Antaios Compania Naviera S.A. v Salen Rederierna A.B.

CourtHouse of Lords
JudgeLord Diplock, Lord Keith of Kinkel, Lord Scarman, Lord Roskill, Lord Brandon of Oakbrook
Judgment Date26 Jul 1984
JurisdictionEngland & Wales

[1984] UKHL J0726-1

House of Lords

Lord Diplock

Lord Keith of Kinkel

Lord Scarman

Lord Roskill

Lord Brandon of Oakbrook

Antaios Compania Naviera S.A.
(Appellants)
and
Salen Redevierna A.B.
(Respondents)
Lord Diplock

My Lords,

1

On 3 November 1978, the Antaios was chartered by the appellants ("the Shipowners") to the respondents ("the Charterers") on a three-year time charter in the New York Produce Exchange ("N.Y.P.E.") form which incorporated the standard withdrawal clause. The words appearing in the clause that are relevant to the dispute which is the subject matter of this appeal are:

"failing the punctual and regular payment of the hire or on any breach of this Charter Party the Owners shall be at liberty to withdraw the vessel from the service of the Charterers without prejudice to any claim they (the Owners) may otherwise have against the Charterers."

2

The Antaios was sub-chartered, and sub-sub-chartered, but nothing turns on this since the Charterers were vicariously liable for any breaches of the head charter committed by the sub-charterers or sub-sub-charterers.

3

By May 1980 market rates of hire had risen, so it was very much to the interest of the Shipowners to withdraw the vessel when the charter was only half-way through its term. This they purported to do on 20 May 1980, the charter being reinstated two days afterwards upon the usual "without prejudice" terms as to the rate of hire payable until the date of its expiry some eighteen months later.

4

There were several disputes between the Shipowners and the Charterers which were submitted to arbitration under clause 17 of N.Y.P.E. which provides for arbitration in London. The arbitral hearing in the only dispute with which your Lordships are concerned, took place in February 1982. It was about the Shipowners' right to withdraw the vessel on 20 May 1980. The Arbitrators' award was published on 9 July 1982. So far as is relevant to the instant appeal it awarded and declared that the Shipowners were not entitled to withdraw the vessel Antaios from the service of the Charterers on or about 20 May 1980. The award was accompanied by reasons that ran to no less than 96 pages, of which 78 were devoted to this issue.

5

On 30 July 1982 the Shipowners applied to the High Court, under section 1(3)( b) of the Arbitration Act 1979, for leave to appeal on questions of law arising out of the award. Reduced to a single sentence, the only question of law relied upon as so arising was the true construction of the words "on any breach of this Charter Party" in the standard N.Y.P.E. withdrawal clause.

6

Leave to appeal to the High Court was refused by Staughton J. on 5 November 1982, when he gave, as I think unwisely, reasons for his decision, which take up four columns in [1983] 2 Lloyd's Rep. 474. A fortnight later, on 19 November 1982, the same learned judge gave leave to appeal to the Court of Appeal from his own refusal of leave to appeal to the High Court from the Arbitrators' award. Again, but as I think in this case less unwisely, he gave his reasons for doing so. These will merit examination by your Lordships later. Pursuant to such leave, the appeal from Staughton J.'s decision was heard by the Court of Appeal who, on 8 July 1983 dismissed it by a majority (Sir John Donaldson M.R. and Fox L.J.; Ackner L.J. dissenting). They refused leave to appeal to this House from their decison; so, in the result, at that stage approximately one year after its date, the award, which was in any event only an interim one, became final and conclusive on the issues which it decided.

7

My Lords, the course followed in the proceedings in the Supreme Court, illustrates the difficulty of preventing counsel instructed in commercial arbitrations of the kinds to which section 4 of the Arbitration Act 1979 applies, from indulging (no doubt in the supposed commercial interests of their clients) in delaying tactics, so as to attain a similar result to that which it had been possible to achieve before the passing of the Act of 1979 by using the procedure of demanding that an award be stated in the form of a special case whenever the contract sued upon raised a question of construction that was arguable, however faint the prospects of success.

8

Unless judges are prepared to be vigilant in the exercise of the discretions conferred upon them by sections 1 and 2 of the Arbitration Act 1979, including in section 1 the new subsection (6A) that was added by section 148(2) of the Supreme Court Act 1981, they will allow to be frustrated the intention of Parliament, as plainly manifested by changes in procedure that these statutes introduced, to promote speedy finality in arbitral awards rather than that insistence upon meticulous semantic and syntactical analysis of the words in which business men happen to have chosen to express the bargain made between them, the meaning of which is technically, though hardly commensensically, classified in English jurisprudence as a pure question of law.

9

That such was Parliament's intention this House was at pains to indicate in the analysis of the provisions of the Arbitration Act 1979 made in my own speech in Pioneer Shipping Ltd. and others v. B.T.P. Tioxide Ltd. (The Nema) [1982] A.C. 724 in which the other members of the House who were present at the hearing concurred. At that time the way in which the parliamentary intention was being thwarted was by parties to arbitrations applying for leave to appeal from any award that involved a question that was even remotely arguable as to the construction of the relevant contract, and by some, though not all, commercial judges following a policy of granting leave in virtually all such cases, albeit upon conditions as to provision of security for, or payment into court of, the whole or a substantial part of the amount of the award. Accordingly, although the Court of Appeal's judgment in the The Nema [1982] A.C. 724, reversing that of Robert Goff J. granting leave to appeal from an arbitral award, appeared prima facie to an Appeal Committee of this House to be right, leave to appeal from that judgment was granted by this House in order to afford it an opportunity of laying down guidelines as to the circumstances in which the statutory discretion to grant leave to appeal from arbitral awards by section 1(3)( b) ought to be exercised.

10

From the general guidelines stated in the The Nema I see, as yet, no reason for departing. Like all guidelines as to how judicial discretion should be exercised they are not intended to be all-embracing or immutable, but subject to adaptation to match changes in practices when these occur or to refinement to meet problems of kinds that were not foreseen, and are not covered by, what was said by this House in the The Nema. The instant case, too, in the view of an Appeal Committee of this House, disclosed a need for some addition to the The Nema guidelines particularly in relation to the practices to be followed upon the refusal by a commercial judge of leave to appeal to the High Court from an arbitral award. It was for that purpose that, despite the additional delay caused to the arbitrators' award in the instant case becoming final, that leave to appeal was granted.

11

My Lords, the dispute that was submitted to arbitration was a typical case of a shipowner seeking to find an excuse to bring a long-term time charter to a premature end in a rising freight market. Stripped to its essentials the Shipowners were seeking to rely upon the Charterer's breach of an innominate term in the charterparty relating to the Charterer's right (acting through their sub-sub-charterers) to issue bills of lading on behalf of the master of the vessel, as constituting "any other breach of this Charter Party" within the meaning of the N.Y.P.E. withdrawal clause.

12

The arbitrators decided this issue against the Shipowners. The 78 pages in which they expressed their reasons for doing so contained an interesting, learned and detailed dissertation on the law, so lengthy as to be, in my view, inappropriate for inclusion in the reasons given by arbitrators for an award. Their reasons can be adequately summarised as being (1) that "any other breach of this Charter Party" in the withdrawal clause means a repudiatory breach — that is to say: a fundamental breach of an innominate term or breach of a term expressly stated to be a condition, such as would entitle the Shipowners to elect to treat the contract as wrongfully repudiated by the Charterers, a category into which in the arbitrators' opinion the breaches complained of did not fall, and (2) that even if that were wrong, the word "on" immediately preceding "any other breach" meant "within a reasonable time of" their first knowledge of the breach; and the Shipowners, in the arbitrators' opinion, had not given notice of withdrawal until after such reasonable time had expired.

13

To the semantic analysis, buttressed by generous citation of judicial authority, which led the arbitrators to the conclusions as to the interpretation of the wording of the withdrawal clause that I have summarised, the arbitrators' added an uncomplicated reason based simply upon business commonsense:

"We always return to the point that the Owners' construction is wholly unreasonable, totally uncommercial and in total contradiction to the whole purpose of the N.Y.P.E. time charter form. The Owners relied on what they said was 'the literal meaning of the words in the clause.' We would say that if necessary, in a situation such as this, a purposive construction should be given to the clause so as not to defeat the commercial purpose of the contract."

14

This passage in the award anticipates the approach to questions of construction of commercial documents that was voiced by this House in the very recent case, Miramar Maritime Corp. v. Holborn Oil Trading Ltd. [1984] 3 W.L.R. 1, which dealt with a bill...

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