In a recent decision in which Hesketh Henry acted for the successful applicant, the High Court of New Zealand ordered an anti-suit injunction in support of an agreement to arbitrate – the first such instance in New Zealand. Its effect was to restrain the respondents from continuing proceedings brought in the High Court of Guyana on grounds that it breached the arbitration agreement set out under a contract of insurance.
An anti-suit injunction is an order issued by a court that prevents the responding party from commencing or continuing the litigation of a dispute in a foreign jurisdiction or forum. While uncommon in New Zealand, anti-suit injunctions are commonly issued in the English Courts to restrain parties litigating disputes subject to English law and jurisdiction.
The first respondent owned a tug, the Christopher B Turecamo (Tug), and a barge, the NRC Resolute (Barge). The second respondent operated both vessels at all relevant times.
In December 2018, when sailing from Saint Lucia to Guyana, the Barge overturned and was lost in international waters north of Trinidad and Tobago.
The respondents claimed on the insurance policies they had with the applicant (the Club).
The claims were investigated by the Club due to concerns about the condition of the Tug and Barge. In the period in which the claims were under investigation, due to non-payment of outstanding calls due to the Club, the Club cancelled the insurance policies.
The respondents commenced proceedings in Guyana, seeking damages for various claims arising out of or in connection with the contracts of insurance.
In response, the Club filed a notice of protest to jurisdiction in Guyana (which is still waiting to be heard) and applied for an anti-suit injunction in the High Court of New Zealand.
In New Zealand, anti-suit injunctions have only been considered in a handful of prior instances, none of which concerned an arbitration agreement.
In assessing the application, Gault J employed a three-step inquiry derived from a number of leading English decisions, where the legal principles regarding anti-suit injunctions are relatively well-settled.
- Is New Zealand the natural forum for the dispute?
In other words, is there is a “high probability” that there is an arbitration agreement governing the dispute in which a New Zealand court has a sufficient interest?
The dispute resolution process under the Club’s General Rules (Rules) specified that any dispute arising “out of or in connection with the Rules” was to be resolved by reference to arbitration, with the Club having a right of election between Auckland and London. The contracts of insurance were also to be governed by the applicable laws of New Zealand.
The Rules were deemed to have been properly incorporated into the relevant contracts of insurance. In a number of documents, including the most recent renewal indication, the contracts of insurance were explicitly said to be “as per” the Rules, with a website link provided to take the respondents to an online copy. Further, arbitration agreements are generally said to survive the termination of any agreement in which they are contained.
Given that the Rules mandated disputes be settled by arbitration in New Zealand, and accordingly subject to the New Zealand Arbitration Act 1996, Gault J considered the Court had a sufficient interest in upholding and enforcing the agreement to arbitrate.
Therefore, the Court considered there to be little doubt that there was an arbitration agreement that governed the dispute, that the respondents’ proceeding in Guyana breached the arbitration agreement, and that the Court had sufficient interest in hearing the dispute.
- Is there any strong reason to refuse relief, despite the applicant’s legitimate interest?
The second question is whether there is any strong reason not to grant an anti-suit injunction, notwithstanding the Club’s legitimate interest. It might be, for example, that the application is vexatious, oppressive, or otherwise unconscionable.
Gault J considered three matters, none of which amounted to a strong reason to refuse relief:
- The fact that one of the respondents’ causes of action in its statement of claim in the Guyana proceeding was statutory, and therefore beyond the scope of the contracts of insurance, was not a strong reason to require other disputes that are under the contracts of insurance to be litigated other than in accordance with the arbitration agreement.
- The fact that arbitration proceedings had yet to be commenced by the Club in New Zealand did not weigh against relief either because it is not incumbent on the Club, which not the claimant in the dispute, to commence arbitration proceedings.
- The fact that there had been a delay between proceedings being commenced in Guyana and the application for an ant-suit injunction being brought in New Zealand was immaterial because, in other instances in which overseas proceedings had not been progressed, longer delays than a single year have been permitted in jurisdictions such as England.
- Do the ends of justice require an injunction be granted?
A key point for Gault J was that, at least in the context of arbitration, primacy should be given to the supervisory role of the Court to support, not supplant, the extra-judicial process the parties have contracted to adopt. Generally, as a policy incentive, the Court ought not lightly interfere with that election.
The Court recognises that it is unconscionable for parties to pursue litigation in other jurisdictions when they have otherwise promised by way of contract to undertake arbitration in a specific forum.
In this case, in the event the court in Guyana declined the Club’s protest to jurisdiction, the Club would have limited means with which to challenge the enforcement of that decision in New Zealand in the absence of an anti-suit injunction – an outcome manifestly unjust in light of the arbitration agreement freely agreed between the parties.
The Effect of the Decision
The Court made an order restraining the respondents from either continuing the extant proceeding commenced in Guyana or commencing any other proceeding other than in accordance with the arbitration agreement contained in the contracts of insurance.
It is important to note that this does not interfere with the jurisdiction of a foreign court, and anti-suit injunctions cannot bind any foreign court into staying proceedings within its own jurisdiction; it acts against the respondents personally. They will be in contempt for a breach of the order.
If you have any questions about the application of anti-suit injunctions in New Zealand, or you have any other questions regarding matters of trade and transport, please get in touch with our Trade and Transport team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.