18/03/2020

Qingdao Huiquan Shipping v Shanghai Dong He Xin [2019] 1 Lloyd’s Rep 520

Qingdao Huiquan Shipping v Shanghai Dong He Xin [2019] 1 Lloyd’s Rep 520

Summary

The Commercial Court granted an anti-suit injunction on contractual grounds notwithstanding the absence of privity of contract. In doing so, it provided a statement of the legal principles in this emerging area. The Court also considered issues of delay, and the obligations of fair presentation where the opposing party is not represented.

Background

The dispute arose out of a written settlement agreement, containing a London arbitration clause, between the claimant (“owners”) and cargo receivers (“Emori”). The agreement provided that certain sums payable to owners by Emori would be paid by a third party, “SDHX” (a company related to Emori), as Emori’s “authorised agent”. SDHX paid those sums on Emori’s behalf in 2014. Over three years later, in April 2017, SDHX commenced proceedings in the Qingdao Shinan District Court to recover the sums paid to owners under the settlement agreement. SDHX alleged that it was entitled to repayment pursuant to a separate oral agreement with owners on substantially identical terms to the written settlement agreement but not containing the arbitration clause. On 1 August 2018, over a year after SDHX issued proceedings in China, owners sought an interim anti-suit injunction restraining those proceedings.

Held

Bryan J granted the owners the anti-suit injunction. He reviewed the emerging law on the circumstances in which an anti-suit injunction will be granted on the strength of a contractual forum clause in circumstances where there is no privity of contract. He held that the principle was that:

“a claimant abroad will be restrained by injunction from suing inconsistently with a forum clause contained in the contract which forms the basis of the claim. That is so even where the defendant himself denies that there is privity of contract and therefore denies that there is privity of contract and therefore denies that the foreign claimant is bound by the contract containing the forum clause. In essence, he is not entitled to found a claim on rights arising out of a contract without also being bound by the forum provisions of that contract”

The Judge held that, although SDHX was purporting to sue under a separate oral agreement, it was in substance asserting rights under the written settlement agreement, and so could be restrained from pursuing proceedings in China inconsistently with the arbitration clause in that agreement.

The Judge also held that the owners’ delay of just over a year in bringing a claim for anti-suit relief was not such as to make it inappropriate to exercise his discretion to grant relief. The key consideration was that the Chinese courts had not yet been required to determine their own jurisdiction over SDHX’s claims, still less the substance of the dispute. There were therefore no question of the delay having materially increased the perceived interference with the Chinese courts’ processes that arises from anti-suit relief.

In deciding the case, the Judge also observed that the cases if Braspetro Oil Services v FPSO Construction [2007] EWHC 1359 (Comm) and CMOC Sale & Marketing v Persons Unknown [2018] EWCH 2230 (Comm) established that, where the defendant does not attend an on-notice hearing, the claimant is under an obligation to “present the case fairly and identify points which might be to the benefit of the defendant”.

Comment

This case contains a valuable and concise summary of the emerging law on when contractual forum clauses can be enforced by way of anti-suit injunction in the absence of privity of contract. However, the decision itself potentially represents a considerable extension of the existing law in this area, particularly in the way that judge was prepared to characterise a claim ostensibly made under a separate oral agreement as being made “in substance” under the written agreement containing the forum clause. It seems that the Judge was influenced by the view that the alleged oral agreement did not exist at all, although he declined to make a finding of fact to that effect, presumably because this was an interim application rather than a trial.

It remains to be seen to what extent the obligation to “present the case fairly” differs materially from the obligation of full and frank disclosure on an ex parte application. It may also be that the Judge’s reference to an “obligation” of fair presentation goes too far. On analysis, neither the Braspetro nor the CMOC cases “establish” such an obligation in terms. In the former, the judge commended counsel for having voluntarily adopted such an approach; and in the latter the judge merely observed that he had required the claimant to follow the same approach in that particular case.