Halki Shipping Corporation v Sopex Oils Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HIRST,LORD JUSTICE HENRY,LORD JUSTICE SWINTON THOMAS |
| Judgment Date | 19 December 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J1219-27 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 1997 |
| Docket Number | QBCMI 97/1082/B |
[1997] EWCA Civ J1219-27
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Before:
Lord Justice Hirst
Lord Justice Henry
Lord Justice Swinton Thomas
QBCMI 97/1082/B
MR. N. HAMBLEN (instructed by Messrs Dorman & Co.) appeared on behalf of the Appellants/Plaintiffs.
MR. R.B. WALLER (instructed by Messrs Clifford Chance) appeared on behalf of the Respondents/Defendants.
Introduction
This case raises an important question under section 9 of The Arbitration Act 1996, namely whether it is still open to a plaintiff to bring Order 14 proceedings to enforce a claim to which the defendant has no arguable defence, where the claim arises under a contract which contains an arbitration clause.
Section 9 of The Arbitration Act 1996 provides so far as relevant as follows:-
"Stay of legal proceedings
(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
….
(4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed."
This section replaced section 1 of The Arbitration Act 1975 which provided:-
"If any party to an arbitration agreement to which this section applies … commences any legal proceedings in any court against any other party to the agreement … in respect of any matter agreed to be referred any party to the proceedings may … apply to the court to stay the proceedings; and the court unless satisfied that … there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."
Under the 1950 and 1975 Arbitration Acts there was a well established practice that a defendant's applications for a stay and a plaintiff's application for summary judgment were heard together, and treated as opposite sides of the same coin.
The usefulness of this practice has frequently been recognised judicially, for example by Lord Mustill in Channel Group v. Balfour Beatty Ltd. [1993) AC 334 in a speech with which the other members of the Appellate Committee agreed at page 356:-
"In recent times, this exception to the mandatory stay has been regarded as the opposite side of the coin to the jurisdiction of the court under RSC Order 14, to give summary judgment in favour of the plaintiff where the defendant has no arguable defence. If the plaintiff to an action which the defendant has applied to stay can show that there is no defence to the claim, the court is enabled at one and the same time to refuse the defendant a stay and to give final judgment for the plaintiff. This jurisdiction, unique so far as I am aware to the law of England, has proved to be very useful in practice, especially in times when interest rates are high, for protecting creditors with valid claims from being forced into an unfavourable settlement by the prospect that they will have to wait until the end of an arbitration in order to collect their money. I believe however that care should be taken not to confuse a situation in which the defendant disputes the claim on grounds which the plaintiff is very likely indeed to overcome, with the situation in which the defendant is not really raising a dispute at all. It is unnecessary for present purposes to explore the question in depth, since in my opinion the position on the facts of the present case is quite clear, but I would endorse the powerful warnings against encroachment on the parties' agreement to have their commercial differences decided by their chosen tribunals, and on the international policy exemplified in the English legislation that this consent should be honoured by the courts, given by Parker L.J. in Home and Overseas Insurance Co. Ltd. v. Mentor Insurance Co. (U.K.) Ltd. [1990] 1 WLR 153, 158 - 159, and Saville J.in Hayter v. Nelson [1990] 2 Lloyds Rep. 265."
The basis on which this jurisdiction has been exercised is that, in respect of the claim or some part of the claim to which there is no defence, there is no dispute to be referred to arbitration. Thus in one of the leading cases, Eagle Star v. Yuval [1978] 1 Lloyds Rep. 357 Goff LJ (as he then was) stated at page 362 that the first question that the Court had to consider was the application for summary judgment under Order 14, for if indeed there was no genuine dispute it would hardly seem logical to consider whether the alleged dispute should be determined by the court or by an arbitrator.
The crucial questions at issue are the meaning of the word "dispute" in an arbitration agreement, and the effect of section 9 of the 1996 Act in the light of the omission from the new section of the qualification "unless satisfied … there is not in fact any dispute between the parties with regard to the matter agreed to be referred", which had appeared in its counterpart in the 1975 Act. ("the 1975 qualification")
The plaintiff's case before the judge under Order 14 was that the defendant has no arguable defence to the claim or at least to no more than a very small part of it. However, Clarke J. held that, short of any admission by a defendant, there remained a dispute between the parties which they had agreed to refer to arbitration, even if the defendant had no arguable defence to all or any part of the claim, and that therefore the defendant was entitled to a stay and there was no scope for an Order 14 judgment in the plaintiff's favour. It is against this ruling, reported to [1997] 1 WLR 1268, that the plaintiff presently appeals.
The background to the case is that the plaintiff, Halki Shipping Corporation, is the owner of the Motor Tanker HALKI which was chartered to the defendant Sopex Oils Ltd. under a tanker voyage charterparty dated 20 June 1995 for the carriage of palm oil and coconut oil from various ports in the Far East to various ports in Europe. As it turned out the vessel loaded cargo at five ports in the Far East and discharged at four ports in Europe, and it is the plaintiff's case that the defendant failed to load and discharge the vessel within the lay time provided by the charterparty, with the result that it claims demurrage in the sum of US$ 517,473.96; the claim is thus in essence a claim for liquidated damages for breach of the charterparty. The defendant does not admit liability.
The arbitration clause provided as follows:-
"General average and arbitration to be London, English law to apply. For arbitration the following clause to apply: Any dispute arising from or in connection with this charterparty shall be referred to arbitration in London. The owners and charterers shall each appoint an arbitrator experienced in the shipping business. English law governs this charterparty and all aspects of the arbitration."
On 9 April 1997 the plaintiff issued a specially endorsed writ claiming demurrage, and the defendant countered by seeking an order staying the action under section 9 of the 1996 Act, which, as is common ground, applies in the present case.
In addition to the main point of principle, the defendant by respondent's notice seeks to raise a further issue arising from the fact that in August 1997, after Clarke J. had given judgment, the plaintiff commenced arbitration proceedings pursuant to the arbitration clause, on the footing that the arbitrator had concurrent jurisdiction; the defendant contends that, in consequence, whatever the outcome of the point of principle, the plaintiff has now waived its right to object to the arbitrator's jurisdiction and/or is now estopped from denying such jurisdiction.
On behalf of the respondent, Mr. Richard Waller urged us to decide this point ourselves at the present juncture: however, seeing that it only arose for the first time after the judgment under appeal, and since it turns to a substantial degree on some rather intricate points of construction of the very extensive correspondence exchanged between solicitors since August, we decided to accede to the submission of Mr. Nicholas Hamblen QC on behalf of the plaintiff that it was more appropriate that the point should be remitted to the judge.
The submissions in outline
Mr. Hamblen submitted that the critical question is what is meant by "dispute", which, as here, and as in most arbitration clauses, is under Section 9 the "matter which under the agreement is to be referred to arbitration". Relying on the decision of the House of Lords in Nova (Jersey) v. Kammgarn [1977] 1 WLR 713, and on a number of subsequent Court of Appeal decisions, he submitted that it is settled by well established and binding authority that "dispute" means a genuine or real dispute, and that a claim which is indisputable because there is no arguable defence does not create a dispute at all. It follows, he submitted, that claims to which there is no arguable defence are outwith the scope of section 9, and are therefore properly the subject matter of court proceedings under Order 14, notwithstanding the omission from Section 9 of the 1975 qualification.
Mr. Waller on the other hand submitted that "dispute" means any disputed claim, and therefore covers any claim which is not admitted as due and payable, thus leaving no scope...
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