has said “Where a man threatens and intends to do a wrongful act, we will, before it is done, grant an injunction to prevent his doing it and we will grant it where the act has been done and is likely to be repeated” – the jurisdiction is simply preventative.”

See also the similar observations from Fry LJ at p401.

That approach, to ask whether any injunctive relief is now necessary, was adopted by Gloster J in Kallang No. 1. A similar approach was taken by her (when sitting as a Deputy Judge) in Green Flower Navigation Malta Ltd, Avin International Ltd v SC Santierul Naval SA Constanta 2002 WL 1876042. Even though there had been clear breaches by the Defendant of the order, in the final analysis a nuanced injunction was granted which is of some significance here because it is plain from paragraph 22 (7) of her judgment that there was a carve-out so as to enable the arrest to remain in place.

It is not right as a matter of principle that an injunction should be granted simply to punish the foreign party for its earlier misconduct or to serve as a deterrent lest it might consider embarking upon further misconduct in the future.

That was emphatically rejected by Gloster J in Kallang No. 1 where she said in paragraph 37 that

“I do not consider that it would be appropriate to impose new injunctions, in the terms of the previous injunctions…simply on the grounds…. that to do so would send out the appropriate message to the defendants in respect of their conduct in dealing with future claims, where ship-owners have the backing of Club letters. It seems to me that this Court should only grant injunctions where there is a need to do so to meet the particular circumstances of the case before it.”

She then went on to say there was no need to maintain the injunction there.

Ms Hosking for Sam was very clear and open in her submissions today. She said in effect that the very commencement of the substantive claim was a breach, the result of which was effectively to taint irretrievably whatever else happened in that action including that arrest. I characterised that in argument as a version of the “fruit of the poison tree” doctrine. Put another way, the Defendant in those circumstances cannot in any way take advantage of the proceedings which were commenced in breach of the arbitration clause. I do not accept that argument. The question of breach and of an injunction are two separate matters. I posed the question to Ms Hosking as to whether, if the foreign Claimant had to launch substantive proceedings to obtain an arrest but could then stay the proceedings immediately so that all that was left was the arrest, would that be a case for enjoining the Defendant to remove the injunction and she said “yes”. I find that a difficult conclusion because functionally and as a matter of substance rather than form, it would be equivalent to obtaining an arrest without substantive proceedings. Having regard to the observations of Hirst J in Kallang No. 2 I would find it surprising if, in those circumstances, there was even a breach at all. However I need not express a final view about that for this reason: there is no doubt at all that there was a breach of the arbitration clause here. That is because when the proceedings were commenced in this case, they were not started exclusively to obtain an arrest to secure an arbitration claim and perhaps not with that aim at all for the reasons already given. There was therefore an historic breach. According to Transnav, however, that breach has been or is now being cured. Transnav is now not taking any step other than to stay the proceedings and leave the arrest in place. That being so, there is in my judgment a separate question as to whether injunctive relief is now required.

This does not mean that in respect of some earlier misconduct there could not be a claim in damages (for breach of the implied term of the arbitration agreement not to litigate elsewhere) but that is a separate matter. It was the assessment of such losses with which Hirst J was concerned in Kallang No. 2.

Leaving aside the issue of non-disclosure therefore, the question is whether there now remains any risk of Transnav going beyond seeking the continuation of the arrest (or reasonable security in lieu thereof).

As to that, we now have the two applications referred to above and had I not received today the news about the hearing next Tuesday I would have ordered the parties to bring such applications on together and as soon as possible, but in fact I have been pre-empted as far as that is concerned. Since I have rejected Ms Hosking’s proposition based on the notion of inevitably tainting whatever follows, even if all that is left is the arrest, a proposition for which she was unable to cite any authority, it must follow that I will not now grant a mandatory injunction to make Transnav discontinue forthwith the proceedings as a whole.

It is also said by Sam that the conduct Transnav was further been shown to be unsatisfactory because in a further agreement made between it and Velcan, the lender to Sam, it undertook not to enforce by arrest or otherwise the US$2.3m obligation owed by Sam to Transnav if this had not been paid as is the case. I see that but that is an obligation owed by Transnav to another party and it is matter for Velcan if it wishes to take any steps in that regard. It is a matter which may be of interest to the Nigerian Court on the question of abuse of process but that is a matter for that Court not this Court.

Ms Hosking as a final riposte said that Sam needs protection because it does not have enough money to satisfy the previous arrests together with this one and because Transnav is similarly starved of ready cash or much of it. But this is not an application for a freezing order, it is for an anti-suit injunction which must be determined on its merits. There is no separate head of injunctive relief based on protection for the Claimant and so I reject that argument.

All of that said, I would remain open to the suggestion of the continuation of some form of negative relief to stop any further action other than to stay the current proceedings and in the light of Transnav’s earlier breach.

That is the form of injunctive relief which I would order now had there been no issue of non-disclosure. The question is therefore whether any non-disclosure makes a difference.

It is trite law that:

The material fact not disclosed here is said to be the existence of s10. In my judgment, it was clearly material. Had it been brought to my attention, I would have had to consider how it might affect any injunction then to be granted. It is plainly relevant to the whole question of what could be done in the Nigerian Court where what was sought is the arrest and there is then a need to bring substantive proceedings. It could give rise to the question of whether the s10 remedy was available immediately. It is true that I would probably still have made a negative order at that point because Transnav, in the skeleton argument put to me then, did not refer to s10 either or suggest that it was about to apply for a stay of the Nigerian proceedings;

What it would have meant was that the situation might change quickly after the first order if Transnav (or Sam) then did decide to apply for a stay - which Transnav has belatedly done. It would then have an impact on the grant or otherwise of any continued injunction relief going forward - which is now exactly what has happened.

Nonetheless, it remained a material fact and Mr Hickland in effect accepted that had he known of it he would have brought it to the attention of the court out of an abundance of caution. However he did not, nor did his client or counsel. They had relied upon the advice of Mr Afun , Sam’s first Nigerian lawyer who made no reference to the provision himself, which I find surprising. Nonetheless, Sam and its legal advisers (who for these purposes are its Counsel and solicitors here) were entitled to rely upon it and take at face value the statement that substantive proceedings had to be launched in order to obtain an arrest. I accept that by 29 January, Mr Atoyebe was also on board but I do not accept that for this reason, Sam or its advisers had to second guess the advice already given.

I appreciate that s11 of the 1996 Act provides a similar sort of regime here but I do not consider that this means that they should not take at face value what Mr Afun had told them. For the same reason I do not consider that it was necessary for Sam’s legal advisers to start looking up textbooks such as Berlingieri’s book on the arrest of ships whose 6^th edition 2016 at para. 8-27 refers to the position in Nigeria and s10. I particularly consider that there was no need to second guess Mr Afun’s advice, especially given the urgency of the situation.

Moreover, and turning to the question of discretion, there are the following factors that favour Sam:

For all those reasons, the non-disclosure would not have altered the course I would have taken today in its absence.

Accordingly, although there has been material non-disclosure, I decline to discharge the original order in its entirety, or make no new order, by reason of it.

So for all those reasons I am not prepared to grant final relief in the form of an order that the Nigerian proceedings be discontinued. But I am open to some form of negative relief and I will hear counsel on that now.