CLASSIC MARITIME INC V LION DIVERSIFIED HOLDINGS BERHAD

[2009] EWHC 1142 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Cooke, 21 May 2009

Arbitration – Contract of affreightment containing arbitration clause – Guarantee agreement containing non-exclusive jurisdiction clause – Proceedings brought under contract of affreightment – Whether guarantee modified arbitration clause – Stay of proceedings – Arbitration Act 1996, section 9 – Whether guarantee proceedings should be stayed – Past consideration – Frustration – Measure of damages – Civil Procedure Rules, Practice Direction 24

Classic entered into a contract of affreightment with Limbungan, under which all disputes were to be referred to arbitration. Lion, Limbungan’s parent company, gave a written guarantee to Classic of Limbungan’s obligations. The guarantee provided that Lion’s obligations under this guarantee were independent and that Classic could bring separate actions against Limbungan and Lion or might join them in one action. Classic sought summary judgment against both of them in English proceedings, and a stay of the proceedings was sought. Cooke J held as follows. (1) The action against Limbungan would be stayed under section 9 of the Arbitration Act 1996 – the arbitration clause had not been varied by the guarantee. (2) The action against Lion would not be stayed pending the outcome of the arbitration, on case management grounds, because the guarantee was a separate transaction and the outcome of the arbitration was irrelevant to the outcome of the action on the guarantee. (3) Summary judgment would not be granted. Although the guarantee was valid in that the consideration for it was not past, a trial was necessary on the question of whether the contract of affreightment had been frustrated. (4) Lion’s chances of success were small, and it was appropriate to require Lion to pay sums claimed into court by means of a provisional order under CPR Practice Direction 24, para 5.1(4). (5) No issue as to remoteness of damage arose, but merely quantum.