Skips A/S Nordheim v Syrian Petroleum Company Ltd (Varenna)

JurisdictionEngland & Wales
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE OLIVER,LORD JUSTICE WATKINS
Judgment Date05 October 1983
Judgment citation (vLex)[1983] EWCA Civ J1005-1
Docket Number83/0379
CourtCourt of Appeal (Civil Division)
Date05 October 1983
Skips A/S Nordheim and Others
(Plaintiffs) Respondents
and
Syrian Petroleum Company
(First Defendants)

and

Petrofina S.A.
(Second Defendant) Appellants

[1983] EWCA Civ J1005-1

Before:

The Master of the Rolls

(Sir John Donaldson)

Lord Justice Oliver

and

Lord Justice Watkins

83/0379

1982 S. No. 1151

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 HOBHOUSE)

Royal Courts of Justice

MR. DAVID JOHNSON, Q.C. and MR. TIMOTHY YOUNG (instructed by Messrs. Sinclair, Roche & Temperley) appeared on behalf of the (Plaintiffs) Respondents.

MR. ANTHONY EVANS, Q.C. and MR. J.N. GRUDER (instructed by Messrs. Ince & Co.) appeared on behalf of the (Second Defendants) Appellants.

THE MASTER OF THE ROLLS
1

In this appeal there appear to be four parties in two groups. First there are the appellants and the respondents. The appellants, the second defendants in the action, were holders of a bill of lading relating to a quantity of crude oil of which they took delivery in West Germany. The respondents, the plaintiffs in the action, were owners of the m/s "Varenna" in which the oil was carried. The plaintiffs by their writ claimed demurrage alleged to be due under the terms of the bill of lading contract. The second defendants sought a stay of the action upon the grounds that the bill of lading contract contained an arbitration clause by incorporation from the charterparty.

2

The dispute is not entirely, or even mainly, about who shall resolve the disputed claim for demurrage. The commercial point, with which we are not concerned, is somewhat different. The second defendants say that they put the charterers in funds to pay the demurrage in question and that the charterers went into liquidation before paying the plaintiffs. They can avoid paying twice if the plaintiffs are obliged to arbitrate, because they can then pray in aid a time bar.

3

The second pair of parties to this appeal appear to be Mr. Justice Staughton and Mr. Justice Hobhouse. At all events, the appeal has been presented on the basis that the decision of Mr. Justice Hobhouse in the present case cannot stand with that of Mr. Justice Staughton in Astro Valiente Compania Naviera S.A. v. Government of Pakistan (1982) 1 Weekly Law Reports 1096 and Mr. Justice Hobhouse in terms declined to follow it.

4

The issue, in a nutshell, is whether the wording of the bill of lading is apt to introduce the provisions of the charterparty arbitration clause (clause 46) and apply it to the bill of lading contract.

5

The terms of the bill of lading, so far as is material, were as follows:

"SHIPPED in apparent good order and condition…[a quantity of crude oil in bulk]…and to be delivered (subject to the undermentioned conditions and exception) in like good order and condition at the port of Wilhelmshaven—West Germany or as near thereto as she may safely get (always afloat) unto Order PETROFINA S.A. or to their assigns upon payment of freight as per Charter party, all conditions and exceptions of which Charter party including the negligence clause, are deemed to be incorporated in Bill of Lading."

6

Any summary of Mr. Justice Hobhouse's detailed review of the authorities would do it less than justice, but his conclusion is contained in two sentences:

"The correct construction of the present bill of lading therefore is that when it refers to conditions it refers only to conditions properly so called to be performed by the consignee on the arrival of the vessel. On no view is an arbitration clause such a condition."

7

The contrary view, urged by the appellants, is that "conditions" in context is a term which is wide enough to incorporate all the provisions of the charterparty, albeit some will thereafter have to be rejected as inappropriate. The appellants then submit that although the arbitration clause is itself inappropriate, since it refers to "disputes arising under this charter" and to the "owners and charterers" each appointing an arbitrator, clause 44 justifies all necessary modifications to make it appropriate, since that clause requires that all bills of lading issued pursuant to the charterparty "shall incorporate by reference all terms and conditions of this charter including the terms of the arbitration clause and shall contain the following Paramount clause…" The respondents retort that under clause 33 it is expressly provided that bills of lading are to be signed as charterers direct without prejudice to this charter and that the charterers must be deemed to have exercised this power and directed the master to sign bills of lading which excluded the arbitration clause.

8

The starting point for the resolution of this dispute must be the contract contained in or evidenced by the bill of lading, for this is the only contract to which the respondent shipowners and the appellant receivers are both parties. What the respondents agreed with the charterers, whether in the charterparty or otherwise, is wholly irrelevant, save in so far as the whole or part of any such agreement has become part of the bill of lading contract. Such an incorporation cannot be achieved by agreement between the owners and the charterers. It can only be achieved by the agreement of the parties to the bill of lading contract and thus the operative words of incorporation must be found in the bill of lading itself.

9

Operative words of incorporation may be precise or general, narrow or wide. Where they are general, and in particular where they are general and wide, they may have the effect of incorporating more than can make any sense in the context of an agreement governing the rights and liabilities of the shipowner and of the bill of lading holder. In such circumstances, what one might describe as "surplus", "insensible" or "inconsistent" provisions fall to be "dis-incorporated", "rejected" or ignored as "surplusage". But the starting point must always be the provisions of the bill of lading contract producing the initial incorporation. And what must be sought is incorporation, not notice of the existence or terms of another contract which is not incorporated (see Manchester Trusts v. Furness (1895) 2 Queen's Bench 539).

10

In the Astro Valiente ( supra) at page 1098 Mr. Justice Staughton referred to the variety of incorporating words which have been judicially considered over the past 90 years or more and said: "If one looks at the cases, it appears to depend on whether the words of incorporation used are 'conditions', 'terms', 'clauses' or 'exceptions', or any combination of the four; and perhaps on whether such words are used in conjunction with the participial phrase 'he or they paying freight as per charterparty'". He continued: "…such nice distinctions are in my judgment not wholly appropriate to commercial relationship, and should if possible be avoided. So too should the interpretation of an ordinary English word 'conditions' in a sense different from that which it naturally bears, particularly in a document which may well not be prepared by a lawyer, or at any rate by an English lawyer."

11

In principle I have considerable sympathy with this view, but this is a corner of the law where the commercial customers—shipowners, shippers and receivers—attach supreme importance to certainty and where particular phrases have established meanings and effects it is not the policy of the law to seek to change them even if, in the absence of precedent, there would be a case for so doing.

12

The appellants submit that the phrase "all conditions and exceptions…including the negligence clause" are very wide words of incorporation and indeed are all-embracing. Accordingly they entitle the court to incorporate the whole charterparty into the bill of lading contract and then to proceed to eliminate inconsistent or insensible provisions. They are however faced with two obstacles. The first is that an arbitration clause is not an "exception". They must therefore rely upon the words "all conditions" as words of incorporation. The second is that "conditions" in the context of incorporating charterparty provisions into a bill of lading contract has been the subject of considerable judicial consideration and the conclusions reached, unless distinguishable, fully support the decision of Mr. Justice Hobhouse.

13

In T.W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd. (1912) Appeal Cases 1, there were two separate paragraphs relied upon as incorporating an arbitration clause. The first was "[the consignee] paying freight for the said goods, with other conditions as per charterparty with average accustomed". The second was "Deck load at shippers' risk, and all other terms and conditions and exceptions of charter to be as per charterparty, including negligence clause". Earlier authorities had established that a reference to "other conditions" coupled with the obligation to pay freight only incorporated such of the charterparty conditions as were to be performed by the consignee ( Grey v. Carr LR 6 QB 522 and Serraino & Sons v. Campbell (1891) 1 Queen's Bench 283). In this situation Leslie Scott, K.C., later Lord Justice Scott, who was a specialist in this branch of the law, did not argue that these decisions were wrong, but that they were distinguishable. The suggested ground of distinction was that the deckload paragraph was divorced from the provision referring to the payment of freight. From this it followed, as he submitted, that the ejusdem generis considerations which restricted the ambit of "conditions" in the context of payment of freight and taking delivery did not apply and the word should have a wider meaning. He also relied upon the presence of a cesser...

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27 cases
2 books & journal articles
  • Third party rights under shipping contracts in English and South African law
    • South Africa
    • Juta South Africa Mercantile Law Journal No. , May 2019
    • 25 May 2019
    ...TW Thomas & Co Ltd v Portsea Steamship Co [1912] AC 1 (HL). But see more recently Skips Al S Nordheim v Syrian Petroleum Co (The Varenna) [1984] QB 599 (CA) and Miramar Maritime Corp v Holborn Oil Trading Ltd (The Miramar) [1984] 1 AC 676 (HL). 126 Supra note 23. 127 Supra note 23 at 15A—C.......
  • Arbitration
    • Singapore
    • Singapore Academy of Law Annual Review No. 2012, December 2012
    • 1 December 2012
    ...Pte Ltd v United Eng Contractors Pte Ltd[2000] 2 SLR(R) 852 at [9], citing Skips A/S Nordheim v Syrian Petroleum Co Ltd, The Varenna[1984] QB 599; [1983] 3 All ER 645. Singapore courts have for some time tended to construe words of incorporation restrictively: see Star-Trans Far East Pte Lt......

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