Dera Commercial Estate v Derya Inc.
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Carr |
| Judgment Date | 13 July 2018 |
| Neutral Citation | [2018] EWHC 1673 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000432 |
| Date | 13 July 2018 |
[2018] EWHC 1673 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF AN ARBITRATION
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mrs Justice Carr DBE
Case No: CL-2017-000432
Mr David Semark (instructed by Mills & Co Solicitors Limited) for the Claimant
Mr Ravi Aswani (instructed by Hill Dickinson LLP) for the Defendant
Hearing dates: 12 th and 13 th June 2018
Judgment Approved
Introduction
This is a challenge by the Claimant, Dera Commercial Est (“Dera”), to the award of a LMAA Tribunal comprised of Mr David Aikman, Mr Edward Mocatta and Mr James Baker (“the Tribunal”) dated 13 th June 2017 (“the Award”). By the Award the Tribunal dismissed Dera's counterclaim for damage to and/or loss of cargo (“the cargo claim”) pursuant to s. 41(3) of the Arbitration Act 1996 (“s. 41(3)”) (“the Act”) on the application of the Respondent, Derya Inc (“the Owners”).
Dera pursues a challenge under s. 68 of the Act (“s. 68”) and, with the permission of Leggatt J (as he then was), appeals under s.69 of the Act (“s. 69”) on the following grounds:
a) serious irregularity (s.68): Dera contends that the Tribunal failed to act fairly and impartially in its conduct of the arbitration contrary to s.33 of the Act. Its varied complaints were challenged summarily on paper by the Owners pursuant to CPR 3.3(4) and CPR 23.8(c) in accordance with the procedure provided for in paragraph O8.5 of The Commercial Court Guide. Leggatt J dismissed all of the procedural challenges summarily save for the allegation of apparent bias, which he judged to require a hearing for proper resolution;
b) points of law (s.69):
i. Whether a claim which is particularised within the six year limitation period applicable to contractual claims pursuant to s. 5 of the Limitation Act 1980 can nevertheless be struck out for “inordinate delay” under s. 41(3) because the parties have contracted for a shorter limitation period (here one year under Article III Rule 6 of the Hague Rules (“Article III Rule 6”));
ii. Whether, in a contract evidenced by a bill of lading subject to the Hague Rules, a geographic deviation precludes a carrier from relying on the one year time bar created by Article III Rule 6;
iii. Whether, where the one year time bar created by Article III Rule 6 applies, the period between a) the time that the cause of action arises and b) the expiry of the contractual time limit is to be taken into account when assessing whether the delay is “inordinate” for the purpose of s. 41(3);
iv. The proper order, burden and/or standard of proof applicable to a tribunal's assessment of whether a delay is “inexcusable” for the purpose of s. 41(3).
Thus, Dera's challenges of law on the principles applicable under s. 41(3) go only to the question of inordinate and inexcusable delay. There is no (nor could there be any) challenge to the finding of serious prejudice through delay to the Owners and the consequent likelihood that this gave rise to a substantial risk that it was not possible to have a fair resolution of the issues in the cargo claim. Nevertheless, success for Dera on the issue of delay would be sufficient for it to succeed in overturning the decision the Tribunal's decision to strike out. The challenge of law on the issue of geographic deviation does not arise directly under s.41(3), but is nevertheless related to the merits of the Owners' application to dismiss the claim for inordinate and inexcusable delay, in the sense that it could affect the relevant limitation period for commencement of the cargo claim.
The questions of law are said to be of general public importance. In particular, there is a dearth of post-1996 authority on the operation of s. 41(3). Only two previous decisions in which it has been considered have been identified: Tag Wealth Management v West [2008] 2 Lloyds Rep 699 and Grindrod Shipping Pte Ltd t/a Island View Shipping v Hyundai Merchant Marine Co Ltd [2018] EWHC 1284 (Comm). In neither of those cases were the issues that arise here under any direct scrutiny. The impact of geographic deviation on limitation and exclusion clauses in the Hague Rules such as Article III rule 6 is also an issue of broad significance.
Background
The voyage
By a contract first concluded on 4 th February 2011, Dera purchased 18,000mt of Indian maize (“the cargo”) from Rika Global Impex Ltd (“Rika”). The purchase price was approximately US$6,000,000. The MV Sur (“the Vessel”) was a bulk carrier with a deadweight of 28,000 tons formerly owned by the Owners. On 5 th May 2011, Rika chartered the Vessel from the Owners on a voyage charter to carry the cargo from India to Jordan.
Five bills of lading were issued in respect of the cargo. Their terms were materially identical. They were all issued in Mumbai on the Congen form and Dera was named as the Notify Party. On their reverse there was a General Paramount Clause incorporating Article III Rule 6 which provides:
“In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.”
There was also a clause incorporating the terms of the charterparty between Rika and the Owners (“the Charterparty”). The Charterparty was on an amended BIMCO form and made provision for disputes to be referred to arbitration in London and for English law to apply.
The cargo was loaded onto the Vessel in two batches. On both occasions, rain caused delays and quantities of wet maize were rejected during loading.
The first batch (around 8,000mts) was loaded at Diamond Harbour between 24 th May and 14 th June 2011. Some of the cargo was then discharged from the Vessel and reloaded (for reasons which remain unclear). Two bills of lading were issued in respect of the cargo loaded at Diamond Harbour. The Vessel departed from Diamond Harbour on 16 th July 2011 (one month after loading had been completed). The Vessel arrived at Vizag on 18 th July 2011 and the remaining 10,000mts of the cargo was loaded between 21 st and 27 th July 2011. Three Bills of Lading were issued in respect of the cargo loaded at Vizag. The Vessel departed for Aqaba on 28 th July 2011 (the day after loading had been completed).
The Vessel arrived at Aqaba, Jordan, around two weeks later, on 16 th August 2011. On arrival, the Jordanian customs authorities took samples of the cargo from the Vessel's hold. On 8 th September 2011, having analysed those samples, the Jordanian customs authorities issued a letter indicating that the cargo would not be permitted to enter Jordan and must be returned to its country of origin. This was on account of “ broken percentage, foreign matters, impurities, damaged kernels…and apparent fungus”.
The Jordanian Proceedings and commencement of the arbitration
Four days later, on 12 th September 2011, Dera issued proceedings against the Owners in Jordan seeking damages of approximately US$8,000,000 in respect of the damage to the cargo (“the Jordanian Proceedings”).
On 16 th September 2011, the Owners' P & I insurers, the American Club (“the Owners' insurers”) (in the exercise of their subrogated rights) appointed Mr Aikman as the Owners' arbitrator “ in connection with all disputes/differences arising under the bills of lading”.
On 4 th October 2011, the Owners made an application to the English Court for an anti-suit injunction restraining Dera from taking further steps in the Jordanian Proceedings on the basis that to do so would be in breach of the arbitration provisions in the Charterparty. In the event, the Owners' application for an anti-suit injunction was dealt with by consent.
On 7 th October 2011, Dera notified the Owners' solicitors that it had appointed Mr Mocatta as arbitrator on its behalf “ in connection with all disputes/differences arising under the bills of lading”.
A consent order in the anti-suit proceedings was sealed on 25 th October 2011. It declared that, under the terms of the Charterparty, Dera was obliged to refer the cargo claim to arbitration in London. The Jordanian Proceedings were subsequently struck out.
Re-export of the cargo
Meanwhile, the cargo remained on board the Vessel at Aqaba. The Owners' efforts had been focussed on arranging for it to be re-exported so that the Vessel could sail from Aqaba to a port where the cargo could be discharged. The Owners made an urgent application to the Jordanian Court for an order obliging Dera and the Jordanian customs authorities to grant the necessary permissions for it to do so. That application was finally dismissed on 22 nd September 2011. On 17 th October 2011, the Owners' insurers issued a Letter of Undertaking (“the LOU”) to Dera in the following terms:
“In consideration of and upon the condition that you release and/or refrain from arresting and/or re-arresting or otherwise detaining [the Vessel] or any other vessel, asset, or other property in the same or associated ownership, management, or control to secure the above claim, we, the American Steamship Owners Mutual Protection and Indemnity Association, Inc., hereby undertake to pay you within (30) days of our receipt of your written demand, any such sums(s) that may be adjudged to be due to you in respect of [the alleged loss, shortage and/or damage to the Cargo] from the vessel and/or her owners, by a final, unappealable award of a London arbitration Tribunal, or as may be agreed between the parties and the undersigned Association, to be recoverable from the owners of the vessel, in respect of the said claim(s), provided that the total of our liability hereunder shall not exceed the sum of US $9,000,000…including interest and costs.”
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