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Charles M Willie & Co (Shipping) Ltd v. Ocean Laser Shipping Ltd,
G Roussos Sons SA and another v. Charles M Willie & Co (Shipping) Ltd.
(England and Wales) Queen's Bench Division (Commercial Court), Rix J, 29th October 1998.
[Editor's note. Although this case concerns arbitral proceedings governed by the Arbitration Act 1950, it is reported because it considers matters that are equally likely to arise under the Arbitration Act 1996.]
Whether notice effective to commence arbitral proceedings - s. 34(2) Limitation Act 1980 considered - whether party to whom rights novated could intervene in existing arbitral proceedings - procedure considered - whether arbitrators had jurisdiction reconsider procedural ruling - difference between award and procedural rulings considered - whether arbitrators could make procedural rulings by award.
Facts:
The plaintiff in the first action ("Willie") contracted to sell to the first plaintiff in the second action ("Roussos") "or company to be nominated" a motor vessel. The contract provided for arbitration either by a single arbitrator or, if the parties could not agree a name, by a three arbitrator tribunal, one appointed by each party, one by the London Maritime Arbitrators Association.
The defendant in the first action ("Ocean") was nominated to take delivery and transfer of the vessel and the bill of sale, dated 26th April 1990, was made out in its name. Prior to that date problems had occurred with the vessel's engine and Roussos, by its solicitor's telex dated 12th March 1992 addressed to Willie's solicitors, commenced arbitral proceedings against Willie. The telex also suggested three names for agreement of one as sole arbitrator, but this suggestion as rejected by Willie and both Roussos and Willie appointed arbitrators.
Subsequently, on the 20th May 1992, Roussos's solicitors wrote to its arbitrator asking him to accept appointment in the same matter on behalf of Ocean. This letter was copied to Willie's solicitors who replied denying any knowledge of Ocean and disputing the appointment of Roussos' arbitrator by Ocean.
Thereafter Roussous and Ocean served Points of Claim on Willie, referring to themselves as buyers of the vessel. Willie advised the arbitrators by letter that it disputed the existence of an arbitration agreement with Ocean and their jurisdiction to deal with Ocean's claims. Roussos's and Ocean's solicitors' response to the arbitrators stated that Roussos's arbitrator had also been appointed as Ocean's arbitrator because Roussous had purchased the vessel on its own behalf and/or on behalf of Ocean. This letter, which was dated 12th November 1993, was copied to Willie's solicitors.
At a subsequent procedural meeting in the arbitration a number of issues were considered by the arbitrators including whether Ocean was a party to the arbitration (albeit it was recognised that the arbitrators did not have power to decide their own jurisdiction) and whether Roussous and/or Ocean should have leave to amend their Points of Claim. It was agreed that the arbitrators need not give reasons for their decision on the amendment issue, but should give reasons on the Ocean issue.
Subsequently the arbitrators made an unreasoned order allowing the proposed amendments and later, by reasoned "Interim Final Award", held that they had jurisdiction to determine Ocean's claims. A few weeks later, however, the arbitrators advised the parties that they had changed their minds about one of the amendments previously allowed, a proposed paragraph 4A, and that this amendment would not be allowed. Roussos and Ocean objected to this reconsideration and, following a further hearing, the arbitrators published a reasoned "Second Interim Final Award" in which they refused the application to amend the Points of Claim so as to insert Paragraph 4A.
These decisions by the arbitrators were challenged both by Roussos and Ocean, on the one hand, and Willie, on the other hand. Roussous and Ocean sought a declaration that the arbitrators' decision on Paragraph 4a, purporting to reverse their earlier decision on the same Paragraph, was made without jurisdiction, and that their earlier decision was valid and binding. Willie sought a declaration that Ocean had not validly commenced an arbitration against it as a proper notice of arbitration had not been served.
Held:
The question of whether Ocean had commenced arbitration against Willie required consideration of its solicitors' letters of the 20th May 1992 and 12th November 1993 in the light of s. 34(3) of the Limitation Act 1980. A provision that the Court of Appeal held in
Nea Agrex SA v. Baltic Shipping Co [1976] 1 QB 933 applied by analogy to arbitral proceedings and which they concluded should be applied flexibly. Despite doubts raised in subsequent cases [the judge reviewed a number of cases including
Vons Ltd v. Transglobal Projects Ltd [1998] 1 WLR 101, which he regarded as wrongly decided], the principles developed in Nea Agrex remained applicable. Applying these principles to the letter of the 20th May 1992 showed that it was effective to commence arbitral proceedings against Willie. It was copied to their solicitors and, looked at objectively, there was no doubt that Willie was intended to regard it has a notice to respond by appointing their arbitrator in respect of Ocean's claim as well as in respect of Roussos's claims. There was no doubt that Willie understood it as such. As for the subsequent letter of the 12th November 1993, this was also effective as a notice to commence arbitral proceedings against Willie. The fact that these letters were copied to Willies' solicitors and not addressed to Willie did not affect this conclusion as they were, in fact, brought to Willie's attention. It was to be hoped that a similarly broad meaning would be given to s. 14 of the Arbitration Act 1996.
As to the question of whether Ocean had done enough to be joined as a further party in the Roussos and Willie arbitration, Ocean's interest arose by novation not by assignment so that this was not a case where one party wished to be substituted for another. Nevertheless, this did not mean that Ocean could only bring its claims by commencing separate arbitral proceedings against Willie. If the court's decision in this case had depended on this question, it would have concluded that Ocean were properly joined in the arbitration when it obtained Roussos's arbitrator's consent to act as its arbitrator, and gave notice to Willie and to the arbitrators of its claim and its submission to the tribunal already in
place.
As to the question of whether the arbitrators were able to change their minds about the amendment of the Points of Claim, this was a question of jurisdiction, since any allegation of misconduct or procedural mishap would have to await the outcome of the arbitration. It concerned, in particular, whether the doctrine of issue estoppel applied only to awards or whether it could also apply to mere questions of procedure. A decision that finally determined a claim, either by holding it to be barred or struck out, could properly be the subject of an award and it was possible that arbitrators also had a discretion to render a procedural decision, whatever its nature, in the form of an interim award, giving rise, in either case to an issue estoppel. It was doubtful, however, whether interlocutory, procedural or discretionary decisions could properly be treated as though they were the subject matter of an interim award. It followed that, because the arbitrators' initial decision to allows the amendments to the Points of Claim was neither a decision on the merits nor finally dispositive of any issue referred, nor expressed as an interim award, there was no basis to hold that the arbitrators lacked jurisdiction to reconsider that decision.
For the plaintiff in the first action: Mr M Nolan (instructed by Messrs Swinnerton Ashley-Claydon).
For the defendant in the first action and plaintiffs in the second action: Mr S Berry (instructed by Messrs Holman Fenwick &
Willan).
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