Viscous Global Investment Ltd v Palladium Navigation Corporation
| Jurisdiction | England & Wales |
| Judge | Mr Justice Males |
| Judgment Date | 30 July 2014 |
| Neutral Citation | [2014] EWHC 2654 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 30 July 2014 |
| Docket Number | Case No: 2013 FOLIO 1655 |
[2014] EWHC 2654 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Males
Case No: 2013 FOLIO 1655
"QUEST"
Mr Ben Olbourne (instructed by Grier Olubi Solicitors) for the Claimant
Mr Yash Kulkarni (instructed by Jackson Parton Solicitors) for the Defendant
Hearing date: 25 th July 2014
Introduction
The issue on this application under section 32 of the Arbitration Act 1996 is whether an arbitration clause in a P & I Club Letter of Undertaking was intended to replace the arbitration clauses incorporated into four bills of lading issued by the defendant shipowners for the carriage of a cargo of bagged rice. The claimant says that it was. If that is so, it is common ground that arbitration has been validly commenced before a three man LMAA tribunal which has jurisdiction to determine its claims.
The defendant says that the LOU arbitration clause was intended to amend the existing arbitration clauses in some limited respects, but in all other respects left those existing clauses unchanged, including in particular their provision for claims of less than US $100,000 to be dealt with by the LMAA Small Claims Procedure. If that is so, what the claimant ought to have done (according to the defendant) was to commence four separate arbitrations, some before a tribunal of three arbitrators and others (because inevitably the amount of the claim under some of the bills must have been less than US $100,000 even though the claimant has not so far specified the amount of its claim under each individual bill) before a sole arbitrator under the Small Claims Procedure. Since that is not what the claimant did the consequence, according to the defendant, is that the tribunal which has been appointed has no jurisdiction over some or all of the claims.
It is apparent, therefore, that there is no dispute that the claimant's claims ought to be arbitrated. It is agreed also that the seat of any arbitration is London and that LMAA procedures should apply. There is, moreover, an existing tribunal of LMAA arbitrators appointed which is eminently qualified to determine liability for any cargo damage which may have occurred. Nobody has suggested otherwise. It may be wondered, therefore, why the parties have not got on with asking the arbitrators to decide the substantive merits of the dispute. If they had done so, and as arbitration was commenced as long ago as November 2012, there would probably have been a final award by now.
Instead, however, the parties have spent what must by now be fairly substantial sums, probably amounting to a high proportion of the modest amount in dispute, arguing about whether these well qualified arbitrators have jurisdiction. Despite the attractive and interesting submissions of Mr Ben Olbourne for the claimant and Mr Yash Kulkarni for the defendant, it is hard to think that this was money well spent. It is also hard to think, however splendid the LMAA Small Claims Procedure may be as a method of resolving small scale maritime claims, that this jurisdictional dispute is really about whether there ought to be one or three arbitrators appointed to deal with the merits of the various claims, or about the finer points of the arbitral procedure which ought to be adopted. Rather, it seems that the shipowners or their club are hoping to knock out the claim on the basis that the claimant has made a somewhat technical mistake in commencing arbitration, and that it is now too late to start again because any new arbitration would be time barred.
That said, of course, if the owners have got a good argument which knocks out some or all of the claim, they are entitled to deploy it.
Section 32
Section 32 of the 1996 Act provides that the court may, on the application of a party to arbitral proceedings (upon notice to the other parties), determine any question as to the substantive jurisdiction of the tribunal. Such an application can only be considered if it is made with the agreement in writing of all the other parties to the proceedings, or with the permission of the arbitral tribunal and the court. In this case the application is made with the permission of the tribunal and pursuant to an order made by Field J on 13 March 2014.
In fact there has already been full argument before the arbitrators of the question that the court is now being asked to determine, but the arbitrators could not agree. No award was issued (hence this is an application under section 32, not section 67) but the arbitrators did indicate their views. The majority (Bruce Harris and Tim Marshall) concluded that they did have jurisdiction over any bill of lading where the sum claimed was over US $100,000, but not over any bills where the sum claimed was below US $100,000. But as the claimant had not broken down the amount of its claims under each of the bills, they could not say which was which. The minority (David Farrington) concluded that the arbitrators had jurisdiction over all the claims.
The facts
The claimant's claim arises out of the carriage of bagged rice from Thailand to Nigeria in late 2011. The cargo of about 9,930 mt was carried on board the defendant's vessel "QUEST" pursuant to four bills of lading variously dated 24 August, 1 September, and 2 September 2011. The claimant's case is that the cargo was discharged in a damaged condition by reason of the defendant's breach of the contracts of carriage contained in or evidenced by the bills of lading.
The bills were each on the standard CONGENBILL 1994 form with the usual "Conditions of Carriage" on the reverse. In each case, clause 1 of the Conditions stipulated:
"All terms and conditions, liberties and exceptions of the Charterparty, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated."
None of the bills identified a charterparty on its face. On each bill, the relevant box was left blank.
There were three charterparties involved in the carriage of the cargo:
(1) a period time charter dated 4 July 2011 between the defendant and Seaboard Overseas Limited ("the head charter");
(2) a trip time charter dated 30 July 2011 between Seaboard and Azelie Corp ("the sub-charter"); and
(3) a voyage charter between Azelie and Valency International Trading Pte Ltd contained in or evidenced by a "Recap of Altered Main Terms agreed" dated 29 July 2011 ("the voyage charter").
Each of the three charterparties contained an arbitration clause. However, they were in different terms.
Clause 48 of the head charter and the sub-charter (both time charters) both provided:
"All disputes arising out of this contract which cannot be amicably resolved shall be referred to arbitration in London. Unless the parties agree upon a sole arbitrator the reference shall be to 2 (two) arbitrators, one to be appointed by each of the parties.
The arbitrators shall be commercial men, and the umpire, if appointed, in the event of disagreement between two arbitrators, shall be a legal man, and shall be Members of the London Maritime Arbitrators' Association.
The contract is governed by English Law and there shall apply to arbitration proceedings under this clause the terms of the London Maritime Arbitrators' Association current at the time when the arbitration proceedings are commenced.
It is further agreed that the 7 (seven) days limit for appointment of the arbitrators, either originally or by substitution, shall be changed to 30 (thirty) days.
Claims up to USD 100,000 to be dealt with in accordance with L.M.A.A. Small Claims Procedure."
In contrast, the voyage charter provided:
"ARBITRATION IF ANY TO BE SETTLED IN SINGAPORE BY ENGLISH LAW."
The claimant sought security from the defendant for its claims under all four of the bills of lading. In due course the defendant's P&I Club, the London Club, issued a single Letter of Undertaking dated 13 June 2012 providing security in respect of the claimant's claims under all of the bills in the sum of US $300,000 inclusive of interest and costs. The LOU, addressed to the claimant, provided so far as relevant:
"Ship: QUEST
Voyage:...
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