On 14 February 2003, the Vitoria sustained serious bottom damage from grounding whilst proceeding down the River Plate. It was carrying a cargo of vegetable oil to India and Bangladesh under various bills of lading and a voyage charterparty. The bills of lading provided for general average to be payable according to the York-Antwerp Rules 1974 and settled at the place provided in the charterparty (cl 4), and for arbitration in London (cl 8).

The bills also incorporated the terms of the charterparty. The charterparty provided for general average to be adjusted, stated and settled (ie paid) according to the York-Antwerp Rules 1950 with New York law to apply (cl 20), the York-Antwerp Rules 1994 to apply (cl 31) and that general average and arbitration to be performed in London with English law to apply (cl 32). Clause 20, which also formed part of the printed form of the Vegoilvoy 1/27/50 charterparty, was superseded by cls 31 and 32.

The demise charterer (the claimant) was incorporated in Liberia and domiciled in Liberia and/or Norway. The claimant appointed Richards Hogg Lindley (RHL) as the average adjusters.

The defendants were cargo insurers of the whole cargo. AXA Corporate Solutions Assurance SA (the first defendant) and Le Continent SA (the second defendant) were incorporated and domiciled in France, Belgian Marine Insurers SA (the third defendant) in Belgium, Fortis Corporate Insurance NV (the fourth defendant) in the Midlands, and Winterhutr Schweizerische Versicherungs-Gesellschaft (the fifth defendant) and Generali Assurances Generales (the sixth defendant) in Switzerland. Each defendant subscribed the respective portions of the cargo it insured to a general average guarantee covering the cargo interests' liabilities in general average. The average guarantee was addressed 'To the Owners of the "Vitoria" and other parties to the adventure as their interests may appear.' The average guarantee was signed by the defendants on various dates between 6 March and 7 April 2003. RHL issued the general average adjustment on 2 January 2004, stating that 'those concerned in cargo' were liable to pay general average in the sum of USD 1,053,302.15.

The claimant sought to recover the sum of USD 1,053,302.15 from the defendants under the average guarantee. The defendants refused to pay the contributions due from 'those concerned in cargo'. They reasoned that the cargo owners were not liable to the claimant in general average. The Vitoria was unseaworthy and so the cause of the grounding and the subsequent general average expenditure could be attributed to the claimant's breaches of the contracts of carriage. Since the cargo owners would not be liable in general average, the defendants would not be liable under the average guarantee. The claimant denied any breaches of the contracts of carriage and asserted that the defendants were liable under the guarantee.

The defendants disputed the jurisdiction of the English court to entertain the claims. Unless some special ground of jurisdiction applied, the first to fourth defendants were required to be sued in France, Belgium and the Netherlands (art 2 of the EC Council Regulation 44/2001 (the Regulation)) and the fifth and sixth defendants were required to be sued in Switzerland (art 2 of the Lugano Convention (the Convention)). The applicable grounds of jurisdiction were found in art 5.1.a of the Regulation and art 5.1 of the Convention. Since this was a matter relating to a contract, the defendants could also be sued in the courts of the place of performance of the obligation in question.

The trial Judge held that the English court did not have jurisdiction to hear an action by the claimant against cargo insurers under a general average guarantee. England was not the 'place of performance of the obligation in question'. The claimant had failed to establish that there was an obligation to pay in England. Each of the defendants had a choice whether to pay the claimant or RHL. Nothing in the guarantee required the defendants to pay the claimant in London. The defendants were entitled to pay the claimant wherever it could be found, notably in Liberia or Norway.

The claimant appealed.

Held: Appeal dismissed.

The issue in this appeal was whether, on the true construction of the guarantee, the defendants had a choice to pay their contribution either to the claimant or RHL, or did the persons entitled to contribution have a choice to require the defendants to pay their contribution to the claimant or RHL?

The natural meaning of the language '[the cargo insurers] undertake to pay to the shipowners or to the Average Adjusters … any contribution to General Average …' was that the defendants were required to pay their contribution to the claimant or to RHL but it could choose either to pay the claimant directly or through RHL. There was nothing in the language that suggested that it was for the persons entitled to contribution to choose. In order to reflect the claimant's wish that it had the choice, the average guarantee should have stated that the claimant could decide who was to be paid. To ensure that issues of liability and general average were determined in England, an English exclusive jurisdiction clause should have been included.

Finally, the defendants had a legitimate commercial interest in paying RHL to ensure that monies owed to the cargo interests were in fact paid to those interests.