Liberia (Republic of) v Gulf Oceanic Inc.
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE OLIVER,LORD JUSTICE NEILL |
| Judgment Date | 07 February 1985 |
| Judgment citation (vLex) | [1985] EWCA Civ J0207-3 |
| Docket Number | 85/0043 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 February 1985 |
[1985] EWCA Civ J0207-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
INTERLOCUTORY LIST (COMMERCIAL)
(MR JUSTICE LLOYD)
Royal Courts of Justice
Lord Justice Oliver
Lord Justice Neill
85/0043
1983 L. No. 2795
MR J. MANCE, Q.C., and MR S. TOMLINSON (instructed by Messrs. Sinclair Roche. & Temperley) appeared on behalf of the Appellants.
MR STEVEN GEE and MRS. ROSALYN HIGGINS (instructed by Messrs. Middleton Lewis Lawrence Graham) appeared on behalf of the Respondents.
This is an appeal, with the leave of the Judge, from an Order made by Lloyd J. in Chambers on the 29th March 1984, dismissing the plaintiffs' summons for an order striking out the first defendants' counterclaim, except in so far as it claimed a declaration that the plaintiffs were a party to a certain contract.
The relevant facts can be quite shortly stated, and it is unnecessary to refer to the evidence filed on behalf of both parties going to the merits of the dispute between them.
The first plaintiff is the Republic of Liberia (referred to throughout as "R.O.L."), and the second ("L.P.R.C.") a Liberian-registered corporation owned and controlled by R.O.L. In March 1979 L.P.R.C. entered into a contract with a third party for the purchase of a large quantity of crude oil to be shipped from the Gulf, and shortly thereafter, on the 9th April 1979, it entered into a contract of affreightment with the first defendant ("G.O.I.") which is also a Liberian-registered corporation. That contract, which was varied by a number of addenda between 1979 and 1982, obliged L.P.R.C. to provide, over a period of three years, cargoes of crude oil to be carried by G.O.I. to a certain minimum amount. The terms of the contract do not matter for present purposes, save that it was to be governed and construed in accordance with the laws of England, and that by an addendum made in July 1979, there were introduced the terms and provisions of the Exconvoy 1969 form of Tank Charterparty and, in particular, the terms of the Arbitration clause contained in that form.
That, as incorporated in this contract, provided for "all differences and disputes of whatsoever nature" arising out of the contract to be submitted to arbitration in London, one Arbitrator to be nominated by each side. Arbitration is, under this provision, to be initiated by one party serving on the other a notice specifying the chosen Arbitrator, and identifying the matter upon which arbitration is sought, and it is provided that if the party so served does not within 21 days serve on the party calling for arbitration a notice nominating its own Arbitrator, the latter party has the right to appoint a second Arbitrator with the same effect as if such Arbitrator had been appointed by the other party.
Disputes arose under the contract as a result of the alleged failure of L.P.R.C. to supply cargoes of the requisite quantity, and although the question whether L.P.R.C. were in breach of contract is, I think, still formally in issue, the substantial question between the parties is the quantum of damage, G.O.I. claiming that damages are to be assessed at the demurrage rates specified in the contract, and the plaintiffs' claiming that the appropriate assessment is on the basis of market rates. The sums involved, even if the dispute is confined to this one point of the different bases of assessment, is very substantial, running into something over $5,000,000.
The circumstances which gave rise to the present action were these. G.O.I. evidently entertained—and they may or may not be right in this—grave doubts about whether, assuming an arbitration award were to be made in their favour, L.P.R.C. had any funds from which such an award could be satisfied, having regard to the fact that it was financially dependent upon R.O.L. The contract is, as mentioned already, a contract to which, on its face, only G.O.I. and L.P.R.C. are parties, but G.O.I. have claimed that in fact L.P.R.C. were acting as agents for an undisclosed principal, R.O.L. They proceeded to invoke the arbitration clause against R.O.L. on the footing that R.O.L. was party to the contract, and they did so by serving on R.O.L. a notice of the appointment of the third defendant, Mr Baker-Harber, as Arbitrator. The response was the nomination by L.P.R.C. of the second defendant, Mr Harris, as the Arbitrator nominated by them—they, of course, not being parties to the arbitration.
R.O.L. not having itself nominated any Arbitrator by the expiry of the time limited by the clause, G.O.I. then proceeded to nominate Mr Harris as the second Arbitrator on behalf of R.O.L., and claimed to proceed with the arbitration on that basis.
It is common ground that the question of whether or not R.O.L. was a party to the contract and thus bound by the arbitration clause is not a matter which can be the subject of arbitration under the clause, so that R.O.L. was left with a limited number of options. They could ignore the arbitration altogether and rely upon successfully resisting the enforcement of any award made on the ground that it was, quite simply, a nullity. That requires both confidence and courage because if they turned out to be wrong in their contention, their case on the merits would have gone by default.
An alternative course might be to proceed with the arbitration without prejudice to their contention that they were not parties to the contract, but that could hardly be satisfactory because, all other considerations apart, they would be incurring substantial irrecoverable costs on a void arbitration if their contention ultimatedly turned out to be correct.
In the further alternative, they could await the award and then apply to the Court for a declaration that it was a nullity before G.O.I. sought to enforce it. Or they could—and this is what they in fact did—apply to the Court here and now for a declaration that they were not parties to the contract.
On the 17th November 1983 R.O.L. and L.P.R.C. together issued a Writ naming G.O.I., Mr Harris and Mr Baker-Harber as defendants, and claiming against them a declaration that L.P.R.C. and G.O.I. were the only parties to the contract, a declaration that the appointment of Mr Harris as Arbitrator in an arbitration between G.O.I. and R.O.L. was null and void, and an injunction to restrain all the defendants from taking any further step in the arbitration.
The Writ, although not specially indorsed, seems to have been treated as Points of Claim, and on the 31st January 1984 G.O.I. served Points of Defence and Counterclaim. Nothing turns on the Defence, but the Counterclaim did four things. First, it adopted the Defence and claimed a declaration that R.O.L. were party to the contract of affreightment, and no question arises as to that. Secondly it went on to plead a claim against R.O.L. for damages for breach of contract (i.e. the claim which they had sought to have dealt with by arbitration). Thirdly, and in the event of its being determined, contrary to their contention, that L.P.R.C. were the principals to the contract of affreightment, they pleaded the some case in damages against L.P.R.C.
Finally—and this is the point of real importance—they pleaded in that event a claim for damages against R.O.L. in tort, on the footing that R.O.L. had wrongfully procured the breach by L.P.R.C. of its contract with G.O.I.
On the 10th February 1984 the plaintiffs issued a summons, expressed to be without prejudice to their right if the matter were determined against them, to apply for a Stay under Section 1 of the Arbitration Act 1975, by which they claimed that the Counterclaim, except so far as it claimed a declaration that R.O.L. were parties to the contract, should be struck out on the grounds, first of all, of sovereign immunity, and secondly, pursuant to R.S.C. Order XV rule 5 of the inherent jurisdiction, on the ground that the Counterclaim ought to be brought by separate action, or was otherwise an abuse of the process of the Court.
They also claimed, without prejudice to their contention that they were not party to the contract, (a) that the action be stayed pursuant to Section 1 of the Arbitration Act 1975, and (b) an order adjourning consideration of that application until after determination of the questions of sovereign immunity, of whether R.O.L. was party to the contract, and of whether G.O.I. was entitled to proceed with its counterclaim. There were similar applications by L.P.R.C. for a Stay, and for striking out the counterclaim against them.
The Order in fact made by the learned Judge on that summons was a simple order dismissing the summons, but it is common ground that that does not fully implement his intentions. In fact the plaintiffs did not pursue the question of sovereign immunity on the hearing of the summons, and the learned Judge took the view that he ought not to decide that point at this stage. He did not in fact specifically adjourn it, but it is quite clear from his judgment that he contemplated that the matter of sovereign immunity should be dealt with on some further application in the proceedings. In so far, therefore, as the order made dismissing the summons might, on its face, suggest that that ground had been unsuccessfully argued by the plaintiffs so as to raise an issue of estoppel, it is misleading.
Equally, the learned Judge was clear that there could be no Stay under Section 1 of the Arbitration Act on R.O.L's application while they were still contending that they were not party to the Arbitration Agreement, and he adjourned that part of the...
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