The insurance company claimant had insured a cargo under a voyage charter made by the defendant as charterer with the claimant as time charterer and disponent owner of the vessel. The charter had an arbitration clause. The cargo was damaged in a fire and steps taken to extinguish it. The insurers began proceedings in Brazil in their own name against the disponent owners to avoid the statutory provisions in England giving effect to the international convention limiting the liability of owners of seagoing ships. The disponent owners applied to the court for an anti-suit injunction, contending that the insurers had no cause of action which would found a claim for relief.
Held: An assignee of rights under a contract which contains an arbitration clause must pursue his claim in arbitration in accordance with the terms of the contract. The court will normally protect a right not to have proceedings brought against him in another forum by granting an anti-suit injunction.
Hobhouse LJ rejected the argument of the disponent owners: ‘Miss Bucknall submits that, even so, there is no right which can be asserted by the timecharterers against the insurance company which gives a cause of action by the former against the latter. She submitted that to recognize any such cause of action would amount to treating the burden of the contract as having been transferred, something which would only occur if there had been a novation. In the present case all that had been transferred was a right of the voyage charterers against the timecharterers. The burden of the contract was not transferred. The insurance company came under no actionable liability to the timecharterers. In my judgment this argument fails to understand the nature of the equitable remedy which is being sought in this action. The simplest way in which to illustrate this is to take a simple analogy. If the assignee of a legal right in action seeks to enforce that right against the debtor without taking into account an equitable set-off which the debtor was entitled to raise against the assignor, the debtor’s remedy, prior to the Common Law Procedure Acts and the Judicature Acts of the last century, would have been to apply in the Court of Chancery for an injunction to restrain the assignee from asserting the common law right in the common law courts unless and until he recognized the equitable right of the debtor. The injunction was granted to provide the debtor with the appropriate protection from the unconscionable conduct of the assignee; it does not depend upon any liability of the assignee for the sums to be set-off. The right to apply for an injunction is not a ’cause of action’ of the same character as the right to sue for damages for breach of contract or tort or to collect a legal debt. It is an application for an equitable remedy to protect the plaintiff against the consequences of unconscionable conduct. Since the fusion of the jurisdiction of the Chancery and Common Law courts, the need of the aggrieved party to apply for an injunction no longer arises and the common injunction has been abolished by statute. He can raise the equity in response to and in the same proceedings as the common law action. However, where the action is brought by the assignee in another jurisdiction which does not recognize the equitable right of the debtor, the debtor’s only remedy is (just as it was in the first half of the last century) to apply for an injunction to restrain the assignee from refusing to recognize the equity of the debtor. The present case is such a case. The insurance company is failing to recognize the equitable rights of the timecharterers. The equitable remedy for such an infringement is the grant of an injunction.’
Hobhouse LJ explained the position of an assignee: ‘But the plaintiff in the Brazilian proceedings and the relevant defendant in the present action is the insurance company. The insurance company has made no contract with the timecharterers. The insurance company is the assignee or the transferee of the rights of the voyage charterers against the timecharterers. It is submitted on behalf of the insurance company that as a result the insurance company is entitled to enforce the voyage charterers’ contractual rights without any obligation to refer the dispute to arbitration. This submission is unsound and contrary to decided authority.
The proper law which governs the voyage charterparty and the contractual rights which the insurance company is seeking to enforce in Brazil is English law. Under s.136 of the Law of Property Act 1925 rights of action are assignable subject to equities, for example, rights of equitable set-off. (Lawrence v Hayes [1927] 2 KB 111) Similarly under s.4 of the Arbitration Act 1950 and s.1 of the Arbitration Act 1975 the stay of an action may be ordered on the application not only of the contracting party but also ‘any person claiming through or under him’. (The position is the same under the 1996 Act: see s.82(2).) An example of such a stay being granted against an assignee is The Leage [1984] 2 Lloyds 259. The assignee takes the assigned right with both the benefit and the burden of the arbitration clause.’
Sir Richard Scott VC agreed: ‘Miss Bucknall argued that, because WAV were not parties to the sub-charterparty and because the subrogation which entitled WAV to sue on Voest’s contractual causes of action did not constitute a novation under which WAV became a party to the sub-charterparty, WAV were not bound by the arbitration agreement. The premises on which this argument is based are correct but the conclusion drawn therefrom is not. WAV is bound by the arbitration agreement not because there is any privity of contract between WAV and DVA but because Voest’s contractual rights under the sub-charter party, to the benefit of which WAV has become entitled by subrogation, are subject to the arbitration agreement which, too, is part of the sub-charter party. WAV cannot enforce those contractual rights without accepting the contractual burden, in the form of the arbitration agreement to which those rights are subject (c/f Halsall v Brizell [1957] Ch. 169 and Tito v Waddell (No. 2) [1977] Ch. 106 at p. 309). WAV is, through subrogation, an assignee from Voest of Voest’s contractual rights against DVA. DVA is contractually entitled, whether as against Voest or any assignee from Voest, to require the enforcement of those rights to be pursued by arbitration. WAV’s attempt to enforce those rights otherwise than by arbitration is a breach of DVA’s contractual entitlement. I agree with Lord Justice Hobhouse that DVA’s remedy is, prima facie, the grant of an injunction to restrain the attemp
Judges:
Hobhouse LJ, Sir Richard Scott VC Morritt LJ
Citations:
[1997] 2 Lloyds Rep 279
Statutes:
Jurisdiction:
England and Wales
Cited by:
Cited – Nisshin Shipping Co Ltd v Cleaves and Company Ltd and others ComC 7-Nov-2003
One party sought a declaration that arbitrators should have no jurisdiction to determine claims for commission said to be due to the Respondent chartering brokers.
Held: Because he has in effect become a statutory assignee of the promisee’s . .
Lists of cited by and citing cases may be incomplete.
Arbitration
Updated: 12 May 2022; Ref: scu.187710