England and Wales High Court (Commercial Court) Decisions

2000 Folio No 600

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 31st January 2001

B e f o r e : THE HON MR JUSTICE LANGLEY

	OWNERS OF CARGO LATELY LADEN ON BOARD THE M/V "DELOS"	Claimants
	- v -
	DELOS SHIPPING LIMITED	Defendants

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Mr M Templeman ...instructed by Messrs Ince & Co for the Claimants) Mr E. King ...instructed by Messrs Davies Battersby for the Defendants) - - - - - - - - - - - - - - - - - - - - - JUDGMENT With reference to R.S.C. Order 68 Rule 1 and the Practice direction of the Master of The Rolls dated 9th July 1990 ([1990] 1 W.L.R. 1126) I certify that the attached text records my judgment and direct that no further note or transcript need be made

The Hon. Mr Justice Langley

COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 for WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE LANGLEY Telephone 0207-947-6395

Mr Justice Langley:

THE APPLICATION
1. This is an application pursuant to section 9 of the Arbitration Act 1996 by the Defendant owners of the MV Delos to stay the proceedings brought by the Claimants claiming as owners and lawful holders of bills of lading in respect of various cargoes carried on board the vessel from Brazil to various ports in India in the period July to September 1998.
THE CLAIMS
2. The claim alleges that the vessel discharged each of the cargoes underweight. The total loss is said to be in excess of $270,000. The claim also alleges that one of the cargoes (semi-refined cotton seed oil) in tank 1C was both short-delivered and contaminated with sea-water. As regards the claims in respect of that cargo, a Letter of Undertaking was provided by which the Defendant agreed to the jurisdiction of this court and the proceedings will therefore be pursued to that extent whatever the outcome of this application. The contamination claim is in a sum in excess of $440,000. The short delivery claim in respect of tank 1C is only a few thousand dollars.
3. Paragraph 3 of the Particulars of Claim alleges that "the contracts of carriage contained within or evidenced by the Bills of Lading incorporated the terms of the Charterparty dated 7 July 1998 including the choice of law clause". The causes of action alleged (Paragraph 6) are breach of duty as carrier and/or bailee for reward and/or breach of the "contracts of carriage contained in or evidenced by the Bills of Lading and/or the Charterparty to take reasonable care of the cargo and deliver the same in the same quantity, good order and condition as shipped."
THE CHARTERPARTY
4. The charterparty provided for arbitration in both clauses 13 (by typed amendment) and 18 (printed) as follows:

13. This contract shall be governed by the laws of England .... Any disputes under this Charter Party shall be settled by Arbitration in London ....

18. Any dispute arising during the execution of this Charter-Party shall be settled in London. Owners and Charterers each appointing an Arbitrator ....

THE BILLS
5. The bills of lading were in two forms: "Congen" bills numbered 1-15 for a cargo of 10,000 mt of soya bean oil, and Ocean bills for other cargoes.

The Congen bills, by printed condition of carriage 1 on the reverse, provided:

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

6. The Ocean bills contained a clause printed on the front which read:

This shipment is carried under and pursuant to the terms of the Charter dated July 7th 1998 at London ... and all the terms whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the rights of the parties concerned in this shipment. Copy of the Charter may be obtained from the Shipper or Charterer.

THE SUBMISSIONS

THE CONGEN BILLS

7. Mr King, for the ship owners submits that the arbitration clauses in the charterparty were plainly incorporated in the Congen bills by express reference: The Rena K 1 LL Rep 545 ; The Nerano [1996] 1 LL Rep 1. He also submitted, on the same authority, that in such circumstances it was legitimate to "manipulate" the arbitration clause so as to apply it to disputes between cargo owners and shipowners.
8. Mr Templeman for the cargo owners submitted first that manipulation of the arbitration clause was not legitimate because it should be construed "at least in part" by reference to its meaning in the charterparty and where the charterparty provisions were intended to apply to the bills they did so expressly, citing the typed (in part) clause paramount. He also submitted that in any event only clause 13 of the charterparty was incorporated because only it (and not clause 18) could be described as "the Law and Arbitration clause", and the bills only incorporated one clause, and that the wording of Clause 13 "any disputes under this charter party" was in any event not appropriate or wide enough to apply to the claims in tort and bailment citing Ashville Investments v Elner Cotton [1989] QB 488 in particular per Bingham LJ at 508H to 509A, and Fillite (Runcorn) Ltd v Aqua-Lift [1989] 26 Con. LR 66, in particular per Slade LJ at page 76.
9. Mr King's riposte was that the first submission was in effect contrary to the authority he cited and in effect to render the words of the bills meaningless. His response to the second submission was the principle of "one-stop" arbitration and to submit that both Clauses 13 and 18 were incorporated, the latter in any event being wide enough to catch the non-contractual claims.

THE OCEAN BILLS

10. . Mr King acknowledged, as he had to, that there was no express reference in the Ocean Bills to the (or any) arbitration clause. But he submitted that the words "all the terms whatsoever" and in particular the word "whatsoever" were as a matter of construction appropriate to incorporate it.
11. Mr Templeman submitted that the authorities established that to incorporate an arbitration clause required an express reference to it in the bills or, if general words could be construed to include it, then they did so only when the arbitration clause in the charterparty itself expressly provided that bills were to be subject to its provisions so that no "manipulation" was required for that result to be achieved. For the first proposition he relied upon T.W. Thomas & Co Ltd v Portsea Steamship Co [1912] AC 1 and The Federal Bulker [1989] 1 LL Rep 103. For the second he referred to The Merak [1965] P 22 and The Annefield [1971] P 169.
CONCLUSION
12. In my judgment, Mr King is right in his submissions on the Congen bills and Mr Templeman in his submissions on the Ocean Bills.

The Congen Bills plainly referred to "the Law and Arbitration clause" as a clause (or term) to be incorporated in the bills. The Rena K and The Nerano are, I think, clear authority that in such a case the parties to the bills intended to arbitrate disputes and to do so as if they were the parties to the arbitration clause appearing in the charterparty: see per Savile LJ at [1996] 1 LL Rep 4. If it were otherwise the words would serve no purpose.

13. Savile LJ distinguished the decision in Miramar Maritime Corporation v Holborn Oil Trading [1984] AC 676 on the basis that the incorporation and manipulation of the clause in circumstances such as the present was to accord with the parties expressed and reasonable intentions not to produce (as in Miramar) an extraordinary and unreasonable result.
14. Whilst I do think Mr Templeman is right in his submission that the wording of the bills is sufficient only to incorporate Clause 13 and not Clause 18 of the charterparty and in his submission that Clause 13 in using the words "any disputes under this Charter Party" is narrower than "in connection with" or "arising out of" I do not think the words used are to be so restricted as to exclude from their scope the claims for breach of duty and bailment in this case the basis of which is, or at least is dependant upon, the existence of the bills. A party agreeing to arbitrate claims under the bills, as in effect, in my judgment, the present parties agreed must I think be taken to have intended also to submit such claims to arbitration where they are in reality inter-dependent: see Harbour Assurance Ltd v Kansa Ltd [1993] QB 701 at 726. Whilst I accept that some of the dicta to which Mr Templeman referred me are wide enough to support his submission to the contrary they are to be found in cases in which the claims under consideration were for rectification, misrepresentation or breach of a collateral contract which I think are not of the same nature as the present claims. As Mr King submitted, if Mr Templeman's point was a good one it could have been argued in The Rena K. That is not of course in any way conclusive, but it does accord with commonsense and, I think, the proper construction of Clause 13 as incorporated in the bills. Were Clause 18 to be incorporated, contrary to my view, it is accepted that its language is wide enough to catch the non-contractual claims: see The Damianos [1971] 1 QB 588.
15. The Ocean Bills do not make any express reference to any arbitration clause. Nor do the arbitration clauses in the charterparty refer to the bills. In The Federal Bulker at page 108 Bingham LJ summarised the effect of the decisions in T.W. Thomas & Co Ltd v Portsea Steamship Company, The Merak and The Annefield to be:

... it is clear that an arbitration clause is not directly germane to the shipment, carriage and delivery of goods. That appears from the decision of the House of Lords in T.W. Thomas .... It is, therefore, not incorporated by general words in the bill of lading. If it is to be incorporated, it must either be by express words in the bill of lading itself ... or by express words in the charterparty itself. ...If it is desired to bring in an arbitration clause, it must be done explicitly in one document or the other.

16. It is not necessary in this case to consider the logic of incorporation derived from a provision in the charterparty because there is no relevant explicit reference at all. Mr King submitted that the word "whatsoever" was sufficient to provide such a reference or at least to create the missing link. I do not agree. The principle underlying the authorities is that the bills are negotiable documents concerned with the carriage of the goods and arbitration clauses are not directly germane to the carriage or are collateral to it. Whilst the word "whatsoever" is a word of considerable width I do not think its interpretation in other contexts (Mr King referred me to Gillespie Brothers v Roy Bowles Transport [1973] 1 QB 400) is of assistance when in the present context the need for express incorporation has been long established by authority.
TIME FOR DEFENCE
17. Mr Templeman submitted that whilst time for the service of a defence by the Defendant should be extended it should only be so on terms that the value of those claims which were to proceed was paid into court. The basis for this submission was that a defence should have been served some time ago to at least the claims the subject of the Letter of Undertaking. Whilst interesting points were touched upon about the application of CPR Part 11(9) and the powers of the court under CPR Part 3.1(3)(a) and (5) I can see no proper basis for imposing such a condition. Not only does it make little sense for a defence to be served before it is known what it is to which it should plead but if the Claimant had thought a sanction was appropriate the remedy was to seek to enter a judgment in default. Wisely in my judgment the Claimant did not do so.
18. I will therefore hear the parties on directions for the future conduct of these proceedings on the basis that the claims under the Congen bills are stayed.