Liberian Shipping Corporation "Pegasus" v A. King & Sons Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE HARMAN,LORD JUSTICE SALMON,THE MASTER of THE ROLLS |
| Judgment Date | 19 January 1967 |
| Judgment citation (vLex) | [1967] EWCA Civ J0119-2 |
| Date | 19 January 1967 |
| Court | Court of Appeal (Civil Division) |
[1967] EWCA Civ J0119-2
The Master of the Rolls
(Lord Denning)
Lord Justice Harman and
Lord Justice Salmon
In The Supreme Court of Judicature
Court of Appeal
Civil Division
From Mr Justice Donaldson
MR A. E. J. DIAMOND (instructed by Messrs Holman, Fenwick & Willam) appeared as Counsel for the Appellants.
MR B. J. DAVENPORT (instructed by Messrs Bentleys, Stokes & Lowless) appeared as Counsel for the Respondents.
The question here is whether the owners of a ship are barred by a time limit. The charterparty contained an arbitration clause in the Centrocon form. It imposed a three months time limit. The claimants were nine days out of time in demanding an arbitration. They seek to have the time extended under Section 27 of the Arbitration Act of 1950 on the ground that it would be undue hardship for them to be time-barred
The clause in this charterparty is this: "Any claim must be made in writing and claimant's arbitrator appointed within three months of final discharge, and where this provision is not complied with, the claim shall be deemed to be waived and absolutely barred".
Section 27 of the Arbitration Act 1950 says: "Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms, if any, as the justice of the case may require, but without prejudice to the provisions of any enactment limiting the time for the commencement of arbitration proceedings, extend the time for such period as it thinks proper".
The facts are these: The owners of the motor vessel "Pegasus" on the 15th November, 1965, let it out on a voyage charterparty whereby the vessel was to load a cargo of scrap and turnings at Great Yarmouth and carry it to Italy to be discharged at La Spezia as the first port and Portici as the second port. On the 15th January, 1966, the "Pegasus" was at Great Yarmouth and started loading. After Nos. 1 and 2 holdshad been loaded with this swarf, as it is sometimes called, there was spontaneous combustion. It went up in flames. The fire brigades, after considerable efforts, managed to put out the fire in those two holds. The swarf was discharged. Other cargo was loaded. The loading was finished on the 17th February, 1966. The vessel left Great Yarmouth and went out to La Spezia. There was some delay. The ship went on to Portici. She could not enter because the depth of water was not sufficient. So she had to go on to a nearby port called Pozzuoli. Eventually the cargo was discharged - and this is the important date - on the 26th March, 1966. Under the Centrocon clause either party had three months in which to make a claim and appoint an arbitrator. So the three months would expire on the 26th June, 1966.
There were claims on both sides. The owners claimed £2,000 demurrage for the delay caused to their vessel by the fire at Great Yarmouth. They asserted a lien for it and it was paid. They also asserted that the vessel itself was damaged by the fire. The inside of the vessel was damaged. And they indicated that the outside was damaged also. In a letter they said that, as a result of the fire-fighting, "the ship broke her mooring wires, and it is highly possible that the rudder, propeller and ship's structure below waterline also suffered damage" In addition, the owners claimed for delay at La Spezia and Pozzuoli. On the other hand, there were cross-claims by the charterers. They said that they were put to expense by reason of the failure to discharge at Portici, and having to arrange transport from Pozzuoli
In view of the cross-claims, a meeting was suggested. The owners' representative, Mr Krapp, who was at Rotterdam, offered to come over from Rotterdam to discuss the matter with the charterers' representatives here. On the 23rd May, 1966, the charterers said: "We feel very strongly that both ourselves and owners have been victims of this most unfortunate fire. Ithas cost us something like £30,000, most of which may never be recovered. We do not doubt that for owners it has likewise been a misfortune. Therefore, whilst maintaining adamantly our position as indicated in this and previous letters, we have no objection to meeting Mr Krapp in London or Norwich and seeing if we cannot put our heads together, as companions in misfortune, to dispose of all these troubles without further endless correspondence". There were one or two further letters. Eventually a letter was written by the charterers on the 10th June in these terms: "Finally, we would again repeat that we are all victims of the tragic fire on the 'Pegasus'. We are anxious to show goodwill where possible and are quite happy to meet Mr Krapp in England to see if we cannot settle everything amicably. Please try and arrange such an appointment but you must make it clear to Mr Krapp that his present bulldozing arguments will not influence us favorably". That was on the 10th June. The three months weald be up on the 26th June. Under the Centrocon clause the party had to appoint his arbitrator by that time or be barred absolutely.
After the 10th June there were telephone conversations, culminating on the 23rd June, a Thursday, with an arrangement by telephone that Mr Krapp should come over to London and discuss the matter with the charterers' representatives on Monday, 27th June. That would be one day after the three months had expired. The meeting was in fact held on that day. There was a discussion for some three hours at which the various claims and counterclaims were discussed. No settlement was reached. The owners suggested arbitration, but the charterers said they did not like arbitration as it was an expensive process. At the end of the meeting it was left that the charterers might make a proposal to settle the outstanding disputes. That meeting was held on the 27th June, one day after the three months had expired. Both sides had, it appears, overlooked the point about the time.
No offer was forthcoming. The owners became anxious. On the 6th July they put the matter before the Protection and Indemnity Association, who immediately were aware of the time limit. On the same day, that is about nine days after the time limit expired, their representative telephoned the charterers asking that the time limit be extended by agreement. It was not extended by agreement. At once the owners' solicitors applied to the Court for an extension of time under Section 27 of the Arbitration Act. It was heard by Master Lawrence on the 27th July. He extended the time. The charterers appealed to Mr Justice Donaldson, who is very experienced in commercial matters. He considered the authorities; and held that owing to the restricted manner in which the Courts have interpreted Section 27 (about undue hardship), the tine should not be extended. He said; "I accept that there is hardship but within the narrow meaning of 'undue hardship', this case does not come within a mile of it". If his judgment stands, it means that the claim is absolutely barred because the owners were nine days out of time
After Master Lawrence extended the time, the ship was in dry dock for an annual overhaul. It was discovered that there was a great deal of damage to the bottom, costing about £25,000 to £30,000 to put right. The owners say it is due to the grounding during the fire, and seek to claim for it. They also claim for the damage to the inside of the vessel which they put at £5,000. They have, in addition, the claims for delay. Are these claims all barred, or can the time be extended.
We have been referred to the cases on this subject. The Courts have on occasion given a narrow meaning to "undue hardship". Thus in Sigalae in 1958, 2 Lloyd's List Reports, page 301, Lord Parker said: "The powers of this Court to extend the time, though discretionary, are only exercised in very restricted cases". In that case the owners were only two dayslate, but the Court did not extend the time.
Mr Davenport, in his excellent argument, supported these cases by saying that commercial men must know where they stand; and that, as soon as the three months are up, they are entitled to consider that all claims are barred save in very exceptional circumstances. He said exceptional circumstances would exist when the claimant was not at fault at all, as, for instance, where the claimant did not know he had a claim within three months and could not reasonably be expected to know: such as goods afterwards discovered not to be up to sample; or late claims by third parties. But if the claimant was at fault himself in not reading the clause, or forgetting about it, or overlooking it, the time should not be extended.
It does appear that in the past the Courts have been inclined to use this argument: The words used in the statute are "undue hardship". A "hardship" by itself is something severe which is hard to endure. It is always a "hardship" to be barred by a time limit. If a man does not read the contract and is a day or two late, it is a "hardship", but it is not an "undue hardship": because it is his own fault.
I cannot accept this narrow interpretation of the statute. These time-limit clauses used to operate most unjustly. Claimants used to find their claims barred when, by some oversight, they were only a day or two late. In order to avoid that injustice, the legislature intervened so as to...
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