Henriksens Rederi A/S v T. H. Z. Rolimpex (Brede)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE CAIRNS,LORD JUSTICE ROSKILL |
| Judgment Date | 04 July 1973 |
| Judgment citation (vLex) | [1973] EWCA Civ J0704-2 |
| Date | 04 July 1973 |
| Court | Court of Appeal (Civil Division) |
In the Matter of the Arbitration Act 1950
and
In the Matter of An Arbitration
[1973] EWCA Civ J0704-2
The Master of the Rolls (Lord Denning),
Lord Justice Cairns and
Lord Justice Roskill.
In The Supreme Court of Judicature
Court of Appeal
Appeal by charterers from judgment of Mr. Justice Mocatta on 28th July, 1972.
Mr. RAYMOND KIDWELL, Q.C., and Mr. ANTHONY CLARICE (instructed by Messrs. Elborne Mitchell & Co.) appeared on behalf of the Appellant Charterers.
Mr. ANTHONY LLOYD, Q. C., and Mr. BASIL ECKERSLEY (instructed by Messrs. Ince & Co.) appeared on behalf of the Respondent Claimants Owners.
The motor vessel Brede is owned by Norwegian shipowners — Henriksens Rederi A/S. In January 1964, it was chartered to Polish charterers, P. H. Z. Rolimpex. The charter was on the Gencon form. It was to carry a cargo of rice from Rangoon in Burma to Gdynia in Poland at a freight rate of 110/- per long ton. The clause for payment of freight was as follows:-
"The freight to be paid in transferable pounds sterling in London to Hambros Bank Ltd., London, for account of Henriksens Rederi A/S, Oslo, as follows: 80% within 7 days of signing Bs/L non-returnable ship and/or cargo lost or not lost and the balance within 7 days of right and true delivery".
The arbitration clause was as follows:
"Any dispute arising under this charterparty or out of any Bills of Lading under this charterparty shall be referred to arbitration in London".
The Hague rules were incorporated by this clause:-
"The Owners' liability under this charterparty shall be governed by the terms of the Hague Rules contained in the International Convention for the unification of certain rules relating to Bills of Lading, dated Brussels, 25th August, 1924".
Article 3, Rule 6 of the Hague Rules says:
……"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."
In pursuance of the Charterparty the vessel went to Rangoon and loaded 8588 long tons of rice. Bills of Lading were issued dated 10th and 15th February 1964. The total freight would be £43,667. On 20th February 1964, the charterers paid 80% of the freight. It came to £35,427.
In March 1964, the vessel arrived at Gdynia and discharged her cargo. The charterers complained that some of the rice had beenlost during the voyage, and that some of it had been damaged. On 11th May 1964, the charterers paid another £4,936 on account of the freight but withheld some £3,000 because of the short delivery and damage. On 13th May 1964, the shipowners protested at this deduction. They told the charterers that the freight should be paid in full and that the charterers should present a claim for the damage to the Owners' Protection and Indemnity Club, who would guarantee the amount of the claim.
The charterers declined, however, to pay the freight in full. They had the cargo surveyed by a grain surveyor. They had the vessel inspected by a naval architect. These reported that 19 long tons of rice were lost on the voyage and that 30 long tons of rice wore damaged by wetting: and that this was due to water entering the hold by reason of the vessel's unseaworthiness. The charterers then got out the exact figures and eventually claimed to deduct £2,529 2s. 6d. for cargo short delivered and damaged. They sent the balance of the freight £830 17s. 6d. to the owners.
The owners told the charterers that they should pay the freight in full and that their (the owners') P. and I. Club in London was ready to issue a guarantee in respect of the charterers' claim for damage to cargo. But the cargo owners declined the offer. They said that they did not think it reasonable to accept a club guarantee instead of withholding the freight. The owners replied that the damage to cargo was a matter for insurance. They claimed the full freight, and reiterated their willingness to arrange a club guarantee for the damage.
It subsequently transpired that the cargo underwriters were standing behind the charterers in their resistance. The cargo underwriters at first paid the charterers £2,529 2s. 6d. for thedamage to cargo, but the charterers repaid it to the underwriters — and then took their stand by withholding it from the freight.
So, by July 1964, the parties had drawn their lines of battle. On the one hand, the shipowners said that the freight should be paid in full without any deduction for damage to cargo: and that the claim for such damage should be decided in a separate cross-claim against them: and that the owners P. and I. Club would guarantee the payment of it. On the other hand, the cargo-owners said that they were entitled to deduct their claim from the freight and were not bound to pay any more.
Thenceforward neither side did anything for two years. The owners did not appoint an arbitrator to determine the disputed claim to freight. The charterers did not appoint an arbitrator to determine the disputed claim for damage to cargo. The charterers hoped and believed that the owners had decided not to pursue the claim for the freight: but, in so doing, they took a chance. They were running a serious risk because, whereas the owners had six years in which to pursue their claim for freight, the charterers had only one year to pursue their claim for cargo shortage and damage.
The shipowners took advantage of this difference in the time-bar. After two years had passed, in January 1966, the shipowners put forward again their claim for freight. This was well within the permitted time of six years. They appointed Mr. Clyde as their arbitrator. The charterers appointed Mr. Chesterman as theirs. In answer to the claim for freight, the charterers put forward their claim in respect of the damaged cargo. In reply the shipowners said that they were discharged from all liability in respect of it because it had not been made within one year after delivery of the goods.
The arbitrators appointed Mr. Rokison as umpire. The arbitrators did not agree. The umpire decided between them. He held that the owners' claim to freight succeeded: but it was limited to freight on the cargo actually delivered. He also held that the cargo charterers' claim for cargo short delivered and damaged was barred by the time limit of one year in the Hague Rules. So the owners' claim for freight (which had a six-years time-bar) succeeded: but the charterers' claim for damage to cargo (with a one-year's time-bar) failed. The umpire stated a case for the opinion of the Court. Mr. Justice Mocatta affirmed the award. The charterers appeal to this Court.
THE LAW AS TO LIMITATION
So far as the running of time is concerned, arbitrations are subject to similar rules as actions at law: but with this necessary modification. An action is deemed to be commenced at the time when the writ is issued. An arbitration is deemed to be commenced when one party serves on the other a notice to appoint an arbitrator, see Section 27 of the Limitation Act, 1939.
In point of principle, when applying the law of limitation, a distinction must be drawn between a matter which is in the nature of a defence and one which is in the nature of a cross-claim. When a defendant is sued, he can raise any matter which is properly in the nature of a defence, without fear of being met by a period of limitation. No defence, properly so called, is subject to a time-bar. But the defendant cannot raise a matter which is properly the subject of a cross-claim, except within the period of limitation allowed for such a claim. A cross-claim may be made in a separate action, or it may be made by way of set-off or counterclaim. But on principle it is always subject to a time-bar.The period allowable to the defendant depends on the steps which he takes to enforce his cross-claim. If he brings it by a separate action or arbitration, he must start his proceedings within the prescribed time or else he will be barred. If he raises it as a "claim" by way of set-off or counterclaim the law is governed by section 28 of the Limitation Act 1937, which says:
"For the purposes of this Act, any claim by way of set-off or counterclaim shall be deemed to be a separate action and to have been commenced on the same date as the action in which the set-off or counterclaim is pleaded".
The word "set-off" is not defined in this section 28: but I think it is used to denote a legal set-off and not an equitable set-off. That is, a legal set-off as permitted by the statutes of set-off. These apply only "when the claims on both sides are liquidated debts or money demands which can be ascertained with certainty at the time of pleading", see Bullen and Leake, 3rd edition, page 679. These cross-claims must arise out of separate transactions. It is so stated in Halsabury 3rd Edition, Volume 34 at page 396. It there says that the right of set-off is:
"….. the right to plead a debt due from the plaintiff, arising from a separate transaction, in reduction or extinction of the "plaintiff's "claim".
Note the emphasis which the editors put on there being separate transactions. If there is no separate transaction, but only opposing demands arising out of the same transaction, then no question of set-off, properly so-called, arises. The editors say in a note on the same page:
"When opposing demands are connected, by originating in the same transaction, the balance has always been regarded by the common law as the debt, so that no question of set-off arises".
For this proposition they cite Lord Mansfield in Green v. Farmer (1768) 4 Burrow at page 2221, when he said (at page 2221):
"Where the nature of the employment,...
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