Your are here: Home >> Decisions

Carriage of Goods by Sea

O. T. Africa Line Ltd -v- Magic Sportswear Corporation and Others

November 2004

In February 2002 the Toronto office of O.T. Africa Line ("OTAL") issued a bill of lading setting out the terms on which goods were to be carried from New York to their final destination in Liberia. After the consignment arrived in Monrovia the United States shippers and the Liberian receivers claimed that there had been a short delivery. OTAL rejected the claim. They contended that full delivery had been given and that the shortage claim was false. The evidence of short delivery was, however, accepted by the Canadian underwriters who had insured the goods ("the insurers"). Following settlement of the policy claim they commenced proceedings in Canada in an attempt to recover the loss from OTAL. As the insurers were exercising rights of subrogation, the proceedings were brought in the names of the shippers and receivers of the goods ("the cargo owners").

The bill of lading stipulated that any dispute was to be referred to the exclusive jurisdiction of the English courts. OTAL therefore reacted to this development by commencing an action against the cargo owners in England, claiming both a declaration of non-liability and an anti-suit injunction to restrain the cargo owners from proceeding in Canada in breach of the jurisdiction clause. The injunction was granted, but the Canadian proceedings continued. OTAL was, therefore, compelled to challenge Canadian jurisdiction in the Canadian courts. Its application to a court in Toronto was, however, rejected. The court held that the binding effect of the exclusive English jurisdiction clause was nullified by section 46(1) of the Canadian Maritime Liability Act 2001 because the bill of lading was issued in Canada, where OTAL also had an office, and Canada rather than England was the appropriate place for the trial. A Federal Court subsequently upheld that decision.

Pending the outcome of a further appeal to a superior court in Canada, the next move in this tactical battle was taken in London. OTAL there succeeded in obtaining permission both to join the insurers as defendants to its action against the cargo owners and to serve an amended claim on the insurers in Canada. They did so on two grounds. Firstly, they asserted that the insurers had committed a tort by procuring the cargo owners to commence proceedings in Canada in breach of contract (i.e. the English jurisdiction clause). Secondly, they maintained that they were entitled to obtain their costs of their action against the cargo owners from the insurers, even though the insurers had not originally been parties to those proceedings.

Once service was effected upon them in Canada, the insurers made an application to the Commercial Court in London. They argued that service of the claim form should be set aside; that OTAL's action against the cargo owners should be stayed; and that the anti-suit injunction made against the cargo owners ought to be discharged.

Mr Justice Langley held that Canadian law was the applicable law when it came to determine whether there had been a tort of procuring a breach of contract - and that, under Canadian law, no tort had been committed. The permission given to serve proceedings in Canada on that basis was, therefore, revoked.

The judge reached a different conclusion, however, with regard to OTAL's claim for a third party costs order against the insurers. He considered that it was at least well arguable that the insurers were the interested parties in both sets of proceedings, since they controlled and funded the litigation. He held that there was a good arguable case that a costs order would be made against the insurers in the proceedings which had been brought against the cargo owners - so there was no justification for setting aside the permission for service in Canada which had been granted on that separate basis.

Turning to the insurers' application for a stay of the proceedings, Langley J. emphasised that exceptional justification was required for an English court to stay proceedings in England when England is the exclusive jurisdiction chosen by the parties to resolve the dispute in question. Subject to what the judge termed "the overriding issue", he was satisfied that there was nothing in the circumstances of this case which would begin to justify such an exceptional course. The only connection with Canada was that the bill of lading had been issued there; the freight had been paid there; and OTAL, an English company, had an office there. However, none of these matters had any relevance to the dispute.

The overriding issue was whether the insurers' applications could be justified on the basis that, were the court not to follow the course they advocated, there would be a clash of jurisdictions and the "appalling" prospect of an apparent challenge to Canadian legislation and the legal principles which the Canadian courts had followed. The judge concluded, however, that the existence of the Canadian legislation that gave rise to these considerations was not a circumstance that was so exceptional that the court would be justified in refusing to grant an anti-suit injunction, the essential purpose of which was to ensure that the parties kept to the agreement they had made and by which they were bound.

The judge concluded, therefore, that the insurers had not made out a case for a stay of the proceedings brought by OTAL. Moreover, there was no good reason why the anti-suit injunction made against the cargo owners should be set aside.

In the circumstances, OTAL applied for a further anti-suit injunction against the insurers. The judge found that, since the insurers were acting directly and deliberately, it was a fair inference that they intended to proceed with the Canadian action unless restrained from doing so. OTAL's application for an anti-suit injunction to restrain the insurers from proceeding in Canada was, therefore, granted.

Return to Decisions