Neutral Citation Number: [2005] EWHC 315 (Comm)

Case No: 2004 FOLIO 866

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 16/03/2005

Before :

THE HON. MR JUSTICE LANGLEY

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Between :

MORA SHIPPING INC. of Monrovia, Liberia Claimant

- and -
(1) AXA CORPORATE SOLUTIONS ASSURANCE S.A.
(2) LE CONTINENT S.A.
(3) BELGIAN MARINE INSURERS S.A.
(4) FORTIS CORPORATE INSURANCE N.V.
(5) WINTERTHUR SCHWEIZERISCHE
VERSICHERUNGS-GESCHELLSCHAFT
(6) GENERALI ASSURANCES GNRALES Defendants

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Mr S. Kenny (instructed by Holman Fenwick & Willan) for the Claimant

Mr A. W. Baker (instructed by Ince & Co) for the Defendants

Hearing date: 25th February 2005

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Judgment
THE HON. MR JUSTICE LANGLEY
Approved Judgment

The Hon Mr Justice Langley :

The Application

1. The Defendant Insurers apply for an order that this court has no jurisdiction over
this claim and so that the issue and service upon them of the Claim Form be set aside.

2. The Claimant company is incorporated in Liberia and domiciled in Liberia and/or

Norway. The company was the demise charterer and disponent owner of the vessel
Vitoria on 14 February 2003 when it sustained serious bottom damage proceeding
down the River Plate. The Defendants are incorporated and domiciled in France
(defendants 1 and 2), Belgium (defendant 3), the Netherlands (defendant 4) and
Switzerland (defendants 5 and 6).

3. Article 2 of EC Council Regulation 44/2001 (in the case of defendants 1 to 4) and

Article 2 of the Lugano Convention (in the case of defendants 5 and 6) require that the
Defendants be sued in the countries of their domicile unless some special ground of
jurisdiction under the Regulation or Convention applies.

The Average Guarantee

4. The claim in these proceeding is brought against the Defendant Insurers as

subscribers, for their respective proportions, on various dates in March and April
2003, to an Average Guarantee which was addressed to the Owners of the Vitoria and
other parties to the adventure as their interests may appear and which provided:

In consideration of delivery in due course of the goods

specified below to the consignees thereof without collection of
a deposit, we, the undersigned insurers, hereby undertake to
pay to the shipowners or to the Average Adjusters, Richards
Hogg Lindley Limited, on behalf of the various parties to the
adventure as their interests may appear, any contribution to
General Average which may hereafter be ascertained to be
legally due in respect of the said goods. We further agree:

(a) to make a payment on account of such sum as is duly

certified by the average adjusters to be properly payable in
respect of the goods and which is legally due .

(b) to furnish to the said Average Adjusters at their request

all information which is available to us relative to the value and
condition of the said goods.

(c) that any period of prescription shall commence to run

from the date on which the general average adjustment is
issued.

5. The emphasis is mine. The words underlined give rise to the issue on jurisdiction.
THE HON. MR JUSTICE LANGLEY
Approved Judgment

The Adjustment

6. The goods referred to in the Average Guarantee were the entire cargo of the
Vitoria. The grounding and the repairs it necessitated caused (so it is alleged) the
claimant and others to incur various expenses of a general average nature totalling
some US $1.2m. That was the figure set out in a general average adjustment prepared
by Richards Hogg Lindley (RHL) dated 2 January 2004. The adjustment also stated
that those concerned in cargo were liable to contribute $1,053,302.15 in general
average. The adjustment was sent on 10 February 2004 to the first defendant (Axa)
under cover of a letter from RHL which called for payment direct to us to the
following Account: Charles Taylor Consulting Plc, National Westminster Bank .
London .. RHL is not a corporate entity but a trading division of CTC
Management Limited (CTML) which is a company incorporated in this jurisdiction
ultimately owned by Charles Taylor Consulting Plc (CTC).

The Proceedings

7. The Defendants did not pay in response to the letter from RHL. The Claim Form
was issued on 15 October 2004. The present application was made by Notice dated 15
December 2004. The defendants evidence is that they intend to defend the claim if
they fail on their present application, or in a proper forum if they succeed, on the basis
that the bottom damage to the vessel was caused by unseaworthiness.

The Issue

8. The parties are agreed that the only special ground of jurisdiction which could be
applicable, if established by the claimant, is to be found in Article 5.1(a) of the
Council Regulation and Article 5.1 of the Lugano Convention. So far as material
Article 5.1.(a) of the Regulation provides that:

A person domiciled in a Member State may, in another

Member State, be sued:

in matters relating to a contract in the courts for the place of

performance of the obligation in question.

9. Article 5.1 of the Convention is, so far as material, identical.

10. The question is, therefore, as the parties agree, whether on its true construction
the contract, the Average Guarantee, obliged the defendants to pay contribution to
general average within the jurisdiction of this court. If it did there is jurisdiction; if it
did not, there is not.

The Submissions of the Defendants

11. Mr Baker, for the defendants submits succinctly that the payment obligation in
the Average Guarantee expressly entitled the defendants to pay the shipowner, a
company domiciled in Liberia and/or Norway, and so did not oblige the defendants to
make payment within the jurisdiction applying the established principle that it is for a
debtor to seek out his creditor and pay him at his place of business. On the wording of
the Guarantee he submits the undertaking was to pay to the shipowners or to the
Average Adjusters and that answers the question before the court. It is, of course, the
THE HON. MR JUSTICE LANGLEY
Approved Judgment

fact that it is the shipowner which brings the present claim to enforce an obligation
said to be owed to it.

The Claimants Submissions

12. Mr Kennys submissions for the claimant are, necessarily if they are to succeed,
more complex. He accepts (as he must) that the Average Guarantee contemplates two
alternative modes of performance of the payment obligation and that one of those
modes (payment to the shipowners) would not satisfy the Regulation and Article. But
he submits that the right or power to choose between those alternative modes of
performance, is, on a true construction of the Average Guarantee, vested in the parties
to whom the average guarantee is addressed. Therefore, so the submission continues,
once RHL said on behalf of those parties, Pay us by payment to a bank account in
London, the defendants obligation was to pay in London.

The Evidence

13. To provide support for these submissions, the claimant has adduced evidence of
what it submits are the ordinary practices of average adjustment which should
inform the exercise of construction. Mr Baker submits this evidence (and the
response to it) is all irrelevant and in any event either inconclusive or helpful to the
defendants. It is important to note that it is not suggested by the claimant that the
evidence establishes any binding market custom or practice. It shows, at most, that it
is the usual but not invariable modern practice that after publication of the average
statement the adjusters collect for and distribute the funds to all interested creditor
parties. A provision of the kind in issue in this case is common in other standard forms
of Average Guarantee. It has the beneficial effect of avoiding the need to pay each
creditor party, and there could be, though not in the event in this case, several creditor
parties. It also enables insurers to have the essential comfort that they can, on making
payment, obtain a valid discharge. But these objectives are attainable by providing for
either one or more unique payees. I do not think it follows, as Mr Kenny submits, that
the purpose of the provision is to give the creditor parties the right to elect whether
their collective shares of the general average payable should be paid either to the
shipowners or to the average adjusters. Not only are the creditor parties (save for
the shipowner) not expressly referred to in the relevant obligation in the Average
Guarantee but the benefit of the provision is commercially and legally just as, if not
more, important to the payors as to the payees.

14. The issue raises questions of obligation not usual practice. Nice questions might
arise if the shipowner and adjuster or indeed the creditor parties disagreed about to
whom payment should be made. If there is a right to elect which creates an
obligation upon insurers to observe it there is no obvious answer to the question
whether it is the right of the shipowner or the adjuster or the creditor parties.

15. Mr Baker submitted that if the court was to be informed in construing the Average
Guarantee by commercial considerations it should take into account that at least one
standard form of Average Guarantee contained an express jurisdiction clause, and that
it was not difficult expressly to write into the Guarantee a right of election if that was
intended. He submitted that there were difficulties in seeking to rely on a clause
providing for payment for a purpose (jurisdiction) for which it was not designed. The
clause addresses who is to be paid not where the payment is to be made.
THE HON. MR JUSTICE LANGLEY
Approved Judgment

Construction

16. It is agreed that the place of performance of the payment obligation is to be

determined by the law governing the contract identified by the conflict of laws rules
of this court and that, for the purposes of this application, the law governing the
contract is or is to be treated as the same as English law. It is also agreed that if the
obligation was required to be performed in more than one jurisdiction or could be
performed in more than one jurisdiction then no single jurisdiction would be
established on this basis: Case C-256/00 Besix v Kretzschmar [2002] ECR 1-1699
(ECJ) at 1724-7; Hanbridge Services Ltd v Aerospace Communications Ltd. [1993]
I.L. Pr. 778 (Irish Supreme Court) at 784-5.

17. It was Mr Kennys basic submission that the guarantee must by implication, or to
be commercially rational, in effect be construed to read insurers undertake to pay
to the shipowners or to the Average Adjusters as directed by the parties entitled any
contribution to General Average . That submission necessarily, as Mr Kenny
acknowledged, carried with it the prospect of different directions by different parties
entitled. In my judgment that is not only a commercially improbable commitment but
one which is inconsistent with the express terms of the Guarantee which I think
provide for payment of a single contribution by each insurer to general average due
in respect of the goods, being all the relevant cargo. That does make good
commercial sense: one payment to one person to discharge all the liability undertaken
by each insurer.

18. I do not find the contextual evidence of any real assistance in construing the
Average Guarantee. In law an adjustment is not conclusive nor binding: Sameon Co
S.A. v NV Petrofina, CA (unreported), 30 April 1997. Whilst the guarantee plainly
contemplates in the wording commencing: We further agree, that there will be an
adjustment the obligation of insurers is to pay general average which is legally due.
That obligation is to pay the shipowners or RHL. Those words are unqualified and,
I think, unequivocal. I see no need to read into them any qualifications about election
between one or other payee. It is for the claimant to establish, if there is to be
jurisdiction in this court, that the obligation of insurers is to make payment to RHL in
this jurisdiction. It is not, as expressed, and in my judgment that is conclusive against
the claimants submission.

19. If, however, it is right to consider rights of election (and their subsequent
exercise) between the two named payees, in principle I think the right, absent express
words to the contrary, would be held by the party whose obligation is under
consideration, in this case the obligation of insurers to pay. That derives some support
from Chitty on Contracts, 29th Edn, vol 1, para 21-006 and the cases cited there. Nor
do I think Thorn v City Rice Mills (1889) 40 Ch D 357, to which Mr Kenny referred
me, is a decision to the contrary. In that case payment was to be made to a known
payee at one of two specific places (not to one of two payees) and it was held that the
creditor had to make a demand for payment at one or other place to establish a default
by the payor.

20. Mr Kenny also submitted that the implication of the construction advanced on
behalf of insurers would be unfortunate and uncommercial. There would be no place
of performance of the payment obligation at all. So insurers could only be sued in
THE HON. MR JUSTICE LANGLEY
Approved Judgment

their respective places of domicile. Those places would rarely have any connection
with the facts of the case. Each insurer could make his own choice of who to pay.

21. No construction is, in my judgment, free from potentially unfortunate

consequences. But, the place of performance is itself only an exceptional basis for
jurisdiction. Insurers may be sued as co-defendants in one state of domicile under
Article 6.1 of the Regulation and Convention. This country has no connection with
the factual issues in this case of damage and unseaworthiness. On the claimants
construction each creditor could choose to whom payment was to be made. I agree
with Mr Baker that the commercial way to provide for jurisdiction is to adopt a
jurisdiction clause. Otherwise, in context, jurisdiction in the place of domicile is, and
has now for many years, been the established rule regardless of whether or not that
place has any connection with the material events.

The Subsidiary Point

22. Mr Baker had a second and very much subsidiary point. He referred to RHLs
request for payment in the 10 February letter (paragraph 5). He submitted that
whatever the true construction of the Guarantee that request was ineffective to
establish an obligation to pay in London because it sought payment not to the
adjusters, RHL, nor to the corporate entity, CTML, of which RHL was a division, but
to CTC. I think this is a bad point. The letter from RHL sought a remittance direct to
us by, in effect, payment to an account of CTC in London. If it were right to read the
Guarantee as entitling the adjusters to elect payment to themselves and to fix the place
of performance of the obligations of insurers I think this would have been effective to
do so. It does, however, I think, illustrate some of the difficulties in the claimants
submissions. If the right of election is the right of all creditors there might be
uncertainty as to the authority of the adjuster to make such an election. Moreover if
the adjuster had an unfettered right to require payment to any chosen account and so
to fix the place of payment it would have the consequence that jurisdiction would
depend on such a choice. In each case, however, the desirable criterion of certainty of
jurisdiction would not be met. Jurisdiction could not be determined from the terms of
the contract itself but only upon the unpredictable outcome of an election or elections
made later.

CONCLUSION

23. In my judgment the Claimant has failed to establish that this court has jurisdiction
over the claim it seeks to make and insurers are entitled to the relief they seek. I will
hear the parties on any ancillary matters which cannot be agreed when this judgment
is handed down.