England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT
(MR JUSTICE AIKENS)

		Royal Courts of Justice Strand London, WC2
		10th March 2003

1. LORD PHILLIPS, MR: This is an appeal from the judgment of Aikens J delivered in proceedings under CPR Part 8 on 19th July 2002. At issue is the effect of a letter of undertaking ("LOU"), given by the appellant ("the Club") to the claimants dated 27th July 2001. Aikens J held that this letter obliged the Club to instruct English solicitors on behalf of Junta Maritime Public Co Ltd, the owners of the Juntha Rajpruek ("the vessel") to accept service of the claim form and Admiralty claim in rem No. 2001 Folio 1008 and to file an acknowledgement of service in respect of it. The judge made an order for specific performance of this obligation. The Club, with permission granted by Clarke LJ, appeals against this judgment. By the LOU the Club undertook to accept service of proceedings brought "in a competent court". The Club contends that the English Admiralty Court is not a competent court to entertain the action in rem, in that it has never been in a position to exercise jurisdiction in rem over the vessel. The respondents ("cargo owners") contend that the reference to a "competent court" in the LOU embraces any court that has jurisdiction to determine the cargo owners' claims in proceedings in rem. Thus the issue that we have to resolve is the meaning of "competent court" in the LOU.

Background facts

2. I shall take the background facts from Aikens J's judgment. They are as follows. In May and June 2000 the cargo owners, who are described in the claim form as the owners and/or other persons interested in the cargo lately laden on the vessel "Jutha Rajpruek", shipped various general cargoes on board that vessel. The cargoes mainly consisted of steel coils and light and heavy machinery. They were shipped on board at ports in Japan and Korea for carriage to and delivery at various ports in Vietnam, Thailand and Malaysia.
3. On the evening of 12th June 2000, during the voyage to Thailand, the vessel suffered a main engine breakdown in bad weather. Eventually on 13th June, as the engines could not be restarted, the Master decided to abandon ship. Subsequently the vessel was salved and taken to a Chinese port. General average was then declared. Some or all of the claimants provided security in the standard form of general average guarantees and bonds. Salvage security was posted in the total sum of some US$1.7 million approximately. Some of the cargo sustained loss or damage as the result of the shifting of cargo and/or ingress of water. That loss or damage is estimated to be something just over US$200,000.
4. Websters, the well-known surveyors and adjusters, acted on behalf of the claimants. They initially sought security for salvage contributions and cargo claims from the defendant P&I Club, the Steamship Mutual ("the Club"). The Club had apparently taken over the defence of these claims on behalf of its member, the owners of the vessel.
5. Cargo damage claims were presented at various times between January and May 2001. After the salvage indemnity claim was quantified in October 2001, Websters demanded security for all these claims, together with interest and costs.
6. On 31st May 2001, the Club, on behalf of its member, granted the claimants an extension of time for starting suit until 1st September 2001. At the same time the Club invited Websters to provide further information on quantum so they could address the security issue. Further information was provided. On 5th July 2001, the defendant Club sent Websters a draft letter of undertaking, which they said they were recommending to their members to accept.
7. On 27th July 2001, the Club issued the LOU to the claimants. The form of that letter of undertaking was in materially identical terms to that of the draft. The material part read as follows:

"In consideration of your refraining from taking any action resulting in the arrest of the above-named ship or any other ship or property in the same ownership, associated ownership or management for the purpose of obtaining security in respect of the above claims against the above-named ship concerning the cargo referred to above we hereby undertake take to pay to you on behalf of the cargo owners or to solicitors you may appoint on written demand such sums as may be finally adjudged by any final unappealable judgment of a competent court or tribunal to be due to you from the Shipowners in respect of the said claims or as may be agreed to be recoverable from the Shipowners in respect of the said claims between the parties hereto provided always that our liability hereunder shall not exceed the sum of US$1,893,738 ... plus interest and costs.

And for the consideration aforesaid:

We hereby warrant that we are informed by Juntha Maritime Public Company Limited that the above-named ship was not demise chartered at any material time.

We further undertake that we will within 14 days of receipt of a written request from you to do so, instruct solicitors to accept on behalf of the above-named ship service of in-rem proceedings brought by you in a competent court and/or tribunal as mentioned above and file an acknowledgement of service thereof, albeit wholly without prejudice to the Owner's rights to contest jurisdiction and/or apply to stay such proceedings.

We warrant that we have irrevocable authority from Juntha Maritime Public Company Limited to instruct solicitors as aforesaid and to give this letter of undertaking in these terms.

This undertaking is to be governed by and construed in accordance with English law and we agree to submit to the exclusive jurisdiction of the English High Court of Justice for the purpose of any process for the enforcement hereof."

8. On 24th August 2001, the Club informed Websters that it was not prepared to grant any further extensions of time for starting suit beyond 1st September 2001. On 29th August 2001, the claimants issued an Admiralty claim form in rem. It names as the defendants: "The Owners and/or demised charterers of the vessel 'Juntha Rajpruek' and the other vessels set out in the schedule hereto". There were in fact eight other named sister ships.
9. On 8th November 2001 Websters wrote to the Club formally requesting that the Club appoint English solicitors by 22nd November 2001 to accept service of that claim form. This was done, it was said, pursuant to the terms of the LOU and this request was repeated on 19th November 2001. On 22nd November 2001 the Club refused that request. That letter including some reasons. Those were expanded upon in a fax that was sent the following day.
10. The bills of lading, in respect of which claims were brought by the cargo claimants, were in various forms. There were 28 bills of lading in all. They break down into five categories. Thirteen of the bills of lading were on one or other of two slightly different "owners" forms of bill. Both those forms of bill of lading provided for Thai law and for exclusive Thai jurisdiction. Then there were 10 bills of lading on a "Both Goods Shipping & Trading Pte Ltd" form. They provided for English law and exclusive Hong Kong jurisdiction. Next there were two bills of lading on a "Sun II Shipping Company" form. They provided for the exclusive jurisdiction of the country where Sun II has its principal place of business. Next there were two bills of lading on a "Dae Lim Maritime" form. They provided for the exclusive jurisdiction of the country where Dae Lim has its principal base of business. Those two categories of bills of lading are not "owners" bills but are "demise charterers'" bills. This may also be true of the final bill of lading which is on a "KS Shipping" form. The terms of that have not been identified to date.

The judge's decision

11. The Club argued before Aikens J that it was only obliged to instruct solicitors to accept service of proceedings brought in a court where such proceedings could be both commenced and pursued to a conclusion. The English Admiralty Court failed on both counts. Proceedings could not be commenced because neither the vessel nor any sister ship had ever come within the jurisdiction. Proceedings could not be pursued to a conclusion because they would be subject to being stayed by reason of the exclusive jurisdiction clauses in the bills of lading.
12. Aikens J held that the LOU had four purposes:

(i) to ensure that the vessel would not be arrested;

(ii) to provide security for the claims of the cargo owners;

(iii) to give a warranty that the vessel was not demise chartered;

(iv) to give an undertaking to accept service of in rem proceedings in a competent court.

13. The judge held that the fourth purpose would be largely defeated if the Club was only obliged to accept service in a jurisdiction in which the vessel or a sister ship was actually present. Furthermore the express reservation in the LOU of the shipowner's rights to contest the jurisdiction and to apply to stay the proceedings demonstrated that the "competent court" was not necessarily one in which the proceedings would be pursued to a conclusion.
14. In the light of these considerations Aikens J held that a "competent court" in the LOU means a court that has jurisdiction to entertain the claim advanced in in rem proceedings. The Admiralty Court had such jurisdiction by reasons of the provisions of sections 20 and 21 of the Supreme Court Act 1981.

The Club's submissions

15. For the Club, Mr Alistair Schaff QC abandoned the submission that a "competent court" had to be a court in which the proceedings would be pursued to a conclusion. Thus reliance was no longer placed on the fact that most of the bills of lading had exclusive jurisdiction clauses. His submissions were as follows.
16. Many letters of undertaking expressly agreed to the jurisdiction of the English Court. This one did not. It did not expressly purport to confer jurisdiction on any court. In the absence of agreement the English Admiralty Court had no jurisdiction in this matter. It had neither jurisdiction to determine the merits of the claim nor anterior jurisdiction to decide whether, having regard to the exclusive jurisdiction clauses it should determine the merits.
17. He further submitted that the object of the LOU was to provide security to the cargo interests in consideration of their refraining from arresting the vessel or any sister ship. Provision was made for instructing a solicitor to accept service of proceedings as an alternative to the arrest which would otherwise have been a normal method of commencing proceedings. The LOU did not, however, release the cargo interests from the requirement of identifying a jurisdiction in which proceedings could be commenced by reason of the presence within its territorial waters of the vessel or a sister ship. Only a court of such a jurisdiction could be said to be "competent". On Aikens J's interpretation of the LOU, the requirement that the Court be "competent" added nothing, for the LOU required service to be accepted of in rem proceedings and such proceedings could not be brought in any court other than one falling within Aikens J's definition of a competent court.
18. Thus Mr Schaff submitted that, in the context of the LOU "competent" could only properly apply to a court which was in a position to be seized of the proceedings in rem by reason of the presence within its territorial jurisdiction of a vessel which could be arrested, or at least served with due process. We asked Mr Schaff whether, in order to confer competence on a court it was necessary for the vessel to be in a situation in which service of proceedings or arrest was practicable. He answered that it was not. All that was required was that the vessel should be within the territorial jurisdiction of the court. It followed from this, as Mr Schaff accepted, that if the vessel, or a sister ship, passed along the Channel in the English separation zone, the English Admiralty Court would be likely to become "competent".
19. In support of his submissions Mr Schaff referred us to only one authority. That was the decision of Sheen J in The Freccia del Nord [1989] 1 Lloyd's Rep 388. That case involved a contest for jurisdiction in respect of a collision. The issue was whether the English Court was "seized" of the proceedings before the Court of Rotterdam for the purposes of the Convention on Jurisdiction scheduled to the Civil Jurisdiction and Judgments Act 1982. Sheen J held that the Admiralty Court was not seized of an action in rem until the vessel in question was either served with the writ or arrested. Towards the end of his judgment he added this at page 392:

"Finally, I must add that the Court cannot have jurisdiction over a ship which does not come within its jurisdiction. Many a writ in rem has been issued in the hope or expectation that the ship against which the plaintiff has brought his action will come within the jurisdiction. Frequently that hope or expectation has been frustrated or thwarted by a change of orders to the master of the ship."

20. I do not see that this decision assists Mr Schaff. It demonstrates that a claimant cannot, by service or arrest, found jurisdiction unless the vessel in question comes within the territorial waters of the court in question. But it does not follow from this that, in the context of the LOU the adjective "competent" is appropriate to describe a court in whose territorial waters the vessel happens to be. Out of that context it seems to me that the natural meaning of a "competent court" in relation to in rem proceedings could be either a court competent to entertain the subject matter of the claim -- Aikens J's interpretation -- or a court competent by virtue of having become seized of the proceedings. Mr Schaff conceded that, in the context of the LOU it could not have the latter meaning. That is because under the 1952 Brussels Convention relating to the Arrest of Seagoing Ships, Article 7, it is arrest of the ship which usually founds jurisdiction. The Club's undertaking, which was given in consideration of cargo interests refraining from arresting the vessel, envisaged that jurisdiction would be established by the acceptance of service and not before.
21. Is there any good reason for preferring to the meaning of "competent" determined by Aikens J the alternative for which Mr Schaff contends? I must confess that, in considering this question, I was influenced by my own experience of the use of Club guarantees. Many Clubs, while domiciled outside the jurisdiction, are managed in London. Cargo insurers are also often based in London. Where cargo is damaged, the cargo interests will wish to obtain security and, if necessary, to found jurisdiction. Often this is not necessary, for being sensible commercial men the rival interests usually manage to resolve their differences by agreement. If litigation is necessary, the English Admiralty Court is often favoured by both parties, whether or not there has been express prior agreement to this. The Court is preferred not only because it is, in reality, the "local" court of the interests involved and their advisers, but also because of its recognised expertise. The terminology used in the LOU, with its reference to "solicitors", has, I suspect, a history which reflects this reality. An agreement which permits cargo interests to select a suitable court which enjoys Admiralty jurisdiction does not strike me as in any way surprising.
22. What is there to be said in favour of restricting cargo interests to commencing proceedings in any jurisdiction in which the vessel, or a sister ship, happens to be, or is about to enter, or has just left? I mention these alternatives because Mr Schaff's interpretation raises some nice practical questions as to how the undertaking works. Mr Schaff was unable to suggest any obvious reason, although it may well be that in the instant case there is a reason which lies concealed under the veil of legal professional privilege.
23. The practical difficulties raised by Mr Schaff's interpretation include the following. At what stage does the vessel or a sister ship have to be within the jurisdiction -- when the proceedings are issued? Or when the Club is called on to instruct solicitors to accept service? Or at any time during the 14-day period for responding to the request to instruct solicitors to accept service? Or are the solicitors to be instructed to accept service only if asked to do so at a time when the vessel or a sister ship is within the jurisdiction?
24. Mr Schaff did his best to answer this barrage of questions. He said that if, after issue of the LOU, the vessel or a sister ship came within the jurisdiction, that would suffice to render the Court competent, even if the vessel departed before the cargo interests called upon the Club to instruct solicitors to accept service. If cargo interests called upon the LOU shortly before a vessel arrived, the Club would have fourteen days to respond, but would only be required to do so if the vessel in fact came within the jurisdiction. In this way Mr Schaff gave positive answers to the questions put to him. It did not seem to me, however, that those were the only answers he could have given. His interpretation of "competent" raised questions to which the answers were not obvious.
25. More generally, I can make no commercial sense out of the regime for which Mr Schaff contends, whereas that found by the judge accords well with what are, in normal circumstances, the requirements of business efficacy.
26. For these reasons I was left unpersuaded by Mr Schaff's arguments and concluded that the appeal should be dismissed, a view that proved to be shared by the other members of the Court.
27. Mr Teare QC, who was not called upon to respond, informed us nonetheless, by way of an ironic postscript, that his instructions were that a sister ship of the Juntha Rajpruek had, on more than one occasion, traversed the English Channel in territorial waters.
28. For these reasons I would dismiss this appeal.
29. LORD JUSTICE SEDLEY: If an argument as admirably presented as Mr Schaff's has been insufficient to thrust his opponent into more than a guest appearance, then it can only be because the judgment of Aikens J was, as I agree it was, plainly right.
30. I, too, would dismiss this appeal.
31. LORD JUSTICE LONGMORE: Mr Schaff submitted that the choice before the court is either to construe the words "competent court" in the letter of undertaking as meaning a court which is able to exercise Admiralty jurisdiction, or as a court into whose territorial waters a vessel has come after the letter of undertaking has been given. It is difficult to see what commercial justification the latter construction could have, when an important part of the undertaking given by his clients is that the vessel is not to be arrested by or on behalf of cargo interests.
32. I therefore agree with the Master of the Rolls and Aikens J that the cargo owners' contention is to be preferred, and I would also dismiss this appeal.


 
ORDER: Appeal dismissed with costs; permission to appeal to the House of Lords refused.

(Order not part of approved judgment) ______________________________