Mora Shipping Inc of Monrovia, Liberia v Axa Corporate Solutions Assurance Sa & Ors

For jurisdiction under Article 5.1(a) of the EC Council Regulation 44/2001, and the corresponding provision of the Lugano Convention, the place of performance depends on the true construction of the contractual obligation.

A promise to pay one of two alternative payees does not attract an inflexible rule that the promisee chooses. The contract, its language and commercial context determine the election. Here, a general average guarantee gave the cargo insurers the choice whether to pay the shipowners or the average adjusters. Payment could therefore be made in more than one jurisdiction, so England was not the place of performance.

The claimant, a shipowner, sought contributions from cargo insurers under a general average guarantee following serious damage to its vessel. The guarantee required payment of sums legally due to the shipowners or to the appointed average adjusters.

The insurers refused payment, contending that the cargo interests were not liable because the vessel was unseaworthy. The claimant issued proceedings in England. Langley J held that the English court had no jurisdiction and set aside issue and service of the claim form.

The appeal concerned whether the receiving parties or the insurers had the right to choose the payee, and whether England was the place of performance under Article 5.1(a) of the EC Council Regulation 44/2001 and Article 5.1 of the Lugano Convention.

1. Disposition. Lord Justice Clarke delivered the leading judgment. Lord Justice Neuberger and Lord Justice Ward agreed. The appeal was dismissed, with the respondents’ appeal costs summarily assessed at £9,000 and permission to appeal refused.
2. The ordinary rule under Article 2 of the EC Council Regulation 44/2001 and the Lugano Convention is that a defendant is sued in the state of domicile, subject to special grounds. Article 5.1(a) of the Regulation and Article 5.1 of the Convention required identification of the place of performance of the obligation in question. If the obligation could be performed in more than one jurisdiction, no single place of performance was established: Besix v Kretzschmar [2002] ECR 1-1699 (ECJ) and Hanbridge Services Ltd v Aerospace Communications Ltd [1993] IL Pr 778.
3. The guarantee was construed according to ordinary contractual principles. The court considered its language as a whole, the factual matrix and the commercial context. The insurers assumed a primary obligation to pay contributions legally due: Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd [1984] AC 226. The underlying contracts, under which general average was to be settled, meaning paid, in London, formed part of the context: Union of India v EB Aaby’s Rederi A/S [1975] AC 797.
4. There was no rigid rule that an alternative promise necessarily gave the promisor the right of election. The issue depended on construction. Nevertheless, the natural meaning of an undertaking to pay to the shipowners or the average adjusters was that the insurers could choose. Nothing in the guarantee, viewed as a whole, transferred that choice to the receiving parties. Commercial considerations supported that conclusion, particularly because cargo interests might themselves be receiving parties and payment through the adjusters could be the simplest and safest course.
5. The average adjuster’s request for payment into a London account did not alter the contractual allocation of the choice. Nor did the adjustment establish liability, since an adjustment was not conclusive or binding and the guarantee concerned sums legally due. The insurers could pay in more than one jurisdiction. England was therefore not the place of performance. The court added that parties wishing to give the receiving party the choice, or to secure English jurisdiction over liability and general average, should provide expressly for those matters.

• Court of Appeal (Civil Division): Appeal dismissed. Respondents’ appeal costs summarily assessed at £9,000. Permission to appeal refused.
• High Court, Commercial Court Division: Langley J, on 16 March 2005, declared that the court had no jurisdiction, set aside issue and service of the claim form, ordered the claimant to pay the defendants’ costs, and granted permission to appeal.