Metal Scrap Trade Corporation Ltd v Kate Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Mackay of Clashfern,Lord Bridge of Harwich,Lord Brandon of Oakbrook,Lord Oliver of Aylmerton,Lord Goff of Chieveley |
| Judgment Date | 25 January 1990 |
| Judgment citation (vLex) | [1990] UKHL J0125-2 |
| Date | 25 January 1990 |
| Court | House of Lords |
[1990] UKHL J0125-2
House of Lords
Lord Chancellor
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Oliver of Aylmerton
Lord Goff of Chieveley
My Lords,
I have had the advantage of reading in draft the speeches to be delivered by my noble and learned friends Lord Bridge of Harwich, Lord Brandon of Oakbrook and Lord Goff of Chieveley.
I agree with the reasoning and conclusion in Lord Brandon's speech and also in the observations of Lord Bridge. I would like to emphasise two matters. I believe it is highly desirable that the question whether or not there was a concluded contract and if there was whether or not there was an arbitration clause included in it, should be decided before costs are incurred in the arbitration. Nothing in this decision puts any doubt upon that.
Secondly, I wish to emphasise that staying the counterclaim should not be taken to restrict in any way the manner in which the court may deal with it, once these questions have been determined. In particular I do not think the court would necessarily be restricted at that stage in the way suggested by my noble and learned friend Lord Goff of Chieveley. In the light of the full circumstances as they then emerge, it would remain open to the court then to strike out the counterclaim.
My Lords,
The circumstances giving rise to this appeal are fully examined in the speech of my noble and learned friend, Lord Brandon of Oakbrook, and I gratefully adopt his account.
The two primary issues in dispute are whether the parties concluded any binding contract at all and, if so, whether the contract incorporated an arbitration agreement. The respondents' originating summons seeks only a declaration that there was no arbitration agreement. The appellants, while resisting that declaration, seek by counterclaim a declaration that there was in any event a binding contract. These two issues are so closely interrelated that it would seem to me absurd that they should be determined by different tribunals. A party against whom English arbitration proceedings have been commenced and who invokes the jurisdiction of the English court by seeking a declaration that he was not a party to the alleged arbitration agreement cannot claim any special immunity from liability to a counterclaim. If the subject matter of the counterclaim is wholly unrelated to the subject matter of the claim, that may well be a ground for striking out the counterclaim under R.S.C. Ord. 28, r. 3. But where, as here, the subject matter of the claim and counterclaim are inseparably interconnected, the proposition that they ought to be disposed of in separate proceedings flies in the teeth of the common sense and common justice of the case.
The respondents are, however, entitled to insist that if, contrary to their primary contention, they are bound by an arbitration agreement, the remaining issues should be disposed of by arbitration and the stay proposed by my noble and learned friend Lord Brandon of Oakbrook will safeguard their position in this respect.
If the court which tries the primary issues concludes that there was no contract, that will be an end of the case. If it concludes that there was a binding arbitration agreement, the remaining issues will be disposed of by arbitration. It is only if the court concludes that there was a binding contract but no arbitration agreement that any further problem will arise as to how the remaining issues should be disposed of. By the time the court reaches that conclusion, if it does, it will know very much more than we know about what is likely to be involved in any further issues in dispute between the parties. It may well be that the court itself will then have learned so much about the case that it will be in a position to dispose of those further issues with little difficulty. But it will be open to the respondents at that stage to show, if they can, that the remaining issues can more conveniently be disposed of in another forum.
For these reasons and for those more fully deployed in the speech of my noble and learned friend Lord Brandon of Oakbrook, with which I agree, I would allow the appeal in the terms of the order which he proposes.
My Lords,
The appellants in this appeal are Kate Shipping Co. Ltd., a Maltese company, formerly the owners of the m.v. " Gladys." Their London solicitors are Zaiwalla & Co. ("Zaiwalla"). The respondents are Metal Scrap Trade Corporation Ltd., an Indian company, whose business is apparent from their name. Their London solicitors are Stocken & Lambert ("Stocken").
In the early part of August 1982 negotiations took place in Calcutta between the appellants through their agents, Westward Shipping Services Pvt. Ltd. and the respondents directly or through their agents, Intercon Transport Management Ltd., for the sale of the Gladys by the appellants to the respondents for scrap. There is a dispute between the parties as to whether these negotiations resulted in a concluded contract, and, if they did, as to whether such contract had incorporated into it by reference a clause providing that English law should apply to the contract and that all disputes arising under it should be decided by arbitration in the United Kingdom ("the disputed clause"). It is the appellants' contention, first, that the negotiations resulted in a concluded contract, and, secondly, that such contract incorporated the disputed clause. It is the respondents' primary contention that the negotiations did not result in a concluded contract at all, because they discovered at a late stage that the Gladys was a refrigerated vessel, which they did not want, and that in consequence of that they broke off the negotiations before any contract had been concluded. The respondents contend in the alternative that, if a contract was concluded, it did not incorporate the disputed clause.
Your Lordships do not have to decide in this appeal which of the contentions of the parties in respect of these matters should prevail. It is sufficient to say that both parties have been treated throughout, rightly in my view, as having an arguable case which they are entitled to have tried. In what follows I shall for convenience refer to the appellants as "the sellers" and to the respondents as "the buyers," without prejudice to the respondents' contention that there was no concluded contract.
The buyers having denied the existence of a concluded contract, the sellers on 9 September 1982 purported to treat such denial as a repudiation and claimed to be entitled to damages for it. On the same day they appointed Mr. Bruce Harris, a distinguished London arbitrator, as their arbitrator in the dispute, and called upon the buyers to appoint their own arbitrator. On 25 October 1982 the buyers appointed Mr. Cedric Barclay, another distinguished London arbitrator who regrettably died earlier this year, as their arbitrator. That appointment was expressly made by the buyers without prejudice to their right to contend that there was no concluded contract, or that, if there was, it did not incorporate any arbitration agreement. More than two years later, on 13 November 1984, the sellers served points of claim in the arbitration, in which they claimed somewhat over $160,000 as damages for wrongful repudiation and interest.
On 15 February 1985 the buyers through Stocken issued an originating summons against the sellers in the Commercial Court in London. By that originating summons the buyers claimed:
"… a declaration that Mr. Cedric Barclay and Mr. Bruce Harris, the arbitrators appointed by the plaintiffs and the defendants respectively, have no jurisdiction to act in and about the dispute between the parties in respect of the vessel Gladys, by reason that there was no arbitration agreement made between the parties."
The claim so formulated was imprecise in that it did not indicate whether the buyers were claiming that there was no contract between the parties at all, or that there was a contract but no arbitration agreement in respect of disputes arising under it. The originating summons was, however, supported by an affidavit of Mr. Asthana, a partner in Stocken, which made clear the alternative cases sought to be made by the buyers: first, that there was no contract; and, secondly, that, if there was, it did not incorporate an arbitration agreement.
There is one further aspect of the buyers' stance to which it is important to draw attention. This is that, while they put forward the two alternative cases referred to above, they wished, if both such cases were to be decided against them, to have the sellers' claim against them determined in the arbitration which had already been begun, and not by any court either in England or elsewhere.
The sellers did not file any evidence in answer to Mr. Asthana's affidavit. Instead on 5 September 1985 they purported to serve points of counterclaim in the proceedings begun by the buyers' originating summons. I say "purported to serve" because, as will be apparent later, they were not entitled, under the relevant rules of court, to serve a counterclaim without a direction of the court authorising them to do so. In their points of counterclaim the sellers repeated substantially the averments which they had made in their points of claim in the arbitration with regard to the making of the contract, its repudiation by the buyers and the consequent loss suffered by the sellers. In the prayer of the pleading the sellers counterclaimed (1) a declaration that the buyers entered into a contract with the sellers to buy the Gladys at a price of U.S.$83 per ton, (2) damages for repudiation of such contract and (3) interest. At the same time as the points of...
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