Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Diplock,Lord Edmund-Davies,Lord Fraser of Tullybelton,Lord Russell of Killowen,Lord Scarman
Judgment Date22 Jan 1981
Judgment citation (vLex)[1981] UKHL J0122-1

[1981] UKHL J0122-1

House of Lords

Lord Diplock

Lord Edmund-Davies

Lord Fraser of Tullybelton

Lord Russell of Killowen

Lord Scarman

Bremer Vulkan Schiffbau Und Maschinenfabrik (A Corporate Body)
(Original Respondents and Cross-Appellants)
and
South India Shipping Corporation
(Original Appellants and Cross-Respondents)
Lord Diplock

My Lords,

1

This case concerns an arbitration clause contained in a shipbuilding contract dated 6 August 1964 for the construction of five bulk carriers. The shipbuilders (Bremer Vulkan) who are respondents to this appeal, are a German company and their shipyard at which the vessels were built was in Germany. The purchasers (South India) who are appellants in the appeal are incorporated in India where their principal place of business is situated. It was expressly provided by the contract that it was to be governed by German law. The only connection that the whole transaction had with England was that the contract contained an arbitration clause couched in the widest terms providing that any "dispute or difference shall be referred to Arbitration in London within the meaning of the English Arbitration Act 1950, and the rules, regulations, etc., of the said Act shall solely apply."

2

The five vessels were delivered over a period of some thirteen months, between 4 November 1965 and 3 December 1966. The contract provided for a guarantee period of twelve months after delivery; so the last of these periods expired on 3 December 1967. A number of complaints in respect of alleged defects in each of the five vessels were notified by South India to Bremer Vulkan during the respective guaranty periods. Some of these were rectified and others were disputed. The parties hoped to reach an amicable settlement and on 13 October 1967 they agreed in writing not to have recourse to arbitration for the time being. Efforts to reach an amicable settlement continued until the autumn of 1969. In the meantime in July 1969, South India complained to Bremer Vulkan that cracks had appeared in the cylinder heads in respect of which they claimed damages for breach of the shipbuilding contract. Bremer Vulkan by letter of 3 September 1969 rejected this claim both on the merits and upon the ground that having regard to the guarantee periods of twelve months from delivery of each vessel this claim and any other claims first notified to them after the expiry of the relevant twelve month period was time barred under German law. In May 1970 South India wrote to Bremer Vulkan a long letter summarising their various claims under fifteen heads and suggesting a further meeting. This meeting was postponed from time to time by agreement between the parties. It ultimately took place in April 1971, but no settlement was reached as Bremer Vulkan intended to rely upon their defence that under German law the bulk of the claims were time barred. South India then gave notice to Bremer Vulkan of their intention to refer the disputes between them to arbitration and invited Bremer Vulkan to concur in the appointment of an arbitrator. Discussion followed between the parties' solicitors as to whether the terms of reference to the arbitrator should provide for him to hear the time-bar point as a preliminary issue. In the result it was not until January 1972 that there was appointed as sole arbitrator Sir Gordon Willmer who had retired from the Court of Appeal some three years previously. His notice of appointment referred, without particularising them, to disputes having arisen between the parties under and concerning the shipbuilding agreement and that Bremer Vulkan's time-bar point should be determined in the arbitration.

3

No application was made to the arbitrator for a preliminary appointment. Instead, in April 1972 it was agreed between the parties, both of whom were represented by London solicitors very experienced in commercial arbitration, that South India should deliver "a full Statement of Claim" so that Bremer Vulkan could plead the time-bar defence to specific claims to which they contended this defence applied.

4

Later in 1972 South India claimed that structural defects had been discovered in the stern frames of the vessels and in May 1973 it was agreed between the parties that claims in respect of these alleged defects should be added to the points of claim in the current arbitration without the need for any further formal submission. A similar agreement was reached in April 1975 in respect of an alleged defect in a collision bulkhead which was discovered in November 1974 as a result of an explosion on one of the vessels. In the result the points of claim, which together with its accompanying schedules, is a very long and detailed document, was not delivered until 23 April, 1976.

5

No application for directions had been made by either party to the arbitrator. The notice of his appointment couched in the broad terms that I have mentioned was all that he received and all he ever knew about the arbitration until the proceedings in which this appeal is brought appeared in the law reports.

6

The court proceedings were started by Bremer Vulkan on 25 April 1977 in the High Court by writ claiming in the alternative (1) an injunction restraining South India from proceeding with the arbitration or (2) a declaration that the arbitrator has power to dismiss South India's claim for want of prosecution. The case was tried on affidavit, without pleadings, in the Commercial Court by Donaldson J. although not until nearly two years later in March 1979. It was heard together with another action between different parties which raised similar points of law. Donaldson J. granted Bremer Vulkan the injunction sought. South India's appeal to the Court of Appeal (Lord Denning M.R., Roskill and Cumming-Bruce L.JJ.) was dismissed on 23 November, 1979.

7

My Lords, this summary and time-table of events makes it evident that the disputes between the parties that give rise to this appeal have been dealt with in a most dilatory way at all three stages: (1) from the expiry of the guarantee periods in 1966/7 to the appointment of the arbitrator in January 1972; (2) from his appointment to the issue of the writ by Bremer Vulkan in April 1977; and (3) from the issue of the writ to the hearing of the action at first instance in March 1979. It is, however, common ground that your Lordships are concerned only with the delay at the second stage from January 1972 to April, 1977, and in particular the delay between the nomination of the arbitrator and the delivery of the full points of claim in April 1976. That is because the basis on which the action was argued and decided in the Courts below was that the High Court had the same discretionary power to enjoin a dilatory claimant from proceeding with an English arbitration at the behest of a respondent who had passively endured the delay, as it had to dismiss for want of prosecution an action brought by a dilatory plaintiff in the High Court. Though this was the effect of the conclusion reached alike by Donaldson J. and all three members of the Court of Appeal the trains of reasoning by which each came to this conclusion were not identical. All, however, were at one in holding that to justify the court in granting such an injunction in cases where there has been no application to the arbitrator for directions, the principles (first stated by the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 and approved by this House in Birkett v. James [1978] A.C. 297), applicable to the exercise of the court's discretion to dismiss a plaintiff's action in the High Court for want of prosecution, would apply mutatis mutandis to the exercise of the court's discretion to enjoin a claimant from proceeding further with an arbitration.

8

Upon the application of these principles to the facts of the instant case, Donaldson J. and the Court of Appeal were also at one in holding that the delay by South India as claimant in proceeding with the arbitration during the period between the appointment of the arbitrator and the delivery, more than four years later, of the detailed points of claim was so inordinate and inexcusable and had given rise to so substantial a risk that a fair trial of the issues could not be had, that if the arbitration had been an action it ought to have been dismissed for want of prosecution. It was on this ground that the injunction was granted and upheld.

9

My Lords, an injunction is a discretionary remedy, and if the analogy between dismissing an action in the High Court for want of prosecution and granting an injunction to restrain a claimant from proceeding with a pending arbitration is sound, I apprehend that your Lordships, having regard to what was said upon this topic in Birkett v. James, would not think it right to review the facts yourselves with a view to considering whether either collectively or individually your Lordships would have exercised the discretion in the same way as the learned judge. The question that lies at the heart of this appeal is whether that analogy is sound in law. For my part I think that it is not and that nothing that had happened had given the judge jurisdiction to grant the injunction that he did.

10

Much reliance was placed by Mr. Rokison upon the similarity of what he called "this kind of arbitration" to an ordinary heavy action in the Commercial Court. No doubt where heavy claims for damages under a shipbuilding contract are the subject-matter of a reference to English arbitration before a legal arbitrator familiar with the procedure of English courts, and the parties are represented in the arbitration by English solicitors and counsel, the way in which the proceedings in the arbitration are in fact, conducted, except that they are not held in public or in wigs and gowns, will show considerable resemblances to the way in which an action to enforce a similar claim would...

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