Thu, 17 January, 2019
The Court of Appeal has handed down judgment in Kaefer Aislamientos SA v. AMS Drilling Mexico SA & Ors  EWCA Civ 10. The decision is essential reading for anyone seeking to establish or challenge jurisdiction in the High Court. It reconciles the various strands of authority on what is the test of ‘good arguable case’ and provides guidance on the approach to be taken in any dispute over jurisdiction particularly disputes where the evidence before the court is incomplete.
Leading counsel from Quadrant Chambers acted for all parties.
The dispute over jurisdiction arose in circumstances where the appellant repairer sought to recover sums alleged to be due under a contract for works to a rig. The appellant issued proceedings against four defendants including the respondents, the Singaporean owner of the rig and its holding company. In order to establish that the respondents were party to the contract and to the jurisdiction agreement contained in it, the appellant had to show that the respondents were undisclosed principals to the contract. It was common ground that there was no direct evidence on this issue. The appellant alleged that the evidence was such that the court could infer that the respondents were party to the contract.
Both at first instance and on appeal, there was a dispute as to the elements of the test to be met by the appellant if it was to establish that the High Court had jurisdiction under Art. 25 of the Recast Brussels Regulation. That dispute focussed on the substantive meaning of the phrases ‘good arguable case’ and ‘much the better argument’ and on whether the test for jurisdiction has two discrete parts or one part with composite ingredients.
At first instance, the judge treated the test as having two discrete parts, namely a claimant has to establish that it has a good arguable case and that it has much the better argument. On the evidence, he held that the appellant could establish a good arguable case against the rig owner but failed to show that it had the better argument. He held the appellant failed in both respects in its attempt to establish jurisdiction against the holding company. In assessing the evidence, the judge rejected an argument from the respondents that the terms of the contract were such as to exclude the possibility of undisclosed principals or were at least strongly indicative that the respondents were not party to the contract.
On appeal, the appellant sought to argue that the question of who had the ‘better argument’ was an unjustified gloss on the good arguable case test, which should not in any event be applied where the evidence was incomplete or contradictory. The appellant also argued that the judge had erred in his evaluation of the evidence. The respondents challenged the judge’s approach to the significance of the contract terms and in particular the entire agreement clause in those terms.
The Court of Appeal dismissed the appeal. In doing so, the court considered and applied the judgments of the Supreme Court in Brownlie (2017) and Goldman Sachs (2018).
The Court emphasised that disputes over jurisdiction should be determined with dispatch and should not become a distraction from the main event. It recognised that courts have nevertheless struggled to find a test, which encapsulates in readily workable language what the test is and how it should be applied.
Having considered the authorities, the Court held that the test for jurisdiction is now the three-limbed test described by Lord Sumption in Goldman Sachs. A claimant asserting jurisdiction must establish:
This three-limbed test is a confirmation of the relative test in Canada Trust requiring a claimant to show that it has the better argument based on plausible evidence. The burden of proof remains on a claimant but the test is context specific and flexible. A court must be astute not to express any view on the ultimate merits of the case. The word ‘much’ has now been laid to rest.
In relation to limb (ii) of the test, the Court has expressly acknowledged that it is an instruction to courts to seek to overcome evidential difficulties and arrive at a conclusion if they reliably can. A court is to use judicial common sense and pragmatism. Attempts by claimants to seek extensive disclosure and then rely on a defendant’s refusal to give such disclosure as evidence of an uncooperative attitude were deprecated. Limb (iii) of the test addresses the situation where it is not possible for a court to assess the relative merits of each party’s case at an early interlocutory stage. A claimant still has to establish a sufficiently plausible evidential basis for the application of a jurisdictional gateway.
In considering the test, the Court also made a number of other findings on matters which commonly arise in jurisdictional disputes.
In relation to Art. 25 of the Recast Brussels Regulation, the test is the same regardless of the domicile of the parties and requires a claimant to demonstrate consensus over a jurisdiction agreement clearly and precisely.
Former case law on service abroad being an exercise of an exorbitant jurisdiction no longer applies to raise the bar for establishing jurisdiction.
An appellate court should be reticent in interfering with a judge’s evaluation of the evidence particularly where a judge has addressed complex facts in close detail.
The Court of Appeal differed from the judge on the weight to be given to the contract’s express terms. Where the contract terms identified the parties to the contract and contained an entire agreement clause, those are relevant factors to be taken into account when assessing jurisdiction and were strongly indicative that the alleged agents did not intend to act on behalf of undisclosed principals when entering the contract.
The Court dismissed the appeal with costs.
A copy of the judgment is available here.
Nigel Cooper QC, instructed by Michelle Yong and Mary Dodwell of Stephenson Harwood, acted for the Respondents.
Michael Nolan QC, instructed by David Leckie, Tom Roberts and Emily Newey of Clyde & Co, acted for the Appellant.
Nigel's commercial practice predominantly covers the fields of shipping, energy and insurance law. He appears before the Commercial and Admiralty Courts, in arbitration (both domestic and international) and before the appellate courts. Nigel accepts appointments as an arbitrator and has acted as a mediator and as a party's representative in mediations. He has experience of public inquiries having appeared for the government in the three most recent shipping formal investigations.
Nigel's shipping & commodities work covers most aspects of international trade and the carriage of goods (including international sales disputes and all forms of bill of lading and charterparty disputes); shipbroking and management including related fraud and professional negligence claims; shipbuilding (including superyachts) and off-shore construction; ship sale and purchase; limitation and collision actions, pollution and, occasionally, Merchant Shipping Act offences. In addition to his commercial shipping practice, Nigel has a specialist interest in disputes in the yachting and marine leisure market. In the energy sector, Nigel's work covers both upstream and downstream aspects of the industry. He has advised on disputes relating to drilling and exploration, to production and to the sale and purchase of energy products as well as on related issues such as the enforcement of related guarantees and the insurance of drilling units. Nigel's insurance & reinsurance practice extends to policy disputes in both the non-marine and marine sectors.
In the wider commercial arena, Nigel has considerable experience of handling cases that are factually and technically complex with a corresponding level of documents. He is known for being approachable, and believes in working as a team with those instructing him.
To view Nigel's full profile, please click here.
Michael Nolan’s practice covers all aspects of the law relating to ships, the international carriage and sale of goods, insurance and reinsurance, harbour law, commercial contracts, private international law and professional negligence. He appears regularly in arbitration, is a supporting member of the LMAA , a member of the SCMA and accepts appointments as an arbitrator. He is a member of COMBAR and was on the executive committee from 1998 to 2001. He has strong links with Singapore and travels there regularly.
He is recommended for Shipping and Commodities in the current editions of Chambers UK, for Shipping and International arbitration in Legal 500 UK and for Shipping (International Arbitration) in Legal 500 Asia Pacific.
To view Michael's full profile, please click here.