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Court grants anti-suit injunction in misdelivery claim

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Times Trading Corporation v. National Bank of Fujairah (Dubai Branch) (MV Archagelos Gabriel)[2020] EWHC 1078 (Comm)

The Commercial Court has granted an anti-suit injunction where the contractual status of the applicant was not clear and there were time-bar issues in respect of the claim under the bill of lading. The judgment helpfully provides some clarity on “quasi-contractual” anti-suit injunctions, and illustrates the approach that the Court may take where there is no clear, undisputed arbitration agreement.

The background facts

National Bank of Fujairah (“NBF”) was the holder of 27 bills of lading relating to a cargo of steam coal which was loaded on the Vessel in May 2018.

The bills of lading incorporated a London arbitration clause, by reference to a voyage charter party between TML and Harmony, as well as a General Paramount Clause that provided for the usual 12-month time limit for cargo claims.  

Between 8 and 10 June 2018, the cargo was discharged in India without production of the original bills of lading, against the provision of letters of indemnity issued by TPL.

On 28 December 2018, NBF asserted a misdelivery claim against the carrier. The notice was addressed to the Vessel’s registered owner, Rosalind Maritime LLC (“Rosalind”) “c/o Times Navigation Inc.” Rosalind’s solicitors took no issue with the addressing of the claim, which NBF took to impliedly mean that Rosalind was the carrier. Accordingly, on 2 January 2019, NBF issued a writ in rem in the Singapore High Court against the “owners and/or demise charterers of the vessel”.

In order to avoid arrest of the Vessel, TPL (a company related to TML) provided security for NBF’s claims. TPL subsequently entered into a Cooperation Agreement, under which it assumed conduct of the defence of NBF’s misdelivery claims on behalf of Rosalind and Times, the latter of which was described in the agreement as the bareboat charterer of the Vessel.

On 4 June 2019, NBF commenced London arbitration proceedings for misdelivery by a notice addressed to Rosalind, “c/o Times Navigation Inc”. TPL’s solicitors replied, reserving rights in respect of the validity of the arbitration notice, and proposing to appoint an arbitrator.

In July 2019, after the 12-month time bar had expired, Rosalind’s lawyers alleged that the Vessel was under bareboat charter to Times when the bills of lading were issued, and that the notice was invalid as it purported to commence arbitration against the wrong party.

The arbitration was not progressed. In February 2020, NBF proposed a stay of the Singapore proceedings on the basis that Times waived any time bar defence it might have raised in relation to the arbitration proceedings. Times refused.

On 9 March 2020, Times applied for an anti-suit injunction (“ASI”) to restrain NBF from pursuing its claims against Rosalind in Singapore. NBF asserted that the bareboat charter between Rosalind and Times was a sham, and that there was no genuine contract in those terms.

The Commercial Court Decision

The Court has the power to grant an ASI where it considers that it is just and convenient to do so. It will normally do so to restrain proceedings brought in breach of an arbitration agreement, unless the respondent can show strong reasons why an ASI should not be granted. The requirements for an ASI are more likely to be met where it is highly probable that there is a relevant arbitration clause governing the dispute (contractual ASI), than where the ASI is sought because, for example, the litigation is frivolous or vexatious (non-contractual ASI). However, the Court also drew attention to what were referred to as quasi-contractual ASIs.

In that context, as there was a dispute as to the true identity of the carrier, NBF argued that there was no high degree of probability that there was a valid arbitration clause between the two parties. Times contended that the real issue was whether the dispute in question was governed by the arbitration clause, i.e. whether the foreign claimant was, in substance, asserting a contractual liability.

The Court distinguished between the following two situations:

  1. The quasi-contractual/derived rights category – where the existence of the contract is not in doubt, but the person who has brought the proceedings is not a direct party to that contract; and
  2. Inconsistent contractual claims – where the party seeking the ASI denies the  existence or validity of the contract under which he is being sued and consequently impeaches the dispute resolution clause, and the party resisting the ASI claims under the contract but does not respect the forum clause in that contract.

In neither situation should a party be entitled to assert rights under a contract without also being bound by its jurisdictional provisions. Therefore, in both cases, the Court should ask whether there were strong reasons why an ASI should not be granted.

While this case did not fit squarely into either category, the Court did not think that any principled distinction could be drawn as a result. NBF had adopted an inconsistent approach, by denying the contract on one level, while also bringing a claim against Times in Singapore relying on the contract. Therefore, even if the case was not to be regarded as contractual, it should like the existing quasi-contractual cases be treated “as if” it were a contractual case and the same principles should apply.

As to whether there were strong reasons for denying the ASI, NBF relied on the possibility that its substantive claim against Times might be time-barred in the arbitration and submitted that it had acted reasonably in not commencing proceedings against Times before time expired. However, the Court found that, whether or not NBF had acted reasonably or unreasonably, the time bar issue was not a sufficiently strong reason for denying the ASI.

Having considered other discretionary factors, including that the Vessel interests would likely all have been aware of what NBF understood the situation to be, the Court granted an interim ASI on the condition that Times undertake not to rely on any time bar point in the London arbitration.

Comment

The decision is consistent with the principle that a party should not be entitled to take the benefits under a contract without also being subject to the burdens. The case also makes it clear that the English courts will incline towards granting an ASI where court proceedings have been commenced in breach of an arbitration agreement, unless there is strong reason not to do so.

Angela Song

Angela Song Associate

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