Orexim Trading Ltd v Mahavir Port and Terminal Private Ltd and others [2017] EWHC 2663 (Comm)

In Orexim Trading Ltd v Mahavir Port and Terminal Private Ltd and others [2017] EWHC 2663 (Comm), the High Court held that a claim under s.423 of the Insolvency Act 1986 ("IA 1986") where it was not brought by an insolvent company within the jursdiction did not fall within the jurisdictional gateways under paragraph 3.1 CPR PD 6B.

In December 2013, Orexim Trading Ltd ("Orexim") entered into an agreement with Atlantis ME FZE ("Atlantis") to sell 10,000 metric tonnes of Ukranian sunflower oil. Atlantis subsequently sold the sunflower oil to Global International Imes Private Ltd ("Global"), which sold the goods to the final sub-purchaser, Zarrin Persia ("Zarrin"). As per the agreement with Atlantis, Orexim chartered a vessel from Mahavir Port and Terminal Private Limited ("MPT") to transport the sunflower oil.

Various disputes arose in early 2014 between Orexim and MPT about the shipment of sunflower oil which ultimately led to the arrest of the vessel transporting the sunflower oil.

On 15 May 2014, Orexim, Atlantis and MPT entered into a settlement agreement (the "Settlement Agreement") subject to English law and jurisdiction. The terms of the Settlement Agreement were not complied with.

In the meantime Orexim also discovered that MPT had claimed that the vessel had been transferred to Singmalloyd Marine(s) Pte Limited ("Singmalloyd") which had, in turn transferred the vessel to Ports India Private Limited ("Zen").

Orexim brought claims against MPT, Singmalloyd and Zen in the English High Court for (i) damages for breach of the Settlement Agreement; (ii) under s.423 of the IA 1986 to set aside the transfer of the vessel to Singmalloyd on the basis of no or significantly less consideration passing to MPT; and (iii) a claim for a declaration that the transaction was a sham.

On 30 August 2016, HHJ Waksman QC granted Orexim permission to serve the English claim form out of the jurisdiction on the three defendants. MPT and Zen both issued applications challenging the jurisdiction of the English court over the s.423 IA 1986 claim and declaration claim, Singmalloyd did not participate in the proceedings. There were no challenges from MPT as to the jurisdiction of the English court to hear the claim under the Settlement Agreement as it was clearly subject to an English law and jurisdiction clause.

The jurisdiction gateways under paragraph 3.1 CPR PD 6B, allow for the service of an English claim form on a defendant outside the EU/EFTA. Permission will only be granted if (i) there is a good arguable case that the claim is covered by one of the gateways as per paragraph 3.1 CPR PD 6B; (ii) there are serious issues to be tried on the merits of the claims; and (iii) England and Wales is the appropriate jurisdiction for trial.

Orexim sought to rely on paragraph 3.1(20)(a) CPR PD 6B and argued that the s.423 IA 1986 claim was "under an enactment which allows proceedings to be brought" pursuant to paragraph 3.1 CPR PD 6B.

MPT and Zen argued  the opposite that the s.423 IA 1986 claim was not within any of the gateways as it does not expressly confer a right to bring a claim against a person out of the jurisdiction.

HHJ Waksman QC noted that the gateway under paragraph 3.1(20)(a) CPR PD 6B should be narrowly interpreted. He considered two contrasting decisions namely Re Harrods (BA) [1992] Ch 72 and Re Paramount Airways [1992] Ch 223.  In Re Harrods it was held  in order to fall within the specific gateway, the enactment had to include express wording in relation to proceedings against persons who were not within the court's jurisdiction Accordingly permission to serve out was refused because the claim concerned a s459 claim under the Companies Act 1985 which contained no express wording allow service out of the jurisdiction. 

In contrast Re Paramount, which was concerned with a section 238 Insolvency Acxt 1986 claim, rule 12.12 of the Insolvency Rules 1986 (as they then were) permitted service out of the jurisdiction if it was in connection with insolvency proceedings within the jurisdiction. 

In short HHJ Waksman QC concluded it was one thing to stress the need for extra-territorial jurisdiction in circumstances where the relief is sought in connection with insolvency proceedings here in respect of an English registered company but quite another where the claim has no such factor which intrinsically connects it to this jurisdiction.

HHJ Waksman QC also stated that although Erste Group Bank AG (London) v JSC (VMZ Red October) [2013] EWHC 2926 (Comm), [2014] B.P.I.R. 81 had concluded that a s.423 IA 1986 claim did fall within a paragraph 3.1(20)(a) gateway, Flaux J had been incorrect, having not been referred to the decision in Re Harrods.

The High Court further held that Orexim had not presented a good arguable case for service of the s.423 IA 1986 claim on the basis that it had "arisen out of the same or closely connected facts" as the damages claim arising from the Settlement Agreement. There had to be greater connecting factors, other than that fact that MPT was a defendant in both the s.423 claim IA 1986 claim and damages claim, which were not apparent in this case.

HHJ Waksman QC concluded that if there were no available gateways for the s.423 IA 1986 claim, then the declaration claim would fail for the same reasons. As such, the permission granted to Orexim to serve out of the jurisdiction in relation to the s.423 IA 1986 claim and the declaration claim were set aside against both MPT and Zen.