England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/03/2011

Mr Justice Eder:

1. The claimants are companies incorporated and formed under the laws of Malaysia. At all material times, the first claimant was the owner of M/V MUJUR 1 (the "vessel"). The second claimant was the manager of the vessel.
2. The defendants, also companies incorporated and formed under the laws of Malaysia and all based in Malaysia, are the underwriters of a policy of marine insurance covering the vessels hull and machinery for the period 16 July 2008 to 15 July 2009 ("the policy"). The policy was placed by Anika Insurance Brokers Sdn Bhd ("Anika") which is also incorporated and formed under the laws of Malaysia and which carries on business in Malaysia.
3. The policy incorporated the Institute Time Clauses Hulls 01/10/83 ("the ITC Clauses") which are expressly stated to be "subject to English Law and practice".
4. On 12 January 2009, the vessel commenced a voyage from Dili, Timor Leste (East Timor) to Surabaya, East Java (Indonesia). On 14 January 2009, the vessel reportedly suffered a failure of her steering gear and ultimately became incapacitated. On 15 January 2009, the vessel finally grounded at Maumere, Indonesia, sustaining further damage.
5. The claimants' claim under the policy is, in essence, a claim for the full insured value of the vessel (i.e. RM 6,000 million) on the basis that the vessel was a constructive total loss. The vessel was later sold for scrap on an "as is, where is" basis for US$50,000.
6. By an application dated 16 July 2010, the claimants sought an order from the Commercial Court on a without notice basis for permission to serve the Claim Form on the defendants out of the jurisdiction. That application was duly granted by Flaux J on 19 July 2010. This is the hearing of the defendants' application to set aside that order.
7. The original application to serve out was based on two main grounds viz (i) the policy was expressly governed by English law; and/or (ii) the policy contained terms to the effect that the English Court had jurisdiction to determine any claims under the policy. Both these grounds were said to be founded upon the term of the policy that I have already quoted viz that it was "subject to English Law and practice". However, the latter ground, i.e. that that term has the effect that the English Court has jurisdiction has now been abandoned by the claimants. Such abandonment is plainly correct in light of the authorities including most recently Novus Aviation v Onur Air [2009] 1 Lloyd's Rep 576. Notwithstanding, it is common ground that the policy was governed by English law and that the claimants therefore bring themselves in the relevant "gateway" contained in paragraph 3.1(6) (c) of Practice Direction B supplementing CPR Part 6. It is also common ground that the claimants have shown a serious issue to be tried.
8. In broad terms, the main issue which I have to determine is whether England is the forum conveniens. In particular, CPR 6.37(3) provides that where an application for permission under rule 6.36 is made, the court will not give permission unless satisfied that England and Wales is "the proper place in which to bring the claim". In considering that question, it is common ground that the relevant principles to be applied were established in the landmark decision of the House of Lords in Spiliada v Cansulex [1987] 1 AC 460. In particular:

a) The court will only grant permission to serve out where England is the most appropriate forum to try the action (pp 464-465 per Lord Templeman).

b) The burden of proof rests on the plaintiff to persuade the court that England is the most appropriate forum for the trial of the action and he has to show that this is clearly so (see per Lord Goff at p 481).

c) The question is to identify the forum in which the case can be suitably tried for the interests of all parties and for the ends of justice (see per Lord Goff at p 480).

d) The natural forum is the one with which the action has the most real and substantial connection, including factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the transaction and the places where the parties carry on business (p 478 per Lord Goff).

9. In considering these matters, one of the difficulties is that the defendants have not as yet served any formal defence. That is, of course, no criticism of the defendants as there is no obligation on the defendants to serve any defence until the question of jurisdiction has been determined. However, in considering whether or not England is the most appropriate forum, it is necessary to have in mind the overall shape of any trial and, in particular what are, or what are at least likely to be, the issues between the parties and which will ultimately be required to be determined at any trial. These were originally set out in two letters sent by the defendants and their lawyers dated 25 February 2010 and 22 March 2010 viz (i) an alleged breach of warranty in relation to the licensing/registration of the vessel with the Mongolian registry and compliance with the registry's regulations; (ii) an alleged breach of warranty in relation to the maintenance and management of the vessel including breaches of SOLAS and MARPOL; (iii) an alleged misrepresentation in the broking slip that the vessel would be classed under Bureau Veritas within three months which was not done; (iv) an alleged failure on the part of the claimants to sue and labour.
10. I should deal briefly with issue (iii). At the hearing before me, it emerged that there was some uncertainty as to whether this issue would indeed be pursued by the defendants. Whether or not this was so was important particularly because the claimants said that if that issue were pursued, it raised difficult questions of English law including points which were said to be "important" and "open" by Arnould's Law of Marine Insurance, 17^th Ed. Paras 17-28 to 17-63 and that this was a significant factor that the court should take into account in deciding whether England is the most appropriate forum. That seemed to me a very powerful argument (particularly in light of the authorities referred to below) and I indicated at the end of the argument before me that if that point were pursued I would conclude that England was the most appropriate forum. However, since there were doubts as to whether this issue would be pursued, I gave the defendants an opportunity of taking further instructions and clarifying their position. In the event, I have now been informed that issue (iii) will not be pursued and the defendants' solicitors, Messrs Hill Dickinson, have given an undertaking to this Court on behalf of the defendants to that effect in the following terms:

"Further to your directions at the application hearing which was heard last Friday, 4 March 2011, I hereby confirm that all seven underwriters, namely (1) Uni Asia General Bhd; (2) Tokio Marine Insuranse (Malaysia) Bdh; (3) Tahan Insuarnce Mlaysia Bhd; (4) Multi-Purpose Insurance Bhd; (5) Kurnia Insurans (Malaysia) Bhd; (6) Berjaya Sompo Insuarnce Bhd; and (7) Lonpac Insurance Bhd, hereby undertake they will not raise any issue with regard to any alleged misrepresentation when litigating this claim in any future Court proceedings."

In light of that undertaking, I can ignore issue (iii).

11. Before considering the other specific issues, it is convenient to deal briefly with a number of general matters raised by the defendants. First, reliance is placed on the fact that the Malaysian courts are local to the parties and their places of business. In particular, the defendants rely on the fact that the claimants and defendants are all companies incorporated under the laws of Malaysia and carry on business in Malaysia. The policy records the business address of the claimants as being in Malaysia and each of the defendants conducts its business as a marine underwriter from offices in Malaysia. Second, the trading limits specified in this policy extend to the Asean Water, East Coast of India, Bangladesh, Taiwan, China and Korea. Third, the defendants rely on the fact that Malaysia is the place where the contract was both negotiated and signed and that all sums of money were expressed in Malaysian Ringgits. In general, it is said on behalf of the Defendants that the parties, their businesses and the "centre of gravity" of events have no connection with England and geographically are more proximate to England. In my judgment, these matters would almost certainly be highly relevant if, for example, the court were concerned with the question of identifying the proper law of the contract. However, the question here is rather different i.e. what is the most appropriate forum for the trial of the action. In that context, it seems to me that these general points are of much lesser importance save to the extent that that they may affect the conduct of the proceedings and the trial of the action. In such circumstances, it seems to me that these matters have to be considered in that context – and in particular in the context of the issues that are likely to be required to be determined at any trial.
12. Apart from issue (iii), the main focus of the argument before me concerned the first two issues i.e. the alleged breaches of warranties. In that context, it is said on behalf of the defendants that the courts of Malaysia are an available forum for the hearing of this dispute and, plainly, a more appropriate one. In particular, it is said that Malaysia is the location of the parties; the location of the documentary evidence and the potential key witnesses; and the place close to where the events occurred. Moreover, the Malaysian courts have enacted legislation which provides that the Malaysian courts will apply English law to marine insurance matters as if the dispute were being administered in England so (in so far as this factor is legally relevant in such an application) the claimants could suffer no juridical disadvantage by the forum being Malaysia. The foregoing is advanced notwithstanding the defendants' primary position (which I accept) that the burden throughout remains on the claimants to show that England is the most appropriate forum - and clearly so; and that there is no burden as such on the defendants to show any other forum which may be appropriate or more appropriate than England.
13. As to the first issue, it is common ground that the matters concerning Mongolian law and the Mongolian registry can be dealt with in either forum. So far as this issue may involve consideration of matters of English law, I deal with this separately below.
14. As to the second issue, it seems likely that this will give rise to both factual and expert issues. In this context, on behalf of the defendants it is said that the key documentary evidence is in Malaysia or at least very close to Malaysia. In particular, it is said that all of the documentary material relating to factual matters in dispute is currently at the various offices of the claimants, the defendants, the marine surveyors and the Mongolian registration representative, all of which are located in Malaysia and/or Singapore. None is located in England. The defendants also say that the witnesses as to the condition of the vessel prior to the inception of the policy and thereafter (which is perhaps the key issue of fact) are all located in or near Malaysia and are not located in or near England. These potential witnesses include the Master and Chief Engineer of the vessel both of whom are, I am told, from Burma but are likely to give evidence in English. It is common ground that the courts in Malaysia will hear evidence in either English or Malay. The other likely potential witnesses on behalf of the Claimants include the chief officer who is Indonesian (and who speaks Bahasa Indonesia, the language which is said by the defendants to be similar to Malay), other members of the crew, and Mr Elliott (an expert surveyor) who is based in Singapore and speaks English. So far as the defendants' evidence is concerned, the position is somewhat vague. Reference is made to surveyors having been engaged by the defendants. It is said that they are based in Indonesia and Singapore and that they are able to communicate in English. It is also said that the initial surveyors based in Indonesia are more comfortable with Bahasa Indonesia than English.
15. Bearing all these matters in mind, it seems impossible to say that England is the natural or most appropriate forum for this action - still less that this is clearly so. Mr Davey, on behalf of the claimants, realistically concedes that at least so far as these factors were concerned this was indeed the case. Nevertheless, he submits that the fact that the parties had expressly chosen English law as the governing law tipped the balance in favour of England and made it the most appropriate forum. In particular, Mr Davey submits that although a choice of English law does not necessarily of itself amount to a choice of English jurisdiction, the fact that English law applies is here a factor of some significance. In particular, Mr Davey submits that the Commercial Court is the natural forum for the resolution of the questions of English insurance law which arise at least in the present case.
16. In Spiliada and (at p 481), Lord Goff said that the fact that English law is the proper law of the contract might be of very great importance or it may be of little importance in the context of the whole case; that (at 486F-G) in that case, it was a relevant factor that the litigation was being fought under a contract governed by English law and that was by no means an insignificant factor in that case since there was not only a dispute as to the effect of the bill of lading contract (as to which there appeared to be differences between English and Canadian judges) but also as to the nature of the obligations under the contract.
17. In Sawyer v Atari Interactive Inc [2006] ILPr 8, Lawrence Collins J. reviewed the authorities on the relevance of a choice of English law in the exercise of the discretion to serve out. He considered that topic again in Novus v Onur, in particular at paragraphs 74 to 80. As there stated, in particular at paragraph 77, the fact that a contract is governed by English law is not necessarily a predominating factor. That factor would have a different weight in different circumstances.
18. One important potential factor referred to by Lawrence Collins J. is the fact that the foreign forum, notwithstanding the express choice of English law, may not apply English law and may instead apply its own law: Coast Lines v Hudig and Veder v Chartering NV [1977] 2 Lloyd's Rep 390 affirmed [1972] 2 QB 34.
19. I accept that general proposition. On behalf of the claimants it is submitted that the law which would be applied by the Malaysian court is governed by the Malaysian Civil Law Act 1956. This provides in relation to marine insurance that the law is the same as administered in England "at the date of the coming into force of this Act" i.e. English law in 1956. Whilst pre-1956 authorities are binding in Malaysia, it is submitted on behalf of the claimants that post 1956 cases are merely persuasive and the Malaysian court is entitled to depart from them. However, as I understand, the Malaysian Civil Law Act 1956 simply identifies what is the general law which will be applied in Malaysia. But that Act says nothing about the position where the parties have expressly agreed English law is the governing law of the contract. In such circumstances, there is no evidence before me to suggest that the Malaysian court would not apply English law in the ordinary way. On the contrary, the defendants have put in evidence a decision of the High Court of Malaya, Concord Line Co Ltd v The Owners of the Ship "Molly" [1997] 4 CLJ SUPP 285 where the charterparty in that case was expressly governed by English law and, as one might expect, the Court proceeded on the basis of applying English law.
20. In any event, unlike issue (iii), the first two issues (breaches of warranty) and the fourth issue (sue and labour) would seem to be relatively straightforward. They do not appear to involve any novel, complex or undecided issues of English law. In such circumstances, the fact that English law is the governing law is, in my judgment, of rather little significance: see Dicey, Morris and Collins on The Conflict of Laws, 14^th Ed., para 12-029 and Navigators Insurance Co & Os v Atlantic Methanol Production Company LLC [2004] Lloyd's Rep IR 418.
21. For these reasons, I do not accept the claimants' submission that the choice of English law as the governing law makes England the most appropriate forum.
22. Finally, I should deal with a discrete point raised by the claimants viz that although the parties can be confident that the English court will be impartial and free from suspicions of corruption, there are what the claimants describe as "concerns" in this respect as regards Malaysia. Such concerns are stated to be based on comments made in November 2008 by the Malaysian Chief Justice Tan Sri ZAki Azmi as reported in the New Straits Times. As reported, those comments relate to two retired judges. However, those comments are not independently confirmed and, in any event, the article refers to measures the Chief Justice has implemented which has "stopped corruption". In my judgment, the contents of that article provide no justification whatsoever to suggest that the parties in this insurance case will not have a fair trial before the Malaysian court.
23. For all these reasons, I hereby set aside the order for service out made by Flaux J. Counsel are invited to agree and to draw up the appropriate order. Failing agreement, I will deal with any outstanding issues.