Incitec Ltd v Alkimos Shipping Corporation

REASONS FOR JUDGMENT 1 Before the Court are two notices of motion in the two proceedings N 303 of 2003 and N 304 of 2003. In N 303 of 2003 Incitec Ltd ("Incitec") sues Alkimos Shipping Corporation ("ASC") and Hyundai Merchant Marine Co Ltd ("Hyundai"). In N304 of 2003 Sumitomo Australia Limited ("Sumitomo") sues ASC. Each proceeding arises out of the refusal in March 2002 of the Australian Quarantine and Inspection Service ("AQIS") to permit the discharge of part of the cargo of fertilizer carried on board the Alkimos which had arrived in Newcastle on a voyage from the loading port of Tampa, Florida. Incitec and Sumitomo are the relevant cargo interests. They are represented by different solicitors. Incitec has sued both owner (ASC) and time charterer (Hyundai) of the ship. Sumitomo has only sued the owner (ASC). Incitec was a voyage charterer under a contract of affreightment with Hyundai. 2 I have made orders in both proceedings for the service outside the jurisdiction of the surveyor who undertook a survey at the time of loading of the cargo in Tampa, Florida. (See [2004] FCA 348.) 3 After the cargo was in effect rejected by AQIS, the ship proceeded to Gladstone and Asian ports. She was arrested in Chittagong where she remained under arrest for a considerable period of time. 4 The claims of the plaintiffs not only concern the considerable loss of value of the cargo, but also, in the Incitec matter, millions of dollars in demurrage and detention costs for which Hyundai has asserted Incitec bears responsibility under the voyage charter. 5 In the motions before the Court, ASC, the owner of the Alkimos seeks leave to cross-claim against Hyundai, the time charterer of the Alkimos. In the Incitec proceeding the cross-claim claim is against Hyundai as an existing and present defendant. In the Sumitomo proceedings the cross-claim would have the effect of joining Hyundai to the proceeding. 6 No point was taken by Hyundai that service out of the jurisdiction was required in the Sumitomo proceedings. Hyundai, however, did oppose leave being granted to ASC to serve the cross-claims on the basis of futility. It said (and Mr Nell, who appeared for Hyundai, orally moved the Court, which course I permitted) that should leave be granted the cross-claims should be stayed on the basis of their being contrary to an exclusive foreign jurisdiction clause in the time charter. Thus, it was said, leave should not be given if the only result of the leave was the immediate staying of the cross-claims. 7 Mr Nell and Dr Bell argued the substance of the matter, being identical in the notices of motion filed by the owner (ASC) and the oral motions by the time charterer (Hyundai). 8 The relevant evidence is in narrow scope and is as follows. ASC and Hyundai executed a written time charter dated 10 January 2002 in New York Produce Exchange ("NYPE") form (1946 version) with certain amendments and additional clauses in respect of the hire of the Alkimos, a single deck container bulk carrier of 25,189 tons gross register for a period 90 days to about 5 months, the word "about" being defined as meaning plus or minus 20 days charterer's option. Clause 17 of the NYPE form was excised and in its place the following appeared: BIMCO/LMAA 1998 Arbitration Clause to apply 9 The 1998 arbitration clauses of the Baltic and International Maritime Council (BIMCO) were published in a special circular dated 1 July 1998. The circular noted the available choice of three BIMCO drafted arbitration clauses: the first providing for English law and London arbitration, the second providing for United States law and New York arbitration and the third providing for law and place of arbitration as mutually agreed between the parties. The reference in clause 17 of the time charter was plainly a reference to the first alternative referred to in the BIMCO circular, the acronym LMAA obviously being a reference to the London Maritime Arbitrators Association. In the circumstances, the shorthand expressions used in clause 17 plainly incorporate the first choice of clause in the circular, in particular when one looks at its terms, which are as follows: This Contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause. The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced. The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator. In cases where neither the claim nor any counterclaim exceeds the sum of USD50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. [emphasis added] 10 Both proceedings were commenced by the plaintiffs in March 2003. 11 In 2003 both principals, ASC, apparently a Liberian corporation said to be the owner of the ship, which is Greek flagged, and Hyundai, I assume, a corporation of the Republic of Korea, had London solicitors. Mr Anicich of Sparke Helmore, who acts in Australia for Hyundai in respect of the proceedings, deposed in an affidavit read by Mr Nell that the London solicitors were retained "in relation to the claims arising out of the voyage [in question] … including the claims which are the subject of these proceedings." Ince & Co act for ASC. More Fisher Brown act for Hyundai. 12 In September, October, November and December 2003 correspondence took place between the London solicitors varying the dispute resolution mechanism. On 5 September 2003, Mr Herring of Ince & Co (for ASC) wrote to Mr Wright of Mr Fisher Brown (for Hyundai) saying: As you know, the Charterparty between our parties provides that disputes will be referred to arbitration in London. Our clients would prefer, if it can be agreed, that all disputes under the Charterparty be dealt with by the High Court of Justice in London, with English law to apply. Please let us know whether your clients would be agreeable to varying the dispute resolution provision in the Charterparty so as to provide for High Court jurisdiction and English law. 13 Mr Herring wrote again on 2 October 2003 as follows: I refer to previous correspondence. Have you now obtained instructions from your clients as to whether they will be prepared to refer disputes under the Charter to the English High Court rather than to London arbitration? I would be grateful for your response on this. You will recall that amongst the security given by the West of England they gave a Letter of Undertaking for US$1,716,687.50. The Owners would now like to replace that security with a bank guarantee (probably from the Royal Bank of Scotland) in the same amount. Please confirm that your clients would be agreeable to such a change. 14 On 12 November 2003, Mr Herring sent an email in the following terms: Please come back to me re the jurisdiction issue. The owners want to progress their claims and if your clients are not prepared to agree High Court proceedings then our clients will appoint an arbitrator and give notice. I thought that you had expected firm instructions a few days back. 15 On 2 December 2003, at 12.19 pm London time, Mr Wright responded to Mr Herring's email in the following terms: Paul-sorry have been elusive. HMM agree to Court. As regards guarantee can it just be signed by rbs? What is status of RBS shipping centre. Payment in club letter was on demand. Can that be changed? Agree with you that last para poses no problem. 16 The notices of motion seeking leave to file and serve the cross-claim were dated the next day, 3 December 2003, and filed two days later. No point was made in argument about this chronology or timing. 17 Clause 42 of the time charter was a clause in a rider to the charter and was in the following terms: Clause 42 NYPE Interclub Agreement Liabilities for cargo claim shall be borne by the Owners and the Charterers in accordance with NYPE Interclub Agreement in February, 1970 and its reprints of May, 1984 and amendment thereto. 18 It is unnecessary to set out the full terms of the agreement referred to in clause 42 (the "Interclub Agreement"). It did not deal with jurisdiction or choice of law. Rather, it set out rules for apportionment of responsibility for cargo claims, that is to provide a mechanism and a basis for such apportionment. Whether or not it was a comprehensive mechanism or basis for such apportionment may be a matter that the parties will debate in due course. 19 Also, by clause 74, the time charter was said to be governed by English law. 20 By a voyage charter dated 7 January 2002 Hyundai chartered the Alkimos to Incitec for the carriage of 31,716 MT (5% more or less in owners' option) of fertilizer in three grades. Pursuant to this voyage charter the ship loaded three consignments of fertilizer at Tampa in February 2002 for carriage to Australian ports. These consignments were shipped under two bills of lading each of which bills was an owner's bill signed on behalf of the master and issued on behalf of the owners of the ship, that is ASC. 21 At the same time, another consignment of 5,500 MT of fertilizer was also loaded on board the ship at Tampa for carriage to Australia. This consignment was shipped by Sumitomo under another bill of lading issued on behalf of ASC. This consignment was not shipped pursuant to Hyundai's voyage charter with Incitec. There was no contract or charter party between Hyundai and Sumitomo in relation to this consignment. 22 Upon the arrival of the Alkimos at Newcastle, residues of barley were found by AQIS in a number of the holds. As a consequence, only part of the Incitec cargo was allowed to be discharged. The remaining cargo on board the Alkimos, including the Sumitomo consignment, was resold and transported from Australia on the same ship to ports in Asia. 23 The cross-claims brought by the owner, ASC against the time charterer, Hyundai, are for contribution, on two bases. The first basis is as a joint tortfeasor pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the "LR(MP) Act"). The second basis of the claim is by way of equitable contribution. There is no claim made in the cross-claim seeking to enforce the Interclub Agreement. 24 As can be seen from the above facts, there was originally an arbitration clause. If the relevant dispute fell within that clause (as in my view it does, see below) the time charterer, Hyundai, when faced with claims such as in the cross-claims brought in a court in Australia could have invoked s 7(2) of the International Arbitration Act 1974 (Cth) (being Australian legislation which, amongst other things, gives effect to the New York Convention 1958 on international arbitration) to seek a mandatory stay of the proceedings, subject to the satisfaction of the terms of that provision. However, as can be seen from the above facts, and as was common ground between the parties in argument, the London solicitors for the parties agreed to the release of the provision for arbitration in favour of the High Court of Justice in London, presumably intending the Commercial Court in London. 25 Some debate took place before me over whether or not what had been put in place of the arbitration clause was an exclusive or a non-exclusive jurisdiction clause. Before dealing with that matter, I should add that neither party said that the scope of the dispute resolution clause (whether exclusive or non-exclusive) had been widened or narrowed by the variation brought about by the London solicitors from the terms contained within the BIMCO arbitration clause. Thus, whether or not the dispute in question fell within the confines of the jurisdiction clause was to be gauged by reference to the terms of the original arbitration clause, that is whether the cross-claims reflected a "dispute arising out of or in connection with" the time charter. 26 It seems to me tolerably plain that the solicitors were agreeing to an exclusive English jurisdiction clause. There was a binding arbitration clause. The shipowner (ASC) was, it would seem, at least in September, threatening to take the matter to arbitration. The communications and the agreement were in the context of the claims being made against both parties in the Incitec proceeding and against ASC in the Sumitomo proceeding. This was not a general and non-specific variation to the arbitration clause; it was in connection with those live proceedings which would plainly involve, at some point, the need to resolve the question of the responsibility as between ASC and Hyundai for any success achieved by Incitec or Sumitomo in the proceedings. In those circumstances, it seems to me to be tolerably plain that the solicitors, and through them the parties, were specifically agreeing to the substitution of arbitration by an identified and precise form of litigation process - the High Court of Justice in London applying English law and procedure. That is made plain in the first two written communications from Ince & Co. 27 That being so, the relevant issues for determination are (a) whether ASC's claims for contribution as set out in the two proposed cross-claims fall within the scope of the dispute resolution clause that Hyundai and ASC have agreed to; and (b) in the event that the claims do fall within that clause whether the prosecution of those cross-claims as against Hyundai should be allowed to proceed in this Court. 28 I express the matter this way because I am dealing with both the applications for leave to proceed against and join Hyundai on the cross-claims and the applications for a stay. It could equally be expressed as whether the cross-claims if allowed to be filed should be stayed.

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