Schiffahrtsgesellschaft Detlef Von Appen GmbH v Wiener Allianz Versichrungs AG & Voest Alpine Intertrading GmbH

Factual and Procedural Background

The Plaintiff, referred to as the Timecharterers, obtained leave from the Commercial Judge to issue and serve a writ out of the jurisdiction in Austria against the Defendant Insurance Company and the Defendant Voyage Charterers. The writ principally sought an injunction to restrain the continuation of proceedings in Brazil initiated by the Insurance Company against the Timecharterers. The Brazilian proceedings concerned claims arising from damage to cargoes carried on a vessel that suffered a fire and abandonment during a voyage from Brazil to Southeast Asia. The shipowners admitted liability subject to limitation under the London Convention, but Brazil was not a party to that Convention, allowing the Insurance Company to pursue claims in Brazil outside the limitation regime.

The contractual framework involved a timecharterparty governed by English law between the shipowners and the Timecharterers, and a voyage charterparty (also governed by English law) between the Timecharterers and the Voyage Charterers. The voyage charterparty contained an arbitration clause requiring disputes between the Timecharterers and the Voyage Charterers to be referred to arbitration in London.

The Insurance Company, as assignee by subrogation of the Voyage Charterers’ rights, commenced proceedings in Brazil against the Timecharterers. The Timecharterers sought an injunction in England to restrain these proceedings on the basis that the dispute was subject to the arbitration clause. The Commercial Judge upheld the injunction against the Insurance Company but set aside leave to serve the Voyage Charterers. The Insurance Company appealed.

Legal Issues Presented

1. Whether the Insurance Company, as assignee of the Voyage Charterers’ rights, is bound by the arbitration clause contained in the voyage charterparty between the Timecharterers and the Voyage Charterers.
2. Whether the Brazilian proceedings brought by the Insurance Company against the Timecharterers infringe the arbitration agreement and justify an injunction restraining those proceedings.
3. Whether leave to serve the writ out of the jurisdiction was properly granted under RSC Order 11 rule 1(1)(d) given the contractual relationships and claims involved.
4. Whether the delay by the Timecharterers in seeking injunctive relief disentitles them from such relief.
5. Whether the pleadings and Points of Claim endorsed on the writ were adequate and consistent with the basis for leave to serve out of jurisdiction.
6. Whether the Timecharterers have a cause of action against the Voyage Charterers for breach of contract as a result of the Insurance Company’s actions and whether costs orders should have been made.

Arguments of the Parties

Appellant's Arguments (Insurance Company)

• The Brazilian action was based on rights acquired by subrogation from the Thai receivers, not from the Voyage Charterers, and therefore did not infringe the arbitration clause between the Timecharterers and the Voyage Charterers.
• The Insurance Company was not a party to the voyage charterparty and the subrogation did not amount to a novation, so the arbitration clause did not bind them.
• The claim under RSC Order 11 rule 1(1)(d) requires a contract between the plaintiff and defendant; since the Insurance Company was not a party to the contract, leave to serve out of jurisdiction was improperly granted.
• The delay by the Timecharterers in bringing the injunction application, after the Brazilian proceedings had been ongoing for a considerable time, disentitled them from relief.
• The Points of Claim endorsed on the writ primarily alleged a tort claim which was later abandoned, so the writ did not properly support the injunction claim.

Respondent's Arguments (Timecharterers)

• The Brazilian proceedings are based on rights derived from the Voyage Charterers, not the Thai receivers; thus the arbitration clause applies.
• Under English law, an assignee of contractual rights takes those rights subject to the arbitration clause, including the burden to arbitrate disputes.
• The Insurance Company cannot enforce the assigned rights in a manner inconsistent with the arbitration clause without breaching the contract.
• Delay in seeking injunctive relief was considered but did not justify denying relief, especially since the Timecharterers did not submit to Brazilian jurisdiction.
• The pleadings and affidavit sufficiently supported the claim for injunction to enforce the arbitration clause, despite abandonment of the tort claim.
• The Timecharterers sought an injunction as an equitable remedy to restrain breach of contract by the Insurance Company, not damages or other relief.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court carefully examined the factual and contractual matrix, focusing on the voyage charterparty between the Timecharterers and the Voyage Charterers, which contained a London arbitration clause. The Insurance Company, as assignee by subrogation of the Voyage Charterers' rights, sought to enforce those rights in Brazil, a jurisdiction that does not recognize the New York Convention or the London Convention limitation regime.

The Court held that under English law, an assignee of contractual rights takes those rights subject to the arbitration clause governing the contract. The assignee cannot enforce the rights in a manner inconsistent with the obligation to arbitrate disputes. The Insurance Company's attempt to litigate in Brazil without arbitration breached the contractual rights of the Timecharterers.

The Court rejected the Insurance Company's argument that it was not bound by the arbitration clause due to lack of privity or novation. It relied on statutory and case law establishing that rights assigned carry with them the burden of arbitration agreements.

The Court further held that the injunction sought by the Timecharterers was an appropriate equitable remedy to restrain a continuing breach of contract, particularly given that Brazil was an inappropriate forum and the Insurance Company's conduct was oppressive.

Regarding jurisdiction under RSC Order 11 rule 1(1)(d), the Court found that the claim to enforce the arbitration clause fell squarely within the rule, even though the Insurance Company was not an original party to the contract, as it was enforcing assigned contractual rights.

The Court considered the delay in seeking the injunction but concluded that it did not justify denying relief. The Timecharterers had not submitted to Brazilian jurisdiction, and the delay was not so unreasonable as to defeat their claim. The Court accepted the Commercial Judge’s discretion in this regard.

On the adequacy of the writ and pleadings, despite initial procedural confusion and abandonment of some causes of action, the Court held that the pleadings sufficiently supported the claim for an injunction to enforce the arbitration clause and that leave to serve out of jurisdiction was properly granted.

Finally, on costs, the Court upheld the lower court’s decision to make no order due to the procedural complexities and delays caused by the Plaintiffs’ original pleadings and conduct.

Holding and Implications

The Court dismissed the appeals of the Defendants (Insurance Company and Voyage Charterers) and upheld the orders of the Commercial Judge granting the injunction against the Insurance Company and setting aside leave against the Voyage Charterers.

The direct effect of the decision is that the Insurance Company is restrained from continuing proceedings in Brazil that breach the arbitration clause in the voyage charterparty. The ruling confirms that assignees of contractual rights are bound by arbitration clauses and cannot circumvent them by litigating in foreign jurisdictions that do not recognize such clauses. The Court did not make any new precedent beyond affirming existing principles regarding arbitration clauses, assignment of rights, and injunctions to restrain foreign proceedings.