Borealis AB v Stargas Ltd

I will ask Rix LJ to give the first judgment.

This appeal arises out of a case management decision by a judge of the Commercial Court not to grant an application made at a very late stage to join a foreign party on a claim for contribution under section 1 of the Civil Liability (Contribution) Act 1978 ("the 1978 Act"). As against the intended foreign party the application was without notice, but it was made with notice to the existing parties to the litigation, one of whom took a neutral stance and the other of whom opposed the application on the ground that it would lead to an adjournment of the trial date currently fixed for July this year.

The judge, Moore-Bick J, was prepared to assume that if the foreign party was not joined, then the claimed contribution would be irremediably lost since it could only be made in England in the current proceedings. Nevertheless, he held, on balance in his discretion, that the application should be refused. He did not do so on grounds related to the question of jurisdiction over the intended foreign party, although he took account of the possibility that opposition to English jurisdiction might lead to some further delay to the trial if the joinder application was granted.

Rather the judge concluded that the balance of justice came down in favour of the existing litigant who opposed the joinder and did so on three main grounds. First, the applicant had left its application too late, and had failed adequately to explain that lateness to the court. Secondly, the applicant had failed to satisfy the court that the claim which it would lose by virtue of failure of its application was a valuable one. And, thirdly, the opposing litigant would itself be prejudiced, albeit in a non-specific way, by the prolongation of the burden of litigation.

Leave to appeal has been given by Clarke LJ on the basis that there is a real prospect of showing that the judge's decision was disproportionate and wrong in principle, given his assumption that a claim in the pending action is the only basis on which the applicant can seek a remedy against the intended foreign party who, the applicant asserts, would be the party ultimately responsible for the relevant liability.

I must put factual flesh upon this schematic skeleton. The applicant, in this court the appellant, is Stargas Limited ("Stargas"). In 1993 it sold a cargo of Saudi Arabian propane on CFR terms to Borealis AB ("Borealis"), then called Statoil Petrokjemi AB. The sale was of "field grade" quality and provided that the findings of the load port inspector would be "final and binding" on both parties. The contract included carriage of the propane under a charterparty under which Stargas acted as disponent carrier. The contract provided for English law and the jurisdiction of the High Court in London. Stargas' charterparty was with the owners of the Berge Sisar, Bergesen A/S.

In due course the propane was tested at load port and was found within specification. By the end of the voyage, however, the cargo was discharged and found to be off specification in that it failed the copper corrosion strip test required under a "A-140" specification. The vessel's tanks were also alleged by Bergesen to have been damaged by the propane. As a result Borealis, the buyer, blamed Stargas, the seller, for shipping off specification goods. Stargas blamed the shipowner, Bergesen, for damaging what it said was sound cargo when shipped, and Bergesen blamed Stargas for loading dangerous, because corrosive, goods under its charterparty.

In the proceedings in the Commercial Court in London, Borealis claimed against Stargas, Stargas claimed against Bergesen and Bergesen counterclaimed against Stargas. Borealis' claim is for some $1.3 million and Bergesen's claim is for a little over $0.3 million. Stargas had purchased the propane cargo in three lots under three separate contracts; one with the Saudi Arabian Oil Company, ("Saudi Aramco"), the producer of Saudi Arabian propane, one with Trammogas and one with Texaco. All three contracts were FOB Yanbu and incorporated Saudi Aramco's standard terms. The contract with Saudi Aramco specifically incorporated the A-140 specification. This can be contrasted with the Stargas/Borealis sale where the quality is field grade and there is an issue in the proceedings whether such a quality incorporates the A-140 specification.

The supply contracts with Saudi Aramco and Trammogas provide for Saudi Arabian law and jurisdiction, but the supply contract with Texaco provides for arbitration in England under English law. Trammogas and Texaco were themselves purchasers of the propane under contracts which, by one or more stages which the evidence does not disclose, would have led back to Saudi Aramco.

Stargas has protected its position as against Texaco by commencing arbitration in England, albeit we are informed that its rights against Texaco have been assigned to Borealis, but Stargas has not commenced proceedings against Saudi Aramco or Trammogas in Saudi Arabia. Stargas' arbitration against Texaco is stayed pending the outcome of the court proceedings.

Bergesen has also commenced arbitration proceedings against Saudi Aramco in London under its bill of lading contract. That bill of lading incorporated the terms of the Stargas charterparty, including its English law and arbitration clause. Saudi Aramco was the shipper of the propane. The arbitration by Bergesen against Saudi Aramco is also stayed pending the outcome of these proceedings.

It may be noted that Stargas' financial interest in the proceedings covers both the $1.3 million claimed from it by Borealis and the $0.3 million claimed from it by Bergesen, but its application to join Saudi Aramco, for the purposes of contribution, only relates to the $0.3 million claim from Bergesen. If the cause of the trouble was the original off specification condition of the propane, then Stargas' primary remedy is under its three sale contracts which, in the absence of some term of exclusion, would prima facie indemnify Stargas against both claims which it faces. However, the full Saudi Aramco standard terms are not before the court, therefore the court does not know the details of the contractual position under Stargas' supply contracts including its contract with Saudi Aramco itself.

There has been a small cluster of claims appearing in the English courts arising out of shipments of propane from Yanbu in the autumn of 1993. This may be said to give force to Bergesen's allegation that what went wrong was not something on the voyage to do with the process of carriage, but something to do with the inherent quality of the cargo shipped itself. The other cases which have surfaced are the " Havmann" [1997] 2 Lloyd's Reports 759 concerning a shipment in October 1993, and The "Baltic Flame" [2001] 2 Lloyd's Reports 202, which concerned shipments in both April and November 1993. The court has been told that the " Havmann" dispute has been settled, but that The "Baltic Flame" dispute is still pending although at present of uncertain direction.

Common to these actions is the allegation that the cargoes were loaded apparently sound but discharged off specification without any obvious explanation. Saudi Aramco is the sole producer of propane in Saudi Arabia and ships it from Yanbu. It was not a party to the " Havmann", but it is now a party to The "Baltic Flame" where it has been joined by a CIF seller, Fortum Oil & Gas ("Fortum"), to respond to a claim for contribution in respect of another shipowner's claim for damage to his cargo tanks under his charterparty with Fortum. That is the relief that Stargas is seeking to obtain by joining Saudi Aramco in these proceedings.

In both this case and The "Baltic Flame" Saudi Aramco is the shipper under a bill of lading contract with a shipowner. A CIF or CFR seller in chain has entered into a charterparty with the shipowner, and the shipowner claims against his charterer that his cargo tanks have been damaged by the cargo. The charterer says, "In that case, if the shipowner is correct, then the shipper is liable to the shipowner under the bill of lading for the same damage and I, a mere seller in chain, am entitled to a contribution"; indeed, it is submitted, a complete indemnity from the original producer and shipper of the cargo. I shall revert to The "Baltic Flame" in due course because it is submitted by Bergesen that in other respects The "Baltic Flame" is not on all fours with the present case.

In these circumstances, if Stargas had sought to join Saudi Aramco at the outset of these proceedings, then, subject to the important question of service out of the jurisdiction (an issue which would be raised by Saudi Aramco rather than existing parties to the proceedings, and was albeit unsuccessfully raised by Saudi Aramco in The "Baltic Flame"), there would presumably have been no difficulty in accommodating Saudi Aramco's joinder in this action.

The difficulty in...