QCR Spring 2019: Challenge to jurisdiction - Whether made in time - Relief from sanctions - Matters relating to insurance - Civil Procedure Rules, r 11(5)
Griffin Underwriting Ltd. v Varouxakis (Free Goddess)  EWHC 3259 (COMM) (28th November 2018)
The claimant, Griffin, insured the Free Goddess under a kidnap and ransom insurance policy for a 30-day round trip through the Gulf of Aden. Whilst on a voyage from Egypt to Thailand, the vessel was seized by pirates and taken to Somalia. The claimant thus paid out $6.5 million under the insurance policy and the vessel was released and arrived in Oman.
General average was declared and a settlement agreement was reached between Griffin, the shipowner and vessel's manager. Ordinarily, Griffin would have had a claim for general average contribution against the bill of lading holders. However, the vessel was abandoned by the owners in Oman, meaning that the performance of the bill of lading and the delivery of the cargo did not take place. The vessel was instead sold and bareboat-chartered back.
The bill of lading holders commenced arbitration proceedings in London against the shipowner, seeking delivery of the cargo. The proceedings resulted in various orders against the shipowner that were not complied with.
Griffin subsequently brought a Commercial Court action against the defendant for inducing breaches by the shipowner and the vessel manager, companies under his control, of the settlement agreement. Griffin claimed that it had lost the right to recover general average on a subrogated basis against the cargo interests due to the shipowner's failure to complete the voyage under the bill of lading.
After being served with the proceedings, the defendant filed an acknowledgment of service indicating an intention to contest jurisdiction. Griffin contended that the defendant's application was made out of time. The defendant sought an extension of time to bring his claim on the basis that the parties had agreed a moratorium in relation to all litigation, terminable on 48 hours' notice, albeit that the moratorium was subsequently lifted.
It was held by Mr. Justice Males that:
- The defendant must be treated as having accepted that the Court had jurisdiction in accordance with CPR 11(5). This was because, upon filing an acknowledgement of service, the defendant had 28 days to make an application challenging the jurisdiction of the court. The defendant failed to do this and thus was treated as having accepted it.
- Also, failure to notify the court of the moratorium meant that it was not effective to extend the time for the defendant to challenge the jurisdiction. Thus, the parties could not agree an indefinite extension of time without notifying the court.
- The defendant was not permitted to make his application out of time. The delay in question was 6 months and this was held to be a "serious failure".
Obiter dicta, the judge stated that the general average claim had been lost when the voyage was abandoned in Oman. Also, that the claim for payments received by the shipowner from cargo interests and the P&I Club were subject to the settlement agreement and the shipowner was accountable for those to the claimant.
In his judgment Mr. Justice Males reminded applicants that it is not open to the parties to agree an indefinite extension of time without notifying the court and noted that in this court 'it takes three to make an agreement'.
This case highlights the need for parties to exercise caution when entering into agreements to pause proceedings to explore settlements of their claims. Unless the court is notified of such agreements, the same may not be effective.