| CONFLICT OF LAWS — Jurisdiction — Stay of foreign proceedings — Claimants owing defendant company money under contracts subject to exclusive jurisdiction of English High Court — Insolvency proceedings relating to defendant in Canada — Defendant’s trustee in bankruptcy applying to Canadian court to restrain claimants from refusing to make payment under contracts — Claimants seeking injunction restraining trustee from proceeding with application — Whether injunction to be granted
AWB Geneva SA and another v North America Steamships Ltd [2007] EWHC 1167 (Comm)
QBD: Field J: 17 May 2007
A party to a contract that was subject to the exclusive jurisdiction of the English High Court could not restrain the other party’s foreign trustee in bankruptcy from seeking an order in foreign insolvency proceedings that certain conditions precedent to liability under the contract should cease to apply.
Field J so held in the Queen’s Bench Division when dismissing an application by the claimants, AWB Geneva SA and Pioneer Metal Logistics Co Ltd BVI, for an interim anti-suit injunction restraining the trustee in bankruptcy of the defendant, North America Steamships Ltd, from proceeding with an application to the Supreme Court of British Columbia for an order prohibiting any party to a forward freight swap agreement with the defendant from refusing to make any payment to the defendant under such agreement as a result of the defendant’s insolvency.
The claimants had entered into three freight forward swap agreements with the defendant, a company incorporated in Canada, each of which contained a clause conferring exclusive jurisdiction on the English High Court. The claimants both owed the defendant money under those agreements, but the agreements provided that the obligation on each party to pay sums owing was subject to the condition precedent that no event of default had occurred and was continuing with respect to the other party. Amongst the defined events of default was bankruptcy. The defendant became insolvent, and its trustee in bankruptcy filed a petition under the Companies’ Creditors Arrangement Act of Canada (“the CCAA”), which, in broad terms, provided a regime that corresponded to the combined effect of the provisions of UK insolvency law relating to administrations (Sch B1 to the Insolvency Act 1986) and compromises or schemes of arrangement (Pt I of the 1986 Act and s 425 of the Companies Act 1985). The trustee applied to the Canadian court for an order prohibiting any party to a forward freight swap agreement with the defendant from refusing to make any payment to the defendant under such an agreement as a result of the defendant’s insolvency. The claimants applied to the English High Court for an injunction restraining the trustee from proceeding with its application to the Canadian court.
FIELD J said that it was established that an anti-suit injunction should normally be granted if a party to an exclusive jurisdiction agreement, in breach of that agreement, began proceedings in a jurisdiction other than the one agreed: see OT Africa Line Ltd v Magic Sportswear [2005] 2 Lloyd’s Rep 170, para 30, per Longmore LJ. But was the trustee’s application to the Canadian court a breach of the exclusive jurisdiction clause? In his Lordship’s opinion it was not. The exclusive jurisdiction clause applied where one of the parties was seeking a judicial determination on the rights or obligations of one or both of them existing under the contract. The trustee was not seeking such a determination. Rather, it was seeking relief in insolvency proceedings that was intended to prohibit various counterparties, including the claimants, from relying on certain contractual rights which they might otherwise be entitled to rely on. In other words, the petition against the defendant was not an attempt by the trustee to assert the defendant’s contractual rights against the claimants under the agreements but was an application to the Canadian court to apply the freestanding statutory regime of the CCAA. The position would be the same if it was the defendant which was applying to the Canadian court under the CCAA. By way of contrast, if the trustee were to commence court proceedings against the claimants to enforce the agreements, it would be bound, at least as a matter of English law, by the exclusive jurisdiction clause in the sense that it could not enforce the defendant’s contractual rights without at the same time accepting the claimant’s right to rely on the jurisdiction clause. Accordingly, the injunction sought should not be granted.
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