English court clarifies test for jurisdiction 'good arguable case'

Out-Law News | 23 Jan 2019 | 11:38 am | 3 min. read

A recent decision by the Court of Appeal in England provides "helpful clarification" about the standard of proof which a party to a dispute with an international dimension must reach when seeking to demonstrate the jurisdiction of the courts to hear its claim.

The decision, in a shipping dispute, confirms that the standard of proof requires a party to demonstrate it has a "good arguable case" against its opponent; and that it does not need to show separately that it had "much the better argument", as found by the High Court judge. It also summarises the approach which the court will take to evidential gaps and conflicts in this context, according to commercial litigation expert Andrew Barns-Graham of Pinsent Masons, the law firm behind Out-Law.com.

However, the Court of Appeal ultimately upheld the High Court's judgment, finding that although the judge had mistakenly added a 'gloss' to the good arguable case test, his conclusions were correct.

"Establishing whether the court has jurisdiction is obviously a fundamental starting-point for any case," he said. "However clearly the test is articulated, there will often be difficulties in applying it in cases with an international dimension. This makes it essential, for claimants and defendants alike, to seek early advice from litigators with jurisdictional expertise."

Shipping outfitters Kaefer Aislamientos SA ('Kaefer') issued proceedings against four companies in the English courts, seeking payment of sums alleged to be due under a contract to repair an offshore oil rig. For its claim to be successful, Kaefer had to show that these companies, which included the Singapore-registered owner of the rig and its holding company, were undisclosed principals to the contract, which was on paper entered into by two other companies which are now in financial difficulties.

There was no direct evidence on whether the companies were undisclosed principals to the contact, although Kaefer argued that the evidence was such that the court could infer that this was the case. The High Court originally found that Kaefer had a good arguable case against the rig owner. However, the rig owner had "the better of the argument" and its arguments were "more plausible", which the judge said meant that Kaefer failed the jurisdictional test as established by case law.

The Supreme Court, which is the UK's highest court, has ruled in two significant cases on jurisdiction since the High Court came to its conclusions in the Kaefer case. The Court of Appeal, which was able to refer to these cases in its judgment, found that although they did not change the law, they did make it clear that whether the claimant had been able to demonstrate a 'good arguable case' was a "straightforward" test that did not require further clarification by way of "glosses, glosses upon glosses, explications and reformulations".

"There is no discernible logic for saying that jurisdiction arises if the claimant, having established that it has the better case (relatively), then has to proceed upwards and onwards and show that it has 'much' the better case," said Lord Justice Green, giving the judgment of the Court of Appeal. "A plausible case is not one where the claimant has to show it has 'much' the better argument."

"Limb (ii) ['good arguable case'] is an instruction to the court to seek to overcome evidential difficulties and arrive at a conclusion if it 'reliably' can. It recognises that jurisdiction challenges are invariably interim and will be characterised by gaps in the evidence. The court is not compelled to perform the impossible but, as any judge will know, not every evidential lacuna or dispute is material or cannot be overcome. Limb (ii) is an instruction to use judicial common sense and pragmatism, not least because the exercise is intended to be one conducted with 'due despatch and without hearing oral evidence'," he said.

The Court of Appeal went on to emphasise that a decision on jurisdiction was intended to be a preliminary one, and that the 'good arguable case' test was "not to be equated with the test for summary judgment".

"In the case of the latter the grant of summary judgment is a determination on the merits upon the evidence before the court and a court should not... readily be prevented from fully assessing the merits," said Lord Justice Green. "But a finding about jurisdiction is not a finding on the substantive merits. A rejection of jurisdiction does not prevent a claimant from pursuing the merits in a different court, for instance that of the defendant's domicile."

However, the court concluded that although the High Court judge "did err in parts of his thinking", "ultimately, he applied a test which can be said to be consistent with that expressed in the Supreme Court judgments".