Metal Scrap Trade Corporation Ltd v Kate Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,LORD JUSTICE PARKER,LORD JUSTICE FOX |
| Judgment Date | 30 March 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0330-9 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 March 1988 |
| Docket Number | 88/0305 |
[1988] EWCA Civ J0330-9
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR. JUSTICE STEYN
Royal Courts of Justice
Lord Justice Fox
Lord Justice Parker
and
Lord Justice Staughton
88/0305
MR. S. BRODIE Q.C. and MR. P.G. CALDIN (instructed by Messrs Stockton & Lambert) appeared on behalf of the Appellant (Plaintiff
MR. A. COLMAN Q.C. and MR. S.R. CROOKENDEN (instructed by Messrs Zaiwalla & Co.) appeared on behalf of the Respondent (Defendant).
In this appeal Metal Scrap Trade Corporation Limited, an Indian corporation, feature as respondents in the proposed arbitration, plaintiffs in the court below, appellants in this court and buyers (so it is said) of the vessel "Gladys". Without prejudice to the question whether there was any contract of sale I shall call them "the buyers". Kate Shipping Company Limited, a Maltese Corporation with an address in Dubai, feature as claimants in the proposed arbitration, defendants in this action, respondents in this court and sellers of the vessel "Gladys". I shall call them "the sellers".
There is a dispute between the parties as to whether a contract of sale was ever made. If there was such a contract, there may be a dispute as to whether the buyers repudiated it, although at present it seems unlikely that there will be any issue as to that. Thirdly, there may well be a dispute as to the loss which the sellers claim to have suffered in consequence, amounting to $161,182.77 and interest from October 1982.
None of those three questions falls to be decided today.
There is also a dispute as to whether the contract, if there was one, incorporated an arbitration clause. That too does not fall to be decided today. What does fall to be decided, over five years after the events in question, is whether Steyn J. was right to permit, as he did by his order of 2nd May 1986, an action in the Commercial Court which would decide (if and when it eventually comes to trial) all the issues between the parties.
The facts giving rise to this procedural wrangle are as follows. On or about 7th August 1982 the sellers say that a contract was concluded, partly orally and partly in writing, for the sale of m.v. "Gladys" by the sellers to the buyers. In the negotiations it is said that Westward Shipping Services Private Limited of Calcutta acted as brokers or agents for one party or the other, and that Intercon Transport Management Limited (apparently an English company) acted as agents for the sellers. It is said to have been agreed that the contract should be on the same terms as those arranged for the sale of another vessel, "Intra Spray", in January 1982, "with logical amendments". That contract had been on the Norwegian sale form with a good deal of alteration, and contained the term
"If any dispute should arise in connection with the interpretation and fulfilment of this contract, same shall be decided by arbitration in the city of United Kingdom, English law to apply…"
The parties had there been a shade cavalier in the amendment they made to the printed form.
Within a day or two the buyers decided that they did not want the "Gladys", ostensibly on the ground that she was a refrigerated vessel. That attitude was communicated to the sellers. On 9th September 1982 the sellers say that they accepted the buyers' conduct as a repudiation of the contract; and they claim to have suffered loss on a subsequent sale of the vessel to others.
On 9th October 1982 the sellers appointed Mr. Bruce Harris as arbitrator. Their telex to the buyers continued:
"You are therefore called upon to confirm your acceptance of Mr. Harris as sole arbitrator or to appoint your arbitrator within 14 days of receipt of this notice failing which we shall request the London Maritime Arbitrators Association to appoint an arbitrator on your behalf in the reference".
That accorded with further provisions in the arbitration clause in the "Intra Spray" contract, which I have already quoted in part.
Seeing that the buyers wished to contend that there was no contract, or at any rate no arbitration clause, they then had a decision to take. The choice open to them is set out in Mustill and Boyd on Commercial Arbitration p. 513:
A. In a clear case, the party who alleges the excess of jurisdiction may seek to restrain the proceedings by an injunction.
B. The party may start an action in the High Court for a declaration that the arbitrator does not possess the jurisdiction which is being asserted.
C. In certain circumstances, the arbitrator may, of his own motion or at the initiative of a party, invite the High Court to decide whether he possesses the disputed jurisdiction.
D. The arbitrator can, and should, conduct his own enquiries into the extent of his jurisdiction, although such enquiries will not as a rule have any binding force.
E. The complaining party can make his objection known, and then bide his time until the award has been made, afterwards either attacking the award by a declaratory action or a motion to set aside the award, or by resisting enforcement of the award on the basis that there was an excess of jurisdiction.
See also Republic of Liberia v. Gulf Oceanic Inc. (1985) 1 L1.R. 539 per Oliver L.J. at p.541:
"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 within 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 ultimately 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".
There is another solution to the problem which is sometimes adopted. This is to make an ad hoc submission, conferring on the arbitrators jurisdiction to decide if there is a contract. But that depends on agreement of the parties.
The buyers eventually chose two of those measures, as they were entitled to do. On 25th October 1982 their solicitors sent a telex to the sellers' agents:
"We act on behalf of Metal Scrap Trade Corporation Ltd, Calcutta. Our client informs us that you have appointed Mr Bruce Harris as arbitrator for Kate Shipping Co. Ltd in connection with alleged dispute with our clients.
Please note that we have appointed Mr. C. Barclay of 139 Sloane Street London SW1 as our clients' arbitrator. Please note that the appointment of Mr. Barclay is not to be treated as a waiver of any defence that our clients may have inter alia in relation to. the appointment of Mr Bruce Harris as your principal's arbitrator. Further, Mr Barclay has been appointed without prejudice to our clients' rights to contend that there is no contract and/or arbitration agreement between the parties".
Two years later, on 13th November 1984, the sellers' solicitors served points of claim in the arbitration. That perhaps caused the buyers' solicitors to take their second measure, which was to issue an originating summons in the Commercial Court on 15th February 1985. The relief which they claimed was as follows:
"The Plaintiffs claim against the Defendants a declaration that Mr. Cedric Barclay and Mr. Bruce Harris, the arbitrators appointed by the Plaintiffs and 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".
I suppose that the sellers' solicitors entered an acknowledgment of service. On 13th March 1985 the buyers' solicitor swore an affidavit, asserting (on information and belief) that there was no contract, or at any rate no arbitration agreement.
"6. Upon the particulars provided by Westward, the Plaintiffs selected the "GLADYS" among nine other vessels and I am instructed that in oral discussions on Saturday, the 7th August 1982 between the Plaintiffs (who were unaware that the vessel was a reefer or part-reefer vessel) and Westward, the Defendants' brokers, the Plaintiffs agreed in principle to buy the vessel, subject to terms to be agreed.
7. On the next working day, Monday the 9th August 1982, the Plaintiffs came to know from market sources that the vessel was a reefer vessel. After checking with Westward that the vessel was such a vessel, they informed Westward orally that they were no longer interested in buying her. The Defendants have treated that as a repudiation of a binding contract and appointed an arbitrator in connection therewith.
8. Whether or not the discussions of the 7th August 1982 concluded in a binding contract (as to which the Plaintiffs' case is that they did not), I am instructed that the question of...
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