Facts
Cargo owners shipped various general cargoes on the Jutha Rajpruek from Japan and Korea for carriage to Vietnam, Thailand and Malaysia. 28 bills of lading were involved, which provided a variety of exclusive jurisdiction clauses. Unfortunately, the vessel suffered an engine breakdown and the master had to abandon ship. The vessel was salved, general average was declared and some of the cargo owners provided security in standard form general average guarantees and bonds. Some of the recovered cargo was found to have sustained damage.

The shipowners’ P&I Club, the Steamship Mutual, took over defence of the cargo owners' claims on behalf of the shipowners and by letter of undertaking undertook to pay on written demand "such sums as may be finally adjudged by any final unappealable judgment of a competent court or tribunal to be due from the shipowners in respect of the said claims or as may be agreed to be recoverable in respect of the said claims…". The Club also undertook to instruct solicitors to accept service of in rem proceedings brought "in a competent court" within 14 days of a written request, without prejudice to the shipowners’ right to contest jurisdiction, and apply to stay the proceedings. The undertaking was governed by English law and jurisdiction.

The cargo owners issued a claim form in rem in the English Admiralty Court, but Steamship Mutual refused to appoint English solicitors to accept service, arguing that it was only obliged to instruct solicitors in a jurisdiction where in rem proceedings could be commenced and pursued to a conclusion. They said that the Admiralty Court failed on two counts - proceedings could not be commenced because neither the vessel nor a sister ship came within its jurisdiction, and because proceedings would be stayed because of the exclusive jurisdiction clauses in the bills.

At first instance, the judge held that "competent court" meant a court with jurisdiction to hear the claim advanced in in rem proceedings and that the Admiralty Court had this jurisdiction under the Supreme Court Act of 1981. The purpose of the letter would be defeated if it only obliged the Club to accept service in a jurisdiction in which the vessel or a sister ship was actually present.

The Club appealed, arguing that the letter had not conferred jurisdiction on any specific court. In the absence of agreement, the Admiralty Court had no jurisdiction. Only a court in which proceedings could be commenced by reason of the presence within its territorial waters of the vessel or a sister ship could be said to be competent.

Judgment
In a leading judgment given by the Master of the Rolls, Lord Phillips, the Court of Appeal agreed with the judge.

In the context of the letter of undertaking, the natural meaning of "competent court" could either be a court competent to entertain the subject matter of the claim or a court competent by virtue of having become seized of the proceedings. The former interpretation made commercial sense, whereas the latter, put forward by the Club raised numerous practical difficulties. At what stage would the vessel or sister ship have to be within the jurisdiction? When the proceedings are issued? Or when the Club is called on to instruct solicitors to accept service? Or at any time during the 14 day period for responding to the request? Or when the solicitors are instructed?

In reaching his conclusions, Lord Phillips was influenced by his own experience of the use of Club guarantees. "Many Clubs," he said, "while domiciled outside the jurisdiction, are managed in London. Cargo insurers are also often based in London. Where cargo is damaged, the cargo interests will wish to obtain security and, if necessary, to found jurisdiction. Often this is not necessary, for…..the rival interests usually manage to resolve their differences by agreement. If litigation is necessary, the English Admiralty Court is often favoured by both parties, whether or not there has been express prior agreement to this. The Court is preferred not only because it is, in reality, the "local" court of the interests involved and their advisers, but also because of its recognised expertise. The terminology used in the letter of undertaking, with its reference to "solicitors", has, I suspect, a history that reflects this reality. An agreement which permits cargo interests to select a suitable court which enjoys Admiralty jurisdiction does not strike me as in any way surprising."

In consequence, the Club’s appeal was dismissed.