Petroleo Brasiliero SA v Mellitus Shipping Inc.
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE POTTER,LORD JUSTICE JONATHAN PARKER,LORD JUSTICE SEDLEY |
| Judgment Date | 29 March 2001 |
| Neutral Citation | [2001] EWCA Civ 418 |
| Docket Number | Case No: QBCMF 2000/2211/A3 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 March 2001 |
[2001] EWCA Civ 418
Lord Justice Potter
Lord Justice Sedley and
Lord Justice Jonathan Parker
Case No: QBCMF 2000/2211/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
(MR JUSTICE LONGMORE)
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Gaisman QC and Stephen Kenny Esquire (instructed by Messrs Richards Butler, London, for Saudi Arabian Marketing and Refining Company)
Iain Milligan QC and Michael Coburn Esquire (instructed by Messrs Middleton Potts, London, for Fortum Oil and Gas (formerly Neste Oy))
INTRODUCTION
In these two appeals, raising identical issues, the appellants and fourth party ("Saudi Aramco"), who are in each case defendants to a Part 20 claim for contribution by the respondents and third party ("Fortum"), appeal against orders to similar effect made by Longmore J on 10 April 2000, whereby he (inter alia) dismissed Saudi Aramco's applications to set aside Fortum's Part 20 claims and/or service of those claims out of the jurisdiction upon Saudi Aramco and, in consequence, also ordered that Saudi Aramco pay one half of Fortum's costs of the application in the first action (1998 Folio 645) and the whole of Fortum's costs of the application in the second action (1998 Folio 856).
The actions concern two shipments of propane each carried on the vessel "Baltic Flame" in April and November 1993 respectively. The parties and the factual allegations in each action are essentially the same. Saudi Aramco was the shipper of both cargoes and the original party to the Bills of Lading under which they were carried. Both cargoes were shipped from Yanbu in Saudi Arabia, six Bills of Lading being issued, dated 9 April 1993, in respect of the April cargo and one only, dated 16 November 1993, in respect of the November cargo.
Both cargoes were tested on loading and found to be "on specification". However when they arrived at their intended ports of discharge, both cargoes failed copper strip corrosion tests. As a result the cargoes had to be carried on to other discharge facilities and sold at a discount by their intended receivers ("Petrobras"), who are the plaintiffs in each action. Further, as a result of the apparent contamination of the shipments, the shipowners ("Mellitus"), who are the defendants in the actions, lost time and incurred expenses at the discharge ports and elsewhere, and incurred further costs in cleaning and removing residues of the cargoes from the vessel's tanks after each carriage.
THE PARTIES AND THE ISSUES
In the first action (relating to the April shipment) and the second action (relating to the November shipment) Petrobras claimed as lawful holders of the Bills of Lading against Mellitus as owners of the vessel, alleging that the cargo was contaminated during the voyage from Yanbu. Petrobras also claimed in respect of demurrage which it alleged it became liable to pay to the charterers of the vessel.
Mellitus counterclaimed against Petrobras on the basis that the cargo was contaminated on shipment and that Petrobras, as lawful holder of the Bills of Lading, was liable under the contracts of carriage contained therein for the loading of a dangerous/injurious cargo. The counterclaim was in respect of time lost and bunkers and stores used in removing residues and cleaning tanks after each carriage ("the tank-cleaning costs"), which were US$585,610 in the first action and US$180,608 in the second action..
Mellitus also issued Third Party/Part 20 proceedings against the time-charterer of the vessel ("Fortum"), claiming a contractual indemnity and/or damages in respect of any liability that Mellitus might be under to Petrobras and also for the tank cleaning costs. The indemnity was claimed on the basis that the liability to pay Petrobras (if any) and the incurring of the tank-cleaning costs were caused by compliance with Fortum's orders as time-charterer. Damages were also claimed for various breaches of express and implied terms of the time-charter.
Mellitus also issued Third Party/Part 20 proceedings against Saudi Aramco as the shipper and original party to the Bills of Lading, claiming damages on a similar basis to its counterclaim against Petrobras, namely that the cargo was contaminated on shipment and that Saudi Aramco as shipper was, and remains, liable under the Bill of Lading contracts for having loaded a dangerous/injurious cargo.
The Bill of Lading contracts pursuant to which Mellitus claimed damages against Saudi Aramco expressly incorporated the terms of charterparties including the arbitration clauses. The relevant charterparties were in the Asbatankvoy form, additional clause 33 of which provided for LMAA arbitration in London before a panel of three arbitrators, the contract being governed by English law. Accordingly, on 27 September 1999 a consent order was made staying Mellitus' Part 20 proceedings against Saudi Aramco.
At a case management conference on 22 October 1999, Fortum obtained permission to serve its own Part 20 claim forms in both actions upon Saudi Aramco out of the jurisdiction. The order was made on the basis that Saudi Aramco was a "necessary or proper party" to the proceedings within the meaning of RSC Order 11 rule 1(1)(c) because, to the extent that Fortum is liable to Mellitus under its time-charter, then so too must Saudi Aramco be liable to Mellitus under the Bills of Lading, thus entitling Fortum to claim a contribution from Saudi Aramco under s.1 of the Civil Liability (Contribution) Act 1978 ("The 1978 Act"). At the time the order for leave was made, the attention of the court was specifically drawn to the fact that the Part 20 proceedings commenced by Mellitus against Saudi Aramco had been made subject to a stay on the grounds that Mellitus' claim against Saudi Aramco was one which had been referred to arbitration pursuant to s.9 of the Arbitration Act 1996.
SAUDI ARAMCO'S APPLICATIONS
By notices of application dated 5th January 2000, Saudi Aramco challenged the jurisdiction of the court and applied to set aside Fortum's Part 20 Claim Forms and/or service of them on the grounds that Saudi Aramco was not a proper party to the proceedings within RSC Order 11 rule 1(1)(c) and/or the court should in any event exercise its discretion to set aside jurisdiction on the basis that it was not a proper case for service out: see Order 11 rule 4(2). It submitted in broad terms, and upon the particular facts, that the interests of justice did not require that Saudi Aramco as a foreign party should be brought to England to answer Fortum's claims for contribution.
The submissions of Saudi Aramco to the judge, repeated in this court, may be summarised as follows.
(1) The exercise of jurisdiction under RSC Order 11 is "exorbitant" ("i.e., it is one which, under general English conflict of rules, an English court would not recognise as possessed by any foreign court": per Lord Diplock in Amin Rasheed v Kuwait Insurers [1984] AC 50 at 65); thus it ought to be exercised with care.
(2) The power to join necessary or proper parties under RSC Order 11 rule 1(1)(c) needs to be exercised with "special care" because the cause of action may have no connection whatsoever with England: see ( Dicey & Morris: Conflict of Laws 13th Ed.) Vol. 1 p.315, citing The Brabo [1949] AC 326 per Lord Porter at 338–9 and per Lord Normand at 357; see also Multinational Gas & Petrochemical Co. v Multinational Gas & Petrochemical Services Ltd [1983] Ch.258 per May L.J. at 271E and per Dillon L.J. at 292C-D and Arab Monetary Fund –v—Hashim (No 4) [1992] 1 WLR 553 at 557.
(3) Because the notion of a "proper" party represents a wide class of persons and because Order 11 rule 1(1)(c) lacks formal control to prevent the inappropriate joinder of foreign parties, a careful weighing of the applicable discretion by the court is necessary, particularly where the claim against the foreigner is a contingent claim in the nature of third, or as here, fourth party proceedings.
(4) The operation of the 1978, Act in combination with Order 11 rule 1(1)(c), creates the possibility of joinder of a foreign party to answer a claim in contribution where that party could not be sued directly by the plaintiff who has suffered the original damage in respect of which contribution is sought, e.g. where (as in this case) it has been agreed that the primary liability should be the subject of arbitration.
(5) If the foreign party is joined to meet a possible secondary liability by way of contribution, his primary liability to the person who has suffered damage will in effect (if not in strict...
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