England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE STEEL)

		Royal Courts of Justice Strand London, WC2
		Tuesday, 14 January 2003

1. LORD PHILLIPS, MR: Lord Justice Rix will give the first judgment.
2. LORD JUSTICE RIX: This is an application for permission to appeal from two judgments of David Steel J, dated respectively 25 April and 14 October 2002. The applicant is Welex AG, a Swiss company which was the receiver of a cargo of steel goods shipped on the defendant's vessel from the Ukraine to Szczecin in Poland. On arrival the steel was found to be damaged by sea water. The bill of lading in question was also claused. Liability for any sea water damage has been admitted, but there remains an issue on quantum as to how much of the cargo damage is due to a pre-existing condition and how much is due to sea water which entered on the voyage. The issues which arise out of the two judgments of David Steel J, however, are on a jurisdictional issue.
3. Following the discovery of the damaged cargo at Szczecin, Welex sought security for its claim, then put at some $800,000 to $900,000 but subsequently reduced to something over $0.5m, by arresting the vessel in Portugal. It claimed a maritime lien and therefore asserted its claim for security from the vessel itself as against both Rosa Maritime, who owned the vessel at the time of the voyage in question, and also its new owners, Alexia, who had purchased the vessel from Rosa Maritime following the discharge at Szczecin and before the arrest was claimed in Portugal.
4. The Portuguese court, whose jurisdiction was invoked on 16 July 2001 and whose certificate of arrest was served upon the vessel as against both Rosa Maritime and the new owners on 31 July 2001, required that jurisdiction on the substance of the claim be established before a court of merits before 60 days. Welex brought its claim in Poland in the courts Of Szczecin on the basis that that was a convenient forum in circumstances where the condition of the goods on discharge had been established as a result of surveys which then took place. However, on 19 September 2001, Rosa Maritime commenced arbitration proceedings in London. The existence of a London arbitration clause in the underlying fixture had already been asserted before the Portuguese court.
5. On 31 July 2001 a standard form charter party had been produced before the Portuguese court. That charter party form referred, by means of a manuscript amendment to the standard form, to London arbitration. The fixture recap document, which is an e-mail, was not produced to Welex, however, until 29 September 2001, the same date as Rosa Maritime commenced its arbitration in London. The fixture had been agreed on 19 March 2001. The date of the issue of the bill of lading on loading was 9 April 2001. No original or copy of an original charter party evidencing the fixture has ever been produced since that time, although the judge did find that both parties to the fixture Party, the original vessel owners and the sellers the steel, had executed a charter party by April 2001. Whether that was before or after the issue of the bill of lading is not clear on the findings of the judge. The bill of lading was on the Congen form. Typically, its first clause in standard form incorporated:

"All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration clause...."

6. The front of the bill of lading, again in typical form, referred in print to:

"Freight payable as per Charter Party dated...."

7. A dotted line was provided to insert the date of the Charter Party. In this case the date, as often happens, was left blank.
8. The question therefore arose in the first of the judgments below as to whether the fixture of the 19 March 2001 had been successfully incorporated in the bill of lading and whether such incorporation included a London arbitration clause. So far as the fixture recap is concerned, that does refer to arbitration in London and to English law. It also refers to the standard form charter party with alterations which included the handwritten alteration to London arbitration. When that recap is compared to the standard charter party form which has been produced, it is to be noted that the standard clause 47 in that form referring to:

"Arbitration, if any, to be settled in Hamburg in accordance with Rules of the GMAA".

Has been changed in manuscript to read "London". The status of the original reference to GMAA is unclear.

9. David Steel J held, on the authority of The San Nicholas [1976] 1 Lloyd's Rep 8 and The "SLS Everest" [1981] 2 Lloyd's Rep 389, that the failure to fill in the date of the charter party in a bill of lading of this nature does not prevent extrinsic evidence being admissible to prove the charter party in question. The judge also held that the bill of lading successfully incorporated the fixture recap e-mail whether or not a charter party had been executed. In coming to this conclusion he differed from the views expressed by His Honour Judge Diamond QC in The "Heidberg" [1994] 2 Lloyd's Rep 287 at 311. It was Judge Diamond's view in that case that a charter party, which had not been reduced to writing at the time of the issue of the bill of lading in question, could not be incorporated into such a bill of lading so far as it related to a transferee of the bill. For these purposes Judge Diamond also considered that a recap telex would not qualify for the purposes of constituting a charter party being reduced into writing.
10. On the facts of this case the difference of opinion on this question between David Steel J and Judge Diamond in The "Heidberg" is an important point which is worthy of further consideration on appeal. This point also has ramifications for the purposes of the second main issue raised on this application, which relates to the judge's second judgment under which he granted an anti-suit injunction against Welex to prevent it from continuing with its proceedings in Poland and thus to vindicate Rosa Maritime's asserted rights under the arbitration clause (see The "Angelic Grace" [1995] 1 Lloyd's Rep 87).
11. Mr Duncan Matthews QC raises two main points in connection with the exercise of the judge's discretion on the granting of this injunction. He submits that it is uncertain on the evidence that the security obtained by the Portuguese arrest would be available in the London arbitration. It is entirely arguable, despite what the judge says on this question in his second judgment, that the availability of the Portuguese security in the London arbitration has not been established. This is significant where the new owners, although expressing their willingness to be joined in arbitration proceedings in London (something which can only be done by consent), have made it clear they are not willing to bring the security of their vessel into the London arbitration proceedings as security for Welex's claim. The uncertainty therefore of the availability of security in the London arbitration is an important consideration which, in my judgment, is also worthy of revisiting on appeal.
12. Beyond that, however, there is this additional question which it seems to me is also worth consideration on appeal. Whatever might be the outcome of the difference of opinion as to the incorporation of the fixture terms, the status of a jurisdiction clause, and in particular an arbitration clause, may well be in a special category. At the time Welex commenced its proceedings in Poland, it did not know of the arbitration clause in London. When the 60 days in which the Portuguese court required Welex to bring its claim on the merits had expired, Welex had not commenced arbitration in London, although on one view of the possible running of that 60 day period Rosa had commenced arbitration in London.
13. It was not until the date of that commencement on 19 September that both the fixture recap e-mail and the standard form had been produced to Welex. In these circumstances it may well be that, whatever be the position about the incorporation of the general terms of the fixture recap e-mail, it may be arguable that both as a question of incorporation and as a matter of affecting the discretion of the court in granting an anti-suit injunction, the continuing uncertainty as to the existence of any London arbitration clause is an important matter to be taken into account. It does not appear from the judge's second judgment that he did place any particular emphasis upon this question.
14. In refusing permission to appeal David Steel J, and again Longmore LJ in refusing permission to appeal on paper, both expressed concern as to the very large costs which have been run up on the jurisdictional battles between the parties to date. It appears from the material put before us that those costs, on both sides, appear likely to be well in excess of £300,000 and may well be approaching £400,000 to £500,000. Those are enormous costs to be expending on jurisdictional issues, even in relation to a claim which may be worth upwards of $0.5m and even where such issues may, tactically, be as important as the underlying merits. There is no doubt that the expenditure of such costs is very regrettable. Nevertheless, it is also clear that those costs have been considerably increased by the defendants Rosa Maritime, both in pursuing what the judge thought to have been a bad point in seeking to rely upon copies of an executed charter party, which did not represent its original form, and in pursuing a multiplicity of evidence from foreign lawyers.
15. In any event, the costs in general have already been incurred. If Welex has a real prospect of success upon appeal then those costs can be added to the value of its claim as being a bone of contention upon such an appeal. In such circumstances, I consider that the costs incurred to date, however regrettable they are, as a factor for this court's consideration on this application are very much a two-edged sword. I do not consider, against what I have already said about the merits of this application, that they should affect the decision and should prevent permission being granted.
16. For all these reasons, therefore, I an of the view that permission to appeal should be granted for this application to appeal.
17. LORD PHILLIPS, MR: I agree. It is regrettable that so much time, energy and expense has in this case been devoted to the issue of jurisdiction. However, in my view, that fact should not prevent the applicants from pursuing an arguable appeal which raises important issues of principle.
Order: Permission to appeal granted.