Federal Court of Australia|1996-12-04|Before: Mr P, Tamberlin J

Hi-Fert Pty Limited and Cargill Fertilizer Inc v Kiukiang Maritime Carriers Inc and Western Bulk Carriers (Australia) Ltd [1996] FCA 1914; (1997) 150 ALR 54 (4 December 1996)

HI-FERT PTY LIMITED AND CARGILL FERTILIZER INC. V. KIUKIANG MARITIME

CARRIERS INC. AND WESTERN BULK CARRIERS (AUSTRALIA) LTD

Admiralty - two applications - application that proceedings be stayed permanently on the basis of an arbitration clause in the charter party - whether Australian proceedings are vexatious or oppressive - whether Australia is an "inappropriate forum" for resolution of the disputes - proceedings relate to contamination of fertiliser - statutory interpretation - meaning of the term "arising from" - whether all disputes should be referred to the elected arbitrator - 'one-stop adjudication' encouraged by courts - authorities favour broad interpretation of adjudication clauses - effect of s 11(2) of the Carriage of Goods by Sea Act 1991 (Cth) - s 11(2) allows no scope for severance of arbitration clause into positive and negative aspects - permissible for Court to take arbitration clause into account in exercising its discretion - possibility of duplication and inconsistent findings.

Practice And Procedure - whether proceedings are vexatious or oppressive - whether Australia is an appropriate forum for resolution of the disputes.

Carriage of Goods by Sea Act (No. 160) 1991 (Cth) s 11(2)

Sea-Carriage of Goods Act 1924 (Cth) s 9(2)

International Arbitration Act 1974 (Cth) s 2C

Ferris v Plaister (1994) 34 NSWLR 474, considered

IBM Australia Ltd v National Distribution Services Ltd (1991) 22

Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206, considered

Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, applied

Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc. [1985] USSC 203; 473 US 614 (1985), cited

Qantas Airways Ltd v Dillingham Corporation (1985) 4 NSWLR 113, cited

Ethiopian Oilseeds v Rio del Mar (1990) 1 Lloyds R 86, considered

Continental Bank v Aeokos Compania Naviera SA (1994) 1 WLR 588,

Harbour Assurance Co (UK) Ltd v Kansas General International Insurance Co Ltd (1993), 1 Lloyds R 455, cited

Mir Brothers Developments Pty Ltd v Atlantic Constructions Pty Ltd (1984) 1 BCL 80, cited

Compagnie des Messageries Maritimes v Wilson [1954] HCA 62; (1954) 94 CLR 577, distinguished

Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538, applied

Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197,

Halsbury's Laws of England, vol 2, 4th edition

Mustill MJ, and Boyd SC, The Law and Practice of Commercial

Counsel for the Plaintiffs: Mr R B S Macfarlan QC

Mr P King

Solicitor for the Plaintiffs: Withnell and Co

Counsel for the First Defendant: Mr G J Nell

Solicitor for the First Defendant: Mr James Neill

Counsel for the Second Defendant: Mr N C Hutley SC

Dr A S Bell

Solicitor for the Second Defendant: Ebsworth and Ebsworth

When this matter was argued before me on 15 November 1996 the parties foreshadowed that an issue had been recently raised by the plaintiffs as to whether s7 of the International Arbitration Act 1974 (Cth) should be read down or whether it was invalid as precluding the exercise by the Federal Court of Australia, sitting in Admiralty, of the judicial power of the Commonwealth in respect of the several causes of action in the proceedings.

2. I understand that the Attorneys-General have now been notified pursuant to s78B of the Judiciary Act 1903 (Cth) and do not wish to participate.

3. The constitutional issue is said to arise if as a matter of construction all the claims are determined to be within the arbitration clause.

4. As I have formed a view that the claims fall within the ambit of the clause I now publish my reasons for reaching this conclusion. I propose to fix a date in the near future for oral argument on the foreshadowed constitutional point.

7. The first is taken out by Western Bulk Carriers (Australia) Ltd ("WBC"), the second defendant. It seeks an order that the proceedings be stayed permanently on the ground that the plaintiffs have agreed to submit disputes arising from the charter party to arbitration in London; that the proceedings are vexatious or oppressive and that Australia is an inappropriate forum for resolution of the disputes.

8. The second is taken out by Kiukiang Maritime Carriers Inc. ("KMC"), the first defendant and seeks an order that the proceeding be permanently stayed as against it in favour of arbitration in London.

9. The first plaintiff, Hi-Fert Pty Limited ("Hi-Fert"), is the consignee of the cargo. It carries on business in South Australia. The second plaintiff, Cargill Fertilizer Inc. ("Cargill") is a United States corporation and is the consignor of the damaged cargo.

10. KMC is the owner of the MV "Kiukiang Career", ("the vessel"). It employed the master and the crew.

By three bills of lading issued in Tampa, Florida on 24

March 1996, KMC is alleged to have acknowledged shipment, on

board the vessel, of the cargo (fertiliser) in apparent good

order and condition for carriage to Australian ports for

delivery in the same good order and condition as when shipped.

It is alleged that Hi-Fert, or alternatively Cargill, was the

owner of the cargo entitled to sue in respect of loss or damage

or alternatively was the holder or endorsee of the bills of

lading to whom property in the cargo passed upon endorsement.

13. A duty of care is claimed to have been owed by KMC, as carrier by sea for reward, or, pursuant to an express or implied contract under the bills of lading, to deliver the cargo in good order and condition.

14. The alleged breach of the duty of care and of the contract is that KMC failed to carry and deliver the cargo in good order and condition. The cargo became contaminated with a quarantineable disease, namely "karnal bunt", and the vessel was prevented from discharging at Newcastle in Australia so that the cargo was not delivered.

15. Alternatively, it is claimed the loss and damage was caused by the negligence of KMC in breach of its duty as carrier and bailee for reward.

16. It is further claimed that the contracts contained in the bills of lading, were subject to the Hague Rules as enacted in the Carriage of Goods by Sea Act 1936 of the USA. Clause 3(1) of those Rules provides that the carrier is bound to exercise due diligence to make the ship seaworthy and make the holds and other parts of the ship fit and safe for the reception, carriage and preservation of the goods. It is alleged that KMC failed to make the ship seaworthy and to make the holds fit for the reception, carriage or preservation of the cargo. Alternatively, it is claimed that clause 3(2) of the Hague Rules provides that with some exceptions the carrier must properly and carefully load, handle, stow and discharge the goods. There is then alleged a breach of contract or duty by reason of which the plaintiff has suffered a loss of "not less than" $A7,870,965.

17. WBC was the charterer of the vessel and represented itself to be the disponent owner. It is said that by contract of affreightment between Hi-Fert and WBC, dated 11 November 1993, WBC agreed to carry from American ports to Australian ports, four full cargoes, with two extra cargoes at the charterer's option, of bulk harmless cargo including fertilisers up to 31 October 1995 in return for payment of freight.

18. Allegations are then made as to misrepresentations allegedly made by WBC to Hi-Fert as a result of which Hi-Fert continued to carry goods, in vessels supplied by WBC comprising fertiliser cargoes and optional cargoes, after September 1995. It is claimed that WBC engaged in misleading or deceptive conduct and breached s52 of the Trade Practices Act 1974 (Cth) thereby causing loss and damage.

19. Alternatively, it is claimed that each representation amounted to warranties collateral to the charter party and that the terms of each of the warranties were breached. Further, there is a count in negligence whereby it is alleged that WBC was negligent and breached its duty as a carrier and bailee for reward resulting in the contamination of the fertiliser. Furthermore, it is alleged that the misrepresentations were made negligently. In addition, there is a claim that under the charter party WBC agreed to be responsible for loss or damage to the cargo, or delay in delivery caused by negligent stowage of cargo, or failure to make the vessel seaworthy. In breach of these terms it is said that WBC negligently stowed the cargo and failed to act with due diligence. In addition, it is claimed that it was an express or implied term of the charter party that the vessel's holds should be clean, dry and free from residue of any previous cargoes before commencement of loading and be ready to load the cargo upon the issue of Notice of Readiness. It is said that these terms were breached.

20. The WBC application for a stay is based on clause 34 of the time charter made between Hi-Fert and WBC of 11 November 1993, which reads:

"Clause 34

ARBITRATION Any dispute arising from this charter or any

Bill of Lading issued hereunder shall be settled in accordance

with the Provisions of the Arbitration Act, 1950, and any

subsequent Acts, in London, ... each party appointing an

Arbitrator, and the two Arbitrators in the event of disagreement

appointing an umpire whose decision shall be final and binding

upon both parties hereto.

This Charter Party shall be governed by and construed in

accordance with English law."

21. The broad question is whether the words "any dispute arising from this charter..." are sufficiently wide to encompass claims under the Trade Practices Act 1974 (Cth); claims based on collateral contract or warranties; and claims for negligence. It is common ground that the clause is sufficiently wide to cover disputes based on breaches of express or implied terms of the charter.

22. The parties were unable to point to any case law precedent on the words "arising from this charter". There are a number of cases which deal with terms such as "arising under"; "arising out of"; "arising in relation to" or "arising in connection with": Cf Halsbury's Laws of England, Volume 2, 4th edition at pars 612 and 613; The Law and Practice of Commercial Arbitration in England, Mustill and Boyd, 2nd edition (1989), at 117-121.

23. WBC submits that the Court should approach the construction of the arbitration clause on the basis that prima facie all disputes of whatever kind are referred to the chosen arbitrator in the nominated jurisdiction. In this case arbitration in London.

24. Counsel referred me to the Court of Appeal decision in Ferris v Plaister (1994) 34 NSWLR 474 where the relevant clause referred to provided that:

"... any dispute ... as to the construction of the Contract or

as to any matter or thing of whatsoever nature arising

thereunder or in connection therewith."

25. The Court held that this clause was sufficiently comprehensive to cover a dispute as to whether the contract could be avoided for fraud. At 496-497 Mahoney JA said:

"I do not differ from those who would take a wide rather

than a narrow view of the scope of arbitration clauses and I

accept the device of severability as a useful device for

achieving the accommodation of legal logic ('the invalidity of

the contract carries with it the invalidity of the arbitration

clause') to the wide view of the scope of an arbitration clause.

But I would add a qualification. The Court should keep steadily

in mind that its function is to decide what is before it, a

particular dispute between particular parties, and to decide it

in a way which will do justice between them. Its discretions are

to be exercised and legal devices are to be employed so that the

function is performed."

26. Similarly, in IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 the Court of Appeal, differently constituted, addressed the effect of an arbitration clause expressed to govern "any controversy or claim arising out of or related to the agreement or the breach thereof". The Court held that these words were sufficiently wide to include claims for relief under the Trade Practices Act 1974 (Cth).

27. At 483 Clarke JA said in relation to this clause:

"There are no indications in the contract that the words

should be construed narrowly. Nor, in my opinion, are there any

compelling reasons in favour of reading down the meaning of the

phrase. On the contrary there are powerful considerations in

favour of the contrary view. The consequence of an

interpretation of the arbitration clause which excludes the

claims under the Act would be that the causes of action based

upon breaches of the contract would remain with the arbitrator,

and be decided by him, and those in which reliance were placed

upon ss52, 82 and 87 of the Act would be determined in a court

of law. As I earlier pointed out this conclusion would follow

even in a case in which the same representations were said to

ground claims in breach of contract and under the Act.

The parties could hardly be thought to have contemplated that

the arbitration clause would work in that way. It is far more

likely that they intended that all disputes between them

concerning the terms of the contract, the performance of it and

matters connected, in a real sense, with the contract should be

referred to the one tribunal for determination. ... I would

find it difficult to ascribe to the parties to a contract an

intention to submit only part of a dispute to an arbitral

tribunal reserving the remainder for consideration by the Court

as this would, on any view, be inefficient and costly."

28. In the Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206, at 235, Stephen J in relation to the question whether there was an implied power in an arbitrator to award interest, after referring to authority, said:

"The principle ... is that, subject to such qualifications

as relevant statute law may require, an arbitrator may award

interest where interest would have been recoverable and the

matter been determined in a court of law. What lies behind that

principle is that the arbitrators must determine disputes

according to the law of the land. ... a claimant should be able

to obtain from arbitrators just such rights and remedies as

would have been available to him were he to sue in a court of

law of appropriate jurisdiction. As Russell On Arbitration, 19th

ed., puts it at p.356, speaking of an arbitrator's power to

award interest up to the date of his award, 'it was always

considered that he had power to do so, by virtue of his implied

authority to follow the ordinary rules of law'." (Emphasis

added)

29. At 246-247 Mason J with whom Murphy J agreed, said:

"I see no reason why the parties cannot authorize an

arbitrator to decide whether interest is payable by one party to

another, just as they can authorise him to decide whether

damages should be awarded. It is to the submission that one

looks to find the powers of the arbitrator, though the powers

thereby conferred are supplemented by the Arbitration Act and by

other relevant statutory provisions." (Emphasis added)

30. His Honour pointed out, at 247, that the arbitration submission referred to "all differences arising out of this policy". He considered that it contemplated all such differences should be arbitrated in the light of the general law which applied to the subject matter in dispute and this included s94 of the Supreme Court Act, by which the Court was empowered to award interest at such rate as it thinks fit between the date when the cause of action arose and the date when the judgment takes effect.

31. Mason J followed a line of United States authority to the effect that the parties to an arbitration can invest an arbitrator with such powers as they deem proper provided they do not violate any rule of law. In the United States it has been held that the parties may authorise an arbitrator to grant equitable relief including relief by way of injunction.

32. The most apposite case to the present is the recent decision of the Court of Appeal in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160. The arbitration clause in that case referred to,"any dispute or difference arising out of this Agreement". It provided that the agreement should be interpreted in accordance with the English law. The Court there held that a claim by an Australian agent that a purported termination of an agency agreement was wrongful, by reason of what had been represented during the course of the agreement (involving as particularised, misrepresentation, estoppel and misleading conduct in contravention of the Trade Practices Act 1974 (Cth)) gave rise to a dispute or difference "arising out of" the agency agreement within the meaning of the arbitration clause. Their Honours went on to decide that a claim under the Trade Practices Act 1974 (Cth), could be arbitrated in England. The Court affirmed the judgment of Cole J below reported at (1994) ATPR par 41-332 at 43,392).

33. After reviewing the authorities, Gleeson CJ, with whom Meagher and Sheller JJA agreed, said at 165:

"When the parties to a commercial contract agree, at the

time of making the contract, and before any disputes have yet

arisen, to refer to arbitration any dispute or difference

arising out of the agreement, their agreement should not be

construed narrowly. They are unlikely to have intended that

different disputes should be resolved before different

tribunals, or that the appropriate tribunal should be determined

by fine shades of difference in the legal character of

individual issues, or by the ingenuity of lawyers in developing

points of argument.

In Ethiopian Oilseeds, Hirst J held that a claim for

rectification of a contract gave rise to a dispute "arising out

of" the relevant agreement.

That decision, and the reasoning underlying it, reflects the

current state of the law in New South Wales: ..." (Emphasis

added)

34. When discussing the authority of the arbitrator to decide questions under the clause his Honour pointed out that it was for the arbitrator to decide, applying relevant principles of conflict of laws, what part the allegation of a contravention of the Trade Practices Act 1974 (Cth) and the asserted entitlement to relief under s87 of that Act would play in the arbitration. He considered that it was not for the New South Wales Court of Appeal to pre-empt that decision. He referred to the decision in Atkinson-Leighton (supra at 246) and identified the central question as being whether there is to be implied in a submission to arbitration a term that the arbitrator is to have the authority to give the claimant such relief as would be available to him in a court of law having jurisdiction with respect to the subject matter. He answered this question in the affirmative. He also referred to the decision of the United States Supreme Court in Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc. [1985] USSC 203; 473 US 614 (1985) at 636-637 where the Court held anti-trust claims under the Sherman Act 1890 (US) were subject to arbitration under an agreement which provided for an arbitration in which the proper law of the contract was specified as Swiss law. That decision was applied by Rogers J in Qantas Airways Ltd v Dillingham Corporation (1985) 4 NSWLR 113 at 120.

35. In giving a broad interpretation to the expression "arising out of" in Francis Travel (supra), Gleeson CJ agreed with the analysis of authorities undertaken by Hirst J, Ethiopian Oilseeds v Rio del Mar (1990) 1 Lloyd's R 86, and observed his Lordship's analysis reflected the current state of the law as it applies in New South Wales.

36. The expression "arising from" is at least as wide, in my view, as the expression "arising out of". The words "out of" are commonly used in the sense of "from". See for example the meanings assigned to "out of" in the New Shorter Oxford Dictionary (1993), 2039.

37. Hi-Fert sought to distinguish the decision and reasoning in Francis Travel, on the basis that the Court of Appeal may not have appreciated the exact terms under consideration by Hirst J in Ethiopian Oilseeds. It is true that Gleeson CJ in referring to that case only refers to the expression "arising out of" whereas the complete expression under consideration was "any dispute arising out of or under this contract". In my view, there is no force in this speculation for two reasons.

38. The first is that at (1991) 1 Lloyds R 97, Hirst J gave a wide meaning to the expression "arising out of". He said:

"I find it very difficult to make any distinction between the

words "arising out of" and "arising in connection with", the

two phrases appearing to me to be virtually synonymous."

39. The second is that there is no basis in the reasons for decision in Francis Travel for the assumption that the three learned judges who comprised the Court overlooked the wording addressed by Hirst J. In Ethiopian Oilseeds his Lordship canvassed and discussed a range of expressions akin to "arising out of" in considerable detail.

40. WBC submits that the words "any dispute arising from the charter" encompass all disputes arising from all matters related, in a real sense, to the operation and performance of the charter.

41. In relation to the misrepresentation claim it is said that the representations alleged are concerned with the manner in which the charter is to be performed and as to the way in which the vessel would be placed in a state of readiness to carry the goods under the charter. The breach of the representation alleged in substance was the failure of WBC to perform in accordance with that representation.

42. The collateral warranties alleged, it is submitted by WBC, are given in connection with the continued performance of the charter. The breach again results from the manner of performance of the charter.

43. In relation to the negligence case, it is said that this is founded on a claim that the defendant is a bailee for reward and that this cannot be divorced form the obligation brought into existence by reason of the charter party.

44. WBC emphasises that each of the breaches of obligations alleged is in fact a breach in performance of the charter. As a result each dispute is intimately connected with the charter and forms an essential part of the operation of the charter. Therefore, the causes of action can be properly said to "arise from" the charter.

45. It is said that the words "arising from " have as broad an ambit as the words "in connection with".

46. Further support, it is said, is gained by reference to the expression "any dispute" which is said to indicate that all manner of disputes should be subject to the clause.

47. WBC referred to the statement of Steyn LJ in Continental Bank v Aeokos Compania Naviera SA (1994) 1 WLR 588 at 592 said in relation to a jurisdiction agreement:

"The answer is not to be found in the niceties of language of

clause 21.02. It is to be found in a common sense view of the

purpose of the clause."

48. Referring to an argument for a narrower interpretation of the clause, his Lordship said at 593:

"Moreover, if Miss Dohmann is right, it would mean that a

claim for damages for a negligent misrepresentation inducing the

contract (a tort) would be outside clause 21.02, but a claim

seeking rescission of the contract on the ground of the same

misrepresentation (a contractual claim) would be covered by it.

If the defendants' contention is accepted, it follows that the

two claims might have to be tried in different jurisdictions.

That would be a forensic nightmare."

49. The thrust of the authorities both here and in England in the interpretation of dispute resolution clauses is towards "one stop adjudication". See for example, Harbour Assurance Co (UK) Ltd v Kansas General International Insurance Co Ltd (1993) 1 Lloyds R 455 at 469-470 per Hoffman LJ.

1. As a matter of construction, Clause 34 of the time

charter does not cover trade practices claims. The words

"arising from" are narrow and cannot encompass statutory

actions. The clause is restricted to breaches of express or

implied terms of the agreement.

2. As the clause is a London arbitration clause providing for

English law to be applied under the English Arbitration Act, the

implication cannot be drawn that an arbitrator could deal with

Australian trade practices allegations.

3. Even if the clause were sufficiently wide to cover trade

practices claims, the breaches alleged in this case are

different from those in the Francis decision. This difference

arises from the nature of the charter in the present case. It is

not one for a charter party of a particular vessel but rather one

that contemplates that a certain number of voyages will occur

within a specified period so that the charterer must nominate

the loading period and lay days. The representations do not

relate to the breach of any obligations arising from the charter

party but relate to an earlier stage when Hi-Fert decided to

attract the overall contract to the particular cargo by not

objecting to the nominated vessel.

4. The collateral contract claim is outside the arbitration

clause. Reliance is placed on the decision of the Court of

Appeal in Mir Brothers Developments Pty Ltd v Atlantic

Constructions Pty Ltd (1984) 1 BCL 80. Of course, it must be

noted that the Mir Brothers decision was narrowly confined to

its special circumstances by Francis Travel.

51. Consistently with the authorities referred to above, particularly Francis Travel, it is clear that the current thrust of authority favours the adoption of a broad interpretation of arbitration clauses such as the present. The courts favour a one-stop adjudication of all disputes if this can be accommodated consistently with the language of the clause. The difficulties with a fragmented approach are manifest in the above authorities.

52. In my view, the words "arising from" in the present case, should be construed to convey a meaning equivalent to the expressions "arising out of" or "arising in connection with". On this approach, I consider that the clause is sufficiently wide to permit the inclusion of allegations of misrepresentation and deceptive conduct under the Trade Practices Act 1974 (Cth). This accords with the evident purpose of the clause.

53. WBC submits that because the charter party confers on the shipper an option to decline a vessel nominated under the agreement, any representation made in advance of nomination which is relied on by not rejecting the vessel, means that the misrepresentation does not have the requisite connection to attract the arbitration clause. However, in my view, the present representations alleged are closely related to the performance of the vessel to be nominated under the charter, and that is such a close connection between the charter and the dispute as to bring the misrepresentation claim within the words "arising from" the charter.

54. In relation to the second argument, I think that the principles referred to in Francis Travel apply here. The parties have clothed the arbitrator, by agreement, with jurisdiction to deal with Australian trade practices allegations.

55. In the present case, unlike Mir Brothers, the alleged collateral warranties concern the performance of the contract itself and do not constitute an agreement independent of or separate from the contract. In Mir Brothers, on the other hand, the warranty alleged was that two sets of drawings were identical. That warranty did not prescribe the manner in which the contractual obligations were to be performed. Rather the contention was that the work required by the second set of drawings was more extensive and represented a variation in the tender for which the respondent was entitled to be paid. Those circumstances are quite different from those in the present case. Here, there is a sufficiently close connection between the charter and the warranties to fall within the terms of reference. The breaches of contract and breaches of warranties as particularised are identical.

56. It was suggested by counsel for the defendants, (Hi-Fert and Cargill) that the pleadings in Francis Travel included a collateral contract claim. This is not apparent either from the Court of Appeal judgment or the decision of Cole J at first instance. Nor is it apparent from the Amended Summons and Summary of plaintiff's contention which was placed before me by consent.

57. For the above reasons, I consider that the arbitration clause covers all the matters raised in the Amended Statement of Claim.

58. KMC seeks a stay on the ground that each of the Bills of Lading are subject to the governing charter party and incorporate the arbitration clauses. See Condition 2 of the Conditions of Carriage.

59. However, s11(2) of the Carriage of Goods by Sea Act (No. 160) (Cth) 1991 ("the 1991 Act") provides:

"(2) An agreement (whether made in Australia or elsewhere) has

no effect so far as it purports to:

(a) ....

(b) .....

(c) preclude or limit the jurisdiction of a court of the

Commonwealth .. in respect of:

(i) a bill of lading, or a similar document of title, relating

to the carriage of goods from any place outside Australia to any

place in Australia; ..." (Emphasis added)

60. The predecessor to subs11(2) was subs9(2) of the Sea-Carriage of Goods Act 1924 (Cth). That subsection provided:

"(2) Any stipulation or agreement, whether made in the

Commonwealth or elsewhere, purporting to oust or lessen the

jurisdiction of the Courts of the Commonwealth or of a State in

respect of any bill of lading or document relating to the

carriage of goods from any place outside Australia to any place

in Australia shall be illegal, null and void, and of no effect."

(Emphasis added)

61. Subsection 9(2) was considered by the High Court in Compagnie des Messageries Maritimes v Wilson [1954] HCA 62; (1954) 94 CLR 577. The Bill of Lading in that case provided:

"Rule 16. All legal actions arising out of the interpretation

or performance of the present bill of lading will be judged by

the tribunal in the town or place indicated in the bill of

lading, the shippers or claimants formally accepting its

competence."

62. A later clause provided that the "tribunal" was to be a French commercial court.

63. The appellant argued that the operation of subsection 9(2) should be limited so that it would not destroy wholly the condition of the bill of lading. The argument was that it left the clause with effect as a positive agreement to litigate in the French court; notwithstanding that in its negative aspect, (that is as a stipulation against litigating elsewhere), it was deprived of all effect and it became utterly null in its application to Australian courts.

64. The High Court held that to so limit the operation of subsection 9(2) would defeat its object. As Dixon J said at 583:

" .... it can hardly be doubted that its object was to

insure that Australian consignees of goods imported might

enforce in Australian courts the contracts of sea-carriage

evidenced by the bills of lading which they held. Section 9(2)

is expressed in the strongest words and makes a stipulation or

agreement falling within its terms illegal, null, void and of no

effect.

The double aspect which no doubt the condition now under

consideration exhibits is but the consequence of a single

stipulation, and that stipulation clearly falls within the

language of that section. It is therefore without any effect and

can afford no foundation for the use of s6 of the Arbitration

Act 1902."

65. KMC contends that the effect of the varied wording in subs11(2)(c) in the present case, is that subs11(2) of the 1991 Act can be read down so as to leave the agreement to submit to arbitration intact after its operation. Reliance is placed on the words "so far as it purports" in the subsections. In other words, the effect is to render ineffective the requirement of an arbitration in London, but to leave intact the agreement to arbitrate. As a result, it is said, that the effect of the clause after the section operates is that the disputes must be arbitrated and that they can be arbitrated in Australia subject to the general doctrine of forum non conveniens.

66. Hi-Fert, on the other hand, contends that the effect of s11 of the 1991 Act, when read with the s2C of the International Arbitration Act 1974 (Cth), is to deprive the arbitration clause of all effect both in its negative effect in depriving the Court of jurisdiction and in any positive effect of conferring power on arbitrators to decide the dispute.

"2C. Nothing in this Act affects:

(a) the continued operation of section 9 of the Sea Carriage of

Goods Act 1924, under subsection 20(2) of the Carriage of Goods

by Sea Act 1991; or

(b) the operation of section 11 or 16 of the Carriage of Goods

by Sea Act 1991."

68. By s21 of the 1991 Act, s2C of the International Arbitration Act 1974 (Cth) was repealed and the above section was substituted.

69. Section 20(2) of the 1991 Act provides that the Sea Carriage of Goods Act 1924 (Cth) as in force immediately before the commencement of s20 of the 1991 Act, continues to apply to a contract of carriage of goods by sea after that date if, the contract was made before the commencement and that Act would have applied, but for the operation of subsection 20(1).

70. In the present case, the bill of lading was made after the commencement of the 1991 Act and accordingly the Sea Carriage of Goods Act 1924 (Cth) has no application.

71. For the above reasons, I reject the submission that there is no basis for an application for a stay on the ground that no effective agreement to arbitrate exists.

72. The wording from "any stipulation or agreement purporting to oust or lessen the jurisdiction shall be illegal, null and void, and of no effect" allows no scope for severance of an arbitration clause into positive and negative aspects and the High Court has so held. However, the words "so far as" in the 1991 Act invite the conclusion that there is room for a severance of the obligation to arbitrate and the submission to a jurisdiction in which the arbitration must take place Accordingly, I do not consider that the reasoning in Wilson's case (supra) applies.

73. A further submission made for Hi-Fert is that it is not permissible to take even clause 34 into account when the Court comes to exercise its discretion as to whether this Court is clearly inappropriate. In my opinion, the introductory wording of s11(2) of the 1991 Act that "an agreement has no effect so far as it purports to preclude or limit jurisdiction" does not prevent this Court, when exercising its discretion as to whether a stay ought to take place, from taking into account the fact that the parties have evinced an intention to submit to a London arbitration. It is a relevant factor. To take this intention into account is to weigh it in the balance. It is not to give it controlling weight so as to preclude or limit jurisdiction.

74. A mandatory stay is not available in the present case under s7(2) of the International Arbitration Act 1974 (Cth) in respect of the claims against KMC. The Court has a discretion to stay these proceedings in favour of arbitration in London where the prosecution of the claim against KMC in this Court, is clearly inappropriate. It is necessary to consider whether this Court is a clearly inappropriate forum. In determining this question, the relevant principles are set out in Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538.

75. Voth (supra) concerned an action brought by a resident New South Wales Company which sued an accountant, who was a citizen of the United States, in the Supreme Court of New South Wales for damages for professional negligence. The Court held that the action should be stayed on the ground that the New South Wales Supreme Court was clearly an inappropriate forum in which to permit the action to proceed.

"... Granted that there is an obligation on the domestic courts

of this country to exercise jurisdiction which is conferred upon

them - a matter on which the majority in Oceanic Sun was united

- it does not extend to cases where it is established that the

forum is clearly inappropriate."

77. At 564, their Honours adopted as the principles to be applied in applications for a stay on inappropriate forum grounds, those stated by Deane J in Oceanic Sun Line Special Shipping Co Inc. v Fay [1988] HCA 32; (1988) 165 CLR 197 at 247-248, where his Honour said:

"That power is a discretionary one in the sense that its

exercise involves a subjective balancing process in which the

relevant factors will vary and in which both the question of the

comparative weight to be given to particular factors in the

circumstances of a particular case and the decision whether the

power should be exercised are matters for individual judgment

and, to a significant extent, matters of impression. The power

should only be exercised in a clear case and the onus lies upon

the defendant to satisfy the local court in which the particular

proceedings have been instituted that it is so inappropriate a

forum for their determination that their continuation will be

oppressive and vexatious to him. Ordinarily, a defendant will be

unable to discharge that onus unless he can identify some

appropriate foreign tribunal to whose jurisdiction the defendant

is amenable and which would entertain the particular proceedings

at the suit of the plaintiff. Otherwise, that onus will

ordinarily be discharged by a defendant who applies promptly for

a stay or dismissal if he persuades the local court that, having

regard to the circumstances of the particular case and the

availability of the foreign tribunal, it is a clearly

inappropriate forum for the determination of the dispute between

the parties. The reason why that is so is that, once it is

accepted that the adjectives "oppressive" and "vexatious" are

not to be narrowly or rigidly construed and are to be applied in

relation to the effect of the continuation of the proceedings

rather than the conduct of the plaintiff in continuing them, the

continuation of proceedings in a tribunal which is a clearly

inappropriate forum would, in the absence of exceptional

circumstances being established by the plaintiff ... be

oppressive or vexatious to such a defendant ..."

78. This Court, in my view, in the circumstances, is clearly an inappropriate forum to consider the issues raised between the parties. The important relevant circumstances are as follows:

. Hi-Fert's claim against KMC raises questions common to

the claims against WBC;

. as a result of the parties' agreement English law will apply

in any event;

. Hi-Fert's claim against WBC must be stayed if WBC so requires

insofar as it concerns breaches of the express or implied terms

of the charter party;

. Hi-Fert's dispute with WBC as a whole, is covered by the

construction of clause 34 and is clearly related in important

respects to the claim against KMC;

. the only place in which the dispute can be resolved in its

totality is London and it is appropriate that there should be a

"one-stop" adjudication in the present proceeding;

. failure to grant a stay as against KMC may result in

duplication of proceedings with the consequent possibility of

inconsistent findings, differing evidence elicited from

witnesses in cross-examination, possible inconvenience to

witnesses having to give evidence twice, and further expense and

delay;

. Hi-Fert and the defendants entered into the arrangements

which provide for a London arbitration. This is a relevant

discretionary consideration which is to be weighed in the

balance but does not dictate the outcome of the balancing

process.

79. While it is true that apart from the Agreement, London has no strong connection with the subject matter of the present dispute, I nevertheless consider that the above considerations are sufficient to make this Court a clearly inappropriate forum in which to decide the questions raised, primarily because of the likely fragmentation of jurisdiction which is likely to result.

80. For the above reasons and subject to hearing the further submissions to be made on the additional questions, I have formed the view that the application by KMC should be granted.

81. I propose to hear submissions on the additional matters raised by the plaintiff at a date to be arranged before making any orders in this proceeding.

Sea Carriage of Goods Act 1924(Cth)

Sea-Carriage of Goods Act 1924(Cth)s 9(2)

Arbitration Act 1974

(1991) 22

NSWLR 466

Hi-Fert Pty Limited and Cargill Fertilizer Inc v Kiukiang Maritime Carriers Inc and Western Bulk Carriers

At a glance

Court

Decision date

Before

Source

Judgment (114 paragraphs)

Hi-Fert Pty Limited and Cargill Fertilizer Inc v Kiukiang Maritime Carriers Inc and Western Bulk Carriers (Australia) Ltd [1996] FCA 1914; (1997) 150 ALR 54 (4 December 1996)

Parties

Legislation Cited (8)

Cases Cited (10)