Aiden Shipping Company Ltd v Interbulk Ltd (Vimeira)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Bridge of Harwich,Lord Brightman,Lord Mackay of Clashfern,Lord Ackner,Lord Goff of Chieveley
Judgment Date22 May 1986
Judgment citation (vLex)[1986] UKHL J0522-1

[1986] UKHL J0522-1

House of Lords

Lord Bridge of Harwich

Lord Brightman

Lord Mackay of Clashfern

Lord Ackner

Lord Goff of Chieveley

Aiden Shipping Company Limited
(Respondents)
and
Interbulk Limited
(Appellants)
Lord Bridge of Harwich

My Lords,

1

For the reasons given in the speech of my noble and learned friend Lord Goff of Chieveley, with which I agree, I would allow the appeal.

Lord Brightman

My Lords,

2

I agree with the conclusion reached in the speech to be delivered by my noble and learned friend, Lord Goff of Chieveley, and for the reasons which he gives I would allow this appeal.

Lord Mackay of Clashfern

My Lords,

3

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley, and for the reasons which he gives I too would allow this appeal.

Lord Ackner

My Lords,

4

I have had the advantage of reading in draft the speech to be delivered by my noble and learned friend, Lord Goff of Chieveley and I agree that the appeal should be allowed for the reasons which he gives.

Lord Goff of Chieveley

My Lords,

5

There is before the House a question of construction of section 51(1) of the Supreme Court Act 1981. Section 51(1) provides as follows:

"Subject to the provisions of this or any other Act and to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal and in the High Court, including the administration of estates and trusts, shall be in the discretion of the court, and the court shall have full power to determine by whom and to what extent the costs are to be paid."

6

The main question at issue in the case is whether, despite the broad words of the section, there is to be implied a limitation upon persons by whom costs may be ordered to be paid, viz. that costs may only be ordered to be paid by persons who are parties to the relevant proceedings. There are other subsidiary issues to which I will refer later.

7

The matter has arisen in the following way. The respondents, Aiden Shipping Co. Ltd. (to whom I will refer as "the owners") chartered their vessel Vimeira to the appellants Interbulk Ltd. (to whom I will refer as "the charterers") under a time charter dated 11 April 1979. The charterers sub-chartered the vessel to I.C.C.O. International Corn Co. N.V. (to whom I will refer as "the sub-charterers") by a voyage charter dated 8 November 1979. Both charters contained safe port clauses in terms which are to all intents and purposes identical, and both also contained London arbitration clauses.

8

Under these charters, the vessel discharged a cargo of grain in the Rodenhuizedok at Ghent. When she left the dock on 4 January 1980, she was found to have suffered damage to her rudder. The owners commenced arbitration proceedings in London against the charterers, claiming damages resulting from the alleged unsafety of the Rodenhuizedok; and the charterers then commenced arbitration proceedings in London against the sub-charterers claiming to be indemnified against any liability which they might be held to be under to the owners. I shall refer to the first arbitration as "the head arbitration," and to the second as "the sub-arbitration." The same three gentlemen were appointed as the arbitral tribunal in each arbitration, though in different roles. The two arbitrations were held separately. By an award dated 30 September 1982, the charterers were held liable to the owners; and by an award dated 13 January 1983, the sub-charterers were held liable to the charterers. However, both awards were determined on points which were not in issue in the arbitrations, and as a result both were remitted to the arbitrators in terms which, in the case of the head arbitraton, gave the owners the opportunity to raise and argue the point on which the arbitrators had found in their favour.

9

By a notice of originating motion dated 2 August 1984, the owners applied for an order further remitting the award in the head arbitration to enable them to raise a new point, viz. that the dock was unsafe by virtue of the presence of submerged concrete blocks, and that it was contact with one of these that had caused the damage to the vessel's rudder. The charterers then in their turn issued and served on the sub-charterers a notice of originating motion seeking the same relief in the sub-arbitration. Both motions were heard together by Hirst J. in November 1984, though no formal order was made that they should be heard together. On 26 November 1984, Hirst J. dismissed the owners' application against the charterers, and in consequence, the charterers' application against the sub-charterers was also dismissed.

10

A question then arose as to the order for costs. It was plain that the charterers were entitled to an order against the owners that they should pay the charterers' costs of the owners' originating motion, and that the sub-charterers were entitled to a similar order against the charterers. But the question arose whether the judge had jurisdiction to order that there should be included, in the charterers' costs which the owners were liable to pay, the costs which the charterers were ordered to pay to the sub-charterers. After a discussion late in the evening following the delivery of a long judgment, the judge held that, having regard to the wide terms of section 51(1) of the Act of 1981, he had jurisdiction to make such an order which, in the exercise of his discretion, he then made. He therefore ordered that the owners pay the charterers' costs of the application (such costs to include any costs paid by the charterers to the sub-charterers in the sub arbitration proceedings).

11

The owners then appealed to the Court of Appeal against the judge's order as to costs. The judgment of the Court of Appeal [1985] 1 W.L.R. 1222 was delivered by Sir John Donaldson M.R. He observed that common sense and justice suggested strongly that the judge was right. However, on the basis of two earlier decisions of the Court of Appeal, Forbes-Smith v. Forbes Smith [1901] P. 258 and John Fairfax & Sons Pty. Ltd. v. E. C. de Witt & Co. (Australia) Pty. Ltd. [1958] 1 Q.B. 323 (the latter of which was not cited to the judge), he concluded that the jurisdiction to award costs of and incidental to proceedings was confined to parties to proceedings. He then said, at p. 1227:

"In the light of these authorities, it is, alas, clear that the judge [had] no power to make the order which he made unless it can properly be said that in some way the proceedings on the two motions to remit became one single set of proceedings. This could only be done by consolidation or treating the sub-charter arbitration proceedings as 'third party' proceedings, dependent on and part of the head charter arbitration proceedings."

12

He went on to consider whether it was possible for the proceedings to be treated as having been consolidated, a course which had been taken in Bremer Handelsgesellschaft m.b.H. v. Westzucker G.m.b.H. (No. 2) [1981] Lloyd's Rep. 130. He concluded, however, that it would not be right to follow that case (in which the matter had been dealt with in a very robust way, without any citation of authority, by a two-judge court) on this point. He said of the present case:

"Quite apart from the fact that there was no consolidation order or agreement to consolidate, it is difficult to see how the proceedings could have been consolidated. In consolidated actions, parties with the same interest are represented by the same solicitors and counsel."

13

He also pointed out that, although this was a classic "third party" situation, the relevant order, R.S.C., Ord. 16, did not on its true construction apply in the case of an originating motion. He concluded his judgment as follows, at p. 1228:

"With unconcealed regret, I would allow the appeal and delete the words in parenthesis in paragraph 2 of the judge's order. It is a quarter of a century since Parker L.J. (John Fairfax & Sons Pty. Ltd. v. E. C. de Witt & Co. (Australia) Pty. Ltd. [1958] 1 Q. B. 323, 331-332) drew attention to this problem and I hope that the Supreme Court Rule Committee will now produce a solution. The committee will not have jurisdiction to amend section 51 so as to enable orders for costs to be made in one set of proceedings against a stranger to those proceedings, but I apprehend that it has ample power to provide that where separate proceedings are ordered to be tried together, the court can also order that thenceforward they should be treated as combined (as contrasted with 'consolidated') proceedings in which the parties to the several parts become parties to the whole. Section 51 and R.S.C., Crd. 62, r. 2(4), would then enable the court to do justice between all concerned."

14

It is against that decision that the charterers now appeal, with leave of this House.

15

As I have already stated, the main issue in the case is whether there is to be implied into section 51(1) of the Act of 1981 a limitation restricting orders as to costs to orders made against parties to the relevant proceedings. Section 51(1) is (for all material purposes) identical to section 50(1) of the Supreme Court of Judicature (Consolidation) Act 1925, which itself is (for all material purposes) identical to section 5 of the Supreme Court of Judicature Act 1890 (an Act passed to amend the Supreme Court of Judicature Acts 1873-1875). In the rules of court contained in Schedule 1 to the Supreme Court of Judicature Act (1873) Amendment Act 1875, Order 55, which related to costs, opened with the words: "Subject to the provisions of the Act, the costs of and incidental to all proceedings in the High Court shall be in the discretion of the court; …" The words: "and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid" (now to be found in almost identical terms in section 51(1) of the Act of...

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