Union of India v E B Aaby's Rederi A/S (Evje)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE MEGAW,LORD JUSTICE SCARMAN |
| Judgment Date | 19 March 1973 |
| Judgment citation (vLex) | [1973] EWCA Civ J0319-3 |
| Date | 19 March 1973 |
| Court | Court of Appeal (Civil Division) |
[1973] EWCA Civ J0319-3
The Master of the Rolls (Lord Denning),
Lord Justice Megaw and
Lord Justice Scarman
In The Supreme Court of Judicature
Court of Appeal
Revised.
Appeal (by leave of Mr. Justice Mocatta) of defendants from judgment of Mr. Justice Mocatta on 9th March 1972.
Mr. ROBERT GOFF, Q. C., and Mr. JOHN HOBHOUN(instructed by Messrs. Stocken & Co.) appeared on behalf of the appellant defendant.
Mr. CHRISTOPHER STAUGHTON, and Mr. DAVID JONHSON (instructed by Messrs. William A. Crump & Son) appeared on behalf of the Respondent Plaintiffs.
On 14th January 1966 the owners of the Norwegian motor vessel "Evje" let her on charter to the Government of India. The ship was to go to a port on the Western seaboard of the North American continent and there collect wheat in bulk and carry it to India to discharge either at Bombay or at Kandla. The clauses which are material in the present case are two: clause 2, which deals with general average:
"'General Average' shall be payable according to York/Antwerp Rules 1950 and to be settled in London," followed by a long sentence (the Jason clause) which says that "if the owner shall have exercised due diligence to make the vessel in all respects seaworthy…. the owners of the cargo shall contribute with the shipowner in general average."
Next the Centrocon arbitration clause (amended), which is set out in full:-
"All disputes from time to time arising out of this contact shall, unless the parties agree forthwith on a single Arbitrator, be referred to the final arbitrament of two Arbitrators carrying on business in London, who shall be Members of The Baltic and engaged in the Shipping and/or Grain trades, one to be appointed by each of the parties, with power to such Arbitrators to appoint an Umpire. Any claim must be made in writing and Claimant's arbitrator appointed within twelve (12) months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred."
They are very familiar clauses in a charterparty. The bill of lading contained the same clauses.
The vessel loaded a cargo of wheat at Portland, Oregon. On 23rd January 1966 it left for Bombay, It was to call atYokohama in Japan for bunkers. Unfortunately, when it was a good way across the Pacific, on 12th February 1966 it ran out of bunkers and stopped. It was in mid ocean and in peril. The Masts cabled to Japan for a tug. The tug came and towed her for a while. Afterwards on 17th February 1966 the tug managed to supply her with some bunkers and she made her own way unasisted. She arrived at Yokohama on 18th February 1966. There she was re-fueled. She arrived at Bombay on 8th March 1966. The cargo was discharged and completed on 12th inarch 1966.
Meanwhile, while the vessel was still on her way to Yokohama, on 17th/18th February 1966 a question arose about the expense which had been incurred in sending for the tug and getting its help. That expense was a general average expenditure. The shipowners would be entitled to a contribution towards it from the cargo owners, unless it was due to the shipowner's own negligence.
The question arose: Were the shipowners negligent? At first sight it would seem that they were. The vessel ought not to have run out of bunkers on the way across the Pacific. The shipowners however defied negligence. They said that the vessel took on enough bunkers before leaving Portland: but that it turned out that the fuel was of a very poor quality. It clogged up and caused a lot of trouble: and in particular it used up a great deal of oil. The shipowners said: "It was not our fault: it was the fault of the suppliers."
Assuming that it was not the fault of the shipowners, the expense must be a general average expenditure. The shipowners would have to bear their share, but they could come on to the cargo owners to pay a contribution. In support of the claimfor contribution, the shipowners would have a lien on the cargo which they could exercise when the ship got to its final port of discharge. They would be entitled to hold the goods and not release them until they received payment or a general average bond for whatever sum might be found due.
Most cargo owners sign a Lloyd's average bond. But the representatives of the Government of India do not give a bond. They give an undertaking which they honour. They did so in this case. Whilst the vessel was still on her way to Yokohama, on 17th February 1966, the shipowners' representatives wrote to the Director-General, India Supply Mission in London: "We shall therefore be obliged if you will let us have the usual undertaking by the Indian Government to pay their cargo's proportion of General Average when this has been determined."
On 23rd February, 1966, the Director General, India Supply Mission in London, replied:… "I am to say that the High Commissioner for India in London hereby gives an undertaking that any General Average contribution which may be legally clue from the Government of India as cargo owners will be paid by this Mission. In view of the above undertaking you are requested to contact the ship-owner's agents in India, by cable if necessary, to release government cargo immediately the vessel arrives at an Indian Port."
In reply the shipowners' representatives wrote to the Director General on 25th February: "we thank you for your letter of the 23rd February and note that we may apply to you for settlement when our Adjustment of General Average is completed. We shall be obliged if you will let us have particulars of the value of the Indian Government cargo in due course."
On the faith of the undertaking the shipowners did not assert a lien. When the vessel got to Bombay the cargo was released. Discharge started on 8th March and was completed on 12th March 1966.
Shortly afterwards the average adjusters, in accordance with their practice, set about making their average adjustment. In many cases it takes months and years. They have often to write to many places around the world for details. In this particular case the adjustment took just under a year. On 24th February 1967 the average adjusters issued their adjustment. The total expenditure which fell to be proportioned was £12,070. 7s.10d. The proportion applicable to the cargo was £5,995. 4s.7d.
On 30th March 1967 the shipowners' representatives sent a copy of the adjustment to the Director General of the Indian Supply Mission and requested a contribution of £5,995. 4s.7d. But that request was not complied with. On 7th June 1967 the solicitors for the Government of India disclaimed liability. They said: "We have examined the Average adjustment Statement and we have come to the conclusion that the incident alleged to give rise to General Average arose due to the poor quality of the fuel oil by virtue of the presence of impurities in the same and as such we contend that the vessel was unseaworthy at or before the commencement of the relevant voyage and that it was the said unseaworthiness that caused the alleged incident giving rise to General Average."
Thenceforth there was much delay for reasons into which I will not enter. Eventually on 4th June 1971, a writ was issued by the shipowners against the Union of India claiming the amount of £5,995, the general average contribution. In the points ofdefence, the defendants relied, amongst other things, on the centrocon arbitration clause. They said that any claim had to be made in writing, and arbitrator appointed, within 12 months of final discharge. Here the final discharge was on 12th March 1966. So the claim had to be made by 12th March 1967. It was also alleged that the shipowners had not exercised due diligence to make the vessel seaworthy and had been negligent.
On these pleadings Mr. Justice Mocatta directed a preliminary issue to see whether this action was barred by reason of the time bar in centrocon arbitration clause. As a safeguard, in case there was a time bar, the shipowners took out an originating summons asking an extension of time under section 27 of the Arbitration Act 1950. On the preliminary issue Mr. Justice Mocatta held that the action was not barred by the 12 months time bar: but if it was barred, he would not have granted in extension of time. The defendants appeal to this Court.
The first point is whether a claim for general average contribution comes within the Cantrocon arbitration clause at all. The profession of average adjusters have assumed for many years that it does not. But in the " Astraea ( Alma Shipping Co. v. Union of India) 1971 2 Ll. R. 494, Mr. Justice Roskill held that the time bar in the Centrocon arbitration clause did apply to general average contributions. He was told by a number of distinguished average adjusters that their profession has for many years taken the view that arbitration clauses of this kind have no application to claims for general average contribution; but nevertheless Mr. Justice Roskill held that the Centrocon clause did apply to general average contribution.
In considering this point one thing is I think clear. In order to be caught by the time bar in the Centrocon arbitration clause, the "claim" must be a claim "arising out of thiscontract". In my opinion a claim by shipowners against a cargo owner for general average contribution does not arise "out of" the contract. It arises "in the course of it". It arises in the course of the voyage. It arises out of the perils encountered in carrying out the contract, and not out of the contract itself. That was clearly the view of Lord Esher, Master of the Rolls, in Burton v. English (1883) 12 Q.3.D 218, at page 220: It does not arise from any contract at all, but from the Rhodian laws and has become incorporated into the law...
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